US $
- Q3 GAAP net income of $87 million / $1.11 per diluted share
- Adjusted EBITDA of $157 million
- Net cash position at $145
million and liquidity at $1.3
billion at quarter-end
- Acquisition by Paper Excellence Group approved by
stockholders
MONTRÉAL, Nov. 3, 2022
/PRNewswire/ - Resolute Forest Products Inc.
(NYSE: RFP) (TSX: RFP) today reported net income of
$87 million, or $1.11 per
diluted share, for the quarter ended September 30, compared to
net income of $80 million, or $0.99 per diluted share, in the same period in
2021. Sales were $974 million in the quarter, an increase of
$157 million from the year-ago period. Excluding special
items, the company reported net income of $85 million, or
$1.08 per diluted share, compared to
net income of $67 million, or $0.84 per diluted share, in the third quarter
of 2021.
Non-GAAP financial measures, such as adjustments for special
items and adjusted EBITDA, are explained and reconciled below.
Quarterly Operating Income Variance
Against Prior Period
Consolidated
The company reported operating income of $124 million in
the quarter, compared to $217 million in the second quarter.
The $93 million reduction reflects lower realized prices in
wood products ($185 million), partially offset by higher
prices in the pulp, paper and tissue segments ($48 million),
higher shipments in wood products ($40
million) and lower manufacturing costs ($12 million).
The company also recorded higher selling, general and
administrative expenses ($17 million), reflecting a higher
share-based compensation expense and costs incurred in relation
with the acquisition by the Paper Excellence Group.
On July 5, the Paper Excellence
Group, through its wholly-owned subsidiary Domtar Corporation, a
global diversified manufacturer of pulp and specialty, printing,
writing, and packaging papers, entered into an agreement with
Resolute to acquire all of the outstanding common shares of
Resolute stock.
For additional information, a full description of the
transaction is outlined in the definitive proxy statement of
Resolute filed on September 20, 2022,
with the U.S. Securities and Exchange Commission (or, the "SEC") at
www.sec.gov and with the Canadian securities regulators on the
System for Electronic Document Analysis and Retrieval at
www.sedar.com and mailed to stockholders of Resolute beginning on
September 20, 2022. Please also see
Resolute's current reports on Form 8-K filed on July 6, 2022, July 7,
2022, August 4, 2022,
October 25, 2022, October 27, 2022 and October 31, 2022 with the SEC.
Segment Operating Income
Variance
Wood Products
The wood products segment generated operating income of
$42 million in the quarter, a
decrease of $138 million from the
previous quarter. The average transaction price fell to
$624 per thousand board feet, a
$307 per thousand board feet, or 33%,
decrease from the previous quarter. Wood products shipments
increased by 88 million board feet, to 606 million, reflecting
gradually improving rail car availability, leading to a 71 million
board feet reduction in finished goods inventory, to 168 million at
quarter-end. The operating cost per unit (or, the "delivered cost")
decreased by $25 per thousand board
feet, or 4%. EBITDA in the segment declined by $138 million, to $53
million.
Market Pulp
The company generated operating income of $81 million in
the market pulp segment, an increase of $40 million from the
previous quarter. The average transaction price increased by
$93 per metric ton, or 10%, to
$1,025 per metric ton, with gains in
all grades. The delivered cost decreased by $54 per metric ton, or 7%, mainly due to lower
maintenance costs in the quarter. Shipments increased by 5,000
metric tons and finished goods inventory remained relatively
unchanged at 67,000 metric tons. EBITDA in the segment rose by
$38 million, to $86 million.
Tissue
The tissue segment incurred an operating loss of
$12 million in the quarter, compared to an operating loss of
$9 million in the second quarter. The
average transaction price increased by $72 per short ton, or 4%, but the delivered cost
rose by 10%, mostly reflecting higher pulp prices. Shipments were
2,000 short tons lower and finished goods inventory increased by
1,000 short tons. Segment EBITDA decreased by $3 million, to
negative $8 million.
Paper
The paper segment generated operating income of $52 million
in the quarter, an increase of $15 million from the previous
quarter. The average transaction price increased by $66 per metric ton, or 8%, reflecting more
favorable market conditions. Shipments decreased by
34,000 metric tons, mostly reflecting inventory destocking in
the prior quarter and lower productivity, and finished goods
inventory increased by 7,000 metric tons due to shipment timing.
The delivered cost was relatively unchanged as higher chemical
prices were offset by lower maintenance costs. Segment EBITDA
improved by $15 million, to $62 million.
Consolidated Quarterly Operating
Income Variance Against Year-Ago Period
Operating income in the third quarter was $22 million higher than the same quarter of 2021.
The variance includes higher selling prices for the market pulp,
paper and tissue segments ($125
million) and higher shipments in wood products ($33 million). The company faced higher
manufacturing costs ($99 million),
mainly related to fiber ($46
million), maintenance and labor ($25
million) and energy prices ($24
million), as well as higher freight ($24 million). The company also recorded higher
selling, general and administration expenses ($25 million), reflecting a higher share-based
compensation expense and costs incurred in relation with the
acquisition by Paper Excellence Group, and it benefited from a
lower Canadian dollar ($12
million).
Corporate, Cash and Liquidity
The company generated $163 million of cash from operating
activities in the quarter and it invested $31 million, net, in
fixed assets.
With $446 million of quarter-end cash, liquidity stood at
$1.3 billion. As a result, the
company ended the quarter in a net cash position of $145 million.
By quarter-end, the company had recorded cumulative softwood
lumber duty deposits of $535 million on the balance sheet,
including $35 million paid in the quarter.
The company continues to assess the extent of the damage from a
fire that started on October 6 at its Menominee (Michigan) recycled pulp mill, which resulted
in the temporary idling of the facility. The company aims to
restart the mill in the coming months. The company maintains
insurance coverage for the mill, subject to customary deductible
and limits. There was no injury in connection with the fire.
At the special meeting of stockholders held on October 31, Resolute's stockholders approved the
acquisition by the Paper Excellence Group. The closing of the
transaction is expected in the first half of 2023, following
regulatory approvals and satisfaction of other customary closing
conditions, the receipt of which remain outstanding.
Earnings Conference Call
Due to the pending transaction with Paper Excellence Group, the
company will not host a third quarter 2022 earnings conference
call.
Description of Special Items
|
Special
items
|
Third
quarter
|
|
(in
millions)
|
|
2022
|
|
2021
|
|
Closure costs,
impairment and other related charges
|
$
|
(1)
|
$
|
-
|
|
Non-operating pension
and other
postretirement benefit costs (credits)
|
|
3
|
|
(3)
|
|
Other income,
net
|
|
(37)
|
|
(20)
|
|
Income tax effect of
special items
|
|
33
|
|
10
|
|
Total
|
$
|
(2)
|
$
|
(13)
|
Cautionary Statements Regarding
Forward-Looking Information
Statements in this document 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 potential benefits of the
proposed transaction between Resolute Forest Products and Domtar
Corporation; the prospective performance and outlook of our
business, performance and opportunities; the ability of the parties
to complete the proposed transaction, the expected timing of
completion of the proposed transaction; the impact of the
coronavirus (or, "COVID-19") pandemic and resulting economic
conditions on our business, results of operations and market price
of our securities; the impact on our future business results of the
price volatility of our products; the logistics and transportation
network constraints and the levels of inventory; and 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; estimated
capital expenditures; environmental, social and governance
(or, "ESG") reporting; 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," "aim," "continue" 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 document include, but are not limited
to: uncertainties as to the timing of the proposed transaction with
Domtar Corporation; the risk that the proposed transaction with
Domtar Corporation may not be completed in a timely manner or at
all; the possibility that competing offers or acquisition proposals
will be made; the possibility that any or all of the various
conditions to the consummation of the proposed transaction may not
be satisfied or waived, including the failure to receive any
required regulatory approvals from any applicable governmental
entities (or any conditions, limitations or restrictions placed on
such approvals); the occurrence of any event, change or other
circumstance that could give rise to the termination of the merger
agreement, including in circumstances that would require us to pay
a termination fee or other expenses; the inability to recover
softwood lumber duty refunds in a timely manner or at all; the
effect of the pendency of the proposed transaction on our ability
to retain and hire key personnel, our ability to maintain
relationships with our customers, suppliers and others with whom we
do business and our business generally or our stock price; risks
related to diverting management's attention from our ongoing
business operations; 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 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 and
political conditions; the highly cyclical nature of the forest
products industry; any difficulties in obtaining timber or wood
fiber at favorable prices, or at all; impacts of inflation on the
price of goods and services, including changes in the cost of
purchased energy and other raw materials; any loss of important
customers and resulting accounts receivable credit risk exposure;
physical, financial, regulatory, transitional and litigation risks
associated with global, regional, and local weather conditions, and
climate change; financial, litigation, liability and reputational
risks associated with ESG reporting; 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, and workforce shortages;
disruptions to our supply chain, operations, or the delivery of our
products, including due to public health epidemics and workforce
shortages; 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; increases of interest rates and
changes relating to the London Interbank Offered Rate, which could
impact our borrowings under our credit facilities; losses that are
not covered by insurance; any additional closure costs and
long-lived asset impairment or goodwill impairment or accelerated
depreciation charges; any need to record additional valuation
allowances against our recorded deferred income tax assets or any
limitation of our use of certain tax attributes; 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 forth under Part I, Item 1A, "Risk
Factors," of our annual report on Form 10-K for the year ended
December 31, 2021, filed with the SEC
on March 1, 2022, as set forth under
Part II, Item 1A, "Risk Factors," of our quarterly report on Form
10-Q for the quarter ended June 30,
2022, filed with the SEC on August 4,
2022, and as set forth under Part II, Item 1A, "Risk
Factors," of our quarterly report on Form 10-Q for the quarter
ended September 30, 2022, filed with
the SEC on November 3, 2022, which
have been heightened by the COVID-19 pandemic, including related
governmental responses and economic impacts, market disruptions and
resulting changes in consumer habits. In addition, please refer to
the documents that Resolute files with the SEC on Forms 10-Q and
8-K.
All forward-looking statements in this document are expressly
qualified by the cautionary statements contained or referred to in
this document 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.
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 and papers, which are marketed
in over 60 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 www.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,
|
|
2022
|
2021
|
2022
|
2021
|
|
Sales
|
$
|
974
|
|
$
|
817
|
|
$
|
2,977
|
|
$
|
2,830
|
|
|
Costs and
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales,
excluding depreciation, amortization and distribution
costs
|
|
653
|
|
|
554
|
|
|
1,847
|
|
|
1,642
|
|
|
Depreciation and
amortization
|
|
34
|
|
|
42
|
|
|
101
|
|
|
123
|
|
|
Distribution
costs
|
|
107
|
|
|
87
|
|
|
310
|
|
|
264
|
|
|
Selling, general and
administration expenses
|
|
57
|
|
|
32
|
|
|
133
|
|
|
114
|
|
|
Closure costs,
impairment and other related charges
|
|
(1)
|
|
|
—
|
|
|
8
|
|
|
2
|
|
|
Net loss on
disposition of assets
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
Operating
income
|
|
124
|
|
|
102
|
|
|
576
|
|
|
685
|
|
|
Interest
expense
|
|
(5)
|
|
|
(5)
|
|
|
(16)
|
|
|
(16)
|
|
|
Non-operating pension
and other postretirement benefit (costs) credits
|
|
(3)
|
|
|
3
|
|
|
(13)
|
|
|
8
|
|
|
Other income (expense),
net (4)
|
|
37
|
|
|
20
|
|
|
95
|
|
|
(74)
|
|
|
Income before income
taxes
|
|
153
|
|
|
120
|
|
|
642
|
|
|
603
|
|
|
Income tax provision
(5)
|
|
(66)
|
|
|
(40)
|
|
|
(89)
|
|
|
(167)
|
|
|
Net income including
noncontrolling interest
|
|
87
|
|
|
80
|
|
|
553
|
|
|
436
|
|
|
Net income attributable
to noncontrolling interest
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1)
|
|
|
Net income
attributable to Resolute Forest Products Inc.
|
$
|
87
|
|
$
|
80
|
|
$
|
553
|
|
$
|
435
|
|
|
Net income per share
attributable to Resolute Forest Products Inc.
common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
1.12
|
|
$
|
1.00
|
|
$
|
7.14
|
|
$
|
5.44
|
|
|
Diluted
|
$
|
1.11
|
|
$
|
0.99
|
|
$
|
7.07
|
|
$
|
5.39
|
|
|
Weighted-average
number of Resolute Forest Products Inc.
common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
77.5
|
|
|
79.4
|
|
|
77.4
|
|
|
80.0
|
|
|
Diluted
|
|
78.4
|
|
|
80.1
|
|
|
78.2
|
|
|
80.8
|
|
|
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,
|
December 31,
|
|
2022
|
|
2021
|
|
|
Assets
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
446
|
|
$
|
112
|
|
|
Accounts receivable,
net:
|
|
|
|
|
|
|
|
Trade
|
|
297
|
|
|
257
|
|
|
Other
|
|
60
|
|
|
56
|
|
|
Inventories,
net
|
|
609
|
|
|
510
|
|
|
Other current
assets
|
|
49
|
|
|
54
|
|
|
Total current
assets
|
|
1,461
|
|
|
989
|
|
|
Fixed assets,
net
|
|
1,275
|
|
|
1,270
|
|
|
Amortizable intangible
assets, net
|
|
57
|
|
|
57
|
|
|
Goodwill
(2)
|
|
85
|
|
|
31
|
|
|
Deferred income tax
assets
|
|
515
|
|
|
653
|
|
|
Operating lease
right-of-use assets
|
|
54
|
|
|
54
|
|
|
Other assets
|
|
606
|
|
|
484
|
|
|
Total
assets
|
$
|
4,053
|
|
$
|
3,538
|
|
|
Liabilities and
equity
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
Accounts payable and
other
|
$
|
493
|
|
$
|
421
|
|
|
Current portion of
long-term debt
|
|
1
|
|
|
2
|
|
|
Current portion of
operating lease liabilities
|
|
8
|
|
|
8
|
|
|
Total current
liabilities
|
|
502
|
|
|
431
|
|
|
Long-term debt, net of
current portion
|
|
300
|
|
|
300
|
|
|
Pension and other
postretirement benefit obligations
|
|
991
|
|
|
1,151
|
|
|
Deferred income tax
liabilities
|
|
2
|
|
|
—
|
|
|
Operations lease
liabilities, net of current portion
|
|
48
|
|
|
51
|
|
|
Other
liabilities
|
|
91
|
|
|
88
|
|
|
Total
liabilities
|
|
1,934
|
|
|
2,021
|
|
|
Equity:
|
|
|
|
|
|
|
|
Resolute Forest
Products Inc. shareholders' equity:
|
|
|
|
|
|
|
|
Common
stock
|
|
—
|
|
|
—
|
|
|
Additional paid-in
capital
|
|
3,811
|
|
|
3,807
|
|
|
Deficit
|
|
(456)
|
|
|
(1,009)
|
|
|
Accumulated other
comprehensive loss
|
|
(1,015)
|
|
|
(1,062)
|
|
|
Treasury stock at
cost
|
|
(224)
|
|
|
(222)
|
|
|
Total Resolute
Forest Products Inc. shareholders' equity
|
|
2,116
|
|
|
1,514
|
|
|
Noncontrolling
interest
|
|
3
|
|
|
3
|
|
|
Total
equity
|
|
2,119
|
|
|
1,517
|
|
|
Total liabilities
and equity
|
$
|
4,053
|
|
$
|
3,538
|
|
|
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,
|
|
|
2022
|
|
|
2021
|
|
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
Net income including
noncontrolling interest
|
$
|
553
|
|
$
|
436
|
|
|
Adjustments to
reconcile net income including noncontrolling interest to net cash
provided by operating activities:
|
|
|
|
|
|
|
|
Share-based
compensation
|
|
6
|
|
|
3
|
|
|
Depreciation and
amortization
|
|
101
|
|
|
123
|
|
|
Deferred income
taxes
|
|
85
|
|
|
167
|
|
|
Net pension
contributions and other postretirement benefit payments
|
|
(34)
|
|
|
(71)
|
|
|
Gain on
previously-held equity investments (2)
|
|
(42)
|
|
|
—
|
|
|
Net loss on
disposition of assets
|
|
2
|
|
|
—
|
|
|
Loss (gain)
on translation of foreign currency
denominated deferred income taxes
|
|
42
|
|
|
(7)
|
|
|
(Gain) loss
on translation of foreign currency
denominated pension and other postretirement benefit
obligations
|
|
(70)
|
|
|
6
|
|
|
Net planned major
maintenance amortization (payments)
|
|
19
|
|
|
(15)
|
|
|
Changes in working
capital:
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
(39)
|
|
|
(45)
|
|
|
Inventories
|
|
(81)
|
|
|
(48)
|
|
|
Other current
assets
|
|
(19)
|
|
|
(11)
|
|
|
Accounts payable and
other
|
|
48
|
|
|
34
|
|
|
Other, net
|
|
20
|
|
|
8
|
|
|
Net cash provided by
operating activities
|
|
591
|
|
|
580
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
Cash invested in fixed
assets
|
|
(68)
|
|
|
(79)
|
|
|
Cash invested in
intangible assets
|
|
(3)
|
|
|
—
|
|
|
Acquisitions of
businesses, net of cash acquired (2) (3)
|
|
(49)
|
|
|
—
|
|
|
Disposition of
assets
|
|
5
|
|
|
—
|
|
|
Increase
in countervailing and anti-dumping duty
cash deposits on softwood lumber
|
|
(138)
|
|
|
(128)
|
|
|
Other investing
activities, net
|
|
—
|
|
|
3
|
|
|
Net cash used in
investing activities
|
|
(253)
|
|
|
(204)
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
Issuance of long-term
debt
|
|
—
|
|
|
300
|
|
|
Payment of special
dividend
|
|
—
|
|
|
(79)
|
|
|
Repayments of
debt
|
|
(2)
|
|
|
(557)
|
|
|
Purchases of treasury
stock
|
|
(2)
|
|
|
(34)
|
|
|
Payments of financing
fees
|
|
—
|
|
|
(7)
|
|
|
Other financing
activities, net
|
|
—
|
|
|
2
|
|
|
Net cash used in
financing activities
|
|
(4)
|
|
|
(375)
|
|
|
Effect of exchange rate
changes on cash and cash equivalents, and restricted
cash
|
|
(7)
|
|
|
(1)
|
|
|
Net increase in cash
and cash equivalents, and restricted cash
|
$
|
327
|
|
$
|
—
|
|
|
Cash and cash
equivalents, and restricted cash:
|
|
|
|
|
|
|
|
Beginning of
period
|
$
|
152
|
|
$
|
159
|
|
|
End of
period
|
$
|
479
|
|
$
|
159
|
|
|
Cash and cash
equivalents, and restricted cash at end of period:
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
446
|
|
$
|
119
|
|
|
Restricted cash
(included in "Other assets")
|
$
|
33
|
|
$
|
40
|
|
|
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 diluted 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, 2022
|
Operating
income
|
Net
income
|
EPS
|
|
(Unaudited, in
millions of U.S. dollars, except per share amounts)
|
|
GAAP, as
reported
|
$
|
124
|
|
$
|
87
|
|
$
|
1.11
|
|
|
Adjustments for special
items:
|
|
|
|
|
|
|
|
|
|
|
Closure costs,
impairment and other related charges
|
|
(1)
|
|
|
(1)
|
|
|
(0.01)
|
|
|
Non-operating pension
and other postretirement benefit costs
|
|
—
|
|
|
3
|
|
|
0.04
|
|
|
Other income,
net
|
|
—
|
|
|
(37)
|
|
|
(0.47)
|
|
|
Income tax effect of
special items
|
|
—
|
|
|
33
|
|
|
0.41
|
|
|
Adjusted for special
items
|
$
|
123
|
|
$
|
85
|
|
$
|
1.08
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
September 30, 2021
|
Operating
income
|
Net
income
|
EPS
|
|
(Unaudited, in
millions of U.S. dollars, except per share amounts)
|
|
GAAP, as
reported
|
$
|
102
|
|
$
|
80
|
|
$
|
0.99
|
|
|
Adjustments for special
items:
|
|
|
|
|
|
|
|
|
|
|
Non-operating pension
and other postretirement benefit credits
|
|
—
|
|
|
(3)
|
|
|
(0.04)
|
|
|
Other income,
net
|
|
—
|
|
|
(20)
|
|
|
(0.24)
|
|
|
Income tax effect of
special items
|
|
—
|
|
|
10
|
|
|
0.13
|
|
|
Adjusted for special
items
|
$
|
102
|
|
$
|
67
|
|
$
|
0.84
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended
September 30, 2022
|
Operating
income
|
Net
income
|
EPS
|
|
(Unaudited, in
millions of U.S. dollars, except per share amounts)
|
|
GAAP, as
reported
|
$
|
576
|
|
$
|
553
|
|
$
|
7.07
|
|
|
Adjustments for special
items:
|
|
|
|
|
|
|
|
|
|
|
Closure costs,
impairment and other related charges
|
|
8
|
|
|
8
|
|
|
0.10
|
|
|
Net loss on
disposition of assets
|
|
2
|
|
|
2
|
|
|
0.03
|
|
|
Non-operating pension
and other postretirement benefit costs
|
|
—
|
|
|
13
|
|
|
0.17
|
|
|
Other income,
net
|
|
—
|
|
|
(95)
|
|
|
(1.21)
|
|
|
U.S. deferred income
tax asset valuation allowance reversal
|
|
—
|
|
|
(105)
|
|
|
(1.34)
|
|
|
Income tax effect of
special items
|
|
—
|
|
|
41
|
|
|
0.51
|
|
|
Adjusted for special
items
|
$
|
586
|
|
$
|
417
|
|
$
|
5.33
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended
September 30, 2021
|
Operating
income
|
Net
income
|
EPS
|
|
(Unaudited, in
millions of U.S. dollars, except per share amounts)
|
|
GAAP, as
reported
|
$
|
685
|
|
$
|
435
|
|
$
|
5.39
|
|
|
Adjustments for special
items:
|
|
|
|
|
|
|
|
|
|
|
Closure costs,
impairment and other related charges
|
|
2
|
|
|
2
|
|
|
0.02
|
|
|
Non-operating pension
and other postretirement benefit credits
|
|
—
|
|
|
(8)
|
|
|
(0.10)
|
|
|
Other expense,
net
|
|
—
|
|
|
74
|
|
|
0.92
|
|
|
Income tax effect of
special items
|
|
—
|
|
|
(17)
|
|
|
(0.22)
|
|
|
Adjusted for special
items
|
$
|
687
|
|
$
|
486
|
|
$
|
6.01
|
|
|
RESOLUTE FOREST
PRODUCTS INC.
RECONCILIATION OF EBITDA AND ADJUSTED
EBITDA
|
|
|
A reconciliation of our
net income including noncontrolling interest 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, 2022
|
Market
pulp
|
Tissue
|
Wood
products
|
Paper
|
Corporate
and
other
|
Total
|
|
(Unaudited, in
millions of U.S. dollars)
|
|
Net income (loss)
including noncontrolling interest
|
$ 81
|
|
$
(12)
|
|
$ 42
|
|
$ 52
|
|
$
(76)
|
|
$ 87
|
|
Interest
expense
|
|
|
|
|
|
|
|
|
5
|
|
5
|
|
Income tax
provision
|
|
|
|
|
|
|
|
|
66
|
|
66
|
|
Depreciation and
amortization
|
5
|
|
4
|
|
11
|
|
10
|
|
4
|
|
34
|
|
EBITDA
|
$ 86
|
|
$
(8)
|
|
$ 53
|
|
$ 62
|
|
$
(1)
|
|
$
192
|
|
Closure costs,
impairment and other related charges
|
|
|
|
|
|
|
|
|
(1)
|
|
(1)
|
|
Non-operating pension
and other postretirement benefit costs
|
|
|
|
|
|
|
|
|
3
|
|
3
|
|
Other income,
net
|
|
|
|
|
|
|
|
|
(37)
|
|
(37)
|
|
Adjusted
EBITDA
|
$ 86
|
|
$
(8)
|
|
$ 53
|
|
$ 62
|
|
$
(36)
|
|
$
157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
September 30, 2021
|
Market
pulp
|
Tissue
|
Wood
products
|
Paper
|
Corporate
and
other
|
Total
|
|
(Unaudited, in
millions of U.S. dollars)
|
|
Net income (loss)
including noncontrolling interest
|
$ 46
|
|
$
(9)
|
|
$ 64
|
|
$ 16
|
|
$
(37)
|
|
$ 80
|
|
Interest
expense
|
|
|
|
|
|
|
|
|
5
|
|
5
|
|
Income tax
provision
|
|
|
|
|
|
|
|
|
40
|
|
40
|
|
Depreciation and
amortization
|
6
|
|
5
|
|
11
|
|
15
|
|
5
|
|
42
|
|
EBITDA
|
$ 52
|
|
$
(4)
|
|
$ 75
|
|
$ 31
|
|
$ 13
|
|
$
167
|
|
Non-operating pension
and other postretirement benefit credits
|
|
|
|
|
|
|
|
|
(3)
|
|
(3)
|
|
Other income,
net
|
|
|
|
|
|
|
|
|
(20)
|
|
(20)
|
|
Adjusted
EBITDA
|
$ 52
|
|
$
(4)
|
|
$ 75
|
|
$ 31
|
|
$
(10)
|
|
$
144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended
September 30, 2022
|
Market
pulp
|
Tissue
|
Wood
products
|
Paper
|
Corporate
and
other
|
Total
|
|
(Unaudited, in
millions of U.S. dollars)
|
|
Net income (loss)
including noncontrolling interest
|
$
144
|
|
$ (30)
|
|
$
441
|
|
$
114
|
|
$
(116)
|
|
$
553
|
|
Interest
expense
|
|
|
|
|
|
|
|
|
16
|
|
16
|
|
Income tax
provision
|
|
|
|
|
|
|
|
|
89
|
|
89
|
|
Depreciation and
amortization
|
16
|
|
13
|
|
33
|
|
29
|
|
10
|
|
101
|
|
EBITDA
|
$
160
|
|
$ (17)
|
|
$
474
|
|
$
143
|
|
$
(1)
|
|
$
759
|
|
Closure costs,
impairment and other related charges
|
|
|
|
|
|
|
|
|
8
|
|
8
|
|
Net loss on disposition
of assets
|
|
|
|
|
|
|
|
|
2
|
|
2
|
|
Non-operating pension
and other postretirement benefit costs
|
|
|
|
|
|
|
|
|
13
|
|
13
|
|
Other income,
net
|
|
|
|
|
|
|
|
|
(95)
|
|
(95)
|
|
Adjusted
EBITDA
|
$
160
|
|
$ (17)
|
|
$
474
|
|
$
143
|
|
$
(73)
|
|
$
687
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended
September 30, 2021
|
Market
pulp
|
Tissue
|
Wood
products
|
Paper
|
Corporate
and
other
|
Total
|
|
(Unaudited, in
millions of U.S. dollars)
|
|
Net income (loss)
including noncontrolling interest
|
$ 80
|
|
$ (18)
|
|
$
690
|
|
$ (15)
|
|
$
(301)
|
|
$
436
|
|
Interest
expense
|
|
|
|
|
|
|
|
|
16
|
|
16
|
|
Income tax
provision
|
|
|
|
|
|
|
|
|
167
|
|
167
|
|
Depreciation and
amortization
|
18
|
|
14
|
|
32
|
|
46
|
|
13
|
|
123
|
|
EBITDA
|
$ 98
|
|
$
(4)
|
|
$
722
|
|
$ 31
|
|
$
(105)
|
|
$
742
|
|
Closure costs,
impairment and other related charges
|
|
|
|
|
|
|
|
|
2
|
|
2
|
|
Non-operating pension
and other postretirement benefit credits
|
|
|
|
|
|
|
|
|
(8)
|
|
(8)
|
|
Other expense,
net
|
|
|
|
|
|
|
|
|
74
|
|
74
|
|
Adjusted
EBITDA
|
$ 98
|
|
$
(4)
|
|
$
722
|
|
$ 31
|
|
$
(37)
|
|
$
810
|
|
RESOLUTE FOREST
PRODUCTS INC.
Notes to the Unaudited Consolidated
Financial Statement Information
|
|
|
|
1.
|
On July 5, 2022,
Resolute and Paper Excellence Group, through its wholly-owned
subsidiary Domtar Corporation (or, "Domtar"), entered into a
business combination agreement (or, the "Transaction") under
which Domtar will acquire all of the issued and outstanding common
shares of Resolute for $20.50 per share, in cash, without interest,
and one contractual contingent value right per share (or, the
"CVR").
|
|
|
|
Under the CVR,
stockholders will receive any refunds on approximately $500 million
of deposits on softwood lumber duties paid by Resolute through June
30, 2022, including any interest thereon, net of certain expenses
and of applicable taxes. Any proceeds attributable to the CVR will
be distributed proportionally to the CVR holders, and the value
will ultimately be determined by the terms and timing of the
resolution of the softwood lumber dispute between Canada and the
United States. The terms and timing of such resolution is
uncertain.
|
|
|
|
On October 31, 2022,
Resolute's stockholders approved the Transaction. The Transaction,
which is subject to applicable regulatory approvals and the
satisfaction of certain other customary closing conditions, is
expected to close in the first half of 2023.
|
|
|
|
2.
|
On March 4, 2022 (or,
the "Acquisition Date"), we acquired control of Resolute-LP
Engineered Wood Larouche Inc. and Resolute-LP Engineered Wood
St-Prime Limited Partnership (or, "Larouche and St-Prime"),
that were previously held as 50% owned joint ventures, by acquiring
the remaining 50% equity interests from Louisiana-Pacific Canada
Ltd., a wholly-owned subsidiary of Louisiana-Pacific Corporation,
for a cash consideration of $51 million (including $1 million of
working capital adjustment, and net of cash acquired of $8
million). Larouche and St-Prime, which are engineered wood product
facilities located in Quebec, produce I-joists for the construction
industry. This acquisition solidifies our presence in the
engineered wood product segment.
|
|
|
|
At the Acquisition
Date, our previously-held equity investments of $17 million were
remeasured at a fair value of $59 million, which resulted in a gain
of $42 million. The gain was recorded in "Other income (expense),
net" in our Consolidated Statements of Operations for the nine
months ended September 30, 2022.
|
|
|
|
3.
|
On April 1, 2022, we
acquired a 34.5 megawatt power generation facility in Senneterre
(Quebec) for $8 million, including a contingent consideration.
With this acquisition, we will maximize the use of biomass from our
regional operations.
|
|
|
|
4.
|
Other income (expense),
net for the three and nine months ended September 30, 2022 and
2021, was comprised of the following:
|
|
|
|
Three Months
Ended
September
30,
|
|
Nine Months
Ended
September
30,
|
|
(Unaudited, in
millions)
|
2022
|
|
2021
|
|
|
2022
|
|
2021
|
|
|
Foreign exchange
gain
|
$
|
37
|
|
$
|
12
|
|
|
$
|
45
|
|
$
|
1
|
|
|
Gain (loss)
on commodity contracts
(1)
|
|
—
|
|
|
1
|
|
|
|
1
|
|
|
(85)
|
|
|
Income from equity
method investments
|
|
—
|
|
|
8
|
|
|
|
7
|
|
|
12
|
|
|
Gain
on previously-held equity investments
(see Note 2 above)
|
|
—
|
|
|
—
|
|
|
|
42
|
|
|
—
|
|
|
Miscellaneous
expense
|
|
—
|
|
|
(1)
|
|
|
|
—
|
|
|
(2)
|
|
|
$
|
37
|
|
$
|
20
|
|
|
$
|
95
|
|
$
|
(74)
|
|
|
(1)
|
The loss for the nine
months ended September 30, 2021, was principally related to lumber
futures contracts; none of these contracts were outstanding as of
September 30, 2022 and 2021.
|
|
|
|
5.
|
During the second
quarter of 2022, after evaluating all available positive and
negative evidence, although realization is not assured, we
determined that it is more likely than not that the $105 million of
the U.S. deferred income tax assets released during the second
quarter, will be realized in the future prior to
expiration.
|
|
|
|
6.
|
On October 6, 2022, a
fire started at our Menominee (Michigan) recycled pulp mill, which
resulted in the temporary idling of the facility. We cannot yet
estimate the extent of the losses, but aim to restart the mill in
the coming months. We maintain insurance coverage for the mill,
which is subject to customary deductible and limits.
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RESOLUTE FOREST PRODUCTS INC.
Note to the
Reconciliations of Non-GAAP Measures
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1.
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Operating income, net
income and net income per diluted 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 and paper)
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").
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We calculate operating
income, as adjusted for special items, as operating income from our
Consolidated Statements of Operations, adjusted for items such as
closure costs, impairment and other related charges and gains or
losses on disposition of assets that are excluded from our
segment's performance from GAAP operating income.
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We calculate net
income, as adjusted for special items, as net income from our
Consolidated Statements of Operations, adjusted for the same
special items applied to operating income, in addition to
non-operating pension and other postretirement benefit costs and
credits, other income and expense, net, U.S. deferred income tax
asset valuation allowance reversal (to offset future projected tax
implications of the global intangible low-taxed income inclusion),
and the income tax effect of special items.
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EPS, as adjusted for
special items, is calculated as net income, as adjusted for special
items, per diluted share.
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EBITDA by reportable
segment is calculated as net income (loss) including noncontrolling
interest from the Consolidated Statements of Operations, allocated
to each of our reportable segments, adjusted for depreciation and
amortization. Net income (loss) including non-controlling interest
is equal to operating income (loss) for the segments. EBITDA for
corporate and other is calculated as net income (loss) including
noncontrolling interest from the Consolidated Statements of
Operations, after the allocation to reportable segments, adjusted
for interest expense, income taxes, and depreciation and
amortization.
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Adjusted EBITDA means
EBITDA, excluding the same special items (excluding tax items)
applied to net income (loss).
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We define net cash as
cash and cash equivalents less total debt.
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Liquidity is calculated
as cash and cash equivalents from our Consolidated Balance Sheets,
and availability under our credit facilities.
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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, net
income, 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.
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View original
content:https://www.prnewswire.com/news-releases/resolute-reports-third-quarter-2022-results-301668357.html
SOURCE Resolute Forest Products Inc.