Domtar: 234 Kingsley Park Drive

The following excerpt is from the company's SEC filing.

Fort Mill, South Carolina 29715

News Release

TICKER SYMBOL

Investor RELATIONS

MEDIA RELATIONS

(NYSE: UFS) (TSX: UFS)

Nicholas Estrela

Director

Investor Relations

Tel.: 514-848-5049

David Struhs

Vice-President

Corporate Services and Sustainability

Tel.: 803-802-8031

DOMTAR CORPORATION REPORTS PRELIMINARY FIRST QUARTER 2019 FINANCIAL RESULTS

Price and volume momentum in Paper drive strong results

(All financial information is in U.S. dollars, and all earnings per share results are diluted, unless otherwis e noted).

First quarter 2019 net earnings of $1.27 per share; earnings before items

of $1.44 per share

Paper prices $30 per ton higher quarter-over-quarter

Paper shipments increased 2% quarter-over-quarter

Fort Mill, SC, May 1, 2019 – 

Domtar Corporation (NYSE: UFS) (TSX: UFS) today reported net earnings of $80 million ($1.27 per share) for the first quarter of 2019 compared to net earnings of $87 million ($1.38 per share) for the fourth quarter of 2018 and net earnings of $54 million ($0.86 per share) for the first quarter of 2018. Sales for the first quarter of 2019 were $1.4 billion.

Excluding items listed below, the Company had earnings before items

of $91 million ($1.44 per share) for the first quarter of 2019 compared to earnings before items

of $103 million ($1.63 per share) for the fourth quarter of 2018 and earnings before items

of $55 million ($0.87 per share) for the first quarter of 2018.

Description

Segment

Line item

Amount

After tax

effect

EPS impact

(per share)

(in millions)

Margin improvement

   plan

Personal Care

Impairment of property, plant

and equipment

Closure and

restructuring costs

Non-GAAP financial measure. Refer to the

Reconciliation of Non-GAAP Financial Measures

in the appendix.

Fourth quarter 2018

U.S. Tax Reform

Income tax expense

First quarter 2018

Litigation settlement

Other operating loss, net

Gain on disposal

   of property, plant

   and equipment

Pulp and Paper

Other operating income, net

QUARTERLY REVIEW

“We had a solid performance from Pulp and Paper despite a wood fiber shortage that negatively impacted costs and output,” said John D. Williams, President and Chief Executive Officer. “Price and volume momentum in paper continued in a favorable market environment, which led to strong productivity and a good cost performance. The pulp business was impacted by lower prices while higher internal pulp shipments due to wood fiber constraints negatively impacted our volumes. Nevertheless, we continued to improve and increase overall productivity and manage costs through saving initiatives.

Mr. Williams added, “In Personal Care, our margins improved driven by better productivity and operational efficiencies as our new customer ramp-up accelerates. We also successfully implemented price increases in both North America and Europe helping to partially offset raw material cost headwinds. Our teams continue to deliver on our margin improvement plan which is expected to progress throughout the year.”

Operating income was $115 million in the first quarter of 2019 compared to operating income of $133 million in the fourth quarter of 2018. Depreciation and amortization totaled $73 million in the first quarter of 2019.

Operating income before items

was $129 million in the first quarter of 2019 compared to an operating income before items

of $148 million in the fourth quarter of 2018.

  Non-GAAP financial measure. Refer to the

(In millions of dollars)

1Q 2019

4Q 2018

Operating income (loss)

Pulp and Paper segment

Personal Care segment

Total operating income

The decrease in operating income in the first quarter of 2019 was the result of higher selling, general and administrative expenses, higher raw material costs and lower volume in pulp. These factors were partially offset by higher average selling prices for paper, lower fixed and other costs and favorable exchange rates.

When compared to the fourth quarter of 2018, manufactured paper shipments were up 2% and pulp shipments decreased 12%. The shipments-to-production ratio for paper was 97% in the first quarter of 2019, compared to 95% in the fourth quarter of 2018. Paper inventories increased by 22,000 tons, and pulp inventories increased by 24,000 metric tons when compared to the fourth quarter of 2018.

LIQUIDITY AND CAPITAL

Cash flow from operating activities amounted to $55 million and capital expenditures were $46 million, resulting in free cash flow

of $9 million for the first quarter of 2019. Domtar’s net debt-to-total capitalization ratio

stood at 23% at March 31, 2019 and at December 31, 2018.

OUTLOOK

Our paper shipments should benefit from higher demand from our customers following the industry capacity closures while our paper prices will further improve as we continue to implement our recently announced price increases. The second quarter will be adversely affected by seasonally higher maintenance activity in our Pulp and Paper business as we move into the annual shutdowns at some of our major facilities. Personal Care is expected to benefit from our margin improvement plan and the ramp-up of a new customer, partially offset by further raw material cost inflation.

EARNINGS CONFERENCE CALL

The Company will hold a conference call today at 10:00 a.m. (ET) to discuss its first quarter 2019 financial results. Financial analysts are invited to participate in the call by dialing 1 (888) 394-8218 (toll free - North America) or 1 (323) 701-0225 (International) at least 10 minutes before start time, while media and other interested individuals are invited to listen to the live webcast on the Domtar Corporation website at

www.domtar.com

The Company will release its second quarter 2019 earnings results on August 1, 2019 before markets open, followed by a conference call at 10:00 a.m. (ET) to discuss results. The date is tentative and will

be confirmed approximately three weeks prior to the official earnings release date.

About Domtar  

Domtar is a leading provider of a wide variety of fiber-based products including communication, specialty and packaging papers, market pulp and absorbent hygiene products. With approximately 10,000 employees serving more than 50 countries around the world, Domtar is driven by a commitment to turn sustainable wood fiber into useful products that people rely on every day. Domtar’s annual sales are approximately $5.5 billion, and its common stock is traded on the New York and Toronto Stock Exchanges. Domtar’s principal executive office is in Fort Mill, South Carolina. To learn more, visit www.domtar.com

Forward-Looking Statements

Statements in this release about our plans, expectations and future performance, including the statements by Mr. Williams and those contained under “Outlook,” are “forward-looking statements.” Actual results may differ materially from those suggested by these statements for a number of reasons, including changes in customer demand and pricing, changes in manufacturing costs, future acquisitions and divestitures, including facility closings, and the other reasons identified under “Risk Factors” in our Form 10-K for 2018 as filed with the SEC and as updated by subsequently filed Form 10-Qs. Except to the extent required by law, we expressly disclaim any obligation to update or revise these forward-looking statements to reflect new events or circumstances or otherwise.

- (30) -

Highlights

(In millions of dollars, unless otherwise noted)

Three months ended

(Unaudited)

Selected Segment Information

Total for reportable segments

Intersegment sales

Consolidated sales

Impairment of property plant and equipment - Personal Care

Consolidated depreciation and amortization and

   impairment of property, plant and equipment

Consolidated operating income

Interest expense, net

Non-service components of net periodic benefit cost

Earnings before income taxes and equity loss

Equity loss, net of taxes

Net earnings

Per common share (in dollars)

Diluted

Weighted average number of common

    shares outstanding (millions)

Cash flows from operating activities

Additions to property, plant and equipment

Consolidated Statements of Earnings

Operating expenses

Cost of sales, excluding depreciation and amortization

Selling, general and administrative

Impairment of property, plant and equipment

Closure and restructuring costs

   shares outstanding (millions)

Consolidated Balance Sheets at

December 31,

Assets

Current assets

Cash and cash equivalents

Receivables, less allowances of $7 and $6

Inventories

Prepaid expenses

Income and other taxes receivable

Total current assets

Property, plant and equipment, net

Operating lease right-of-use assets

Intangible assets, net

Other assets

Total assets

Liabilities and shareholders' equity

Current liabilities

Bank indebtedness

Trade and other payables

Income and other taxes payable

Operating lease liabilities due within one year

Long-term debt due within one year

Total current liabilities

Deferred income taxes and other

Other liabilities and deferred credits

Shareholders' equity

Common stock

Additional paid-in capital

Retained earnings

Accumulated other comprehensive loss

Total shareholders' equity

Total liabilities and shareholders' equity

Consolidated Statements of Cash Flows

For the three months ended

March 31, 2018

Operating activities

Adjustments to reconcile net earnings to cash flows from operating activities

Deferred income taxes and tax uncertainties

Net gains on disposals of property, plant and equipment

Stock-based compensation expense

Changes in assets and liabilities

Difference between employer pension and other post-retirement

   contributions and pension and other post-retirement expense

Other assets and other liabilities

Investing activities

Proceeds from disposals of property, plant and equipment

Cash flows used for investing activities

Financing activities

Dividend payments

Net change in bank indebtedness

Proceeds from receivables securitization facility

Repayments of receivables securitization facility

Cash flows used for financing activities

Net (decrease) increase in cash and cash equivalents

Impact of foreign exchange on cash

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Supplemental cash flow information

Net cash payments for:

Income taxes

Quarterly Reconciliation of Non-GAAP Financial Measures

The following table sets forth certain non-U.S. generally accepted accounting principles (“GAAP”) financial metrics identified in bold as “Earnings before items”, “Earnings before items per diluted share”, “EBITDA”, “EBITDA margin”, “EBITDA before items”,

“EBITDA margin before items”, “Free cash flow”, “Net debt” and

“Net debt-to-total capitalization”. Management believes that the financial metrics are useful to understand our operating performance and benchmark with peers within the industry. The Company c

alculates “Earnings before items” and “EBITDA before items” by excluding the after-tax (pre-tax) effect of specified items. These metrics are presented as a complement to enhance the understanding of operating results but not in substitution for GAAP resul

Reconciliation of "Earnings before items" to Net earnings

Weighted avg. number of common shares outstanding (diluted)

Reconciliation of "EBITDA" and "EBITDA before items" to

   Net earnings

Reconciliation of "Free cash flow" to Cash flows from operating

"Net debt-to-total capitalization" computation

Total capitalization

“Earnings before items”, “Earnings before items per diluted share”, “EBITDA”, “EBITDA margin”, “EBITDA before items”, “EBITDA margin before items”, “Free cash flow”, “Net debt” and “Net debt-to-total capitalization” have no standardized meaning prescribed by GAAP and are not necessarily comparable to similar measures presented by other companies and therefore should not be considered in isolation or as a substitute for Net earnings or any other earnings statement, cash flow statement or balance sheet financial information prepared in accordance with GAAP. It is important for readers to understand that certain items may be presented in different lines by different companies on their financial statements, thereby leading to different measures for different companies.

Quarterly Reconciliation of Non-GAAP Financial Measures – By Segment 2019

The following table sets forth certain non-U.S. generally accepted accounting principles (“GAAP”) financial metrics identified in bold as “Operating income (l

oss) before items”, “EBITDA before items” and “EBITDA margin before items” by reportable segment. Management believes that the financial metrics are useful to understand our operating performance and benchmark with peers within the industry. The Company ca

lculates the segmented “Operating income (loss) before items” by excluding the pre-tax effect of specified items. These metrics are presented as a complement to enhance the understanding of operating results but not in substitution for GAAP results.

Reconciliation of Operating income (loss)

   to "Operating income (loss) before items"

Reconciliation of "Operating income (loss)

   before items" to "EBITDA before items"

“Operating income (loss) before items”, “EBITDA before items” and “EBITDA margin before items” have no standardized meaning prescribed by GAAP and are not necessarily comparable to similar measures presented by other companies and therefore should not be considered in isolation or as a substitute for Operating income (loss) or any other earnings statement, cash flow statement or balance sheet financial information prepared in accordance with GAAP. It is important for readers to understand that certain items may be presented in different lines by different companies on their financial statements, thereby leading to different measures for different companies.

Quarterly Reconciliation of Non-GAAP Financial Measures – By Segment 2018

The following table sets forth certain non-U.S. generally accepted accounting principles (“GAAP”) financial metrics identified in bold as “Operating income (loss) before items”, “EBITDA before items” and “EBITDA margin before items” by reportable segment.

Management believes that the financial metrics are useful to understand our operating performance and benchmark with peers within the industry. The Company calculates the segmented “Operating income (loss) before items” by excluding the pre-tax effect of s

   equipment

Supplemental Segmented Information

Pulp and Paper Segment

Paper Production

('000 ST)

Paper Shipments - Manufactured

Communication Papers

Specialty and Packaging Papers

Paper Shipments - Sourced from 3rd parties

Paper Shipments - Total

Pulp Shipments

('000 ADMT)

Pulp Shipments mix

Hardwood Kraft Pulp

Softwood Kraft Pulp

Fluff Pulp

Personal Care Segment

Operating (loss) income

Average Exchange Rates

/ $CAN

$CAN / $US

€ / $US

  Figures represent Pulp Shipments to third parties.

  Percentages include Pulp Shipments to our Personal Care segment.

Note: the term “ST” refers to a short ton and the term “ADMT” refers to an air dry metric ton.

The above information was disclosed in a filing to the SEC. To see the filing, click here.

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