US $
- Q2 GAAP net income of $256
million / $3.29 per diluted
share
- Adjusted EBITDA of $260
million
- Net cash position at $53
million and liquidity at $1.3
billion at quarter-end
- GHG emissions reduction targets approved by the Science
Based Targets initiative (SBTi)
- Entered into agreement to be acquired by Paper Excellence
Group
MONTRÉAL, Aug. 4, 2022
/CNW Telbec/ - Resolute Forest Products Inc. (NYSE: RFP) (TSX: RFP)
today reported net income for the quarter ended June 30 of $256
million, or $3.29 per diluted
share, compared to net income of $268
million, or $3.34 per diluted
share, in the same period in 2021. Sales were $1,058 million in the quarter, a decrease of
$82 million from the year-ago period.
Excluding special items, the company reported net income of
$155 million, or $2.00 per diluted share, compared to net income
of $300 million, or $3.74 per diluted share, in the second 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 $217 million in the quarter, compared to
$235 million in the first quarter.
The $18 million variation mainly
reflects higher shipments ($47
million) across all segments, more than offset by higher
manufacturing costs ($55 million),
mainly related to fiber ($25 million)
and maintenance ($19 million) costs,
as well as energy prices ($7
million). The overall impact of pricing was neutral as
higher realized transaction prices in the pulp and paper segments
were offset by lower average transaction prices in the wood
products segment. The company also recorded higher freight
($8 million) and selling, general and
administrative expenses ($4
million).
Segment Operating Income
Variance
Wood Products
The wood products segment generated operating income of
$180 million in the quarter,
$39 million lower than the previous
quarter. The average transaction price fell to $931 per thousand board feet, a decrease of
$91 per thousand board feet, or 9%,
reflecting lower benchmark lumber prices, despite the positive
impact of consolidating engineered wood products in the segment's
sales following the acquisition of the remaining 50% equity
interest in Resolute-LP Engineered Wood Larouche Inc. and
Resolute-LP Engineered Wood St-Prime Limited Partnership. Shipments
rose by 65 million board feet, but finished goods inventory
increased by 16 million board feet, to 239 million board feet,
reflecting continued challenges with rail car availability. The
operating cost per unit (or, "delivered cost") rose by
$43 per thousand board feet, or 8%,
mainly reflecting higher log costs due to stumpage fees and fuel
price. EBITDA in the segment slipped by $39
million, to $191 million.
Market Pulp
Operating income in the market pulp segment was $41 million in the second quarter, $19 million higher than in the prior quarter. The
average transaction price increased by $117 per metric ton, or 14%, due to stronger
market conditions. Shipments were 29,000 metric tons higher,
helping to reduce finished goods inventory by 14,000 metric tons to
68,000 metric tons at quarter-end. The delivered cost rose by
$42 per metric ton, mainly due to
higher maintenance and fiber costs. EBITDA in the segment improved
by $22 million, to $48 million.
Tissue
The tissue segment incurred an operating loss of $9 million in the quarter, in line with the first
quarter. The average transaction price increased by $84 per short ton, or 4%, on rising market
pricing. Shipments were 1,000 short tons higher and finished goods
inventory fell by 2,000 short tons. The delivered cost increased by
$126 per short ton, or 6%, mostly due
to higher market pulp prices. EBITDA in the segment fell by
$1 million, to negative $5 million.
Paper
The paper segment recorded operating income of $37 million in the quarter, an improvement of
$12 million over the previous
quarter. The average transaction price rose by $35 per metric ton, or 5%, due to stronger market
conditions in all grades. Shipments rose by 29,000 metric tons,
helping to reduce finished goods inventory by 18,000 metric tons to
67,000 metric tons at quarter-end. The delivered cost increased by
$11 per metric ton, or 2%, mainly due
to higher freight and maintenance costs. EBITDA improved by
$13 million, to $47 million.
Consolidated Quarterly Operating
Income Variance Against Year-Ago Period
The $217 million of operating
income reported in the second quarter was $189 million lower than the comparable quarter of
2021. The variance includes higher selling prices for the pulp,
paper and tissue segments ($108
million), more than offset by lower selling prices for wood
($157 million) and lower shipments as
a result of logistics constraints ($17
million). The company faced higher manufacturing costs
($104 million), mainly related to
fiber costs ($42 million),
maintenance, labor and outside service costs ($31 million) and energy prices ($25 million), as well as higher freight costs
($25 million). It also
benefitted from a lower Canadian dollar ($8
million).
Corporate, Cash and
Liquidity
The company generated $281 million
of cash from operating activities in the quarter, and it invested
$24 million, net, in fixed assets,
for a total of $37 million in the
first six months of the year.
With $355 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 $53 million.
By quarter-end, the company recorded cumulative softwood lumber
duty deposits of $500 million on the
balance sheet, including $60 million
paid in the quarter.
The company also determined that it is more likely than not that
$105 million of the U.S. net deferred
income tax assets will be fully realized in the future prior to
expiration, which resulted in a valuation allowance reversal and
related income tax benefit during the quarter.
On July 6, Resolute and Paper
Excellence Group, through its wholly-owned subsidiary Domtar
Corporation, announced that they have entered into an agreement
under which the latter will acquire all of the outstanding common
shares of Resolute stock. The company expects the transaction to
close in the first half of 2023, following stockholder and
regulatory approvals, and satisfaction of other customary closing
conditions. For additional information on the transaction, please
see Resolute's current reports on Form 8-K filed on July 6 and July 7,
2022 with the U.S. Securities and Exchange Commission (or,
the "SEC"). A full description of the transaction will be outlined
in the proxy statement of Resolute to be filed with 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.
Earnings Conference Call
Due to the pending transaction with Paper Excellence Group, the
company will not host a second quarter 2022 earnings conference
call.
Description of Special
Items
|
Special
items
|
Second
quarter
|
|
(in
millions)
|
|
2022
|
|
2021
|
|
|
Closure costs,
impairment and
other related charges
|
$
|
5
|
$
|
(1)
|
|
|
Net loss on disposition
of assets
|
|
3
|
|
-
|
|
|
Non-operating pension
and other
postretirement benefit costs
(credits)
|
|
3
|
|
(3)
|
|
|
Other (income) expense,
net
|
|
(13)
|
|
49
|
|
|
U.S. deferred income
tax asset
|
|
(105)
|
|
-
|
|
|
valuation allowance
reversal
|
|
Income tax effect of
special items
|
|
6
|
|
(13)
|
|
|
Total
|
$
|
(101)
|
$
|
32
|
|
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; the estimated
expenditures relating to the indefinite idling of the pulp and
paper operations at Calhoun
(Tennessee); 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," "believe," "see," "anticipate,"
"continue," "contribute," "position," "maintain," "remain,"
"increase," "plan," "grow," "enhance," "seek," "provide,"
"support," "estimate," "maximize" 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 and 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, 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
June
30,
|
Six Months Ended
June 30,
|
|
2022
|
2021
|
2022
|
2021
|
|
Sales
|
$
|
1,058
|
|
$
|
1,140
|
|
$
|
2,003
|
|
$
|
2,013
|
|
|
Costs and
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales,
excluding depreciation, amortization and distribution
costs
|
|
647
|
|
|
566
|
|
|
1,194
|
|
|
1,088
|
|
|
Depreciation and
amortization
|
|
35
|
|
|
40
|
|
|
67
|
|
|
81
|
|
|
Distribution
costs
|
|
111
|
|
|
93
|
|
|
203
|
|
|
177
|
|
|
Selling, general and
administration expenses
|
|
40
|
|
|
36
|
|
|
76
|
|
|
82
|
|
|
Closure costs,
impairment and other related charges
|
|
5
|
|
|
(1)
|
|
|
9
|
|
|
2
|
|
|
Net loss on
disposition of assets
|
|
3
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
Operating income
|
|
217
|
|
|
406
|
|
|
452
|
|
|
583
|
|
|
Interest
expense
|
|
(6)
|
|
|
(5)
|
|
|
(11)
|
|
|
(11)
|
|
|
Non-operating pension
and other postretirement benefit (costs) credits
|
|
(3)
|
|
|
3
|
|
|
(10)
|
|
|
5
|
|
|
Other income (expense),
net (2)
|
|
13
|
|
|
(49)
|
|
|
58
|
|
|
(94)
|
|
|
Income before income taxes
|
|
221
|
|
|
355
|
|
|
489
|
|
|
483
|
|
|
Income tax benefit
(provision) (3)
|
|
35
|
|
|
(87)
|
|
|
(23)
|
|
|
(127)
|
|
|
Net income including noncontrolling
interest
|
|
256
|
|
|
268
|
|
|
466
|
|
|
356
|
|
|
Net income attributable
to noncontrolling interest
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1)
|
|
|
Net income attributable to Resolute Forest Products
Inc.
|
$
|
256
|
|
$
|
268
|
|
$
|
466
|
|
$
|
355
|
|
|
Net income per share attributable to Resolute Forest
Products Inc.
common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
3.32
|
|
$
|
3.37
|
|
$
|
6.02
|
|
$
|
4.42
|
|
|
Diluted
|
$
|
3.29
|
|
$
|
3.34
|
|
$
|
5.97
|
|
$
|
4.39
|
|
|
Weighted-average number of Resolute Forest Products
Inc.
common shares
outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
77.5
|
|
|
79.5
|
|
|
77.4
|
|
|
80.4
|
|
|
Diluted
|
|
78.2
|
|
|
80.3
|
|
|
78.2
|
|
|
81.1
|
|
|
See Notes to the
Unaudited Consolidated Financial Statement Information
|
|
RESOLUTE FOREST
PRODUCTS INC.
CONSOLIDATED BALANCE
SHEETS
(Unaudited, in millions of U.S.
dollars)
|
|
|
June 30,
|
December
31,
|
|
2022
|
|
2021
|
|
|
Assets
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
355
|
|
$
|
112
|
|
|
Accounts receivable,
net:
|
|
|
|
|
|
|
|
Trade
|
|
314
|
|
|
257
|
|
|
Other
|
|
53
|
|
|
56
|
|
|
Inventories,
net
|
|
599
|
|
|
510
|
|
|
Other current
assets
|
|
58
|
|
|
54
|
|
|
Total current assets
|
|
1,379
|
|
|
989
|
|
|
Fixed assets,
net
|
|
1,274
|
|
|
1,270
|
|
|
Amortizable intangible
assets, net
|
|
56
|
|
|
57
|
|
|
Goodwill
(1)
|
|
85
|
|
|
31
|
|
|
Deferred income tax
assets
|
|
615
|
|
|
653
|
|
|
Operating lease
right-of-use assets
|
|
56
|
|
|
54
|
|
|
Other assets
|
|
572
|
|
|
484
|
|
|
Total assets
|
$
|
4,037
|
|
$
|
3,538
|
|
|
Liabilities and equity
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
Accounts payable and
other
|
$
|
491
|
|
$
|
421
|
|
|
Current portion of
long-term debt
|
|
2
|
|
|
2
|
|
|
Current portion of
operating lease liabilities
|
|
8
|
|
|
8
|
|
|
Total current liabilities
|
|
501
|
|
|
431
|
|
|
Long-term debt, net of
current portion
|
|
300
|
|
|
300
|
|
|
Pension and other
postretirement benefit obligations
|
|
1,070
|
|
|
1,151
|
|
|
Deferred income tax
liabilities
|
|
2
|
|
|
—
|
|
|
Operations lease
liabilities, net of current portion
|
|
52
|
|
|
51
|
|
|
Other
liabilities
|
|
90
|
|
|
88
|
|
|
Total liabilities
|
|
2,015
|
|
|
2,021
|
|
|
Equity:
|
|
|
|
|
|
|
|
Resolute Forest
Products Inc. shareholders' equity:
|
|
|
|
|
|
|
|
Common
stock
|
|
—
|
|
|
—
|
|
|
Additional paid-in
capital
|
|
3,811
|
|
|
3,807
|
|
|
Deficit
|
|
(543)
|
|
|
(1,009)
|
|
|
Accumulated other
comprehensive loss
|
|
(1,025)
|
|
|
(1,062)
|
|
|
Treasury stock at
cost
|
|
(224)
|
|
|
(222)
|
|
|
Total Resolute Forest Products Inc. shareholders'
equity
|
|
2,019
|
|
|
1,514
|
|
|
Noncontrolling
interest
|
|
3
|
|
|
3
|
|
|
Total equity
|
|
2,022
|
|
|
1,517
|
|
|
Total liabilities and equity
|
$
|
4,037
|
|
$
|
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)
|
|
|
Six Months Ended
June 30,
|
|
|
2022
|
|
|
2021
|
|
Cash flows from operating
activities:
|
|
|
|
|
|
|
Net income including
noncontrolling interest
|
$
|
466
|
|
$
|
356
|
|
Adjustments to
reconcile net income including noncontrolling interest to net cash
provided by operating activities:
|
|
|
|
|
|
|
Share-based
compensation
|
|
5
|
|
|
3
|
|
Depreciation and
amortization
|
|
67
|
|
|
81
|
|
Closure costs,
impairment and other related charges
|
|
2
|
|
|
—
|
|
Deferred income
taxes
|
|
20
|
|
|
127
|
|
Net pension
contributions and other postretirement benefit payments
|
|
(24)
|
|
|
(47)
|
|
Gain on
previously-held equity investments (1)
|
|
(42)
|
|
|
—
|
|
Net loss on
disposition of assets
|
|
2
|
|
|
—
|
|
Loss (gain) on
translation of foreign currency denominated deferred income
taxes
|
|
10
|
|
|
(24)
|
|
(Gain) loss on
translation of foreign currency denominated pension and other
postretirement benefit obligations
|
|
(15)
|
|
|
32
|
|
Net planned major
maintenance amortization (payments)
|
|
14
|
|
|
(9)
|
|
Changes in working
capital:
|
|
|
|
|
|
|
Accounts
receivable
|
|
(49)
|
|
|
(61)
|
|
Inventories
|
|
(69)
|
|
|
(30)
|
|
Other current
assets
|
|
(14)
|
|
|
(2)
|
|
Accounts payable and
other
|
|
63
|
|
|
36
|
|
Other, net
|
|
(8)
|
|
|
13
|
|
Net cash provided by
operating activities
|
|
428
|
|
|
475
|
|
Cash flows from investing
activities:
|
|
|
|
|
|
|
Cash invested in fixed
assets
|
|
(37)
|
|
|
(47)
|
|
Acquisitions of
businesses, net of cash acquired (1)
|
|
(50)
|
|
|
—
|
|
Disposition of
assets
|
|
5
|
|
|
—
|
|
Increase in
countervailing and anti-dumping duty cash deposits on softwood
lumber
|
|
(103)
|
|
|
(89)
|
|
Other investing
activities, net
|
|
—
|
|
|
3
|
|
Net cash used in
investing activities
|
|
(185)
|
|
|
(133)
|
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
Issuance of long-term
debt
|
|
—
|
|
|
300
|
|
Repayments of
debt
|
|
(1)
|
|
|
(557)
|
|
Purchases of treasury
stock
|
|
(2)
|
|
|
(20)
|
|
Payments of financing
fees
|
|
—
|
|
|
(7)
|
|
Other financing
activities, net
|
|
—
|
|
|
2
|
|
Net cash used in
financing activities
|
|
(3)
|
|
|
(282)
|
|
Effect of exchange rate
changes on cash and cash equivalents, and restricted
cash
|
|
(2)
|
|
|
—
|
|
Net increase in cash
and cash equivalents, and restricted cash
|
$
|
238
|
|
$
|
60
|
|
Cash and cash equivalents, and restricted
cash:
|
|
|
|
|
|
|
Beginning of
period
|
$
|
152
|
|
$
|
159
|
|
End of
period
|
$
|
390
|
|
$
|
219
|
|
Cash and cash equivalents, and restricted cash at end
of period:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
355
|
|
$
|
177
|
|
Restricted cash
(included in "Other assets")
|
$
|
35
|
|
$
|
42
|
|
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 June 30,
2022
|
Operating
income
|
Net income
|
EPS
|
|
(Unaudited, in millions of U.S. dollars, except per
share amounts)
|
|
GAAP, as reported
|
$
|
217
|
|
$
|
256
|
|
$
|
3.29
|
|
|
Adjustments for special
items:
|
|
|
|
|
|
|
|
|
|
|
Closure costs,
impairment and other related charges
|
|
5
|
|
|
5
|
|
|
0.06
|
|
|
Net loss on
disposition of assets
|
|
3
|
|
|
3
|
|
|
0.04
|
|
|
Non-operating pension
and other postretirement benefit costs
|
|
—
|
|
|
3
|
|
|
0.04
|
|
|
Other income,
net
|
|
—
|
|
|
(13)
|
|
|
(0.17)
|
|
|
U.S. deferred income
tax asset valuation allowance reversal
|
|
—
|
|
|
(105)
|
|
|
(1.34)
|
|
|
Income tax effect of
special items
|
|
—
|
|
|
6
|
|
|
0.08
|
|
|
Adjusted for special items
|
$
|
225
|
|
$
|
155
|
|
$
|
2.00
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
2021
|
Operating
income
|
Net income
|
EPS
|
|
(Unaudited, in millions of U.S. dollars, 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
|
$
|
405
|
|
$
|
300
|
|
$
|
3.74
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2022
|
Operating
income
|
Net income
|
EPS
|
|
(Unaudited, in millions of U.S. dollars, except per
share amounts)
|
|
GAAP, as reported
|
$
|
452
|
|
$
|
466
|
|
$
|
5.97
|
|
|
Adjustments for special
items:
|
|
|
|
|
|
|
|
|
|
|
Closure costs,
impairment and other related charges
|
|
9
|
|
|
9
|
|
|
0.11
|
|
|
Net loss on
disposition of assets
|
|
2
|
|
|
2
|
|
|
0.03
|
|
|
Non-operating pension
and other postretirement benefit costs
|
|
—
|
|
|
10
|
|
|
0.13
|
|
|
Other income,
net
|
|
—
|
|
|
(58)
|
|
|
(0.74)
|
|
|
U.S. deferred income
tax asset valuation allowance reversal
|
|
—
|
|
|
(105)
|
|
|
(1.34)
|
|
|
Income tax effect of
special items
|
|
—
|
|
|
8
|
|
|
0.10
|
|
|
Adjusted for special items
|
$
|
463
|
|
$
|
332
|
|
$
|
4.26
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2021
|
Operating
income
|
Net income
|
EPS
|
|
(Unaudited, in millions of U.S. dollars, except per
share amounts)
|
|
GAAP, as reported
|
$
|
583
|
|
$
|
355
|
|
$
|
4.39
|
|
|
Adjustments for special
items:
|
|
|
|
|
|
|
|
|
|
|
Closure costs,
impairment and other related charges
|
|
2
|
|
|
2
|
|
|
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
|
$
|
585
|
|
$
|
419
|
|
$
|
5.18
|
|
|
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 June 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
|
$ 41
|
|
$
(9)
|
|
$
180
|
|
$ 37
|
|
$
7
|
|
$
256
|
|
Interest
expense
|
|
|
|
|
|
|
|
|
6
|
|
6
|
|
Income tax
benefit
|
|
|
|
|
|
|
|
|
(35)
|
|
(35)
|
|
Depreciation and
amortization
|
7
|
|
4
|
|
11
|
|
10
|
|
3
|
|
35
|
|
EBITDA
|
$ 48
|
|
$
(5)
|
|
$
191
|
|
$ 47
|
|
$ (19)
|
|
$
262
|
|
Closure costs,
impairment and other related charges
|
|
|
|
|
|
|
|
|
5
|
|
5
|
|
Net loss on disposition
of assets
|
|
|
|
|
|
|
|
|
3
|
|
3
|
|
Non-operating pension
and other postretirement benefit costs
|
|
|
|
|
|
|
|
|
3
|
|
3
|
|
Other income,
net
|
|
|
|
|
|
|
|
|
(13)
|
|
(13)
|
|
Adjusted EBITDA
|
$ 48
|
|
$
(5)
|
|
$
191
|
|
$ 47
|
|
$ (21)
|
|
$
260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 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
|
$ 30
|
|
$
(7)
|
|
$
405
|
|
$
(7)
|
|
$
(153)
|
|
$
268
|
|
Interest
expense
|
|
|
|
|
|
|
|
|
5
|
|
5
|
|
Income tax
provision
|
|
|
|
|
|
|
|
|
87
|
|
87
|
|
Depreciation and
amortization
|
6
|
|
4
|
|
10
|
|
16
|
|
4
|
|
40
|
|
EBITDA
|
$ 36
|
|
$
(3)
|
|
$
415
|
|
$
9
|
|
$ (57)
|
|
$
400
|
|
Closure costs,
impairment and other related charges
|
|
|
|
|
|
|
|
|
(1)
|
|
(1)
|
|
Non-operating pension
and other postretirement benefit credits
|
|
|
|
|
|
|
|
|
(3)
|
|
(3)
|
|
Other expense,
net
|
|
|
|
|
|
|
|
|
49
|
|
49
|
|
Adjusted EBITDA
|
$ 36
|
|
$
(3)
|
|
$
415
|
|
$
9
|
|
$ (12)
|
|
$
445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 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
|
$ 63
|
|
$ (18)
|
|
$
399
|
|
$ 62
|
|
$ (40)
|
|
$
466
|
|
Interest
expense
|
|
|
|
|
|
|
|
|
11
|
|
11
|
|
Income tax
provision
|
|
|
|
|
|
|
|
|
23
|
|
23
|
|
Depreciation and
amortization
|
11
|
|
9
|
|
22
|
|
19
|
|
6
|
|
67
|
|
EBITDA
|
$ 74
|
|
$
(9)
|
|
$
421
|
|
$ 81
|
|
$ —
|
|
$
567
|
|
Closure costs,
impairment and other related charges
|
|
|
|
|
|
|
|
|
9
|
|
9
|
|
Net loss on disposition
of assets
|
|
|
|
|
|
|
|
|
2
|
|
2
|
|
Non-operating pension
and other postretirement benefit costs
|
|
|
|
|
|
|
|
|
10
|
|
10
|
|
Other income,
net
|
|
|
|
|
|
|
|
|
(58)
|
|
(58)
|
|
Adjusted EBITDA
|
$ 74
|
|
$
(9)
|
|
$
421
|
|
$ 81
|
|
$ (37)
|
|
$
530
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 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
|
$ 34
|
|
$
(9)
|
|
$
626
|
|
$ (31)
|
|
$
(264)
|
|
$
356
|
|
Interest
expense
|
|
|
|
|
|
|
|
|
11
|
|
11
|
|
Income tax
provision
|
|
|
|
|
|
|
|
|
127
|
|
127
|
|
Depreciation and
amortization
|
12
|
|
9
|
|
21
|
|
31
|
|
8
|
|
81
|
|
EBITDA
|
$ 46
|
|
$ —
|
|
$
647
|
|
$ —
|
|
$
(118)
|
|
$
575
|
|
Closure costs,
impairment and other related charges
|
|
|
|
|
|
|
|
|
2
|
|
2
|
|
Non-operating pension
and other postretirement benefit credits
|
|
|
|
|
|
|
|
|
(5)
|
|
(5)
|
|
Other expense,
net
|
|
|
|
|
|
|
|
|
94
|
|
94
|
|
Adjusted EBITDA
|
$ 46
|
|
$ —
|
|
$
647
|
|
$ —
|
|
$ (27)
|
|
$
666
|
|
|
|
RESOLUTE FOREST
PRODUCTS INC.
Notes to the Unaudited Consolidated
Financial Statement Information
|
|
|
|
1.
|
On April 1, 2022, we
acquired a 34.5 megawatt cogeneration 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.
|
|
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), subject to post-closing adjustments.
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 six months ended June 30, 2022.
|
|
2.
|
Other income (expense),
net for the three and six months ended June 30, 2022 and 2021, was
comprised of the following:
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
(Unaudited, in
millions)
|
2022
|
|
2021
|
|
|
2022
|
|
2021
|
|
|
Foreign exchange gain
(loss)
|
$
|
11
|
|
$
|
(6)
|
|
|
$
|
8
|
|
$
|
(11)
|
|
|
(Loss) gain on
commodity contracts (1)
|
|
—
|
|
|
(49)
|
|
|
|
2
|
|
|
(86)
|
|
|
Income from equity
method investments
|
|
1
|
|
|
4
|
|
|
|
7
|
|
|
4
|
|
|
Gain on previously-held
equity investments (see Note 1 above)
|
|
1
|
|
|
—
|
|
|
|
42
|
|
|
—
|
|
|
Miscellaneous income
(expense)
|
|
—
|
|
|
2
|
|
|
|
(1)
|
|
|
(1)
|
|
|
$
|
13
|
|
$
|
(49)
|
|
|
$
|
58
|
|
$
|
(94)
|
|
|
(1)
|
The losses for the
three and six months ended June 30, 2021, were
principally related to lumber futures
contracts; none of these contracts were outstanding as of
June 30, 2022 and 2021.
|
|
|
|
3.
|
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 $105 million of the
U.S. net deferred income tax assets released during the quarter,
will be realized in the future prior to expiration.
|
|
4.
|
The following
significant event occurred subsequent to June 30, 2022:
|
|
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 tax and withholding. 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.
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The Board has
unanimously approved the Transaction. The Transaction is subject to
stockholder approval of the majority of the outstanding shares of
Resolute at a stockholders' meeting (or, the "Special
Meeting") to be held in early fall. In addition to stockholder
approval, the Transaction is subject to applicable regulatory
approvals and the satisfaction of certain other customary closing
conditions. A significant stockholder of Resolute, which holds
approximately 40% of the outstanding shares, has entered into a
voting and support agreement to vote its shares in favor of the
Transaction. The Transaction is expected to close in the first half
of 2023.
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Further information
regarding the Transaction will be included in the proxy statement
that will be sent to stockholders in advance of the Special
Meeting.
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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
total debt less cash and cash equivalents.
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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-second-quarter-2022-results-301600463.html
SOURCE Resolute Forest Products Inc.