Resolute Forest Products Reports Preliminary 4th Quarter and 2011 Results

Feb. 9, 2012 - AbitibiBowater Inc., doing business as Resolute Forest Products, today reported net income of $41 million for the year ended December 31, 2011, or $0.42 per share, on sales of $4.8 billion, compared with net income of $2.6 billion, or $27.63 per share, on sales of $4.7 billion in the year ended December 31, 2010. Net loss for the fourth quarter of 2011 was $6 million, or $(0.06) per share, on sales of $1.1 billion, compared with net income of $4.2 billion, or $44.82 per share, on sales of $1.3 billion in the fourth quarter of 2010.

Excluding $125 million of special items described below, net income for the full year was $166 million, or $1.71 per share. Excluding special items of $51 million, net income in the fourth quarter was $45 million, or $0.46 per share. For the full year 2010, net loss excluding special items was $831 million, or $(8.78) per share, and $235 million, or $(2.49) per share, in the fourth quarter 2010.

"Lower demand and weaker pricing for kraft pulp had the most significant impact on fourth quarter results," said Richard Garneau, president and chief executive officer. "We continued our strategy of controlling finished goods inventory by taking market-related downtime to offset the slowdown in demand caused by recent economic uncertainty. These proactive steps demonstrate our focus on profitability and sustainability as we build organizational momentum in spite of the challenging economic climate."

Description of Special Items

Special items, net of tax, for the fourth quarter include:

  • $48 million non-cash charge for reorganization-related tax adjustments
  • $13 million non-cash gain on translation of Canadian dollar net monetary assets
  • $9 million charge for post-emergence expenses
  • $6 million charge related to asset impairment and closure costs
  • $5 million of income from other items
  • $4 million charge in connection with the proposed acquisition of Fibrek Inc.
  • $2 million charge for inventory write-downs

Special items, net of tax, for the year ended December 31, 2011, include:

  • $38 million non-cash charge for reorganization-related tax adjustments
  • $34 million charge for post-emergence expenses
  • $32 million charge related to asset impairment and closure costs
  • $23 million non-cash charge on translation of Canadian dollar net monetary assets
  • $14 million of income from other items
  • $8 million severance charge
  • $4 million charge in connection with the proposed acquisition of Fibrek Inc.
  • $2 million charge for inventory write-downs
  • $2 million gain related to the sale of assets

Special items, net of tax, for the year ended December 31, 2010, include:

  • $3,510 million gain related to reorganization items
  • $97 million non-cash charge on translation of Canadian dollar net monetary assets
  • $30 million gain related to the sale of assets
  • $11 million charge related to asset impairment and closure costs
  • $8 million gain for the reversal of a severance charge
  • $5 million of income from other items

Non-GAAP financial measures, such as adjustments for special items, are reconciled below.

QUARTERLY SEGMENT DETAILS

Newsprint
The newsprint segment generated operating income of $26 million in the fourth quarter, an $8 million increase over the third quarter. The increase resulted from improved operating costs primarily due to a lower Canadian dollar, offset in part by a decrease in shipments. Considering the more competitive international newsprint market, the Company grew the proportion of its domestic newsprint sales in the quarter, where industry capacity reductions have offset the secular decline. Overall average transaction prices remained stable.

Coated Papers
Operating income in the coated papers segment was $13 million in the fourth quarter, a $5 million decrease from the previous quarter. The decrease stems from a 4% reduction in shipments and a $16 per short ton decrease in average transaction price, demonstrating the effects of weaker seasonal demand. In response, the Company met its inventory target by taking production downtime during the quarter.

Specialty Papers
The specialty papers segment generated operating income of $24 million in the fourth quarter, a $3 million reduction from the previous quarter, reflecting the positive effects of a lower Canadian dollar, offset by lower shipments and higher maintenance costs. Average transaction pricing was flat quarter-over-quarter.

Market Pulp
Operating income in the market pulp segment was down $24 million from the third quarter to $12 million in the fourth. Building on the downward momentum that began in the third quarter, average market pulp transaction pricing decreased $67 per metric ton in the quarter and shipments were down 14%. The Company responded to lower demand in North America and Western Europe by taking over 50,000 metric tons of production downtime to maintain inventory levels.

Wood Products
The wood products segment reported an operating loss of $5 million in the fourth quarter, a $2 million increase in the loss from the third quarter. The average lumber transaction price decreased by over $18 per thousand board feet and shipments were down 5% quarter-over-quarter, due to seasonal slowdown for building products and a continued weak U.S. housing market, partly offset by the positive effects of the weaker Canadian dollar. Despite low pricing and a weak U.S. housing market, the wood products segment finished the year with positive EBITDA.

Finance Initiatives
"We redeemed $85 million of our senior secured notes while at the same time increasing cash by $74 million in the fourth quarter," said Jo-Ann Longworth, senior vice president and chief financial officer. "The $107 million working capital improvement, which allowed us to achieve this, resulted largely from our efforts to extend trade terms with our suppliers and to accelerate the collection of trade receivables and indirect tax refunds in Canada."

OUTLOOK

"We expect to see stable newsprint pricing in the Americas, but continued pressure in other U.S. dollar-based export newsprint markets as long as the combination of low ONP prices and a strong U.S. dollar continues," said Garneau. "Pricing in the market pulp segment appears to be stabilizing, but the timing of any improvement from current lows is uncertain. Demand for specialty grades may be weaker as a result of the weak economic recovery. Our network of lower-cost assets and a strong balance sheet give us a strategic edge as the global economy heads into an uncertain 2012."

Resolute Forest Products is a global leader in the forest products industry with a diverse range of products, including newsprint, commercial printing papers, market pulp and wood products. The Company owns or operates 18 pulp and paper mills and 23 wood products facilities in the United States, Canada and South Korea. Marketing its products in close to 90 countries, Resolute Forest Products has third-party certified 100% of its managed woodlands to sustainable forest management standards. The shares of Resolute Forest Products, formerly doing business as AbitibiBowater, trade under the stock symbol ABH on both the New York Stock Exchange and the Toronto Stock Exchange.

SOURCE: Resolute Forest Products