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Last updated on April 16, 2014 at 6:43 EDT

Resolute Reports Preliminary Fourth Quarter and 2012 Results

February 12, 2013

US $

        --  2012 loss of $0.02 per share; earnings of $0.81 per share
            excluding special items
        --  Q4 adjusted EBITDA of $104 million; $386 million for the year
        --  Net debt of $271 million
        --  Cash flow from operations of $266 million in 2012

MONTREAL, Feb. 12, 2013 /PRNewswire/ – Resolute Forest Products Inc.
(NYSE: RFP) (TSX: RFP) reported a net loss of $2 million for the year
ended December 31, 2012, or $0.02 per share, on sales of $4.5
billion. This compares with net income of $41 million, or $0.42 per
diluted share, on sales of $4.8 billion in the year ended December 31,
2011. Net loss in the fourth quarter of 2012 was $36 million, or $0.38
per share, on sales of $1.1 billion, compared with a net loss of $6
million, or $0.06 per share, on sales of $1.1 billion in the fourth
quarter of 2011.

Excluding $81 million of special items, net income for the full year was
$79 million, or $0.81 per diluted share. Excluding special items of $70
million, net income in the fourth quarter was $34 million, or $0.35 per
diluted share. For the full year 2011, net income excluding special
items was $166 million, or $1.71 per diluted share, and $45 million, or
$0.46 per diluted share, in the fourth quarter 2011. All special items
and non-GAAP financial measures, such as adjustments for special items
and adjusted EBITDA, are described and reconciled below.

“We significantly improved the Company’s competitiveness by optimizing
our asset base, reducing costs wherever possible and strengthening our
financial position this year,” said Richard Garneau, president and
chief executive officer. ”We added pulp assets, committed to growth
projects in lumber, invested in power cogeneration plants and further
optimized our paper assets, steps that will position us well for the
future. At the same time, we returned $67 million to our shareholders
in share buybacks, reduced balance sheet working capital by a further
$81 million from the end of 2011 and redeemed an additional $85 million
of debt.”

Operating Income Variance

The Company recorded an operating loss of $30 million in 2012, compared
to operating income of $198 million in 2011. This reflects a $134
million increase in closure costs, impairment and other related
charges, and $173 million of lower volume, in both cases because of
additional market downtime and the Company’s ongoing efforts to focus
production in its most cost-effective mills and drive better efficiency
by restructuring and reducing labor costs. As a result, and in addition
to lower energy, recovered paper and fiber costs, manufacturing costs
improved by $55 million, excluding the effects of lower volume. The
effect of pricing changes in the year was neutral as the increase in
lumber pricing offset declines in pulp, while gains in specialty paper
offset declines in newsprint and coated papers.

In the fourth quarter, the Company recorded an operating loss of $46
million, compared to operating income of $26 million in the third. This
reflects $82 million in closure costs, impairment and other related
charges, mainly related to the idling of a pulp mill and specialty
paper machine in Fort Frances, Ontario, the closure of a specialty
paper machine in Laurentide, Quebec, and costs related to the sale of
assets in Mersey, Nova Scotia. The variance also included the
unfavorable effects of a $10 million non-cash inventory obsolescence
charge for slow-moving spare parts, $10 million unfavorable pricing and
$8 million due to lower volume. The Company’s asset optimization and
restructuring initiatives, as well as more favorable pricing for
recovered paper, maintenance timing and a favorable wood products
inventory adjustment, led to savings of $25 million in overall
manufacturing costs, excluding the effects of lower volume.

SEGMENT DETAILS

Newsprint

The newsprint segment generated operating income of $18 million in the
fourth quarter, an $8 million decrease from the third. Average
transaction price slipped $6 per metric ton and shipments fell 2% as a
result of newsprint export markets pressured by the strong U.S.
dollar. There was a $4 million non-cash provision for spare parts
obsolescence recorded against operating income in the quarter, but it
was offset by lower manufacturing costs and favorable recovered paper
pricing.

An 11% reduction in operating costs led to a 9% increase in operating
income for the year, to $97 million, despite a 10% reduction in
shipments and a 1% decrease in average transaction price. The Company
reduced shipments as part of its efforts to manage its exposure to
markets affected by the strong U.S. dollar and its steps to optimize
its asset base, including the closure and subsequent sale of its
interest in the Mersey newsprint mill.

Coated Papers

Operating income in the coated papers segment was unchanged in the
fourth quarter compared to the third, at $3 million. Average
transaction price rose $18 per short ton, or 2%, but shipments were
down 14% as a result of equipment failures, which pushed operating
costs per unit up 3%.

Operating income in the coated papers segment was down $48 million in
2012, to $9 million, as a result of a 3% reduction in average
transaction price and a 13% reduction in shipments. The Company
continued to make progress in its efforts to improve equipment
efficiency with a smaller labor force, but operating costs per unit
rose by 6% in the year, as the Catawba, South Carolina, mill continues
to work toward capturing the expected efficiencies.

Specialty Papers

The specialty papers segment generated operating income of $8 million in
the fourth quarter, an $18 million decrease from the previous quarter. 
Average transaction price was stable but shipments dropped 3% on lower
demand. The decrease in operating income includes $4 million in
additional costs associated with the Dolbeau, Quebec, facility’s
ramp-up and a $3 million non-cash provision for spare parts
obsolescence.

The restart of the Dolbeau facility is another step in the Company’s
strategy to optimize its asset base; in the last five quarters, three
specialty paper machines, one in each of Laurentide, Fort Frances and
Kenogami, Quebec, were closed or idled, and the Company continued its
labor restructuring initiatives, most recently in Alma, Quebec. Despite
a 16% drop in shipments, consistent with the industry average,
operating income rose 23% from 2011 to 2012, to $76 million, as average
transaction price increased 3% and the Company improved manufacturing
costs, including a $7 million improvement in labor costs and $14
million of favorable power and steam costs.

Market Pulp

Operating income was breakeven in the quarter, a $22 million improvement
over the third. Average transaction price dropped $23 per metric ton,
or 3%, from its already low levels in the third quarter. Despite
indefinitely idling the Fort Frances pulp mill in late November,
shipments rose 8% as the Company ran Fibrek’s Saint-Felicien, Quebec,
facility throughout the quarter, except for four days of downtime to
complete the dredging of many years of accumulated sludge in the
lagoons. Manufacturing costs improved by $18 million as there was no
major maintenance in the quarter.

Operating income in 2012 was $135 million lower than in 2011, reflecting
primarily the $82 per metric ton drop in average transaction price
(which includes, as of May 2012, the three Fibrek mills), but also an
increase of $21 million in operating costs on higher chemicals, maintenance and labor
costs. The five-week outage at Saint-Felicien had a $16 million
negative impact on operating income.

Wood Products

The wood products segment reported operating income of $14 million in
the fourth quarter, $8 million higher than the third. Average
transaction price was unchanged but shipments rose 1%. There was a $7
million favorable inventory adjustment as a result of increasing market
prices for lumber products.

As a result of stronger market conditions and gradually improving North
American housing starts, operating income increased $51 million in the
year, to $26 million, and average transaction price rose $53 per
thousand board feet, or 18%. Shipments were down 9% as a result of the
closure of the Oakhill sawmill in Nova Scotia and downtime in Quebec
sawmills. Manufacturing costs rose $16 million mainly because of higher stumpage fees in Quebec,
which is tied to lumber pricing.

CORPORATE & FINANCE

The Company used cash on hand to repurchase 1,946,205 shares of common
stock during the fourth quarter under its previously announced share
repurchase program, at a total cost of $22 million, and to redeem $85
million of its 10.25% senior secured notes due 2018. With $263 million
of cash, the Company ended the quarter with $782 million of available
liquidity, and $271 million in net debt.

OUTLOOK

Mr. Garneau added: “combined with softening demand and lower exports
from North America, recent capacity restarts by competitors are putting
pressure on pricing in newsprint and supercalender grades. We have
focused our paper production in our most productive sites and drove
better efficiency by restructuring mills and reducing labor costs. This
gives us confidence in the competitiveness of our improved asset base
as we face the challenges ahead. We expect to benefit in 2013 from
investments in power cogeneration assets, with Saint-Felicien and
Dolbeau now fully operational and Thunder Bay expected to come online
by the end of the first quarter. Recent demand and pricing trends are
giving us reason for cautious optimism that the pulp market is
gradually coming out of its prolonged slump. Wood products should
continue to show progress as housing starts build on recent
improvements. Our ongoing growth projects – the capacity enhancement in
Thunder Bay, in addition to the announced restart of the Ignace sawmill
and construction of the new Atikokan sawmill to be completed in 2014 -
further enhance our position in the lumber segment for the future.”


    DESCRIPTION OF SPECIAL ITEMS

    Special items, net of    Fourth
    tax                      quarter   Full year      Fourth      Full year
    (in millions)             2012       2012      quarter 2011     2011

    Charge (gain) on non-
    cash translation of
    Canadian dollar net
    monetary assets              $ 3      $ (23)         $ (13)        $ 23

    Severance                      1           4              -           8

    Closure costs,
    impairment and other
    related charges               60         112              6          32

    Inventory write-downs
    related to closures            4           7              2           2

    Start-up costs of
    idled
    mills                          6          10              -           -

    Net gain on
    disposition of
    assets                       (6)        (22)              -         (2)

    Post-emergence
    expenses                       4           9              9          34

    Transaction costs
    related
    to the acquisition of
    Fibrek                         1           8              4           4

    Other income, net            (6)        (11)            (5)        (14)

    Non-cash charge (gain)
    for
    reorganization-related
    and other tax
    adjustments                    3        (13)             48          38

          Total                 $ 70        $ 81           $ 51       $ 125

EARNINGS CONFERENCE CALL

The Company will hold a conference call to discuss the financial results
at 9:00 a.m. (ET) today. The public is invited to join the call at
(888) 789-9572 (pass code 9922866) at least fifteen minutes before its
scheduled start time. A simultaneous webcast will also be available
using the link provided under “Presentations and Webcasts” in the
“Investors” section of www.resolutefp.com. A replay of the webcast will be archived on the Company’s website. A
phone replay will also be available until February 27 by dialing (800)
408-3053 with the pass code 1158286.

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION

Statements in this press release and the earnings conference call
referred to above that are not reported financial results or other
historical information of Resolute Forest Products Inc. are
“forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. They include, for example,
statements relating to our: efforts to continue to reduce costs and
increase revenues and profitability, including our cost-reduction
initiatives regarding selling, general and administrative expenses;
business and operating outlook; assessment of market conditions;
prospects, growth strategies and the industry in which we operate; 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,” “anticipate,” “attempt,” “project” and other terms with
similar meaning indicating possible future events or potential impact
on our business or Resolute’s 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 Resolute’s actual future financial condition, results of
operations and performance to differ materially from those expressed or
implied in the presentation referred to above include, but are not
limited to, the potential risks and uncertainties set forth under the
heading “Risk Factors” in Part I, Item 1A of Resolute’s annual report
on Form 10-K for the year ended December 31, 2011, filed with the
United States Securities and Exchange Commission and the Canadian
securities regulatory authorities.

All forward-looking statements in the presentation referred to above are
expressly qualified by the cautionary statements contained or referred
to above and in Resolute’s other filings with the SEC and the Canadian
securities regulatory authorities. Resolute disclaims 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 newsprint,
commercial printing papers, market pulp and wood products. The Company
owns or operates over 40 pulp and paper mills and wood products
facilities in the United States, Canada and South Korea, and power
generation assets in Canada. Marketing its products in close to 80
countries, Resolute has third-party certified 100% of its managed
woodlands to at least one of three internationally-recognized
responsible forest management standards, including 65% certified to the
Forest Stewardship Council® (FSC) 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 and other member companies of the Forest Products Association
of Canada, as well as a number of environmental organizations, are
partners in the Canadian Boreal Forest Agreement. The group works to
identify solutions to conservation issues that meet the goal of
balancing equally the three pillars of sustainability linked to human
activities:  environmental, social and economic. Resolute is also a
member of the World Wildlife Fund’s Climate Savers program, in which
businesses establish ambitious targets to voluntarily reduce greenhouse
gas emissions and work aggressively toward achieving them.


                                  RESOLUTE FOREST PRODUCTS INC.

                            CONSOLIDATED STATEMENTS OF OPERATIONS

                   (Unaudited, in millions except per share amounts)

                      Three                        Twelve         Twelve
                      Months    Three Months       Months         Months

                      Ended
                     December      Ended          Ended          Ended
                       31,      December 31,   December 31,   December 31,

                        2012          2011           2012           2011

    Sales            $  1,128   $      1,147   $      4,503   $      4,756

    Costs and
    expenses:                                                             

      Cost of sales,
      excluding
      depreciation,
      amortization
      and cost of
      timber
      harvested           876            864          3,492          3,590

      Depreciation,
      amortization
      and cost of
      timber
      harvested            59             56            233            220

      Distribution
      costs               129            132            514            547

      Selling,
      general and
      administrative
      expenses             35             36            149            158

      Closure costs,
      impairment and
      other related
      charges (2)          82             12            180             46

      Net gain on
      disposition of
      assets (3)          (7)              -           (35)            (3)

    Operating (loss)
    income               (46)             47           (30)            198

    Other (expense)
    income:                                                               

      Interest
      expense            (15)           (18)           (66)           (95)

      Foreign
      currency
      translation
      (loss) gain
      (4)                 (4)              9             17           (21)

      Other, net            4            (6)              5           (27)

    (Loss) income
    before income
    taxes                (61)             32           (74)             55

    Income tax
    benefit
    (provision) (5)        26           (42)             38           (16)

    Net (loss)
    income including
    noncontrolling
    interests            (35)           (10)           (36)             39

    Net (income)
    loss
    attributable to
    noncontrolling
    interests             (1)              4             34              2

    Net (loss)
    income
    attributable to
    Resolute Forest
    Products Inc.    $   (36)   $        (6)   $        (2)   $         41

    Net (loss)
    income per share
    attributable to
    Resolute Forest
    Products Inc.
    common
    shareholders:
    (6)

      Basic          $ (0.38)   $     (0.06)   $     (0.02)   $       0.42

      Diluted        $ (0.38)   $     (0.06)   $     (0.02)   $       0.42

    Weighted-average
    number of
    Resolute Forest
    Products Inc.
    common shares
    outstanding: (6)

      Basic              95.7           97.1           97.4           97.1

      Diluted            96.0           97.1           97.5           97.1


                                  RESOLUTE FOREST PRODUCTS INC.

                                   CONSOLIDATED BALANCE SHEETS

                                     (Unaudited, in millions)

                                               December 31   December 31,

                                                    2012           2011

    Assets                                                               

    Current assets:                                                      

      Cash and cash equivalents                $       263   $        369

      Accounts receivable trade, net                   576            582

      Accounts receivable other                        121            168

      Inventories, net                                 545            475

      Assets held for sale                               -              7

      Deferred income tax assets                        56            109

      Other current assets                              58             59

        Total current assets                         1,619          1,769

    Fixed assets, net                                2,440          2,502

    Amortizable intangible assets, net                  69             18

    Deferred income tax assets                       2,002          1,749

    Other assets                                       194            260

      Total assets                             $     6,324   $      6,298

    Liabilities and equity                                               

    Current liabilities:                                                 

      Accounts payable and accrued liabilities $       581   $        544

      Current portion of long-term debt                  2              -

        Total current liabilities                      583            544

    Long-term debt, net of current portion             532            621

    Pension and other postretirement benefit
    obligations                                      1,946          1,524

    Deferred income tax liabilities                     75             75

    Other long-term liabilities                         72             57

        Total liabilities                            3,208          2,821

    Commitments and contingencies                                        

    Equity:                                                              

    Common stock                                         -              -

    Additional paid-in capital                       3,730          3,687

    Retained earnings                                   38             41

    Accumulated other comprehensive loss             (614)          (311)

    Treasury stock at cost                            (61)              -

      Total Resolute Forest Products Inc.
      shareholders' equity                           3,093          3,417

    Noncontrolling interests                            23             60

      Total equity                                   3,116          3,477

      Total liabilities and equity             $     6,324   $      6,298

 


                                   RESOLUTE FOREST PRODUCTS INC.

                             CONSOLIDATED STATEMENTS OF CASH FLOWS

                                       (Unaudited, in millions)

                                       Twelve Months        Twelve Months

                                    Ended December 31,   Ended December 31,

                                              2012                 2011

    Cash flows from operating
    activities:                                                            

    Net (loss) income including
    noncontrolling interests        $             (36)   $               39

      Adjustments to reconcile net
      (loss) income including
      noncontrolling interests to
      net cash provided by
      operating activities:                                                

      Share-based compensation                       5                    3

      Depreciation, amortization
      and cost of timber harvested                 233                  220

      Closure costs, impairment and
      other related charges                        161                   41

      Write-downs of inventory                      12                    3

      Deferred income taxes                       (35)                   19

      Net pension contributions                   (95)                (175)

      Net gain on disposition of
      assets                                      (35)                  (3)

      (Gain) loss on translation of
      foreign currency denominated
      deferred income taxes                       (37)                   25

      Loss (gain) on translation of
      foreign currency denominated
      pension and other
      postretirement benefit
      obligations                                   30                 (15)

      Premium related to debt
      redemptions                                  (5)                 (16)

      Dividends received from
      equity method investees in
      excess of income                               2                    9

      Leasehold improvement
      incentive received from
      lessor                                         5                    -

      Other, net                                   (3)                  (3)

      Changes in working capital:                                         -

        Accounts receivable                         91                   87

        Inventories                               (21)                 (39)

        Other current assets                         5                   31

        Accounts payable and
        accrued liabilities                       (11)                 (28)

          Net change in working
          capital                                   64                   51

        Net cash provided by
        operating activities                       266                  198

    Cash flows from investing
    activities:                                                            

    Cash invested in fixed assets                (169)                 (97)

    Disposition of investment in
    ACH Limited Partnership                          -                  296

    Disposition of our interest in
    Bowater Mersey Paper Company
    Limited, net of cash                            14                    -

    Disposition of other assets                     36                   19

    Acquisition of Fibrek Inc., net
    of cash acquired (1)                          (24)                    -

    Proceeds from holdback related
    to disposition of investment in
    MPCo                                             -                   29

    Proceeds from insurance
    settlements                                      -                    8

    Decrease (increase) in
    restricted cash                                 76                  (2)

    Increase in deposit
    requirements for letters of
    credit, net                                   (12)                  (8)

    Other investing activities, net                  4                    -

        Net cash (used in) provided
        by investing activities                   (75)                  245

    Cash flows from financing
    activities:                                                            

    Purchases of treasury stock                   (67)                    -

    Dividends and distribution to
    noncontrolling interests                       (5)                 (21)

    Acquisition of noncontrolling
    interest  (1)                                 (27)                 (15)

    Payments of debt                             (198)                (354)

    Payments of financing and
    credit facility fees                             -                  (3)

        Net cash used in financing
        activities                               (297)                (393)

    Net decrease (increase) in cash
    and cash equivalents                         (106)                   50

    Cash and cash equivalents:                                             

        Beginning of period                        369                  319

        End of period               $              263   $              369

 


                                  RESOLUTE FOREST PRODUCTS INC.

       STATEMENTS OF OPERATING INCOME AND NET INCOME ADJUSTED FOR SPECIAL
                                     ITEMS

    A reconciliation of our operating income, net income and net income
    per share reported before special items
    is presented in the tables below. See Note 7 to the Unaudited
    Consolidated Financial Statement Information
    regarding our use of non-GAAP measures.

    Three Months Ended
    December 31, 2012           Operating
    (unaudited, in millions   income (loss)
    except per share amounts)                 Net income (loss)      EPS

    GAAP as reported          $        (46)   $            (36)   $ (0.38)

    Adjustments for special
    items:                                                                

      Foreign currency
      translation loss                    -                   3       0.03

      Severance                           2                   1       0.01

      Closure costs,
      impairment and other
      related charges                    82                  60       0.63

      Inventory write-downs
      related to closures                 5                   4       0.04

      Start up costs of idled
      mill                                8                   6       0.06

      Net gain on disposition
      of assets                         (7)                 (6)     (0.06)

      Post-emergence costs                -                   4       0.04

      Transaction costs                   1                   1       0.01

      Other income, net                   -                 (6)     (0.06)

      Reorganization-related
      and other tax
      adjustments                         -                   3       0.03

    GAAP as adjusted for
    special items             $          45   $              34   $   0.35

    Three Months Ended
    December 31, 2011           Operating
    (unaudited, in millions   income (loss)
    except per share amounts)                 Net income (loss)      EPS

    GAAP as reported          $          47   $             (6)   $ (0.06)

    Adjustments for special
    items:                                                                

      Foreign currency
      translation gain                    -                (13)     (0.13)

      Closure costs,
      impairment and other
      related charges                    12                   6       0.06

      Inventory write-downs
      related to closures                 2                   2       0.02

      Post-emergence costs                -                   9       0.09

      Transaction costs                   5                   4       0.04

      Other income, net                   -                 (5)     (0.05)

      Reorganization-related
      and other tax
      adjustments                         -                  48       0.49

    GAAP as adjusted for
    special items             $          66   $              45   $   0.46

    Twelve Months Ended
    December 31, 2012           Operating
    (unaudited, in millions   income (loss)
    except per share amounts)                 Net income (loss)      EPS

    GAAP as reported          $        (30)   $             (2)   $ (0.02)

    Adjustments for special
    items:                                                                

      Foreign currency
      translation gain                    -                (23)   $ (0.24)

      Severance                           5                   4   $   0.04

      Closure costs,
      impairment and other
      related charges                   180                 112   $   1.15

      Inventory write-downs
      related to closures                12                   7   $   0.07

      Start up costs of idled
      mill                               13                  10   $   0.10

      Net gain on disposition
      of assets                        (35)                (22)   $ (0.22)

      Post-emergence costs                -                   9   $   0.09

      Transaction costs                   8                   8   $   0.08

      Other income, net                   -                (11)   $ (0.11)

      Reorganization-related
      and other tax
      adjustments                         -                (13)   $ (0.13)

    GAAP as adjusted for
    special items             $         153   $              79   $   0.81

    Twelve Months Ended
    December 31, 2011           Operating
    (unaudited, in millions   income (loss)
    except per share amounts)                 Net income (loss)      EPS

    GAAP as reported          $         198   $              41   $   0.42

    Adjustments for special
    items:                                                                

      Foreign currency
      translation loss                    -                  23       0.24

      Severance                          12                   8       0.08

      Closure costs,
      impairment and other
      related charges                    46                  32       0.33

      Inventory write-downs
      related to closures                 3                   2       0.02

      Net gain on disposition
      of assets                         (3)                 (2)     (0.02)

      Post-emergence costs                -                  34       0.35

      Transaction costs                   5                   4       0.05

      Other income, net                   -                (14)     (0.15)

      Reorganization-related
      and other tax
      adjustments                         -                  38       0.39

    GAAP as adjusted for
    special items             $         261   $             166   $   1.71

 


                                              RESOLUTE FOREST PRODUCTS INC.

                                      STATEMENTS OF EBITDA AND ADJUSTED EBITDA

    A reconciliation of our net income including noncontrolling interests to EBITDA and
    Adjusted EBITDA is presented in the tables below.

    See Note 7 to the Unaudited Consolidated Financial Statement Information regarding our
    use of non-GAAP measures EBITDA and Adjusted EBITDA

    Three Months
    Ended December
    31, 2012                                                            Corporate
    (unaudited, in             Coated   Specialty   Market     Wood        and
    millions)      Newsprint   papers    papers      pulp    products     other     Total

    Net income
    (loss)
    including
    noncontrolling
    interests      $      18   $    3   $       8   $    -   $     14   $    (78)   $ (35)

    Interest
    expense, net                                                               15       15

    Income tax
    benefit                                                                  (26)     (26)

    Depreciation,
    amortization
    and cost of
    timber
    harvested             18        9          11       13          8                   59

    EBITDA                36       12          19       13         22        (89)       13

    Foreign
    currency
    translation
    loss                                                                        4        4

    Severance                                                                   2        2

    Closure costs,
    impairment and
    other related
    charges                                                                    82       82

    Inventory
    write-downs
    related to
    closures                                                                    5        5

    Start up costs
    of idled mill                                                               8        8

    Net gain on
    disposition of
    assets                                                                    (7)      (7)

    Post-emergence
    costs                                                                       4        4

    Transaction
    costs                                                                       1        1

    Other income,
    net                                                                       (8)      (8)

    Adjusted
    EBITDA         $      36   $   12   $      19   $   13   $     22   $       2   $  104

    Three Months
    Ended December
    31, 2011                                                            Corporate
    (unaudited, in             Coated   Specialty   Market     Wood        and
    millions)      Newsprint   papers    papers      pulp    products     other     Total

    Net income
    (loss)
    including
    noncontrolling
    interests      $      26   $   13   $      24   $   12   $    (5)   $    (80)   $ (10)

    Interest
    expense, net                                                               18       18

    Income tax
    provision                                                                  42       42

    Depreciation,
    amortization
    and cost of
    timber
    harvested             18        9          13        8          8                   56

    EBITDA                44       22          37       20          3        (20)      106

    Foreign
    currency
    translation
    gain                                                                      (9)      (9)

    Closure costs,
    impairment and
    other related
    charges                                                                    12       12

    Inventory
    write-downs
    related to
    closures                                                                    2        2

    Post-emergence
    costs                                                                      12       12

    Transaction
    costs                                                                       5        5

    Other income,
    net                                                                       (6)      (6)

    Adjusted
    EBITDA         $      44   $   22   $      37   $   20   $      3   $     (4)   $  122

    Twelve Months
    Ended December
    31, 2012                                                            Corporate
    (unaudited, in             Coated   Specialty   Market     Wood        and
    millions)      Newsprint   papers    papers      pulp    products     other     Total

    Net income
    (loss)
    including
    noncontrolling
    interests      $      97   $    9   $      76   $ (50)   $     26   $   (194)   $ (36)

    Interest
    expense, net                                                               66       66

    Income tax
    benefit                                                                  (38)     (38)

    Depreciation,
    amortization
    and cost of
    timber
    harvested             72       37          46       44         34                  233

    EBITDA               169       46         122      (6)         60       (166)      225

    Foreign
    currency
    translation
    gain                                                                     (17)     (17)

    Severance                                                                   5        5

    Closure costs,
    impairment and
    other related
    charges                                                                   180      180

    Inventory
    write-downs
    related to
    closures                                                                   12       12

    Start up costs
    of idled mill                                                              13       13

    Net gain on
    disposition of
    assets                                                                   (35)     (35)

    Post-emergence
    costs                                                                      11       11

    Transaction
    costs                                                                       8        8

    Other income,
    net                                                                      (16)     (16)

    Adjusted
    EBITDA         $     169   $   46   $     122   $  (6)   $     60   $     (5)   $  386

    Twelve Months
    Ended December
    31, 2011                                                            Corporate
    (unaudited, in             Coated   Specialty   Market     Wood        and
    millions)      Newsprint   papers    papers      pulp    products     other     Total

    Net income
    (loss)
    including
    noncontrolling
    interests      $      89   $   57   $      62   $   85   $   (25)   $   (229)   $   39

    Interest
    expense, net                                                               95       95

    Income tax
    provision                                                                  16       16

    Depreciation,
    amortization
    and cost of
    timber
    harvested             73       35          49       30         33                  220

    EBITDA               162       92         111      115          8       (118)      370

    Foreign
    currency
    translation
    loss                                                                       21       21

    Severance                                                                  12       12

    Closure costs,
    impairment and
    other related
    charges                                                                    46       46

    Inventory
    write-downs
    related to
    closures                                                                    3        3

    Net gain on
    disposition of
    assets                                                                    (3)      (3)

    Post-emergence
    costs                                                                      47       47

    Transaction
    costs                                                                       5        5

    Other income,
    net                                                                      (20)     (20)

    Adjusted
    EBITDA         $     162   $   92   $     111   $  115   $      8   $     (7)   $  481

RESOLUTE FOREST PRODUCTS INC.
Notes to the Unaudited Consolidated Financial Statement Information


    1. Acquisition of Fibrek Inc.

       On December 15, 2011, we announced an offer to purchase all of the
       issued and outstanding shares of Fibrek Inc. ("Fibrek"), a producer
       and marketer of virgin and recycled kraft pulp, operating three
       mills. Our acquisition of Fibrek has been achieved in stages. In
       connection with the offer, as of April 23, 2012, we had taken up and
       accepted for payment approximately 48.8% of the then outstanding
       Fibrek shares. On May 2, 2012, we took up and accepted for payment
       additional shares of Fibrek, after which we owned a controlling
       interest (approximately 50.1% of the then outstanding Fibrek shares)
       and Fibrek became a consolidated subsidiary. We subsequently
       acquired additional shares of Fibrek and, as of May 17, 2012 (the
       date the offer expired), we owned approximately 74.6% of the then
       outstanding Fibrek shares. On July 31, 2012, we completed the second
       step transaction for the remaining 25.4% of the outstanding Fibrek
       shares.

       As aggregate consideration for all of the Fibrek shares purchased,
       we distributed approximately 3.3 million shares of our common stock
       and Cdn$63 million ($63 million, based on the exchange rates in
       effect on each of the dates we acquired the shares of Fibrek) in
       cash. In connection with the Fibrek shareholder vote on the
       arrangement, certain former shareholders of Fibrek exercised (or
       purported to exercise) rights of dissent in respect of the
       transaction, asking for a judicial determination of the fair value
       of their claim under the Canada Business Corporations Act. No
       consideration has to date been paid to the former Fibrek
       shareholders who exercised (or purported to exercise) rights of
       dissent. Any such consideration will only be paid out upon
       settlement or judicial determination of the fair value of their
       claims and will be paid entirely in cash. Accordingly, we cannot
       presently determine the amount that ultimately may be paid to former
       holders of Fibrek shares in connection with the proceedings, but we
       have reserved approximately Cdn$14 million ($14 million, based on
       the exchange rate in effect on December 31, 2012) for the eventual
       payment of those claims. The results reported for the year ended
       December 31, 2012 include the financial results of Fibrek for the
       period from May 2, 2012 to December 31, 2012. Fibrek's results of
       operations are included in the market pulp segment.

    2. Closure costs, impairment and other related charges for the years
       ended December 31, 2012 and 2011 were comprised of the following:

                                               Pension and
                                                OPEB plan
                                               curtailment   Severance
                                                   and          and
                   Impairment   Accelerated    settlement      other
    (In millions)  of assets    depreciation     losses        costs     Total

    Indefinite
    idlings:                                                                  

      Bowater
      Mersey Paper
      Company
      Limited in
      Nova Scotia
      (1)                $ 72            $ -           $ 8        $ 15    $ 95

      Kraft mill
      and paper
      machine in
      Fort
      Frances,
      Ontario (2)          31              2             1           6      40

      Paper
      machine in
      Catawba,
      South
      Carolina (2)          1              -             -           -       1

    Permanent
    closure:                                                                  

      Paper
      machine in
      Laurentide,
      Quebec                -             18             -           4      22

    Restructuring
    initiatives:                                                              

      Catawba
      paper mill            -              -             -           4       4

      Baie-Comeau,
      Quebec paper
      mill                  -              -             3           1       4

      Lump-sum
      payments to
      vested
      terminated
      participants          -              -             7           -       7

    Other                   2              1             2           2       7

    2012 Total          $ 106           $ 21          $ 21        $ 32   $ 180

    2011 Total           $ 16            $ 8           $ 8        $ 14    $ 46

    (1) During 2012, we recorded long-lived asset impairment charges
        (including a $7 million write-down of an asset retirement
        obligation for environmental liabilities) related to the sale of
        our interest in Bowater Mersey Paper Company Limited to reduce the
        carrying value of our net assets to fair value less costs to sell.

    (2) During 2012, we recorded long-lived assets impairment charges to
        reduce the carrying value of the assets to their estimated fair
        value, which was determined based on the assets' estimated salvage
        values.

    3.  During 2012, we sold two parcels of land in Gatineau, our Petit
        Saguenay sawmill, our recycling division's assets located in
        Phoenix, Arizona, our interest in our Mersey operations and various
        other assets for total consideration of $55 million, comprised of a
        note receivable of $5 million and net cash proceeds of $50 million,
        resulting in a net gain on disposition of assets of $35 million.

    4.  During 2012, we recorded a foreign currency translation gain of $17
        million. This gain is a result of the stronger Canadian dollar
        relative to the U.S. dollar at December 31, 2012 and its impact on
        the translation of our Canadian dollar net monetary assets in the
        Company's principal Canadian operating subsidiary.

    5.  During 2012, we recorded an income tax benefit of $38 million. The
        income tax benefit reflects favorable reorganization-related and
        other tax adjustments, as well as foreign exchange impacts,
        primarily offset by a net increase in our valuation allowances.

    6.  For the calculation of basic and diluted income per share for the
        year ended December 31, 2012 and 2011, no adjustments to net income
        attributable to Resolute Forest Products were necessary.

    7.  Tables represent a reconciliation of certain financial statement
        line items reported under generally accepted accounting principles
        ("GAAP") to our use of non-GAAP measures of operating income
        (loss), net income (loss) and net income (loss) per share, in each
        case adjusted for special items, as well as EBITDA and adjusted
        EBITDA, in each case by reportable segment. We believe that these
        measures are useful because they allow the reader to more easily
        compare our ongoing operations, financial performance and EPS from
        period to period.  They are also consistent with the indicators
        management uses internally to measure our performance. These
        non-GAAP measures should be considered in addition to and not a
        substitute for measures of financial performance calculated and
        presented in accordance with GAAP in our consolidated statement of
        operations in our filings with the Securities and Exchange
        Commission. Consequently, readers should rely on GAAP operating
        income (loss), operating income (loss) by reportable segment, net
        income (loss) and net income (loss) per share. Non-GAAP measures
        included in our press release include:

        Operating income (loss) adjusted for special items - is defined as
        operating income (loss) from our Consolidated Statements of
        Operations excluding special items, such as closure costs,
        impairment and other related charges, severance costs, inventory
        write-downs, start up costs of idled mills, gains and losses on
        dispositions of assets, transaction costs and other charges or
        credits that are excluded from our segment's performance from GAAP
        operating income (loss).

        Net income (loss) adjusted for special items - is defined as net
        income (loss) from our Consolidated Statements of Operations
        excluding the same items as under operating income (loss) adjusted
        for the special items, in addition to the effects of foreign
        currency translation, post-emergence costs, other income (expense)
        and reorganization-related and other tax adjustments.

        Net income (loss) per share (EPS) adjusted for special items - is
        defined as diluted EPS calculated based on the net income (loss)
        adjusted for special items as described above.

        EBITDA by reportable segment - is defined as net income (loss)
        including noncontrolling interests from our Consolidated Statements
        of Operations, allocated to each of our reportable segments
        (newsprint, coated papers, specialty papers, market pulp and wood
        products) in accordance with FASB ASC 290, "Segment Reporting," and
        adjusted for depreciation, amortization and cost of timber
        harvested.  EBITDA for the corporate and other segment  is defined
        as net income (loss) including noncontrolling interests from our
        Consolidated Statements of Operations after the allocation to
        reportable segments, adjusted for interest expense, income taxes
        and depreciation, amortization and cost of timber harvested.

        Adjusted EBITDA - is defined as EBITDA excluding the special items
        described above.

        Certain prior period amounts within these measures have been
        reclassified to conform to the 2012 presentation.

SOURCE Resolute Forest Products Inc.


Source: PR Newswire