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Domtar Corporation reports preliminary fourth quarter and fiscal year 2013 financial results

Acquired Laboratorios Indas, Spanish market leader in adult incontinence - a key milestone in the development of Domtar's Personal Care business
(All financial information is in U.S. dollars, and all earnings per share results are diluted, unless otherwise noted.)

  • Fourth quarter 2013 net earnings of $2.00 per share, earnings before items1 of $2.09 per share
  • Announced and completed on January 2, 2014, the acquisition of Laboratorios Indas, Spain's largest manufacturer and marketer of adult incontinence products
  • Completed a long-term financing with the successful issuance of 30-year senior notes

TICKER SYMBOL
(NYSE: UFS) (TSX: UFS)

MONTREAL, Feb. 7, 2014 /PRNewswire/ - Domtar Corporation (NYSE: UFS) (TSX: UFS) today reported net earnings of $65 million ($2.00 per share) for the fourth quarter of 2013 compared to net earnings of $27 million ($0.82 per share) for the third quarter of 2013 and net earnings of $19 million ($0.54 per share) for the fourth quarter of 2012. Sales for the fourth quarter of 2013 were $1,359 million.

Excluding items listed below, the Company had earnings before items1 of $68 million ($2.09 per share) for the fourth quarter of 2013 compared to earnings before items1 of $41 million ($1.25 per share) for the third quarter of 2013 and earnings before items1 of $46 million ($1.31 per share) for the fourth quarter of 2012.

Fourth quarter 2013 items:

  • Net gain on sale of property, plant and equipment and business for $5 million ($4 million after tax); and
  • Charge of $7 million ($7 million after tax) for impairment of property, plant and equipment.

Third quarter 2013 items:

  • Loss on sale of business of $19 million ($12 million after tax); and
  • Negative impact of purchase accounting of $2 million ($2 million after tax).

Fourth quarter 2012 items:

  • Closure and restructuring costs of $27 million ($18 million after tax),
  • Charge of $12 million ($8 million after tax) related to the impairment and write-down of property, plant and equipment and intangible assets; and
  • Net losses on the sale of property, plant and equipment of $2 million ($1 million after tax).

Commenting on the fourth quarter results, John D. Williams, President and Chief Executive Officer, said, "Our solid results in the fourth quarter were mostly in line with our expectations in all of our businesses. Lower planned maintenance shutdowns and the continued momentum in pulp markets drove quarter over quarter earnings improvement."

FISCAL YEAR 2013 HIGHLIGHTS

For fiscal year 2013, net earnings amounted to $91 million ($2.72 per share) compared to net earnings of $172 million ($4.76 per share) for fiscal year 2012. The Company had earnings before items1 of $158 million ($4.73 per share) for fiscal 2013 compared to earnings before items1 of $233 million ($6.45 per share) for fiscal 2012. Sales amounted to $5.4 billion for fiscal year 2013.

"In 2013, we continued to transform the earnings profile of our company through further acquisitions in personal care, strategic investments in the pulp and paper business and the disposal of non-core assets. The recent acquisition of Indas represents a significant step in building out our personal care business, and will further help us achieve our goal of $300-$500 million of EBITDA from growing business by 2017. We have made meaningful progress towards this goal and the businesses we have acquired so far bring us closer to the lower end of our target. The continued execution of our strategy will drive earnings and cash flow growth in 2014 and beyond," added Mr. Williams.

QUARTERLY REVIEW

Operating income before items1 was $95 million in the fourth quarter of 2013 compared to an operating income before items1 of $70 million in the third quarter of 2013. Depreciation and amortization totaled $95 million in the fourth quarter of 2013.

(In millions of dollars)   4Q 2013   3Q 2013
Sales   $1,359   $1,375
Operating income (loss)        
  Pulp and Paper segment   75   42
  Personal Care segment   9   11
  Corporate   9   (4)
  Total   93   49
Operating income before items1   95   70
Depreciation and amortization   95   93


The increase in operating income before items1 in the fourth quarter of 2013 was the result of lower costs for maintenance, higher average selling prices for paper and pulp, favorable exchange rates, higher productivity in pulp, and higher paper shipments. These factors were partially offset by higher raw material costs and an unfavorable mix of paper sold.

When compared to the third quarter of 2013, manufactured paper shipments increased 0.4% and pulp shipments increased 7.1%. The shipments-to-production ratio for paper was 100% in the fourth quarter of 2013, compared to 98% in the third quarter of 2013. Lack-of-order downtime and machine slowdowns in pulp and paper totaled 20,000 short tons in the fourth quarter of 2013. Paper inventories remained unchanged when compared to the end of September.

LIQUIDITY AND CAPITAL

In 2013, cash flow provided from operating activities amounted to $411 million and capital expenditures were $242 million, resulting in free cash flow1 of $169 million for fiscal 2013. Domtar's net debt-to-total capitalization ratio1 stood at 24% at December 31, 2013 compared to 16% at December 31, 2012.

Domtar returned a total of $250 million to its shareholders through a combination of dividends and share buybacks in fiscal 2013. Domtar repurchased a total of 11,170,506 shares of common stock at an average price of $78.48 since the implementation of its stock repurchase program in May 2010. At the end of the fourth quarter of 2013, Domtar had $121 million remaining under this program.

OUTLOOK

In 2014, we expect our paper shipments to be in-line with 2013 while we expect the market demand for uncoated free sheet to decline with long-term secular trends. Our paper prices will benefit from the implementation of recently announced price increases. We expect softwood pulp markets to maintain positive momentum but new scheduled industry hardwood pulp capacity makes the latter part of the year more uncertain. Personal care will continue to see earnings growth with the recent acquisition of Indas and with the addition of the new production lines towards the end of the year.

EARNINGS CONFERENCE CALL

The Company will hold a conference call today at 10:00 a.m. (ET) to discuss its fourth quarter and fiscal 2013 financial results. Financial analysts are invited to participate in the call by dialing 1 (866) 321-8231 (toll free - North America) or 1 (416) 642-5213 (International) at least 10 minutes before start time, while media and other interested individuals are invited to listen to the live webcast on the Domtar Corporation website at www.domtar.com.

A replay will be available by dialing 1 (888) 203-1112 (North America) or 1 (647) 436-0148 (International) using access code 5674179 until February 21, 2014.


About Domtar
Domtar Corporation (NYSE: UFS) (TSX: UFS) designs, manufactures, markets and distributes a wide variety of fiber-based products including communication papers, specialty and packaging papers and absorbent hygiene products. The foundation of its business is a network of world class wood fiber converting assets that produce papergrade, fluff and specialty pulps. The majority of its pulp production is consumed internally to manufacture paper and consumer products. Domtar is the largest integrated marketer of uncoated freesheet paper in North America with recognized brands such as Cougar®, Lynx® Opaque Ultra, Husky® Opaque Offset, First Choice® and Domtar EarthChoice®. Domtar is also a leading marketer and producer of a broad line of incontinence care products marketed primarily under the Attends®, IncoPack and Indasec® brand names as well as baby diapers. In 2013, Domtar had sales of US$5.4 billion from some 50 countries. The Company employs approximately 10,000 people. To learn more, visit www.domtar.com.

Forward-Looking Statements
Statements in this release about our plans, expectations and future performance, including the statements by Mr. Williams and those contained under "Outlook," are "forward-looking statements." Actual results may differ materially from those suggested by these statements for a number of reasons, including changes in customer demand and pricing, changes in manufacturing costs, future acquisitions and divestitures, including facility closings, and the other reasons identified under "Risk Factors" in our Form 10-K for 2012 as filed with the SEC and as updated by subsequently filed Form 10-Qs. Except to the extent required by law, we expressly disclaim any obligation to update or revise these forward-looking statements to reflect new events or circumstances or otherwise.

_______________________
1 Non-GAAP financial measure. Refer to the Reconciliation of Non-GAAP Financial Measures in the appendix.


Domtar Corporation        
Highlights        
(In millions of dollars, unless otherwise noted)        
         
  Three months
ended December 31
Three months
ended December 31
Twelve months
ended December 31
Twelve months
ended December 31
  2013 2012 2013 2012
  (Unaudited)
  $ $ $ $
         
Selected Segment Information        
         
Sales        
    Pulp and Paper 1,193 1,218 4,843 5,088
    Personal Care 172 111 566 399
Total for reportable segments 1,365 1,329 5,409 5,487
    Intersegment sales - Pulp and Paper (6) (2) (18) (5)
Consolidated sales 1,359 1,327 5,391 5,482
         
Depreciation and amortization and impairment and write-down of property, plant and equipment and intangible assets        
    Pulp and Paper 85 91 345  365
    Personal Care 10 5 31 20
Total for reportable segments 95 96 376 385
    Impairment and write-down of property, plant and equipment and intangible assets - Pulp and Paper 5 12 20 14
    Impairment and write-down of property, plant and equipment - Personal Care 2 - 2 -
Consolidated depreciation and amortization and impairment and write-down of property, plant and equipment and intangible assets 102 108 398 399
         
Operating income (loss)        
    Pulp and Paper 75 32 171 330
    Personal Care 9 13 43 45
    Corporate 9 (2) (53) (8)
Consolidated operating income 93 43 161 367
Interest expense, net 22 22 89 131
Earnings before income taxes and equity loss 71 21 72 236
Income tax expense (benefit) 6 1 (20) 58
Equity loss, net of taxes - 1 1 6
Net earnings 65 19 91 172
         
Per common share (in dollars)        
  Net earnings        
    Basic 2.01 0.54 2.73 4.78
    Diluted 2.00 0.54 2.72 4.76
Weighted average number of common and exchangeable shares outstanding (millions)        
    Basic 32.4 35.1 33.3 36.0
    Diluted 32.5 35.2 33.4 36.1
         
Cash flows provided from operating activities 124 140 411 551
Additions to property, plant and equipment 62 65 242 236



Domtar Corporation        
Consolidated Statements of Earnings        
(In millions of dollars, unless otherwise noted)        
         
  Three months
ended December 31
Three months
ended December 31
Twelve months
ended December 31
Twelve months
ended December 31
  2013 2012 2013 2012
  (Unaudited)
  $ $ $ $
         
Sales 1,359 1,327 5,391 5,482
Operating expenses        
    Cost of sales, excluding depreciation and amortization 1,081 1,058 4,361 4,321
    Depreciation and amortization 95 96 376 385
    Selling, general and administrative 100 90 381 358
    Impairment and write-down of property, plant and equipment and intangible assets 7 12 22 14
    Closure and restructuring costs - 27 18 30
    Other operating (income) loss, net (17) 1 72 7
  1,266 1,284 5,230 5,115
Operating income 93 43 161 367
Interest expense, net 22 22 89 131
Earnings before income taxes and equity loss 71 21 72 236
Income tax expense (benefit) 6 1 (20) 58
Equity loss, net of taxes - 1 1 6
Net earnings 65 19 91 172
         
Per common share (in dollars)        
           
  Net earnings        
    Basic 2.01 0.54 2.73 4.78
    Diluted 2.00 0.54 2.72 4.76
Weighted average number of common and exchangeable shares outstanding (millions)        
    Basic 32.4 35.1 33.3 36.0
    Diluted 32.5 35.2 33.4 36.1



Domtar Corporation    
Consolidated Balance Sheets at    
(In millions of dollars)    
     
  December 31 December 31
  2013 2012
  (Unaudited)
  $ $
     
Assets    
Current assets    
    Cash and cash equivalents 655 661
    Receivables, less allowances of $4 and $4 601 562
    Inventories 685 675
    Prepaid expenses 23 24
    Income and other taxes receivable 61 48
    Deferred income taxes 52 45
      Total current assets 2,077 2,015
       
  Property, plant and equipment, at cost 8,883 8,793
  Accumulated depreciation (5,594) (5,392)
      Net property, plant and equipment 3,289 3,401
Goodwill 369 263
Intangible assets, net of amortization 407 309
Other assets 136 135
        Total assets 6,278 6,123
     
Liabilities and shareholders' equity    
Current liabilities    
    Bank indebtedness 15 18
    Trade and other payables 673 646
    Income and other taxes payable 17 15
    Long-term debt due within one year 4 79
      Total current liabilities 709 758
     
Long-term debt 1,510 1,128
Deferred income taxes and other 923 903
Other liabilities and deferred credits 354 457
     
Shareholders' equity    
    Exchangeable shares 44 48
    Additional paid-in capital 1,999 2,175
    Retained earnings 804 782
    Accumulated other comprehensive loss (65) (128)
      Total shareholders' equity 2,782 2,877
        Total liabilities and shareholders' equity 6,278 6,123



Domtar Corporation    
Consolidated Statements of Cash Flows    
(In millions of dollars)    
     
  Twelve months
ended December 31
Twelve months
ended December 31
  2013 2012
  (Unaudited)
  $ $
     
Operating activities    
Net earnings 91 172
Adjustments to reconcile net earnings to cash flows from operating activities    
  Depreciation and amortization 376 385
  Deferred income taxes and tax uncertainties (8) (1)
  Impairment and write-down of property, plant and equipment and intangible assets 22 14
  Net losses on disposals of property, plant and equipment and sale of business 4 2
  Stock-based compensation expense 5 5
  Equity loss, net 1 6
  Other (2) (13)
Changes in assets and liabilities, excluding the effects of acquisition and sale of businesses    
  Receivables (70) 99
  Inventories (8) 5
  Prepaid expenses 1 (3)
  Trade and other payables (11) (118)
  Income and other taxes  (26) (4)
  Difference between employer pension and other post-retirement contributions and pension and other post-retirement expense 31 (13)
  Other assets and other liabilities 5 15
  Cash flows provided from operating activities 411 551
     
Investing activities    
Additions to property, plant and equipment (242) (236)
Proceeds from disposals of property, plant and equipment and sale of business 61 49
Acquisition of businesses, net of cash acquired (287) (293)
Investment in joint venture (1) (6)
  Cash flows used for investing activities (469) (486)
     
Financing activities    
Dividend payments (67) (58)
Net change in bank indebtedness (3) 11
Change of revolving bank credit facility 160 -
Issuance of long-term debt 249 548
Repayment of long-term debt (102) (192)
Stock repurchase (183) (157)
  Cash flows provided from financing activities 54 152
     
Net (decrease) increase in cash and cash equivalents (4) 217
Impact of foreign exchange on cash (2) -
Cash and cash equivalents at beginning of period 661 444
Cash and cash equivalents at end of period 655 661
     
Supplemental cash flow information    
  Net cash payments for:    
    Interest (including $2 million and $47 million of tender offer premiums in 2013 and 2012, respectively) 81 116
    Income taxes paid 5 76



Domtar Corporation
Quarterly Reconciliation of Non-GAAP Financial Measures
(In millions of dollars, unless otherwise noted)

The following table sets forth certain non-U.S. generally accepted accounting principles ("GAAP") financial metrics identified in bold as "Earnings before items", "Earnings before items per diluted share", "EBITDA", "EBITDA margin", "EBITDA before items", "EBITDA margin before items", "Free cash flow", "Net debt" and "Net debt-to-total capitalization." Management believes that the financial metrics presented are frequently used by investors and are useful to evaluate our ability to service debt and our overall credit profile. Management believes these metrics are also useful to measure the operating performance and benchmark with peers within the industry. These metrics are presented as a complement to enhance the understanding of operating results but not in substitution for GAAP results.

The Company calculates "Earnings before items" and "EBITDA before items" by excluding the after-tax (pre-tax) effect of items considered by management as not reflecting our current operations. Management uses these measures, as well as EBITDA and Free cash flow, to focus on ongoing operations and believes that it is useful to investors because it enables them to perform meaningful comparisons between periods. Domtar believes that using this information along with Net earnings provides for a more complete analysis of the results of operations. Net earnings and Cash flow provided from operating activities are the most directly comparable GAAP measures.

                       
      2013 2012
    Q1 Q2 Q3 Q4 YTD Q1 Q2 Q3 Q4 YTD
Reconciliation of "Earnings before items" to Net earnings (loss)                      
    Net earnings (loss) ($) 45 (46) 27 65 91 28 59 66 19 172
  (+) Impairment and write-down of property, plant and equipment and intangible assets ($) 7 3 - 7 17 1 - - 8 9
  (+) Closure and restructuring costs ($) - 13 - - 13 1 - 1 18 20
  (-) Net (gains) losses on disposals of property, plant and equipment and business ($) (6) - 12 (4) 2 - - - 1 1
  (+) Impact of purchase accounting ($) - - 2 - 2 1 - - - 1
  (+) Reversal of alternative fuel tax credits ($) 18 - - - 18 - - - - -
  (-) Cellulosic biofuel producer credits ($) (33) - - - (33) - - - - -
  (+) Loss on repurchase of long-term debt ($) 2 - - - 2 30 - - - 30
  (+) Weston litigation settlement ($) - 46 - - 46 - - - - -
  (=) Earnings before items ($) 33 16 41 68 158 61 59 67 46 233
  (/) Weighted avg. number of common and exchangeable shares outstanding (diluted) (millions) 34.9 33.4 32.8 32.5 33.4 37.0 36.6 35.8 35.2 36.1
  (=) Earnings before items per diluted share ($) 0.95 0.48 1.25 2.09 4.73 1.65 1.61 1.87 1.31 6.45
                       
Reconciliation of "EBITDA" and "EBITDA before items" to Net earnings (loss)                      
    Net earnings (loss) ($) 45 (46) 27 65 91 28 59 66 19 172
  (+) Equity loss, net of taxes ($) 1 - - - 1 2 2 1 1 6
  (+) Income tax (benefit) expense ($) (22) (5) 1 6 (20) 8 27 22 1 58
  (+) Interest expense, net ($) 25 21 21 22 89 71 18 20 22 131
  (=) Operating income (loss) ($) 49 (30) 49 93 161 109 106 109 43 367
  (+) Depreciation and amortization ($) 95 93 93 95 376 97 96 96 96 385
  (+) Impairment and write-down of property, plant and equipment and intangible assets ($) 10 5 - 7 22 2 - - 12 14
  (-) Net (gains) losses on disposals of property, plant and equipment and business ($) (10) - 19 (5) 4 - - - 2 2
  (=) EBITDA ($) 144 68 161 190 563 208 202 205 153 768
  (/) Sales ($) 1,345 1,312 1,375 1,359 5,391 1,398 1,368 1,389 1,327 5,482
  (=) EBITDA margin (%) 11% 5% 12% 14% 10% 15% 15% 15% 12% 14%
    EBITDA ($) 144 68 161 190 563 208 202 205 153 768
  (+) Reversal of alternative fuel tax credits ($) 26 - - - 26 - - - - -
  (+) Closure and restructuring costs ($) - 18 - - 18 1 - 2 27 30
  (+) Impact of purchase accounting ($) - - 2 - 2 1 - - - 1
  (+) Weston litigation settlement ($) - 49 - - 49 - - - - -
  (=) EBITDA before items ($) 170 135 163 190 658 210 202 207 180 799
  (/) Sales ($) 1,345 1,312 1,375 1,359 5,391 1,398 1,368 1,389 1,327 5,482
  (=) EBITDA margin before items (%) 13% 10% 12% 14% 12% 15% 15% 15% 14% 15%
                       
Reconciliation of "Free cash flow" to Cash flow provided from operating activities                      
    Cash flow provided from operating activities ($) 63 120 104 124 411 30 175 206 140 551
  (-) Additions to property, plant and equipment ($) (56) (62) (62) (62) (242) (29) (76) (66) (65) (236)
  (=) Free cash flow ($) 7 58 42 62 169 1 99 140 75 315
                       
"Net debt-to-total capitalization" computation                      
    Bank indebtedness ($) 13 2 6 15   13 22 15 18  
  (+) Long-term debt due within one year ($) 8 7 6 4   6 6 7 79  
  (+) Long-term debt ($) 1,104 1,102 1,102 1,510   952 950 1,196 1,128  
  (=) Debt ($) 1,125 1,111 1,114 1,529   971 978 1,218 1,225  
  (-) Cash and cash equivalents ($) (513) (432) (191) (655)   (315) (276) (593) (661)  
  (=) Net debt ($) 612 679 923 874   656 702 625 564  
  (+) Shareholders' equity ($) 2,842 2,652 2,681 2,782   3,009 2,948 3,004 2,877  
  (=) Total capitalization ($) 3,454 3,331 3,604 3,656   3,665 3,650 3,629 3,441  
    Net debt ($) 612 679 923 874   656 702 625 564  
  (/) Total capitalization ($) 3,454 3,331 3,604 3,656   3,665 3,650 3,629 3,441  
  (=) Net debt-to-total capitalization (%) 18% 20% 26% 24%   18% 19% 17% 16%  


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

Domtar Corporation
Quarterly Reconciliation of Non-GAAP Financial Measures - By Segment 2013
(In millions of dollars, unless otherwise noted)

The following table sets forth certain non-U.S. generally accepted accounting principles ("GAAP"), financial metrics identified in bold as "Operating income (loss) before items", "EBITDA before items" and "EBITDA margin before items" by reportable segment. Management believes that the financial metrics presented are frequently used by investors and are useful to measure the operating performance and benchmark with peers within the industry. These metrics are presented as a complement to enhance the understanding of operating results but not in substitution for GAAP results.

The Company calculates the segmented "Operating income (loss) before items" by excluding the pre-tax effect of items considered by management as not reflecting our ongoing operations. Management uses these measures to focus on ongoing operations and believes that it is useful to investors because it enables them to perform meaningful comparisons between periods. Domtar believes that using this information along with Operating income (loss) provides for a more complete analysis of the results of operations. Operating income (loss) by segment is the most directly comparable GAAP measure.

                                           
    Pulp and Paper (1) Personal Care (2) Corporate Total
    Q1'13 Q2'13 Q3'13 Q4'13 YTD Q1'13 Q2'13 Q3'13 Q4'13 YTD Q1'13 Q2'13 Q3'13 Q4'13 YTD Q1'13 Q2'13 Q3'13 Q4'13 YTD
Reconciliation of Operating income (loss) to "Operating income (loss) before items"                                          
    Operating income (loss) ($) 38 16 42 75 171 13 10 11 9 43 (2) (56) (4) 9 (53) 49 (30) 49 93 161
  (+) Impairment and write-down of property, plant and equipment and intangible assets ($) 10 5 - 5 20 - - - 2 2 - - - - - 10 5 - 7 22
  (-) Net (gain) loss on disposal of property, plant and equipment and business ($) (10) - 19 1 10 - - - - - - - - (6) (6) (10) - 19 (5) 4
  (+) Reversal of alternative fuel tax credits ($) 26 - - - 26 - - - - - - - - - - 26 - - - 26
  (+) Weston litigation settlement ($) - - - - - - - - - - - 49 - - 49 - 49 - - 49
  (+) Closure and restructuring costs ($) - 10 - - 10 - 2 2 6 - - 6 - 18 - - 18
  (+) Impact of purchase accounting ($) - - - - - - - 2 - 2 - - - - - - - 2 - 2
  (=) Operating income (loss) before items ($) 64 31 61 81 237 13 12 13 11 49 (2) (1) (4) 3 (4) 75 42 70 95 282
                                           
Reconciliation of "Operating income (loss) before items" to "EBITDA before items"                                          
    Operating income (loss) before items ($) 64 31 61 81 237 13 12 13 11 49 (2) (1) (4) 3 (4) 75 42 70 95 282
  (+) Depreciation and amortization ($) 89 87 84 85 345 6 6 9 10 31 - - - - - 95 93 93 95 376
                                               
  (=) EBITDA before items ($) 153 118 145 166 582 19 18 22 21 80 (2) (1) (4) 3 (4) 170 135 163 190 658
  (/) Sales ($) 1,238 1,208 1,204 1,193 4,843 111 108 175 172 566 - - - - - 1,349 1,316 1,379 1,365 5,409
  (=) EBITDA margin before items (%) 12% 10% 12% 14% 12% 17% 17% 13% 12% 14% - - - - - 13% 10% 12% 14% 12%


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

(1) On May 31, 2013, the Company acquired Xerox's paper print and media product's assets in the United States and Canada.
(2) On July 1, 2013, the Company acquired 100% of the shares of Associated Hygiene Products LLC.


Domtar Corporation
Quarterly Reconciliation of Non-GAAP Financial Measures - By Segment 2012
(In millions of dollars, unless otherwise noted)


The following table sets forth certain non-U.S. generally accepted accounting principles ("GAAP"), financial metrics identified in bold as "Operating income (loss) before items", "EBITDA before items" and "EBITDA margin before items" by reportable segment. Management believes that the financial metrics presented are frequently used by investors and are useful to measure the operating performance and benchmark with peers within the industry. These metrics are presented as a complement to enhance the understanding of operating results but not in substitution for GAAP results.

The Company calculates the segmented "Operating income (loss) before items" by excluding the pre-tax effect of items considered by management as not reflecting our ongoing operations. Management uses these measures to focus on ongoing operations and believes that it is useful to investors because it enables them to perform meaningful comparisons between periods. Domtar believes that using this information along with Operating income (loss) provides for a more complete analysis of the results of operations. Operating income (loss) by segment is the most directly comparable GAAP measure.

                                               
    Pulp and Paper Personal Care (1) Corporate Total
    Q1'12 Q2'12 Q3'12 Q4'12 YTD Q1'12 Q2'12 Q3'12 Q4'12 YTD Q1'12 Q2'12 Q3'12 Q4'12 YTD Q1'12 Q2'12 Q3'12 Q4'12 YTD
Reconciliation of Operating income (loss) to "Operating income (loss) before items"                                          
    Operating income (loss) ($) 106 94 98 32 330 8 12 12 13 45 (5) (1) (2) (8) 109 106 109 43 367
  (+) Impairment and write-down of property, plant and equipment and intangible assets ($) 2 - - 12 14 - - - - - - - - - - 2 - - 12 14
  (+) Closure and restructuring costs ($) 1 - 1 27 29 - - 1 - 1 - - - - - 1 - 2 27 30
  (-) Net losses on disposals of property, plant and equipment ($) - - - 2 2 - - - - - - - - - - - - - 2 2
  (+) Impact of purchase accounting ($) - - - - - 1 - - - 1 - - - - - 1 - - - 1
                                               
  (=) Operating income (loss) before items ($) 109 94 99 73 375 9 12 13 13 47 (5) - (1) (2) (8) 113 106 111 84 414
                                               
Reconciliation of "Operating income (loss) before items" to "EBITDA before items"                                          
    Operating income (loss) before items ($) 109 94 99 73 375 9 12 13 13 47 (5) - (1) (2) (8) 113 106 111 84 414
  (+) Depreciation and amortization ($) 94 90 90 91 365 3 6 6 5 20 - - - - - 97 96 96 96 385
                                               
  (=) EBITDA before items ($) 203 184 189 164 740 12 18 19 18 67 (5) - (1) (2) (8) 210 202 207 180 799
  (/) Sales ($) 1,329 1,261 1,280 1,218 5,088 70 107 111 111 399 - - - - - 1,399 1,368 1,391 1,329 5,487
  (=) EBITDA margin before items (%) 15% 15% 15% 13% 15% 17% 17% 17% 16% 17% - - - - - 15% 15% 15% 14% 15%


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

(1) On March 1, 2012, the Company acquired 100% of the shares of Attends Healthcare Limited.
  On May 1, 2012, the Company acquired 100% of the shares of EAM Corporation. 



Domtar Corporation                      
Supplemental Segmented Information                      
(In millions of dollars, unless otherwise noted)                      
                     
  2013 2012
  Q1 Q2 Q3 Q4 YTD Q1 Q2 Q3 Q4 YTD
Pulp and Paper Segment                    
  Sales ($) 1,238 1,208 1,204 1,193 4,843 1,329 1,261 1,280 1,218 5,088
  Operating income ($) 38 16 42 75 171 106 94 98 32 330
  Depreciation and amortization ($) 89 87 84 85 345 94 90 90 91 365
  Impairment and write-down of property, plant and equipment, and intangible assets ($) 10 5 - 5 20 2 - - 12 14
                         
  Papers                      
  Papers Production ('000 ST) 795 837 827 816 3,275 870 832 788 831 3,321
  Papers Shipments - Manufactured ('000 ST) 828 801 814 817 3,260 870 819 826 805 3,320
    Communication Papers ('000 ST) 706 676 694 701 2,777 756 705 709 684 2,854
    Specialty and Packaging ('000 ST) 122 125 120 116 483 114 114 117 121 466
  Paper Shipments - Sourced from 3rd parties ('000 ST) 83 85 73 41 282 100 92 91 78 361
  Paper Shipments - Total ('000 ST) 911 886 887 858 3,542 970 911 917 883 3,681
  Pulp                      
  Pulp Shipments(a) ('000 ADMT) 372 344 352 377 1,445 389 368 415 385 1,557
    Hardwood Kraft Pulp (%) 17% 14% 14% 14% 15% 15% 16% 20% 19% 18%
    Softwood Kraft Pulp (%) 56% 57% 58% 57% 57% 61% 57% 55% 56% 57%
    Fluff Pulp (%) 27% 29% 27% 29% 28% 24% 27% 25% 25% 25%
                     
Personal Care Segment                    
  Sales ($) 111 108 175 172 566 70 107 111 111 399
  Operating income ($) 13 10 11 9 43 8 12 12 13 45
  Depreciation and amortization ($) 6 6 9 10 31 3 6 6 5 20
  Impairment and write-down of property, plant and equipment ($) - - - 2 2 - - - - -
                           
Average Exchange Rates $US / $CAN 1.009 1.023 1.039 1.050 1.030 1.001 1.010 0.995 0.991 0.999
      $CAN / $US 0.991 0.977 0.963 0.953 0.971 0.999 0.990 1.006 1.009 1.001
      €EUR / $US 1.320 1.306 1.325 1.362 1.329 1.312 1.283 1.252 1.298 1.286

 

(a) Figures are gross of market pulp purchased from other producers on the open market for some of our paper making operations. Pulp Shipments represent the amount of pulp produced in excess of our internal requirement.
   
  Note: the term "ST" refers to a short ton and the term "ADMT" refers to an air dry metric ton.

 

 

SOURCE Domtar Corporation

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