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Domtar Corporation reports preliminary fourth quarter and fiscal year 2012 financial results

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The conversion to specialty and packaging paper at the Marlboro mill nearing completion
(All financial information is in U.S. dollars, and all earnings per share results are diluted, unless otherwise noted.)

  • Fourth quarter 2012 net earnings of $0.54 per share, earnings before items1 of $1.31 per share
  • Closed the sale of the Ottawa/Gatineau hydro assets for CDN$46 million
  • Free cash flow1 payout of 68% in 2012 through regular dividends and share buybacks

TICKER SYMBOL 
(NYSE: UFS) (TSX: UFS)

MONTREAL, Feb. 1, 2013 /PRNewswire/ - Domtar Corporation (NYSE: UFS) (TSX: UFS) today reported net earnings of $19 million ($0.54 per share) for the fourth quarter of 2012 compared to net earnings of $66 million ($1.84 per share) for the third quarter of 2012 and net earnings of $61 million ($1.63 per share) for the fourth quarter of 2011. Sales for the fourth quarter of 2012 amounted to $1.3 billion.

Excluding items listed below, the Company had earnings before items1 of $46 million ($1.31 per share) for the fourth quarter of 2012 compared to earnings before items1 of $67 million ($1.87 per share) for the third quarter of 2012 and earnings before items1 of $93 million ($2.49 per share) for the fourth quarter of 2011.

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).

Third quarter 2012 items:

  • Closure and restructuring costs of $2 million ($1 million after tax).

Fourth quarter 2011 items:

  • Closure and restructuring costs of $38 million ($23 million after tax); and
  • Charge of $12 million ($9 million after tax) related to the impairment and write-down of property, plant and equipment.

"Our paper and pulp businesses performed largely in-line with expectations from a sales standpoint in the fourth quarter," said John D. Williams, President and Chief Executive Officer. "Higher costs for fiber and energy and unexpected costs incurred at a pulp mill following a planned maintenance outage affected results."

FISCAL YEAR 2012 HIGHLIGHTS

For fiscal year 2012, net earnings amounted to $172 million ($4.76 per share) compared to net earnings of $365 million ($9.08 per share) for fiscal year 2011. The Company had earnings before items1 of $233 million ($6.45 per share) for fiscal 2012 compared to earnings before items1 of $452 million ($11.24 per share) for fiscal 2011. Sales amounted to $5.5 billion for fiscal year 2012.

Commenting on the year, Mr. Williams said, "The down cycle in pulp prices contributed to the majority of the decline in Domtar's earnings. We accomplished a great deal again in 2012 nevertheless. We completed two acquisitions in our Personal Care business, we announced the conversion of a world-class commodity paper mill to manufacture specialty papers and launched several innovative projects that provide alternative uses for our wood fiber and the by-products of our manufacturing process. Our journey to build a growing fiber-based business is well underway," added Mr. Williams.

QUARTERLY REVIEW

Operating income before items1 was $84 million in the fourth quarter of 2012 compared to an operating income before items1 of $111 million in the third quarter of 2012. Depreciation and amortization totaled $96 million in the fourth quarter of 2012.

(In millions of dollars)   4Q 2012   3Q 2012
Sales   $1,327   $1,389
Operating income (loss)        
  Pulp and Paper segment   40   103
  Distribution segment   (8)   (5)
  Personal Care segment   13   12
  Corporate   (2)   (1)
  Total   43   109
Operating income before items1   84   111
Depreciation and amortization   96   96

The decrease in operating income before items1 in the fourth quarter of 2012 was the result of lower average selling prices for pulp and paper, higher unit costs for fiber and energy, higher SG&A, freight, and maintenance costs and lower volumes for pulp and paper. These factors were partially offset by high productivity and lower costs for lack-of-order downtime in paper.

When compared to the third quarter of 2012, paper shipments decreased 2.5% and pulp shipments decreased 7.2%. Paper deliveries of Ariva® decreased 10.4% when compared to the third quarter of 2012. The shipments-to-production ratio for paper was 97% in the fourth quarter of 2012, compared to 105% in the third quarter of 2012. Lack-of-order downtime and machine slowdowns in papers totaled 23,000 short tons in the fourth quarter of 2012. Paper inventories increased by 27,000 tons while pulp inventories increased by 3,000 metric tons as at the end of December, compared to September levels.

LIQUIDITY AND CAPITAL

Cash flow provided from operating activities amounted to $551 million and capital expenditures amounted to $236 million, resulting in free cash flow1 of $315 million for fiscal year 2012. Domtar's net debt-to-total capitalization ratio1 stood at 16% at December 31, 2012 compared to 12% at December 31, 2011.

Domtar returned a total of $215 million to its shareholders through a combination of dividends and share buybacks in 2012. Under its stock repurchase program, Domtar repurchased 2,000,925 shares of common stock throughout 2012 and a total of 8,660,703 shares of common stock at an average price of $80.04 since the implementation of the program in May 2010. At the end of the year, Domtar had $304 million remaining under this program.

OUTLOOK

In 2013, we expect market demand for uncoated freesheet paper to decline at a 3 to 4% rate in North America, but our shipments are expected to trend slightly better than market due to an exposure to stable specialty and packaging papers and the incremental volume from the supply agreement signed with Appleton. Paper prices are expected to trend at levels similar to year-end while we expect a slow and steady recovery in pulp prices. The implementation of our growth plans in the Personal Care segment are expected to yield incremental earnings beginning in the fourth quarter of 2013.

EARNINGS CONFERENCE CALL

The Company will hold a conference call today at 11:00 a.m. (ET) to discuss its fourth quarter 2012 financial results. Financial analysts are invited to participate in the call by dialing at least 10 minutes before start time 1 (866) 321-8231 (toll free - North America) or 1 (416) 642-5213 (International), while media and other interested individuals are invited to listen to the live webcast on the Domtar Corporation website at www.domtar.com.

The Company will release its first quarter 2013 earnings on April 25, 2013 before markets open, followed by a conference call at 10:00 a.m. (ET) to discuss results. The date is tentative and will be confirmed approximately three weeks prior to the official earnings release date.


About Domtar

Domtar 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 adult incontinence 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 complete line of incontinence care products marketed primarily under the Attends® brand name. Domtar owns and operates Ariva®, an extensive network of strategically located paper and printing supplies distribution facilities. In 2012, Domtar had sales of US$5.5 billion from nearly 50 countries. The Company employs approximately 9,300 people. To learn more, visit www.domtar.com.

Forward-Looking Statements
All statements in this news release that are not based on historical fact are "forward-looking statements." While management has based any forward-looking statements contained herein on its current expectations, the information on which such expectations were based may change. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of risks, uncertainties, and other factors, many of which are outside of our control that could cause actual results to materially differ from such statements. Such risks, uncertainties, and other factors include, but are not necessarily limited to, those set forth under the captions "Forward-Looking Statements" and "Risk Factors" of the latest Form 10-K filed with the SEC as periodically updated by subsequently filed Form 10-Q's. Unless specifically required by law, we assume no obligation to update or revise these forward-looking statements to reflect new events or circumstances.

_________________________

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 
      2012 2011 2012 2011 
      (Unaudited) 
             
      $ $ $ $
             
Selected Segment Information        
             
Sales        
    Pulp and Paper 1,099 1,177 4,575 4,953
    Distribution 157 177 685 781
    Personal Care 111 54 399 71
Total for reportable segments 1,367 1,408 5,659 5,805
    Intersegment sales - Pulp and Paper (40) (39) (177) (193)
Consolidated sales 1,327 1,369 5,482 5,612
Depreciation and amortization and impairment and write-down
of property, plant and equipment and intangible assets
       
    Pulp and Paper 90 91 361 368
    Distribution 1 1 4 4
    Personal Care 5 3 20 4
Total for reportable segments 96 95 385 376
    Impairment and write-down of property, plant and equipment - Pulp and Paper 7 12 9 85
    Impairment and write-down of intangible assets - Distribution 5 - 5 -
Consolidated depreciation and amortization and impairment and
write-down of property, plant and equipment and intangible assets
108 107 399 461
             
Operating income (loss)        
    Pulp and Paper 40 92 346 581
    Distribution (8) - (16) -
    Personal Care 13 7 45 7
    Corporate (2) - (8) 4
Consolidated operating income 43 99 367 592
Interest expense, net 22 20 131 87
Earnings before income taxes and equity earnings 21 79 236 505
Income tax expense 1 11 58 133
Equity loss, net of taxes 1 7 6 7
Net earnings 19 61 172 365
             
Per common share (in dollars)        
  Net earning        
    Basic 0.54 1.64 4.78 9.15
    Diluted 0.54 1.63 4.76 9.08
Weighted average number of common
and exchangeable shares outstanding (millions)
           
    Basic 35.1 37.1 36.0 39.9
    Diluted 35.2 37.4 36.1 40.2
             
Cash flows provided from operating activities 140 172 551 883
Additions to property, plant and equipment 65 80 236 144



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
      2012 2011 2012 2011
      (Unaudited)
             
      $ $ $ $
             
Sales 1,327 1,369 5,482 5,612
Operating expenses        
    Cost of sales, excluding depreciation and amortization 1,058 1,039 4,321 4,171
    Depreciation and amortization 96 95 385 376
    Selling, general and administrative 90 87 358 340
    Impairment and write-down of property, plant and equipment and intangible assets 12 12 14 85
    Closure and restructuring costs 27 38 30 52
    Other operating loss (income), net 1 (1) 7 (4)
  1,284 1,270 5,115 5,020
             
Operating income 43 99 367 592
             
Interest expense, net 22 20 131 87
             
Earnings before income taxes and equity earnings 21 79 236 505
             
Income tax expense 1 11 58 133
             
Equity loss, net of taxes 1 7 6 7
             
Net earnings 19 61 172 365
             
Per common share (in dollars)        
             
  Net earnings        
    Basic 0.54 1.64 4.78 9.15
    Diluted 0.54 1.63 4.76 9.08
Weighted average number of common
and exchangeable shares outstanding (millions)
       
    Basic 35.1 37.1 36.0 39.9
    Diluted 35.2 37.4 36.1 40.2

Domtar Corporation
Consolidated Balance Sheets at
(In millions of dollars)

             
          December 31 December 31
          2012 2011
          (Unaudited)
          $ $
             
Assets    
Current assets    
    Cash and cash equivalents 661 444
    Receivables, less allowances of $4 and $5 562 644
    Inventories 675 652
    Prepaid expenses 24 22
    Income and other taxes receivable 48 47
    Deferred income taxes 45 125
      Total current assets 2,015 1,934
             
  Property, plant and equipment, at cost 8,793 8,448
  Accumulated depreciation (5,392) (4,989)
      Net property, plant and equipment 3,401 3,459
Goodwill 263 163
Intangible assets, net of amortization 309 204
Other assets 135 109
        Total assets 6,123 5,869
             
Liabilities and shareholders' equity    
Current liabilities    
    Bank indebtedness 18 7
    Trade and other payables 646 688
    Income and other taxes payable 15 17
    Long-term debt due within one year 79 4
      Total current liabilities 758 716
             
Long-term debt 1,128 837
Deferred income taxes and other 903 927
Other liabilities and deferred credits 457 417
             
Shareholders' equity    
    Exchangeable shares 48 49
    Additional paid-in capital 2,175 2,326
    Retained earnings 782 671
    Accumulated other comprehensive loss (128) (74)
      Total shareholders' equity 2,877 2,972
        Total liabilities and shareholders' equity 6,123 5,869



Domtar Corporation
Consolidated Statements of Cash Flows
(In millions of dollars)

         
         
      Twelve months
ended December 31
Twelve months
ended December 31
      2012 2011
      (Unaudited)
      $ $
         
Operating activities    
Net earnings 172 365
Adjustments to reconcile net earnings to cash flows from operating activities    
  Depreciation and amortization 385 376
  Deferred income taxes and tax uncertainties (1) 40
  Impairment and write-down of property, plant and equipment and intangible assets 14 85
  Loss on repurchase of long-term debt - 4
  Net losses (gains) on disposals of property, plant and equipment and sale of business 2 (6)
  Stock-based compensation expense 5 3
  Equity loss, net 6 7
  Other (13) -
Changes in assets and liabilities, excluding the effects of acquisition and sale of businesses    
  Receivables 99 (12)
  Inventories 5 2
  Prepaid expenses (3) 2
  Trade and other payables (118) (27)
  Income and other taxes  (4) 33
  Difference between employer pension and other post-retirement contributions
and pension and other post-retirement expense
(13) (18)
  Other assets and other liabilities 15 29
  Cash flows provided from operating activities 551 883
         
Investing activities    
Additions to property, plant and equipment (236) (144)
Proceeds from disposals of property, plant and equipment 49 34
Proceeds from sale of business - 10
Acquisition of businesses, net of cash acquired (293) (288)
Investment in joint venture (6) (7)
  Cash flows used for investing activities (486) (395)
       
Financing activities    
Dividend payments (58) (49)
Net change in bank indebtedness 11 (16)
Issuance of long-term debt 548 -
Repayment of long-term debt (192) (18)
Debt issue and tender offer costs - (7)
Stock repurchase (157) (494)
Other - 10
  Cash flows provided from (used for) financing activities 152 (574)
         
Net  increase (decrease) in cash and cash equivalents 217 (86)
Cash and cash equivalents at beginning of year 444 530
Cash and cash equivalents at end of year 661 444
         
Supplemental cash flow information    
  Net cash payments for:    
    Interest (including $47 million of tender offer premiums in 2012) 116 74
    Income taxes paid 76 60



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.


                           
        2012 2011
        Q1 Q2 Q3 Q4 YTD Q1 Q2 Q3 Q4 YTD
Reconciliation of "Earnings before items" to Net earnings                      
    Net earnings ($) 28 59 66 19 172 133 54 117 61 365
  (+) Impairment and write-down of property, plant and equipment and intangible assets ($) 1 - - 8 9 2 38 4 9 53
  (+) Closure and restructuring costs ($) 1 - 1 18 20 8 1 1 23 33
  (-) Net losses (gains) on disposals of property, plant and equipment and sale of business ($) - - - 1 1 (5) 5 (3) - (3)
  (+) Impact of purchase accounting ($) 1 - - - 1 - - 1 - 1
  (+) Loss on repurchase of long-term debt ($) 30 - - - 30 - - 3 - 3
  (=) Earnings before items ($) 61 59 67 46 233 138 98 123 93 452
  ( / ) Weighted avg. number of common and exchangeable shares outstanding (diluted) (millions) 37.0 36.6 35.8 35.2 36.1 42.4 41.4 39.7 37.4 40.2
  (=) Earnings before items per diluted share ($) 1.65 1.61 1.87 1.31 6.45 3.25 2.37 3.10 2.49 11.24
                           
Reconciliation of "EBITDA" and "EBITDA before items" to Net earnings                      
    Net earnings ($) 28 59 66 19 172 133 54 117 61 365
  (+) Equity loss, net of taxes ($) 2 2 1 1 6 - - - 7 7
  (+) Income tax expense ($) 8 27 22 1 58 57 20 45 11 133
  (+) Interest expense, net ($) 71 18 20 22 131 21 21 25 20 87
  (=) Operating income ($) 109 106 109 43 367 211 95 187 99 592
  (+) Depreciation and amortization ($) 97 96 96 96 385 93 95 93 95 376
  (+) Impairment and write-down of property, plant and equipment and intangible assets ($) 2 - - 12 14 3 62 8 12 85
  (-) Net losses (gains) on disposals of property, plant and equipment and sale of business ($) - - - 2 2 (7) 6 (4) (1) (6)
  (=) EBITDA ($) 208 202 205 153 768 300 258 284 205 1,047
  (/) Sales ($) 1,398 1,368 1,389 1,327 5,482 1,423 1,403 1,417 1,369 5,612
  (=) EBITDA margin (%) 15% 15% 15% 12% 14% 21% 18% 20% 15% 19%
    EBITDA ($) 208 202 205 153 768 300 258 284 205 1,047
  (+) Closure and restructuring costs ($) 1 - 2 27 30 11 2 1 38 52
  (+) Impact of purchase accounting ($) 1 - - - 1 - - 1 - 1
  (=) EBITDA before items ($) 210 202 207 180 799 311 260 286 243 1,100
  (/) Sales ($) 1,398 1,368 1,389 1,327 5,482 1,423 1,403 1,417 1,369 5,612
  (=) EBITDA margin before items (%) 15% 15% 15% 14% 15% 22% 19% 20% 18% 20%
                           
Reconciliation of "Free cash flow" to Cash flow provided from operating activities                      
    Cash flow provided from operating activities ($) 30 175 206 140 551 148 306 257 172 883
  (-) Additions to property, plant and equipment ($) (29) (76) (66) (65) (236) (13) (20) (31) (80) (144)
  (=) Free cash flow ($) 1 99 140 75 315 135 286 226 92 739
                           
"Net debt-to-total capitalization" computation                      
    Bank indebtedness ($) 13 22 15 18   25 25 17 7  
  (+) Long-term debt due within one year ($) 6 6 7 79   2 2 5 4  
  (+) Long-term debt ($) 952 950 1,196 1,128   825 824 837 837  
  (=) Debt ($) 971 978 1,218 1,225   852 851 859 848  
  (-) Cash and cash equivalents ($) (315) (276) (593) (661)   (604) (742) (461) (444)  
  (=) Net debt ($) 656 702 625 564   248 109 398 404  
  (+) Shareholders' equity ($) 3,009 2,948 3,004 2,877   3,288 3,194 2,999 2,972  
  (=) Total capitalization ($) 3,665 3,650 3,629 3,441   3,536 3,303 3,397 3,376  
    Net debt ($) 656 702 625 564   248 109 398 404  
  ( / ) Total capitalization ($) 3,665 3,650 3,629 3,441   3,536 3,303 3,397 3,376  
  (=) Net debt-to-total capitalization (%) 18% 19% 17% 16%   7% 3% 12% 12%  

"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 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 Distribution 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 Q1'12 Q2'12 Q3'12 Q4'12 YTD
Reconciliation of Operating income (loss) to "Operating income (loss) before items"                                                    
    Operating income (loss) ($) 107 96 103 40 346 (1) (2) (5) (8) (16) 8 12 12 13 45 (5) - (1) (2) (8) 109 106 109 43 367
  (+) Impairment and write-down of property, plant and equipment and intangible assets ($) 2 - - 7 9 - - - 5 5 - - - - - - - - - - 2 - - 12 14
  (+) Closure and restructuring costs ($) 1 - - 26 27 - - 1 1 2 - - 1 - 1 - - - - - 1 - 2 27 30
  (-) Net losses on disposals of property, plant and equipment ($) - - - 2 2 - - - - - - - - - - - - - - - - - - 2 2
  (+) Impact of purchase accounting ($) - - - - - - - - - - 1 - - - 1 - - - - - 1 - - - 1
                                                         
  (=) Operating income (loss) before items ($) 110 96 103 75 384 (1) (2) (4) (2) (9) 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 ($) 110 96 103 75 384 (1) (2) (4) (2) (9) 9 12 13 13 47 (5) - (1) (2) (8) 113 106 111 84 414
  (+) Depreciation and amortization ($) 93 88 90 90 361 1 2 - 1 4 3 6 6 5 20 - - - - - 97 96 96 96 385
                                                         
  (=) EBITDA before items ($) 203 184 193 165 745 - - (4) (1) (5) 12 18 19 18 67 (5) (1) (2) (8) 210 202 207 180 799
  (/) Sales ($) 1,191 1,132 1,153 1,099 4,575 189 172 167 157 685 70 107 111 111 399 - - - - - 1,450 1,411 1,431 1,367 5,659
  (=) EBITDA margin before items (%) 17% 16% 17% 15% 16% - - - - - 17% 17% 17% 16% 17% - - - - - 14% 14% 14% 13% 14%


"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
Quarterly Reconciliation of Non-GAAP Financial Measures - By Segment 2011
(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 Distribution Personal Care (1) Corporate Total
        Q1'11 Q2'11 Q3'11 Q4'11 YTD Q1'11 Q2'11 Q3'11 Q4'11 YTD Q1'11 Q2'11 Q3'11 Q4'11 YTD Q1'11 Q2'11 Q3'11 Q4'11 YTD Q1'11 Q2'11 Q3'11 Q4'11 YTD
Reconciliation of Operating income (loss) to "Operating income (loss) before items"                                                    
    Operating income (loss) ($) 209 91 189 92 581 3 (2) (1) - - - - - 7 7 (1) 6 (1) - 4 211 95 187 99 592
  (+) Impairment and write-down of property, plant and equipment ($) 3 62 8 12 85 - - - - - - - - - - - - - - - 3 62 8 12 85
  (+) Closure and restructuring costs ($) 11 2 1 37 51 - - - 1 1 - - - - - - - - - - 11 2 1 38 52
  (-) Net losses (gains) on disposals of property, plant and equipment and sale of business ($) (4) 12 (4) (1) 3 (3) - - - (3) - - - - - - (6) - - (6) (7) 6 (4) (1) (6)
  (+) Impact of purchase accounting ($) - - - - - - - - - - - - 1 - 1 - - - - - - - 1 - 1
                                                         
  (=) Operating income (loss) before items ($) 219 167 194 140 720 - (2) (1) 1 (2) - - 1 7 8 (1) - (1) - (2) 218 165 193 148 724
                                                         
Reconciliation of "Operating income (loss) before items" to "EBITDA before items"                                                    
    Operating income (loss) before items ($) 219 167 194 140 720 - (2) (1) 1 (2) - - 1 7 8 (1) - (1) - (2) 218 165 193 148 724
  (+) Depreciation and amortization ($) 92 94 91 91 368 1 1 1 1 4 - - 1 3 4 - - - - - 93 95 93 95 376
                                                         
  (=) EBITDA before items ($) 311 261 285 231 1,088 1 (1) - 2 2 - - 2 10 12 (1) - (1) - (2) 311 260 286 243 1,100
  (/) Sales ($) 1,269 1,261 1,246 1,177 4,953 217 190 197 177 781 - - 17 54 71 - - - - - 1,486 1,451 1,460 1,408 5,805
  (=) EBITDA margin before items (%) 25% 21% 23% 20% 22% - - - 1% - - - 12% 19% 17% - - - - - 21% 18% 20% 17% 19%

"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 September 1, 2011, the Company acquired 100% of the shares of Attends Healthcare Inc. 


Domtar Corporation
Supplemental Segmented Information
(In millions of dollars, unless otherwise noted)

                             
          2012 2011
          Q1 Q2 Q3 Q4 YTD Q1 Q2 Q3 Q4 YTD
Pulp and Paper Segment                      
  Sales   ($) 1,191 1,132 1,153 1,099 4,575 1,269 1,261 1,246 1,177 4,953
    Intersegment sales - Pulp and Paper   ($) (52) (43) (42) (40) (177) (63) (48) (43) (39) (193)
  Operating income   ($) 107 96 103 40 346 209 91 189 92 581
  Depreciation and amortization   ($) 93 88 90 90 361 92 94 91 91 368
  Impairment and write-down of property, plant and equipment   ($) 2 - - 7 9 3 62 8 12 85
                             
  Papers                        
  Papers Production   ('000 ST) 870 832 788 831 3,321 899 890 875 871 3,535
  Papers Shipments   ('000 ST) 870 819 826 805 3,320 913 901 889 831 3,534
    Communication Papers   ('000 ST) 756 705 709 684 2,854 816 794 784 729 3,123
    Specialty and Packaging   ('000 ST) 114 114 117 121 466 97 107 105 102 411
                             
  Pulp                        
  Pulp Shipments(a)   ('000 ADMT) 389 368 415 385 1,557 375 361 358 403 1,497
    Hardwood Kraft Pulp   (%) 15% 16% 20% 19% 18% 20% 19% 18% 19% 19%
    Softwood Kraft Pulp   (%) 61% 57% 55% 56% 57% 55% 54% 57% 58% 57%
    Fluff Pulp   (%) 24% 27% 25% 25% 25% 25% 27% 25% 23% 24%
                             
Distribution Segment                        
  Sales   ($) 189 172 167 157 685 217 190 197 177 781
  Operating income (loss)   ($) (1) (2) (5) (8) (16) 3 (2) (1) - -
  Depreciation and amortization   ($) 1 2 - 1 4 1 1 1 1 4
  Impairment and write-down of intangible assets   ($) - - - 5 5 - - - - -
                             
Personal Care Segment                        
  Sales   ($) 70 107 111 111 399 - - 17 54 71
  Operating income   ($) 8 12 12 13 45 - - - 7 7
  Depreciation and amortization   ($) 3 6 6 5 20 - - 1 3 4
                             
                             
Average Exchange Rates   $US / $CAN 1.001 1.010 0.995 0.991 0.999 0.986 0.968 0.980 1.023 0.989
        $CAN / $US 0.999 0.990 1.006 1.009 1.001 1.014 1.034 1.021 0.977 1.011
        €EUR / $US 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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