Pacifica reports sharply higher earnings, sales and EBITDA for first quarter of 2001

Apr 23, 2001, 01:00 ET from Pacifica Papers Inc.

    VANCOUVER, April 23 /PRNewswire/ - Pacifica Papers Inc. (TSE: PPP)
 reported sharp improvements in sales, net earnings and earnings before
 interest, taxes, depreciation, amortization and other non-operating income and
 expenses (EBITDA) for the first quarter ended March 31, 2001, marking the
 Company's 12th consecutive profitable quarter since its inception in mid-1998.
     Net earnings totalled $14.3 million or $0.54 per common share for the
 first quarter of 2001, compared to net earnings of $1.2 million or $0.05 per
 common share for the first quarter of 2000. Net earnings for the latest period
 included a gain of $7.8 million or $0.29 per share arising from the sale of
 49.9% of Pacifica's hydroelectric facilities at Powell River. Sales reached
 $228.1 million for the first quarter of 2001, up 12.5% compared to sales of
 $202.7 million for the comparable period in 2000. EBITDA for the latest
 quarter totalled $45.3 million, up 34.4% from EBITDA of $33.7 million for the
 first quarter of 2000. For the seasonally strong fourth quarter ended December
 31, 2000, Pacifica reported net earnings of $9.6 million or $0.36 per common
 share and EBITDA of $51.1 million on sales of $233.5 million.
     "We're very pleased with these results, which clearly demonstrate the
 commitment of the people of Pacifica to create shareholder value," said Wayne
 Nystrom, Pacifica's President and Chief Executive Officer. "Our strong sales
 and profit performance in the first quarter was achieved despite a slowing
 U.S. economy, which had a negative impact on newspaper and magazine
 advertising volumes. Although prices for our LWC paper products declined due
 to softening demand, prices for our newsprint and certain uncoated groundwood
 papers increased during the period, reflecting the positive impact of recent
 industry consolidation," he said.
     Cash flows from operating activities before changes in non-cash working
 capital, totalled $30.6 million for the first quarter of 2001, compared to
 $17.0 million for the first quarter of 2000, and $36.1 million for the
 preceding quarter.
     Pacifica's paper sales volumes for the first quarter of 2001 totalled
 222,700 tonnes, up 200 tonnes or 0.1% from the comparable period in 2000, and
 down 3,900 tonnes or 1.7% from the previous quarter. Value-added papers
 accounted for a record-high 75.5% of total sales volume for the first quarter
 of 2001, well above the 69.6% level recorded for the year-earlier quarter, and
 slightly above the previous record-high level of 74.8% achieved in the fourth
 quarter of 2000.
     Average paper sales revenues across all products for the first quarter of
 2001 were basically unchanged from the previous quarter, at $1,012 per tonne.
 The benefit of the net increase in Pacifica's paper product prices and a
 reduction in distribution costs during the quarter was offset by the impact of
 lower hedged foreign exchange rates and a seasonal mix of lower-value, higher
 basis weight grades.
     Compared to the first quarter of 2000, Pacifica's average paper sales
 revenues increased by approximately $108 per tonne or 12.0% for the three
 months ended March 31, 2001. This reflects stronger prices across all
 products, a higher value-added product and grade mix, and reduced distribution
 costs. These factors were partly offset by the impact of lower hedged foreign
 exchange rates.
     "On the cost side, Pacifica continued to make significant progress in
 reducing controllable operating costs during the first quarter of 2001.
 Specifically, we realized manufacturing cost savings of approximately $5
 million or $22 per tonne compared to the fourth quarter of 2000, as we
 achieved further efficiencies in our fibre consumption, improved our labour
 costs, and enhanced paper machine runnability," said Mr. Nystrom.
     These cost savings in the first quarter were offset by higher costs of
 $45 per tonne, due primarily to increased energy costs, a power boiler upset
 at its Powell River mill, and higher chemical costs. The higher energy costs
 reflected unseasonably low water levels at Powell and Lois lakes, higher power
 costs stemming from the sale of 49.9% of Pacifica's hydroelectric facilities
 to Powell River Energy Inc. (PREI) in February 2001, and fewer fuel
 substitution opportunities. As a result, Pacifica's overall paper production
 costs increased by approximately $23 per tonne or 3.1% compared to the fourth
 quarter of 2000.
     Compared to the same period in 2000, paper production costs were higher
 by approximately $53 per tonne or 7.4% for the first quarter of 2001. Cost
 reductions of approximately $10 million or $44 per tonne achieved throughout
 the Company were offset primarily by sharp increases in natural gas and oil
 costs, interim custom chipping costs associated with its Powell River woodroom
 reorganization, a power boiler upset at its Powell River mill, and higher
 costs associated with the Company's increased value-added sales mix.
     As announced previously, Pacifica completed the sale of its hydroelectric
 subsidiary, Pacifica Power Co. Ltd., to PREI on February 2, 2001. This
 important transaction generated cash proceeds to Pacifica of $100.0 million,
 which were used substantially to pay down bank debt. Pacifica retains a 50.1%
 interest in the share capital of PREI.
     Capital spending for the first quarter of 2001 totalled $13.4 million,
 compared to $6.4 million for the year-earlier quarter and $32.4 million for
 the fourth quarter of 2000.
     "Following the sale of our hydroelectric facilities, we commenced several
 key high-return capital projects, which are expected to significantly enhance
 our margins upon completion. These included upgrades to our thermomechanical
 pulp (TMP) plant and paper machine No. 10 at Powell River. Our capital
 expenditures also included further work on the integrated waste heat recovery
 system at Port Alberni and the installation of a dilute non-condensable gas
 collection and incineration (DNCG) system at Powell River. We remain on
 schedule to complete the latter project and thereby comply with miscellaneous
 total-reduced sulphur (TRS) emission permit levels by June 1, 2001," Mr.
 Nystrom said.
     Pacifica's mills at Powell River and Port Alberni will be undergoing
 shutdowns for approximately six days each in June 2001 for maintenance and
 capital upgrades. The resulting loss of production will total approximately
 15,000 tonnes.
 
     Proposed Business Combination with Norske Skog Canada Limited
 
     On March 25, 2001, Pacifica entered into an agreement with Norske Skog
 Canada Limited that, if successful, will result in a combination of both
 businesses. The merger will proceed by way of a Court-approved Plan of
 Arrangement. Under the terms of the transaction, Pacifica shareholders may
 elect to receive 2.1 Norske Skog Canada Limited shares or alternatively, one
 Norske Skog Canada Limited share and $7.50 cash, for each Pacifica share held.
 If approved, the transaction is expected to close in June 2001. The new
 company will retain the Norske Skog Canada Limited name, with its corporate
 headquarters remaining in Vancouver.
     Commenting on the proposed transaction, Mr. Trevor Johnstone, Pacifica's
 Chairman of the Board of Directors, said, "Our pending merger with Norske Skog
 Canada Limited will create numerous opportunities to build further value for
 our stakeholders. The new company will be a leading North American producer of
 pulp, newsprint and value-added papers. This broad product mix, combined with
 a strengthened balance sheet and an estimated $60 million in annual cost
 savings flowing from our two companies' operating synergies, will allow the
 new entity to significantly enhance its competitive position in the global
 marketplace."
 
     Summary
 
     "Looking ahead, while the outlook for the balance of 2001 is unclear, the
 recent lowering of interest rates by the U.S Federal Reserve Board, combined
 with the planned reduction in income tax rates, should help to pave the way
 for a turnaround in the U.S economy later this year. Our first quarter results
 clearly demonstrate the progress we're making internally in creating
 sustainable value for our shareholders. We are continuing to pursue
 initiatives to further strengthen our financial performance," Mr. Nystrom
 said.
     Pacifica is a producer of value-added groundwood printing and
 communications papers including lightweight coated paper, soft nip calendered
 paper, telephone directory paper, machine finished hibrite paper, and
 newsprint. Pacifica's operations include two paper mill complexes at Powell
 River and Port Alberni, British Columbia, with a current annual production
 capacity of approximately 891,000 tonnes. Pacifica's shares trade on The
 Toronto Stock Exchange under the symbol "PPP".
 
     Financial Highlights
 
                                             Three Months        Three Months
                                                    ended               ended
                                                 March 31            March 31
                                                     2001                2000
                                                unaudited           unaudited
     -------------------------------------------------------------------------
     Sales and Earnings
      (millions of dollars,
      except where otherwise stated)
     Sales                                   $      228.1      $        202.7
     Operating earnings                              27.1                17.8
     Net earnings                                    14.3                 1.2
     EBITDA (1)                                      45.3                33.7
     EBITDA margin                                  19.9%               16.6%
 
     Financial Position
      (millions of dollars,
      except where otherwise stated)
     Working capital                         $      133.7      $         98.9
     Capital expenditures                            13.4                 6.4
     Total assets                                 1,266.4             1,282.8
     Total long-term debt                           578.9               593.8
     Shareholders' equity                           323.6               287.3
     Current assets to current
      liabilities                                  2.09:1              1.59:1
     Total long-term debt to
      total capitalization                         0.64:1              0.67:1
 
     Per Common Share
      Performance (dollars)
     Basic earnings                          $       0.54      $         0.05
     Diluted basic earnings                          0.54                0.05
     EBITDA                                          1.71                1.28
     Book value (2)                                 12.15               10.88
     Cash flow (3)                                   1.15                0.64
     Price - High                                   13.50               12.80
           - Low                                     8.60               10.25
 
     Sales (thousands of tonnes)
     Lightweight Coated (LWC) Paper                  52.7                52.4
     Telephone Directory Paper                       58.3                49.3
     Other Specialty Groundwood Papers               57.2                53.1
     Newsprint                                       54.5                67.7
     -------------------------------------------------------------------------
     Total                                          222.7               222.5
                                                    --------------------------
                                                    --------------------------
     Production (thousands of tonnes)
     Lightweight Coated (LWC) Paper                  51.8                50.3
     Telephone Directory Paper                       56.6                50.1
     Other Specialty Groundwood Papers               58.0                51.0
     Newsprint                                       54.7                67.1
     -------------------------------------------------------------------------
     Total                                          221.1               218.5
                                                    --------------------------
                                                    --------------------------
     Other Statistical Data
     Weighted average common
      shares outstanding (millions)                  26.5                26.4
     Number of employees                            1,845               1,915
 
     (1) EBITDA is defined as earnings before interest, taxes, depreciation
         and amortization, and other non-operating income and expenses.
     (2) Book value is calculated based on common shares outstanding at the
         end of the period.
     (3) Operating cash flows before changes in non-cash working capital.
 
 
     Consolidated Balance Sheets
 
 
                                                    As at
                                                 March 31               As at
                                                     2001         December 31
     (millions of dollars)                      unaudited                2000
     -------------------------------------------------------------------------
     Assets
     Current assets
         Accounts receivable                 $      139.8      $        131.0
         Inventories                                109.4               117.0
         Prepaid expenses                             2.5                 0.8
     -------------------------------------------------------------------------
                                                    251.7               248.8
     Capital assets - net                         1,000.8             1,052.4
     Deferred charges                                13.9                16.6
     -------------------------------------------------------------------------
                                             $    1,266.4      $      1,317.8
                                             ---------------------------------
                                             ---------------------------------
     Liabilities
     Current liabilities
         Operating loan                      $       15.2      $         15.0
         Accounts payable and
          accrued liabilities                       102.8               123.6
         Current portion of
          long-term debt                              2.3                28.5
     -------------------------------------------------------------------------
                                                    120.3               167.1
     Long-term debt                                 576.6               575.9
     Other long-term obligations                     40.3                38.5
     Deferred foreign exchange gain (loss)          (23.0)                4.8
     Future income taxes                            228.6               223.9
     -------------------------------------------------------------------------
                                                    942.8             1,010.2
 
     Shareholders' Equity
     Share capital                                  253.9               252.2
     Retained earnings                               69.7                55.4
     -------------------------------------------------------------------------
                                                    323.6               307.6
     -------------------------------------------------------------------------
                                             $    1,266.4      $      1,317.8
                                             ---------------------------------
                                             ---------------------------------
 
 
 
 
 
 
     "Wayne Nystrom"                          "David M. Gandossi"
     Wayne Nystrom                            David M. Gandossi
     President and Chief Executive Officer    Vice-President, Finance
                                              and Chief Financial Officer
 
 
     Consolidated Statements of Earnings and Retained Earnings
 
 
                                              Three Months     Three Months
                                                     ended            ended
                                                  March 31         March 31
                                                      2001             2000
     (millions of dollars, except where          unaudited        unaudited
      otherwise stated)
     -------------------------------------------------------------------------
 
     Sales                                    $      228.1     $      202.7
     Expenses
         Materials, labour, and
          other operating                            174.4            161.2
         Depreciation and
          amortization                                18.2             15.9
         Selling, general
          and administrative                           8.4              7.8
     -------------------------------------------------------------------------
                                                     201.0            184.9
     -------------------------------------------------------------------------
 
     Operating earnings                               27.1             17.8
     Interest expense, net of capitalized
      interest of $0.8 (2000 - $nil)                  12.9             15.6
     Other expenses - net                              2.2              0.2
     Gain on sale of subsidiary (note 3)              (7.8)               -
     -------------------------------------------------------------------------
     Earnings before income taxes                     19.8              2.0
     -------------------------------------------------------------------------
 
     Income taxes
         Current                                       0.8              0.6
         Future                                        4.7              0.2
     -------------------------------------------------------------------------
                                                       5.5              0.8
     -------------------------------------------------------------------------
 
     Net earnings for the period              $       14.3     $        1.2
 
     Retained earnings,
      beginning of period                             55.4             34.5
     -------------------------------------------------------------------------
     Retained earnings, end of period         $       69.7     $       35.7
                                              --------------------------------
                                              --------------------------------
     Basic earnings per common share
      (dollars)                               $       0.54     $       0.05
                                              --------------------------------
                                              --------------------------------
 
     Diluted earnings per common share
      (dollars)                               $       0.54     $       0.05
                                              --------------------------------
                                              --------------------------------
 
     Weighted average number of common shares
      outstanding (millions)                          26.5             26.4
                                              --------------------------------
                                              --------------------------------
 
 
     Consolidated Statements of Cash Flows
 
 
                                              Three Months     Three Months
                                                     ended            ended
                                                  March 31         March 31
                                                      2001             2000
                                                 unaudited        unaudited
 
     (millions of dollars)
     -------------------------------------------------------------------------
     Cash flows from operating activities
     Net earnings for the period              $       14.3     $        1.2
     Items not affecting cash:
         Depreciation and amortization                18.2             15.9
         Future income taxes                           4.7              0.2
         Other income - net                           (0.6)            (0.9)
         Gain on sale of subsidiary                   (7.8)               -
         Increase in other
          long-term obligations                        1.8              0.6
     -------------------------------------------------------------------------
                                                      30.6             17.0
     -------------------------------------------------------------------------
 
     Changes in non-cash working capital:
         Accounts receivable                          (6.9)           (16.8)
         Inventories                                   7.6             14.0
         Prepaid expenses                             (1.7)            (0.5)
         Accounts payable and
          accrued liabilities                        (20.8)             9.6
     -------------------------------------------------------------------------
                                                     (21.8)             6.3
     -------------------------------------------------------------------------
                                                       8.8             23.3
 
     Cash flows from investing activities
     Additions to capital assets              $      (13.4)    $       (6.4)
     Proceeds from sale of subsidiary                100.0                -
     Proceeds from sale of capital assets              0.4                -
     -------------------------------------------------------------------------
                                                      87.0             (6.4)
     -------------------------------------------------------------------------
 
     Cash flows from financing activities
     Increase to deferred charges             $       (0.7)    $          -
     Increase (decrease) in operating loan             0.2            (11.2)
     Net repayment of long-term debt                 (97.0)            (4.9)
     Issuance of share capital                         1.7                -
     -------------------------------------------------------------------------
                                                     (95.8)           (16.1)
     -------------------------------------------------------------------------
 
     Increase in cash, and cash, end of
      period                                  $          -     $        0.8
                                              --------------------------------
                                              --------------------------------
     Supplemental cash flow information
     Long-term debt assumed on acquisition
      of Joint Venture (note 3)               $       44.4     $          -
                                              --------------------------------
                                              --------------------------------
 
     Notes to Consolidated Financial Statements
 
     1 Basis of presentation    These consolidated financial statements
                                include the accounts of Pacifica Papers Inc.
                                (the Company), its wholly-owned subsidiaries
                                and partnership, and its proportionate share
                                of the assets and liabilities as at March 31,
                                2001, and its proportionate share of the
                                revenues and expenditures for the period from
                                Februrary 2, 2001 to March 31, 2001, of Powell
                                River Energy Inc. (PREI), a joint venture
                                (Note 3) . All intercompany transactions and
                                amounts have been eliminated on consolidation.
 
                                              Three Months        Three Months
                                                     ended               ended
                       (millions of dollars)      March 31            March 31
                                                      2001                2000
                                                 unaudited           unaudited
                  ------------------------------------------------------------
     2 Segmented  Paper sales
     information     Canada                   $       16.5     $          15.3
                     Foreign
                        United States                167.4               157.9
                        Asia                          26.4                17.0
                        Other                         15.1                10.9
     -------------------------------------------------------------------------
                     Total foreign
                      sales                          208.9               185.8
     -------------------------------------------------------------------------
                  Total                              225.4               201.1
                  Pulp Sales                           2.7                 1.6
     -------------------------------------------------------------------------
                  Total Sales                 $      228.1     $         202.7
                                             ---------------------------------
                                             ---------------------------------
 
     3 Gain on sale of    On February 2, 2001, the Company completed the sale
     subsidiary           of its hydroelectric subsidiary, Pacifica Power Co.
                          Ltd, to PREI. In return, the Company received cash
                          proceeds of $100.0 million, a subordinated debenture
                          of $11.0 million, a promissory note of $2.0 million
                          and a 50.1% interest in the share capital of PREI.
                          The cash proceeds were used substantially to pay
                          down debt.
 
 
     4 Proposed business    On March 25, 2001, the Company entered into an
     combination with       agreement with Norske Skog Canada Limited (Norske
     Norske Skog Canada     Canada) that, if successful, will result in a
     Limited                combination of both businesses. The merger will
                            proceed by way of a Court-approved Plan of
                            Arrangement, and the Company's shareholders may
                            elect to receive 2.1 Norske Canada shares or,
                            alternatively, one Norske Canada share and $7.50
                            cash for each Pacifica share held. If approved,
                            the transaction is expected to close in June 2001.
 
 
     5 Comparative figures  Certain figures have been reclassified to conform
                            with the current period's presentation.
 
 

SOURCE Pacifica Papers Inc.
    VANCOUVER, April 23 /PRNewswire/ - Pacifica Papers Inc. (TSE: PPP)
 reported sharp improvements in sales, net earnings and earnings before
 interest, taxes, depreciation, amortization and other non-operating income and
 expenses (EBITDA) for the first quarter ended March 31, 2001, marking the
 Company's 12th consecutive profitable quarter since its inception in mid-1998.
     Net earnings totalled $14.3 million or $0.54 per common share for the
 first quarter of 2001, compared to net earnings of $1.2 million or $0.05 per
 common share for the first quarter of 2000. Net earnings for the latest period
 included a gain of $7.8 million or $0.29 per share arising from the sale of
 49.9% of Pacifica's hydroelectric facilities at Powell River. Sales reached
 $228.1 million for the first quarter of 2001, up 12.5% compared to sales of
 $202.7 million for the comparable period in 2000. EBITDA for the latest
 quarter totalled $45.3 million, up 34.4% from EBITDA of $33.7 million for the
 first quarter of 2000. For the seasonally strong fourth quarter ended December
 31, 2000, Pacifica reported net earnings of $9.6 million or $0.36 per common
 share and EBITDA of $51.1 million on sales of $233.5 million.
     "We're very pleased with these results, which clearly demonstrate the
 commitment of the people of Pacifica to create shareholder value," said Wayne
 Nystrom, Pacifica's President and Chief Executive Officer. "Our strong sales
 and profit performance in the first quarter was achieved despite a slowing
 U.S. economy, which had a negative impact on newspaper and magazine
 advertising volumes. Although prices for our LWC paper products declined due
 to softening demand, prices for our newsprint and certain uncoated groundwood
 papers increased during the period, reflecting the positive impact of recent
 industry consolidation," he said.
     Cash flows from operating activities before changes in non-cash working
 capital, totalled $30.6 million for the first quarter of 2001, compared to
 $17.0 million for the first quarter of 2000, and $36.1 million for the
 preceding quarter.
     Pacifica's paper sales volumes for the first quarter of 2001 totalled
 222,700 tonnes, up 200 tonnes or 0.1% from the comparable period in 2000, and
 down 3,900 tonnes or 1.7% from the previous quarter. Value-added papers
 accounted for a record-high 75.5% of total sales volume for the first quarter
 of 2001, well above the 69.6% level recorded for the year-earlier quarter, and
 slightly above the previous record-high level of 74.8% achieved in the fourth
 quarter of 2000.
     Average paper sales revenues across all products for the first quarter of
 2001 were basically unchanged from the previous quarter, at $1,012 per tonne.
 The benefit of the net increase in Pacifica's paper product prices and a
 reduction in distribution costs during the quarter was offset by the impact of
 lower hedged foreign exchange rates and a seasonal mix of lower-value, higher
 basis weight grades.
     Compared to the first quarter of 2000, Pacifica's average paper sales
 revenues increased by approximately $108 per tonne or 12.0% for the three
 months ended March 31, 2001. This reflects stronger prices across all
 products, a higher value-added product and grade mix, and reduced distribution
 costs. These factors were partly offset by the impact of lower hedged foreign
 exchange rates.
     "On the cost side, Pacifica continued to make significant progress in
 reducing controllable operating costs during the first quarter of 2001.
 Specifically, we realized manufacturing cost savings of approximately $5
 million or $22 per tonne compared to the fourth quarter of 2000, as we
 achieved further efficiencies in our fibre consumption, improved our labour
 costs, and enhanced paper machine runnability," said Mr. Nystrom.
     These cost savings in the first quarter were offset by higher costs of
 $45 per tonne, due primarily to increased energy costs, a power boiler upset
 at its Powell River mill, and higher chemical costs. The higher energy costs
 reflected unseasonably low water levels at Powell and Lois lakes, higher power
 costs stemming from the sale of 49.9% of Pacifica's hydroelectric facilities
 to Powell River Energy Inc. (PREI) in February 2001, and fewer fuel
 substitution opportunities. As a result, Pacifica's overall paper production
 costs increased by approximately $23 per tonne or 3.1% compared to the fourth
 quarter of 2000.
     Compared to the same period in 2000, paper production costs were higher
 by approximately $53 per tonne or 7.4% for the first quarter of 2001. Cost
 reductions of approximately $10 million or $44 per tonne achieved throughout
 the Company were offset primarily by sharp increases in natural gas and oil
 costs, interim custom chipping costs associated with its Powell River woodroom
 reorganization, a power boiler upset at its Powell River mill, and higher
 costs associated with the Company's increased value-added sales mix.
     As announced previously, Pacifica completed the sale of its hydroelectric
 subsidiary, Pacifica Power Co. Ltd., to PREI on February 2, 2001. This
 important transaction generated cash proceeds to Pacifica of $100.0 million,
 which were used substantially to pay down bank debt. Pacifica retains a 50.1%
 interest in the share capital of PREI.
     Capital spending for the first quarter of 2001 totalled $13.4 million,
 compared to $6.4 million for the year-earlier quarter and $32.4 million for
 the fourth quarter of 2000.
     "Following the sale of our hydroelectric facilities, we commenced several
 key high-return capital projects, which are expected to significantly enhance
 our margins upon completion. These included upgrades to our thermomechanical
 pulp (TMP) plant and paper machine No. 10 at Powell River. Our capital
 expenditures also included further work on the integrated waste heat recovery
 system at Port Alberni and the installation of a dilute non-condensable gas
 collection and incineration (DNCG) system at Powell River. We remain on
 schedule to complete the latter project and thereby comply with miscellaneous
 total-reduced sulphur (TRS) emission permit levels by June 1, 2001," Mr.
 Nystrom said.
     Pacifica's mills at Powell River and Port Alberni will be undergoing
 shutdowns for approximately six days each in June 2001 for maintenance and
 capital upgrades. The resulting loss of production will total approximately
 15,000 tonnes.
 
     Proposed Business Combination with Norske Skog Canada Limited
 
     On March 25, 2001, Pacifica entered into an agreement with Norske Skog
 Canada Limited that, if successful, will result in a combination of both
 businesses. The merger will proceed by way of a Court-approved Plan of
 Arrangement. Under the terms of the transaction, Pacifica shareholders may
 elect to receive 2.1 Norske Skog Canada Limited shares or alternatively, one
 Norske Skog Canada Limited share and $7.50 cash, for each Pacifica share held.
 If approved, the transaction is expected to close in June 2001. The new
 company will retain the Norske Skog Canada Limited name, with its corporate
 headquarters remaining in Vancouver.
     Commenting on the proposed transaction, Mr. Trevor Johnstone, Pacifica's
 Chairman of the Board of Directors, said, "Our pending merger with Norske Skog
 Canada Limited will create numerous opportunities to build further value for
 our stakeholders. The new company will be a leading North American producer of
 pulp, newsprint and value-added papers. This broad product mix, combined with
 a strengthened balance sheet and an estimated $60 million in annual cost
 savings flowing from our two companies' operating synergies, will allow the
 new entity to significantly enhance its competitive position in the global
 marketplace."
 
     Summary
 
     "Looking ahead, while the outlook for the balance of 2001 is unclear, the
 recent lowering of interest rates by the U.S Federal Reserve Board, combined
 with the planned reduction in income tax rates, should help to pave the way
 for a turnaround in the U.S economy later this year. Our first quarter results
 clearly demonstrate the progress we're making internally in creating
 sustainable value for our shareholders. We are continuing to pursue
 initiatives to further strengthen our financial performance," Mr. Nystrom
 said.
     Pacifica is a producer of value-added groundwood printing and
 communications papers including lightweight coated paper, soft nip calendered
 paper, telephone directory paper, machine finished hibrite paper, and
 newsprint. Pacifica's operations include two paper mill complexes at Powell
 River and Port Alberni, British Columbia, with a current annual production
 capacity of approximately 891,000 tonnes. Pacifica's shares trade on The
 Toronto Stock Exchange under the symbol "PPP".
 
     Financial Highlights
 
                                             Three Months        Three Months
                                                    ended               ended
                                                 March 31            March 31
                                                     2001                2000
                                                unaudited           unaudited
     -------------------------------------------------------------------------
     Sales and Earnings
      (millions of dollars,
      except where otherwise stated)
     Sales                                   $      228.1      $        202.7
     Operating earnings                              27.1                17.8
     Net earnings                                    14.3                 1.2
     EBITDA (1)                                      45.3                33.7
     EBITDA margin                                  19.9%               16.6%
 
     Financial Position
      (millions of dollars,
      except where otherwise stated)
     Working capital                         $      133.7      $         98.9
     Capital expenditures                            13.4                 6.4
     Total assets                                 1,266.4             1,282.8
     Total long-term debt                           578.9               593.8
     Shareholders' equity                           323.6               287.3
     Current assets to current
      liabilities                                  2.09:1              1.59:1
     Total long-term debt to
      total capitalization                         0.64:1              0.67:1
 
     Per Common Share
      Performance (dollars)
     Basic earnings                          $       0.54      $         0.05
     Diluted basic earnings                          0.54                0.05
     EBITDA                                          1.71                1.28
     Book value (2)                                 12.15               10.88
     Cash flow (3)                                   1.15                0.64
     Price - High                                   13.50               12.80
           - Low                                     8.60               10.25
 
     Sales (thousands of tonnes)
     Lightweight Coated (LWC) Paper                  52.7                52.4
     Telephone Directory Paper                       58.3                49.3
     Other Specialty Groundwood Papers               57.2                53.1
     Newsprint                                       54.5                67.7
     -------------------------------------------------------------------------
     Total                                          222.7               222.5
                                                    --------------------------
                                                    --------------------------
     Production (thousands of tonnes)
     Lightweight Coated (LWC) Paper                  51.8                50.3
     Telephone Directory Paper                       56.6                50.1
     Other Specialty Groundwood Papers               58.0                51.0
     Newsprint                                       54.7                67.1
     -------------------------------------------------------------------------
     Total                                          221.1               218.5
                                                    --------------------------
                                                    --------------------------
     Other Statistical Data
     Weighted average common
      shares outstanding (millions)                  26.5                26.4
     Number of employees                            1,845               1,915
 
     (1) EBITDA is defined as earnings before interest, taxes, depreciation
         and amortization, and other non-operating income and expenses.
     (2) Book value is calculated based on common shares outstanding at the
         end of the period.
     (3) Operating cash flows before changes in non-cash working capital.
 
 
     Consolidated Balance Sheets
 
 
                                                    As at
                                                 March 31               As at
                                                     2001         December 31
     (millions of dollars)                      unaudited                2000
     -------------------------------------------------------------------------
     Assets
     Current assets
         Accounts receivable                 $      139.8      $        131.0
         Inventories                                109.4               117.0
         Prepaid expenses                             2.5                 0.8
     -------------------------------------------------------------------------
                                                    251.7               248.8
     Capital assets - net                         1,000.8             1,052.4
     Deferred charges                                13.9                16.6
     -------------------------------------------------------------------------
                                             $    1,266.4      $      1,317.8
                                             ---------------------------------
                                             ---------------------------------
     Liabilities
     Current liabilities
         Operating loan                      $       15.2      $         15.0
         Accounts payable and
          accrued liabilities                       102.8               123.6
         Current portion of
          long-term debt                              2.3                28.5
     -------------------------------------------------------------------------
                                                    120.3               167.1
     Long-term debt                                 576.6               575.9
     Other long-term obligations                     40.3                38.5
     Deferred foreign exchange gain (loss)          (23.0)                4.8
     Future income taxes                            228.6               223.9
     -------------------------------------------------------------------------
                                                    942.8             1,010.2
 
     Shareholders' Equity
     Share capital                                  253.9               252.2
     Retained earnings                               69.7                55.4
     -------------------------------------------------------------------------
                                                    323.6               307.6
     -------------------------------------------------------------------------
                                             $    1,266.4      $      1,317.8
                                             ---------------------------------
                                             ---------------------------------
 
 
 
 
 
 
     "Wayne Nystrom"                          "David M. Gandossi"
     Wayne Nystrom                            David M. Gandossi
     President and Chief Executive Officer    Vice-President, Finance
                                              and Chief Financial Officer
 
 
     Consolidated Statements of Earnings and Retained Earnings
 
 
                                              Three Months     Three Months
                                                     ended            ended
                                                  March 31         March 31
                                                      2001             2000
     (millions of dollars, except where          unaudited        unaudited
      otherwise stated)
     -------------------------------------------------------------------------
 
     Sales                                    $      228.1     $      202.7
     Expenses
         Materials, labour, and
          other operating                            174.4            161.2
         Depreciation and
          amortization                                18.2             15.9
         Selling, general
          and administrative                           8.4              7.8
     -------------------------------------------------------------------------
                                                     201.0            184.9
     -------------------------------------------------------------------------
 
     Operating earnings                               27.1             17.8
     Interest expense, net of capitalized
      interest of $0.8 (2000 - $nil)                  12.9             15.6
     Other expenses - net                              2.2              0.2
     Gain on sale of subsidiary (note 3)              (7.8)               -
     -------------------------------------------------------------------------
     Earnings before income taxes                     19.8              2.0
     -------------------------------------------------------------------------
 
     Income taxes
         Current                                       0.8              0.6
         Future                                        4.7              0.2
     -------------------------------------------------------------------------
                                                       5.5              0.8
     -------------------------------------------------------------------------
 
     Net earnings for the period              $       14.3     $        1.2
 
     Retained earnings,
      beginning of period                             55.4             34.5
     -------------------------------------------------------------------------
     Retained earnings, end of period         $       69.7     $       35.7
                                              --------------------------------
                                              --------------------------------
     Basic earnings per common share
      (dollars)                               $       0.54     $       0.05
                                              --------------------------------
                                              --------------------------------
 
     Diluted earnings per common share
      (dollars)                               $       0.54     $       0.05
                                              --------------------------------
                                              --------------------------------
 
     Weighted average number of common shares
      outstanding (millions)                          26.5             26.4
                                              --------------------------------
                                              --------------------------------
 
 
     Consolidated Statements of Cash Flows
 
 
                                              Three Months     Three Months
                                                     ended            ended
                                                  March 31         March 31
                                                      2001             2000
                                                 unaudited        unaudited
 
     (millions of dollars)
     -------------------------------------------------------------------------
     Cash flows from operating activities
     Net earnings for the period              $       14.3     $        1.2
     Items not affecting cash:
         Depreciation and amortization                18.2             15.9
         Future income taxes                           4.7              0.2
         Other income - net                           (0.6)            (0.9)
         Gain on sale of subsidiary                   (7.8)               -
         Increase in other
          long-term obligations                        1.8              0.6
     -------------------------------------------------------------------------
                                                      30.6             17.0
     -------------------------------------------------------------------------
 
     Changes in non-cash working capital:
         Accounts receivable                          (6.9)           (16.8)
         Inventories                                   7.6             14.0
         Prepaid expenses                             (1.7)            (0.5)
         Accounts payable and
          accrued liabilities                        (20.8)             9.6
     -------------------------------------------------------------------------
                                                     (21.8)             6.3
     -------------------------------------------------------------------------
                                                       8.8             23.3
 
     Cash flows from investing activities
     Additions to capital assets              $      (13.4)    $       (6.4)
     Proceeds from sale of subsidiary                100.0                -
     Proceeds from sale of capital assets              0.4                -
     -------------------------------------------------------------------------
                                                      87.0             (6.4)
     -------------------------------------------------------------------------
 
     Cash flows from financing activities
     Increase to deferred charges             $       (0.7)    $          -
     Increase (decrease) in operating loan             0.2            (11.2)
     Net repayment of long-term debt                 (97.0)            (4.9)
     Issuance of share capital                         1.7                -
     -------------------------------------------------------------------------
                                                     (95.8)           (16.1)
     -------------------------------------------------------------------------
 
     Increase in cash, and cash, end of
      period                                  $          -     $        0.8
                                              --------------------------------
                                              --------------------------------
     Supplemental cash flow information
     Long-term debt assumed on acquisition
      of Joint Venture (note 3)               $       44.4     $          -
                                              --------------------------------
                                              --------------------------------
 
     Notes to Consolidated Financial Statements
 
     1 Basis of presentation    These consolidated financial statements
                                include the accounts of Pacifica Papers Inc.
                                (the Company), its wholly-owned subsidiaries
                                and partnership, and its proportionate share
                                of the assets and liabilities as at March 31,
                                2001, and its proportionate share of the
                                revenues and expenditures for the period from
                                Februrary 2, 2001 to March 31, 2001, of Powell
                                River Energy Inc. (PREI), a joint venture
                                (Note 3) . All intercompany transactions and
                                amounts have been eliminated on consolidation.
 
                                              Three Months        Three Months
                                                     ended               ended
                       (millions of dollars)      March 31            March 31
                                                      2001                2000
                                                 unaudited           unaudited
                  ------------------------------------------------------------
     2 Segmented  Paper sales
     information     Canada                   $       16.5     $          15.3
                     Foreign
                        United States                167.4               157.9
                        Asia                          26.4                17.0
                        Other                         15.1                10.9
     -------------------------------------------------------------------------
                     Total foreign
                      sales                          208.9               185.8
     -------------------------------------------------------------------------
                  Total                              225.4               201.1
                  Pulp Sales                           2.7                 1.6
     -------------------------------------------------------------------------
                  Total Sales                 $      228.1     $         202.7
                                             ---------------------------------
                                             ---------------------------------
 
     3 Gain on sale of    On February 2, 2001, the Company completed the sale
     subsidiary           of its hydroelectric subsidiary, Pacifica Power Co.
                          Ltd, to PREI. In return, the Company received cash
                          proceeds of $100.0 million, a subordinated debenture
                          of $11.0 million, a promissory note of $2.0 million
                          and a 50.1% interest in the share capital of PREI.
                          The cash proceeds were used substantially to pay
                          down debt.
 
 
     4 Proposed business    On March 25, 2001, the Company entered into an
     combination with       agreement with Norske Skog Canada Limited (Norske
     Norske Skog Canada     Canada) that, if successful, will result in a
     Limited                combination of both businesses. The merger will
                            proceed by way of a Court-approved Plan of
                            Arrangement, and the Company's shareholders may
                            elect to receive 2.1 Norske Canada shares or,
                            alternatively, one Norske Canada share and $7.50
                            cash for each Pacifica share held. If approved,
                            the transaction is expected to close in June 2001.
 
 
     5 Comparative figures  Certain figures have been reclassified to conform
                            with the current period's presentation.
 
 SOURCE Pacifica Papers Inc.