Mr. Brian Baarda reports

Q4 RESULTS REFLECT KEY DECISIONS TO POSITION CATALYST FOR THE FUTURE

Catalyst Paper Corp. had earnings before interest, taxes, depreciation and amortization of $6.8-million in fourth quarter compared with $8.0-million in third quarter. Catalyst reported a net loss, excluding specific items, of $10.4-million in fourth quarter compared with $10.8-million in third quarter. Operating results were impacted by increased manufacturing expenses, including higher rates for electricity, as well as costs related to the indefinite curtailment of paper machine No. 9 at the Powell River mill, and the acquisition of the Biron paper mill in Wisconsin and the Rumford pulp and paper mill in Maine.

"Our results reflect critical decisions to position the company effectively for the future," said Joe Nemeth, Catalyst president and chief executive officer. "In Q4, we incurred one-time costs and made strategic investments that will enable us to optimize our product mix and performance, while continuing to focus on cost, productivity, efficiency and customer service."

North American paper demand was down in the fourth quarter for all segments with the exception of lightweight coated and uncoated paper. Benchmark prices remained flat for specialty grades and declined for newsprint and pulp. Despite sluggish markets, sales revenues increased modestly in fourth quarter compared with third quarter due to the positive impact of a weaker Canadian dollar, higher average transaction prices for pulp, and increased sales volumes for newsprint, uncoated mechanical and lightweight coated paper.

Results for the year

Adjusted EBITDA was $47.6-million in 2014 compared with $46.1-million in 2013. Excluding specific items, the company's net loss was $28.3-million in 2014 compared with $31.5-million in 2013. Free cash flow was negative $17.2-million compared with negative $21.4-million in 2013. These results understate the year-over-year improvement the company achieved, as it incurred one-time costs of $3.1-million to complete the acquisition of the U.S. assets and did not have the $4.3-million in EBITDA contribution from its interest in Powell River Energy Inc. that existed in 2013. After normalizing for these non-recurring items, adjusted EBITDA increased by $8.9-million compared with the prior year.

"Where we applied a sharp focus on operational excellence, we made substantive progress," said Mr. Nemeth, Catalyst president and CEO. "As we look ahead to 2015, we expect continued improvement as we work diligently to realize the benefits of our U.S. acquisition, revitalize our Powell River operations and consistently apply the operational excellence principles that have enabled our financial recovery."

Cost factors beyond the company's control continued to challenge the competitiveness of the business. In 2014, manufacturing costs were higher mainly due to price increases in fibre, chemicals, steam fuel and electrical power, which represent a major cost for the company's energy-intensive business.

A critical priority in 2014 was implementing initiatives to mitigate the increasing cost of hydroelectricity. The company took advantage of a new Power Smart program extended to pulp producers that provides 75 per cent of capital financing for equipment upgrades that more efficiently harness energy. Through its efforts to mitigate power usage, the company expects to realize financing potential of approximately $45-million through the program.

Liquidity

The company's total liquidity as of Dec. 31, 2014, was $102.7-million representing a $19.9-million decrease from the prior year. This decrease reflects negative free cash flow of $17.2-million generated for the year.

                                           SELECTED HIGHLIGHTS 
                        (in millions of dollars, except where otherwise stated)           
                                                                                             2014     2013     2012
 
Sales                                                                                    $1,109.3 $1,051.4 $1,058.2
Operating earnings (loss)                                                                   (13.5)   (87.8)    19.1   
Depreciation and amortization                                                                44.6     47.0     36.3   
Adjusted EBITDA                                                                              47.6     46.1     55.4   
Before restructuring costs                                                                   48.1     47.3     60.7   
Net earnings (loss) attributable to the company                                             (72.3)  (127.6)   583.2  
Before specific items                                                                       (28.3)   (31.5)   (37.8) 
Adjusted EBITDA margin                                                                        4.3%     4.4%     5.2%   
Before restructuring costs                                                                    4.3%     4.5%     5.2%   
Net earnings (loss) per share attributable to the company's 
common shareholders (in dollars)                        
Basic and diluted from continuing operations                                               $(4.99)  $(9.01)  $41.65  
Basic and diluted from discontinued operations                                                 --     0.21    (1.15) 
Before specific items                                                                       (1.95)   (2.17)   (2.62) 

(in thousands of tonnes)                                                                                            
Sales                                                                                     1,389.3  1,373.3  1,401.4
Production                                                                                1,403.5  1,382.6  1,388.6

Outlook

A key focus for 2015 is the full integration of the Biron and Rumford mills. The company's approach is to identify opportunities to optimize production, product mix and performance. The company has recruited additional talent to enhance its sales capacity and capabilities, and to ensure it can continue to distinguish Catalyst as the industry's leading provider of quality products and superior services to customers worldwide. Mitigation of increasing hydroelectricity rates remains a priority in 2015. The company has launched a pilot program in concert with B.C. Hydro at all of its Canadian mills that financially rewards the company for shifting energy use within specific time frames. The company will explore all feasible opportunities to mitigate the impact of escalating rates, including another 6-per-cent increase planned by B.C. Hydro on April 1. The company anticipates that specialty printing paper markets in North America will remain challenging with the continued evolution of digital media and the displacement of printed mediums. Its strategy within this market is to focus on lightweight niches in all printing and writing grades, and to increase sales of higher-value products, including coated free sheet and coated one-side grades.

Further quarterly results materials

This release, along with the full annual management's discussion and analysis, financial statements, and accompanying notes, is available on the company's website. This material is also filed with SEDAR in Canada and EDGAR in the United States.

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