Domtar Corporation reports preliminary fourth quarter and fiscal year 2011 financial results
TICKER SYMBOL
(NYSE: UFS) (TSX: UFS)
Good financial results despite softness in global pulp markets
(All financial information is in U.S. dollars, and all earnings (loss)
per share results are diluted, unless otherwise noted.)
-
Fourth quarter 2011 net earnings of $1.63 per share, earnings before
items1 of $2.49 per share
-
Personal care segment delivers financial performance in line with
expectations
-
Share buyback totaled $494 million in 2011; share count reduced by 14%
from December 2010
MONTREAL, Feb. 3, 2012 /CNW Telbec/ - Domtar Corporation (NYSE: UFS)
(TSX: UFS) today reported net earnings of $61Â million ($1.63 per share)
for the fourth quarter of 2011 compared to net earnings of $117Â million
($2.95 per share) for the third quarter of 2011 and net earnings of
$325Â million ($7.59Â per share) for the fourth quarter of 2010. Sales
for the fourth quarter of 2011 amounted to $1.4Â billion. Excluding
items listed below, the Company had earnings before items1 of $93 million ($2.49 per share) for the fourth quarter of 2011
compared to earnings before items1 of $123 million ($3.10 per share) for the third quarter of 2011 and
earnings before items1 of $103Â million ($2.41 per share) for the fourth quarter of 2010.
Fourth quarter 2011 items:
-
Closure and restructuring costs of $38 million ($23 million after tax)
mostly related to the restructuring of certain U.S. pension benefit
plans; and
-
Charge of $12 million ($9 million after tax) related to the impairment
and write-down of property, plant and equipment.
Third quarter 2011 items:
-
Gains on the sale of property, plant and equipment of $4 million ($3
million after tax);
-
Charge of $8 million ($4 million after tax) related to the impairment
and write-down of property, plant and equipment;
-
Premium paid on debt repurchase of $4 million ($3 million after tax);
-
Closure and restructuring costs of $1 million ($1 million after tax);
and
-
Negative impact of purchase accounting of $1 million ($1 million after
tax).
Fourth quarter 2010 items:
-
Benefit from cellulosic biofuel producer income tax credit of $127
million;
-
Benefit from reversal of a valuation allowance on Canadian deferred
income tax assets of $100 million;
-
Costs for debt repurchase of $7 million ($4 million after tax); and
-
Closure and restructuring costs of $1 million ($1 million after tax).
"Our pulp earnings were affected by the rapid decline in global pulp
prices while earnings from our paper business were impacted by the
typical seasonal slowdown of the fourth quarter. Nevertheless, our
fourth quarter results are good results and I am pleased to see the
Attends business perform to expectations," said John D. Williams, President and Chief Executive Officer.
FISCAL YEAR 2011 HIGHLIGHTS
For fiscal year 2011, net earnings amounted to $365Â million ($9.08 per
share) compared to net earnings of $605Â million ($14.00 per share) for
fiscal year 2010. The Company had earnings before items1 of $452 million ($11.24 per share) for fiscal 2011 compared to earnings
before items1 of $471 million ($10.90Â per share) for fiscal 2010. Sales amounted to
$5.6Â billion for fiscal year 2011.
Commenting on the 2011 performance, Mr. Williams said, "Looking back at 2011, we delivered another strong performance. The
second half was slightly more challenging due to the decline in pulp
prices however we maintained our volumes. This solid performance
enabled us to pursue our commitment to returning a majority of free
cash flow to shareholders. In 2011, we returned over $543 million or
$13.50 per share, representing 73% of total free cash flow1, through a combination of share buyback and regular dividends."
QUARTERLY REVIEW
Operating income before items1 was $148Â million in the fourth quarter of 2011 compared to an operating
income before items1 of $193Â million in the third quarter of 2011. Depreciation and
amortization totaled $95 million in the fourth quarter of 2011.
In December 2011, Domtar signed a four-year master agreement with the
United Steelworkers that covers approximately 3,000 hourly employees at
nine different locations in the United States. Per the agreement,
Domtar is restructuring the pension plans covering these negotiated
employees. This will result in Domtar's withdrawal from a
multi-employer pension plan and the transition of all covered employees
not grandfathered under the existing defined-benefit pension plans to a
defined-contribution pension plan for future service. As a result,
Domtar incurred a $41 million charge recorded under Closure and
restructuring costs.
(In millions of dollars) Â 4Q 2011Â 3Q 2011
Sales  $1,369 $1,417
Operating income (loss) Â Â Â Â
 Pulp and Paper segment  92 189
 Distribution segment  - (1)
 Personal Care segment  7 -
 Corporate  - (1)
 Total  99 187
Operating income before items1Â 148Â 193
Depreciation and amortization  95 93
The decrease in operating income before items1 in the fourth quarter of 2011 was the result of lower average selling
prices for pulp, lower shipments for paper and higher energy costs.
These factors were partially offset by lower maintenance costs, lower
freight costs, the positive impact of a weaker Canadian dollar and the
inclusion of Attends' earnings for a full quarter.
When compared to the third quarter of 2011, paper shipments decreased
6.5% and pulp shipments increased 12.6%. Paper deliveries of ArivaTM decreased 8% when compared to the third quarter of 2011. The
shipments-to-production ratio for paper was 95% in the fourth quarter
of 2011, compared to 102% in the third quarter of 2011. Paper
inventories increased by 40,000 tons while pulp inventories decreased
by 25,000 metric tons as at the end of December, compared to September
levels.
LIQUIDITY AND CAPITAL
Cash flow provided from operating activities amounted to $883 million
and capital expenditures amounted to $144 million, resulting in free
cash flow1 of $739 million for fiscal 2011. Domtar's net debt-to-total
capitalization ratio1 stood at 12% at December 31, 2011 compared to 9% at December 31, 2010.
OUTLOOK
Prices for pulp are still expected to remain under pressure in certain
geographies while market dynamics in the Asian markets are stabilizing.
In fine papers, North American demand is expected to decline at a 2-4%
rate in 2012, consistent with long-term trends. Any acceleration in
employment growth may help mitigate the structural decline in paper
demand. Inflation on input costs is expected to be moderate in 2012.
EARNINGS CONFERENCE CALL
The Company will hold a conference call today at 11:00 a.m. (ET) to
discuss its fourth quarter 2011 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 2012 earnings on April 26,
2012 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) is the largest integrated
manufacturer and marketer of uncoated freesheet paper in North America
and the second largest in the world based on production capacity, and
is also a manufacturer of papergrade, fluff and specialty pulp.
The Company designs, manufactures, markets and distributes a wide range
of business, commercial printing and publishing as well as converting
and specialty papers including recognized brands such as Cougar®, Lynx® Opaque Ultra, Husky® Opaque Offset, First Choice® and Domtar EarthChoice® Office Paper, part of a family of environmentally and socially
responsible papers. Domtar also produces a complete line of
incontinence care products and distributes washcloths marketed
primarily under the Attends® brand name. Domtar owns and operates ArivaTM, an extensive network of strategically located paper distribution
facilities. The Company employs approximately 8,700Â 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 Â Non-GAAP financial measure. Refer to the Reconciliation of Non-GAAP Financial Measures in the appendix.
Domtar Corporation        Â
Highlights        Â
(In millions of dollars, unless otherwise noted) Â Â Â Â Â Â Â Â
         Â
  Three months endedDecember 31 Three months ended December 31 Twelve months endedDecember 31 Twelve months ended December 31
  2011  2010  2011  2010
  (Unaudited)
  $ $ $ $
         Â
Selected Segment Information        Â
       Â
Sales        Â
  Pulp and Paper 1,177 1,212 4,953 5,070
  Distribution 177 212 781 870
  Personal Care 54 - 71 -
  Wood - - - 150
Total for reportable segments 1,408Â 1,424Â 5,805Â 6,090
  Intersegment sales - Pulp and Paper (39) (51) (193) (229)
  Intersegment sales - Wood - - - (11)
Consolidated sales 1,369Â 1,373Â 5,612Â 5,850
Depreciation and amortization and impairment and write-down of property, plant and equipment       Â
  Pulp and Paper 91 94 368 381
  Distribution 1 1 4 4
  Personal Care 3 - 4 -
  Wood - - - 10
Total for reportable segments 95Â 95Â 376Â 395
  Impairment and write-down of property, plant and equipment - Pulp and Paper 12 - 85 50
Consolidated depreciation and amortization and impairment and write-down of property, plant and equipment 107Â 95Â 461Â 445
         Â
Operating income (loss) Â Â Â Â Â Â Â Â
  Pulp and Paper 92 161 581 667
  Distribution - (3) - (3)
  Personal Care 7 - 7 -
  Wood - - - (54)
  Corporate - (3) 4 (7)
Consolidated operating income 99Â 155Â 592Â 603
Interest expense, net 20Â 29Â 87Â 155
Earnings before income taxes and equity earnings 79Â 126Â 505Â 448
Income tax expense (benefit) 11Â (199)Â 133Â (157)
Equity loss, net of taxes 7Â -Â 7Â -
Net earnings 61Â 325Â 365Â 605
       Â
Per common share (in dollars) Â Â Â Â Â Â Â Â
 Net earnings         Â
  Basic 1.64 7.67 9.15 14.14
  Diluted 1.63 7.59 9.08 14.00
Weighted average number of common and exchangeable shares outstanding (millions) Â Â Â Â Â Â Â
  Basic 37.1 42.4 39.9 42.8
  Diluted 37.4 42.8 40.2 43.2
       Â
Cash flows provided from operating activities 172Â 166Â 883Â 1,166
Additions to property, plant and equipment 80Â 41Â 144Â 153
       Â
        Â
Domtar Corporation       Â
Consolidated Statements of Earnings       Â
(In millions of dollars, unless otherwise noted) Â Â Â Â Â Â Â
        Â
  Three months endedDecember 31 Three months ended December 31 Twelve months endedDecember 31 Twelve months ended December 31
  2011  2010  2011  2010
  (Unaudited)
  $ $ $ $
        Â
Sales 1,369Â 1,373Â 5,612Â 5,850
Operating expenses       Â
  Cost of sales, excluding depreciation and amortization 1,039 1,020 4,171 4,417
  Depreciation and amortization 95 95 376 395
  Selling, general and administrative 87 94 340 338
  Impairment and write-down of property, plant and equipment 12 - 85 50
  Closure and restructuring costs 38 1 52 27
  Other operating loss (income), net (1) 8 (4) 20
  1,270 1,218 5,020 5,247
Operating income 99Â 155Â 592Â 603
Interest expense, net 20Â 29Â 87Â 155
Earnings before income taxes and equity earnings 79Â 126Â 505Â 448
Income tax expense (benefit) 11Â (199)Â 133Â (157)
Equity loss, net of taxes 7Â -Â 7Â -
Net earnings 61Â 325Â 365Â 605
        Â
Per common share (in dollars) Â Â Â Â Â Â Â
       Â
 Net earnings       Â
  Basic 1.64 7.67 9.15 14.14
  Diluted 1.63 7.59 9.08 14.00
Weighted average number of common and exchangeable shares outstanding (millions) Â Â Â Â Â Â Â
  Basic 37.1 42.4 39.9 42.8
  Diluted 37.4 42.8 40.2 43.2
Domtar Corporation    Â
Consolidated Balance Sheets at   Â
(In millions of dollars) Â Â Â
   Â
 December 31 December 31
 2011  2010
 (Unaudited)
 $ $
   Â
Assets   Â
Current assets   Â
  Cash and cash equivalents 444 530
  Receivables, less allowances of $5 and $7 644 601
  Inventories 652 648
  Prepaid expenses 22 28
  Income and other taxes receivable 47 78
  Deferred income taxes 125 115
   Total current assets 1,934 2,000
   Â
 Property, plant and equipment, at cost  8,448 9,255
 Accumulated depreciation  (4,989) (5,488)
   Net property, plant and equipment 3,459 3,767
Goodwill 163Â -
Intangible assets, net of amortization 204Â 56
Other assets  109 203
    Total assets 5,869 6,026
   Â
Liabilities and shareholders' equity    Â
Current liabilities    Â
  Bank indebtedness 7 23
  Trade and other payables 688 678
  Income and other taxes payable 17 22
  Long-term debt due within one year 4 2
    Total current liabilities 716 725
   Â
Long-term debt 837Â 825
Deferred income taxes and other  927 924
Other liabilities and deferred credits  417 350
   Â
Shareholders' equity    Â
 Exchangeable shares 49 64
 Additional paid-in capital 2,326 2,791
 Retained earnings 671 357
 Accumulated other comprehensive loss (74) (10)
   Total shareholders' equity 2,972 3,202
    Total liabilities and shareholders' equity 5,869 6,026
Â
Domtar Corporation
Consolidated Statements of Cash Flows
(In millions of dollars) Â Â
  Â
 Twelve months ended December 31Twelve months ended December 31
 2011 2010
 (Unaudited)
 $ $
  Â
Operating activities  Â
Net earnings 365 605
Adjustments to reconcile net earnings to cash flows from operating activities  Â
 Depreciation and amortization 376 395
 Deferred income taxes and tax uncertainties 40 (174)
 Impairment and write-down of property, plant and equipment 85 50
 Loss on repurchase of long-term debt 4 47
 Net losses (gains) on disposals of property, plant and equipment and sale of businesses (6) 33
 Stock-based compensation expense 3 5
 Equity loss, net 7 -
 Other - (2)
Changes in assets and liabilities, excluding the effects of acquisition and sale of businesses  Â
 Receivables (12) (73)
 Inventories 2 39
 Prepaid expenses 2 6
 Trade and other payables (17) (11)
 Income and other taxes 33 344
 Difference between employer pension and other post-retirement contributions and pension and other post-retirement expense (18) (120)
 Other assets and other liabilities 19 22
 Cash flows provided from operating activities 883 1,166
  Â
Investing activities  Â
Additions to property, plant and equipment (144) (153)
Proceeds from disposals of property, plant and equipment 34 26
Proceeds from sale of businesses and investments 10 185
Acquisition of business, net of cash acquired (288) -
Other (7) -
 Cash flows (used for) provided from investing activities (395) 58
  Â
Financing activities  Â
Dividend payments (49) (21)
Net change in bank indebtedness (16) (19)
Repayment of long-term debt (18) (898)
Premium paid on debt repurchases (7) (35)
Stock repurchase (494) (44)
Prepaid on structured stock repurchase, net - 2
Other 10 (3)
 Cash flows used for financing activities (574) (1,018)
  Â
Net (decrease) increase in cash and cash equivalents (86) 206
Translation adjustments related to cash and cash equivalents - -
Cash and cash equivalents at beginning of year 530 324
Cash and cash equivalents at end of year 444 530
  Â
Supplemental cash flow information  Â
 Net cash payments for:  Â
  Interest 74 107
  Income taxes paid 60 28
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.
Â
                      Â
    2011 2010
    Q1  Q2  Q3  Q4  YTD  Q1  Q2  Q3  Q4  YTD
Reconciliation of "Earnings before items" to Net earnings                    Â
  Net earnings ($) 133 54 117 61 365 58 31 191 325 605
 (-)Alternative fuel tax credits ($) - - - - - (18) - - - (18)
 (-)Cellulose biofuel producer credits ($) - - - - - - - - (127) (127)
 (-)Reversal of valuation allowance on Canadian deferred income tax balances ($) - - - - - - - - (100) (100)
 (+)Impairment and write-down of property, plant and equipment ($) 2 38 4 9 53 16 9 9 - 34
 (+)Closure and restructuring costs ($) 8 1 1 23 33 14 4 1 1 20
 (-)Net losses (gains) on disposals of property, plant and equipment and sale of businesses($) (5) 5 (3) - (3) (1) 48 (18) - 29
 (+)Impact of purchase accounting ($) - - 1 - 1 - - - - -
 (+)Loss on repurchase of long-term debt ($) - - 3 - 3 - 24 - 4 28
 (=)Earnings before items ($) 138 98 123 93 452 69 116 183 103 471
 (/)Weighted avg. number of common and exchangeable shares outstanding (diluted) (millions) 42.4 41.4 39.7 37.4 40.2 43.3 43.4 43.0 42.8 43.2
 (=)Earnings before items per diluted share ($) 3.25 2.37 3.10 2.49 11.24 1.59 2.67 4.26 2.41 10.90
                      Â
Reconciliation of "EBITDA" and "EBITDA before items" to Net earnings                    Â
  Net earnings ($) 133 54 117 61 365 58 31 191 325 605
 (+)Equity loss, net of taxes ($) - - - 7 7 - - - - -
 (+)Income tax expense (benefit) ($) 57 20 45 11 133 26 (5) 21 (199) (157)
 (+)Interest expense, net ($) 21 21 25 20 87 32 70 24 29 155
 (=)Operating income ($) 211 95 187 99 592 116 96 236 155 603
 (+)Depreciation and amortization ($) 93 95 93 95 376 102 101 97 95 395
 (+)Impairment and write-down of property, plant and equipment ($) 3 62 8 12 85 22 14 14 - 50
 (-)Net losses (gains) on disposals of property, plant and equipment and sale of businesses($) (7) 6 (4) (1) (6) (1) 48 (14) - 33
 (=)EBITDA ($) 300 258 284 205 1,047 239 259 333 250 1,081
 (/)Sales ($) 1,423 1,403 1,417 1,369 5,612 1,457 1,547 1,473 1,373 5,850
 (=)EBITDA margin (%) 21% 18% 20% 15% 19% 16% 17% 23% 18% 18%
  EBITDA ($) 300 258 284 205 1,047 239 259 333 250 1,081
 (-)Alternative fuel tax credits ($) - - - - - (25) - - - (25)
 (+)Closure and restructuring costs ($) 11 2 1 38 52 20 5 1 1 27
 (+)Impact of purchase accounting ($) - - 1 - 1 - - - - -
 (=)EBITDA before items ($) 311 260 286 243 1,100 234 264 334 251 1,083
 (/)Sales ($) 1,423 1,403 1,417 1,369 5,612 1,457 1,547 1,473 1,373 5,850
 (=)EBITDA margin before items (%) 22% 19% 20% 18% 20% 16% 17% 23% 18% 19%
                      Â
Reconciliation of "Free cash flow" to Cash flow provided from operating activities                    Â
  Cash flow provided from operating activities ($) 148 306 257 172 883 123 610 267 166 1,166
 (-)Additions to property, plant and equipment ($) (13) (20) (31) (80) (144) (31) (43) (38) (41) (153)
 (=)Free cash flow ($) 135 286 226 92 739 92 567 229 125 1,013
                      Â
"Net debt-to-total capitalization" computation                    Â
  Bank indebtedness ($) 25 25 17 7   19 30 26 23 Â
 (+)Long-term debt due within one year ($) 2 2 5 4   31 30 22 2 Â
 (+)Long-term debt ($) 825 824 837 837   1,600 1,186 961 825 Â
 (=)Debt ($) 852 851 859 848   1,650 1,246 1,009 850 Â
 (-)Cash and cash equivalents ($) (604) (742) (461) (444)   (314) (514) (537) (530) Â
 (=)Net debt ($) 248 109 398 404   1,336 732 472 320 Â
 (+)Shareholders' equity ($) 3,288 3,194 2,999 2,972   2,748 2,642 2,811 3,202 Â
 (=)Total capitalization ($) 3,536 3,303 3,397 3,376   4,084 3,374 3,283 3,522 Â
  Net debt ($) 248 109 398 404   1,336 732 472 320 Â
 (/)Total capitalization ($) 3,536 3,303 3,397 3,376   4,084 3,374 3,283 3,522 Â
 (=)Net debt-to-total capitalization (%) 7% 3% 12% 12%   33% 22% 14% 9% Â
                      Â
"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
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.
Â
                            Â
    Pulp and Paper Distribution Personal Care (1) Corporate Total
    Q1'11Q2'11Q3'11Q4'11 YTDQ1'11Q2'11Q3'11Q4'11YTDQ1'11Q2'11Q3'11Q4'11YTDQ1'11Q2'11Q3'11Q4'11YTDQ1'11Q2'11Q3'11Q4'11 YTD
Reconciliation of Operating income (loss) to "Operating income (loss) before items" Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â
  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 ($) - - - - - - - - - - - - 1 - 1 - - - - - - - 1 - 1
                            Â
 (=)Operating income (loss) before items ($) 219 167 194 140 720 - (2) (1) 1(2) - - 1 7 8 (1) - (1) -(2) 218 165 193 148 724
                            Â
Reconciliation of "Operating income (loss) before items" to "EBITDA before items" Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â
  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
                            Â
 (=)EBITDA before items ($) 311 261 285 2311,088 1 (1) - 2 2 - - 2 10 12 (1) - (1) -(2) 311 260 286 2431,100
 (/)Sales ($) 1,2691,2611,2461,1774,953 217 190 197 177781 - - 17 54 71 - - - - -1,4861,4511,4601,4085,805
 (=)EBITDA margin before items (%) 25% 21% 23% 20% 22% - - - 1% - - - 12% 19%17% - - - - - 21% 18% 20% 17% 19%
                            Â
"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.Â
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Domtar Corporation
Quarterly Reconciliation of Non-GAAP Financial Measures - By Segment
2010
(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.
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                            Â
    Pulp and Paper Distribution Wood (1) Corporate Total
    Q1'10Q2'10Q3'10Q4'10 YTDQ1'10Q2'10Q3'10Q4'10YTDQ1'10Q2'10Q3'10Q4'10 YTDQ1'10Q2'10Q3'10Q4'10YTDQ1'10Q2'10Q3'10Q4'10 YTD
Reconciliation of Operating income (loss) to "Operating income (loss) before items" Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â
  Operating income (loss) ($) 120 149 237 161 667 1 (1) - (3)(3) (5) (49) - -(54) - (3) (1) (3)(7) 116 96 236 155 603
 (-)Alternative fuel tax credits ($) (25) - - - (25) - - - - - - - - - - - - - - - (25) - - - (25)
 (+)Impairment and write-down of property, plant and equipment ($) 22 14 14 - 50 - - - - - - - - - - - - - - - 22 14 14 - 50
 (+)Closure and restructuring costs ($) 20 5 1 - 26 - - - 1 1 - - - - - - - - - - 20 5 1 1 27
 (-)Net losses (gains) on disposals of property, plant and equipment and sale of businesses($) - (3) (14) - (17) - - - - - (1) 49 - - 48 - 2 - - 2 (1) 48 (14) - 33
                            Â
 (=)Operating income (loss) before items ($) 137 165 238 161 701 1 (1) - (2)(2) (6) - - - (6) - (1) (1) (3)(5) 132 163 237 156 688
                            Â
Reconciliation of "Operating income (loss) before items" to "EBITDA before items" Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â
  Operating income (loss) before items ($) 137 165 238 161 701 1 (1) - (2)(2) (6) - - - (6) - (1) (1) (3)(5) 132 163 237 156 688
 (+)Depreciation and amortization ($) 96 95 96 94 381 1 1 1 1 4 5 5 - - 10 - - - - - 102 101 97 95 395
                            Â
 (=)EBITDA before items ($) 233 260 334 2551,082 2 - 1 (1) 2 (1) 5 - - 4 - (1) (1) (3)(5) 234 264 334 2511,083
 (/)Sales ($) 1,2451,3171,2961,2125,070 212 213 233 212870 67 83 - - 150 - - - - -1,5241,6131,5291,4246,090
 (=)EBITDA margin before items (%) 19% 20% 26% 21% 21% 1% - - - - - 6% - - 3% - - - - - 15% 16% 22% 18% 18%
                            Â
"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) As previously reported, Domtar sold 88% of the Wood segment on June 30,
2010 to EACOM Timber Corporation ("EACOM"). During the fourth quarter
of 2010, in an unrelated transaction, Domtar sold the remaining 12% of
common stock held in EACOM.
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Domtar Corporation
Supplemental Segmented Information
(In millions of dollars, unless otherwise noted)
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                    Â
  2011 2010
 Q1  Q2  Q3  Q4  YTD  Q1  Q2  Q3  Q4  YTD
Pulp and Paper Segment                    Â
 Sales ($) 1,269 1,261 1,246 1,177 4,953 1,245 1,317 1,296 1,212 5,070
  Intersegment sales - Pulp and Paper ($) (63) (48) (43) (39) (193) (62) (60) (56) (51) (229)
 Operating income ($) 209 91 189 92 581 120 149 237 161 667
 Depreciation and amortization ($) 92 94 91 91 368 96 95 96 94 381
 Impairment and write-down of property, plant and equipment($) 3 62 8 12 85 22 14 14 - 50
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 Papers                    Â
 Papers Production ('000 ST) 899 890 875 871 3,535 906 882 906 873 3,567
 Papers Shipments ('000 ST) 913 901 889 831 3,534 960 891 896 850 3,597
  Uncoated Freesheet ('000 ST) 913 901 889 831 3,534 925 889 896 850 3,560
  Coated Groundwood ('000 ST) - - - - - 35 2 - - 37
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 Pulp                    Â
 Pulp Shipments(a) ('000 ADMT) 375 361 358 403 1,497 388 486 412 376 1,662
  Hardwood Kraft Pulp (%) 20% 19% 18% 19% 19% 40% 38% 37% 24% 35%
  Softwood Kraft Pulp (%) 55% 54% 57% 58% 57% 49% 52% 53% 62% 54%
  Fluff Pulp (%) 25% 27% 25% 23% 24% 11% 10% 10% 14% 11%
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Distribution Segment                    Â
 Sales ($) 217 190 197 177 781 212 213 233 212 870
 Operating income (loss) ($) 3 (2) (1) - - 1 (1) - (3) (3)
 Depreciation and amortization ($) 1 1 1 1 4 1 1 1 1 4
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Personal Care Segment                    Â
 Sales ($) - - 17 54 71 - - - - -
 Operating income ($) - - - 7 7 - - - - -
 Depreciation and amortization ($) - - 1 3 4 - - - - -
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Wood Segment                    Â
 Sales ($) - - - - - 67 83 - - 150
  Intersegment sales - Wood ($) - - - - - (5) (6) - - (11)
 Operating loss ($) - - - - - (5) (49) - - (54)
 Depreciation and amortization ($) - - - - - 5 5 - - 10
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 Lumber Production (Millions FBM) - - - - - 172 165 - - 337
 Lumber Shipments (Millions FBM) - - - - - 164 187 - - 351
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Average Exchange Rates $US / $CAN 0.986Â 0.968Â 0.980Â 1.023Â 0.989Â 1.041Â 1.028Â 1.039Â 1.013Â 1.030
   $CAN / $US 1.014 1.034 1.021 0.977 1.011 0.961 0.973 0.962 0.987 0.971
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(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, the term "ADMT" refers to an air dry metric ton, and the term "FBM" refers to foot board measure.
For further information: MEDIA AND INVESTOR RELATIONS
Pascal Bossé
Vice-President
Corporate Communications and Investor Relations
Tel.: 514-848-5938