Resolute Forest Products

US $

• Q3 net income of $29 million / $0.31 per share, excluding special items
• Adjusted EBITDA of $104 million
• Best pulp quarter in two years
• $619 million non-cash reduction of U.S. deferred tax assets
  
  

MONTREAL, Oct. 31, 2013 /CNW Telbec/ - Resolute Forest Products Inc. (NYSE: RFP) (TSX: RFP) today reported a net loss of $588 million for the quarter ended September 30, 2013, or $6.22 per share, on sales of $1.1 billion. The Company's quarterly results were significantly affected by a $619 million non-recurring, non-cash income tax charge to reduce the value of deferred income tax assets on its balance sheet. 

Excluding total special items of $617 million, net income in the quarter was $29 million, or $0.31 per share. This compares to net income of $13 million, or $0.13 per diluted share, excluding $24 million of special items, in the third quarter ended September 30, 2012. Before adjusting for special items, net income in that quarter was $37 million, or $0.38 per diluted share, on sales of $1.2 billion. Adjusted EBITDA was $104 million in the quarter, compared to $96 million in the year-ago period.

"Again this quarter, our continued asset optimization efforts helped to maximize our earnings power despite challenging market conditions," said Richard Garneau, president and chief executive officer. "Improvements in volume, transaction price and costs led to the best quarter our pulp segment has seen in two years, which helped to offset the effects of weaker pricing for lumber and excess supply in paper grades." 

Non-GAAP financial measures, such as adjustments for special items and adjusted EBITDA, are reconciled below.

Consolidated Quarterly Operating Income Variance Against Year-Ago Period

Compared to the year-ago period, sales in the quarter declined 2%, or $23 million, to $1.1 billion, primarily as a result of lower pricing ($33 million), mainly in newsprint, and currency fluctuations, offset in part by an increase in volume ($17 million).

The Company recorded operating income of $36 million this quarter, a $5 million improvement over the third quarter of 2012. This reflects a $26 million improvement to pulp and paper manufacturing costs - the benefit of asset optimization initiatives and external power sales from new cogeneration facilities - and a weaker Canadian dollar, offset in part by the lower pricing, largely in newsprint, and higher wood products costs. 

Downtime was 90,000 metric tons lower in the pulp and paper segments this quarter, mainly as a result of the extensive downtime taken in 2012 to improve the operational and environmental performance of the newly acquired Saint-Félicien, Québec, pulp mill.

Segment Operating Income Variance Against Prior Quarter

Newsprint
Operating income in the newsprint segment was $13 million in the third quarter, a $3 million improvement over the second quarter. Newsprint sales rose 3% in the quarter as a result of a 20,000 metric ton increase in shipments, with export sales representing 45% of total newsprint sales, consistent with the first half of the year. After falling $40 since the end of last year, average transaction price has now been stable for two straight quarters. The Company maintained its lower cost advantage in the quarter, reporting operating cost per unit (the "delivered cost") down 1%, to $589 per metric ton, in line with the new low reported in the previous quarter. The Company generated EBITDA of $50 per metric ton of newsprint shipped, compared to an average of $52 in the four previous quarters, despite the falling prices.

Specialty Papers
Operating income was $17 million in the quarter, compared to breakeven in the previous quarter. Sales rose 2% this quarter due mainly to a 5,000 short ton increase in shipments.  Average transaction price was also up $4. Delivered cost fell 7% compared to the second quarter, which included costs and inefficiencies associated with the annual maintenance at our Calhoun, Tennessee, mill. EBITDA was $79 per short ton shipped in the quarter, compared to an average of $61 in the four previous quarters. 

Market Pulp
The market pulp segment generated operating income of $21 million in the quarter, $11 million higher than in the second quarter. Sales grew by 2%, to $269 million, on a 2% increase in shipments and a $5 per metric ton increase in average transaction price. This follows increases of 5% in shipments and $27 per metric ton, respectively, in the second quarter. Delivered cost was down 4%, due mainly to better efficiency at mills in the U.S. southeast, in part from the second quarter annual maintenance at Calhoun. EBITDA in the segment was $85 per metric ton shipped in the quarter, compared to an average of $23 in the four previous quarters. 

Wood Products
Operating income in the wood products segment fell to breakeven in the quarter, down $16 million sequentially. The 3% increase in sales over the second quarter reflects a 21% increase in shipments offset by a $62 per thousand board feet reduction in lumber prices. Finished goods inventory fell 28% due to the Company's efforts to reduce the buildup caused by lower than expected demand in May and June, which included scheduled downtime at most sawmills during peak vacation periods. The drop in pricing reduced EBITDA to $22 per thousand board feet shipped, compared to an average of $63 in the four previous quarters. 

Coated Papers
The coated paper segment generated an operating loss of $3 million in the quarter, down from operating income of $2 million in the second quarter. Sales slipped 4% on a 6% reduction in shipments, as seasonal demand improvement did not materialize to the degree expected.  Delivered cost rose 7% in the quarter, mostly because of the absorption of fixed costs over lower volume and seasonally higher power and wood costs, reducing EBITDA to $51 per short ton shipped, compared to an average of $83 in the four previous quarters. 

Corporate & Finance

Based on the application of accounting standards, including a review of historical earnings, the Company reduced the carrying value of deferred income tax assets on the balance sheet by $619 million, representing the portion related to its U.S. operations. The reduction is a non-recurring, non-cash adjustment, recorded as an income tax charge.

"This reduction in no way affects our underlying tax attributes nor hinders our ability to use them," said Jo-Ann Longworth, senior vice president and chief financial officer. "We have over $1.6 billion of U.S. net operating loss carryforwards available to use against future earnings."

The carrying value of the total net deferred income tax asset recorded on the Company's balance sheet as of the end of the third quarter was therefore reduced to $1,346 million, from $1,961 million in the previous quarter.

Outlook

Mr. Garneau added: "Building on the encouraging developments this quarter, we see the pulp segment maintaining its positive momentum into the fourth quarter, but the timing of worldwide capacity increases makes 2014 somewhat more uncertain.  Wood products should experience better overall pricing in the fourth quarter, based on the gradual increase in lumber prices from the lows late in June.  Costs will remain under pressure, however, given lower wood allocation and the additional burdens imposed on producers with the province of Québec's newly-implemented forest tenure system.  As recent history demonstrates, our leaner and efficient operating platform is a key competitive advantage to face challenging market conditions.  While the seasonal demand surge for coated and specialty papers failed to materialize as expected, and while conditions could change in newsprint, we nonetheless expect to see sequential volume growth in newsprint and supercalender grades in the fourth quarter before we enter seasonal lows.  But we see continued pressure for coated paper as the market struggles to adjust to lower operating rates due to lower demand, grade switching and higher imports."

Earnings Conference Call

The Company will hold a conference call to discuss the financial results at 9:00 a.m. (ET) today.  The public is invited to join the call at (888) 789-9572 (pass code 5722774) at least fifteen minutes before its scheduled start time.  A simultaneous webcast will also be available using the link provided under "Presentations and Webcasts" in the "Investors" section of www.resolutefp.com.  A replay of the webcast will be archived on the Company's website.  A phone replay will also be available until November 14 by dialing (800) 408-3053 with the pass code 6229639.

Description of Special Items

Special items, net of tax		Third quarter		Third quarter
(in millions)		2013		2012
Gain on non-cash translation of Canadian dollar net monetary assets		$ (5)		$ (21)
Closure costs, impairment and other related charges		3		3
Start-up costs of idled mill		2		4
Net gain on disposition of assets		-		(3)
Other income, net		(2)		(1)
Non-cash reorganization-related and other tax adjustments		-		(6)
U.S. deferred income tax asset valuation allowance		619		-
	Total	$ 617		$ (24)

Cautionary Statements Regarding Forward-Looking Information

Statements in this press release and the earnings conference call referred to above that are not reported financial results or other historical information of Resolute Forest Products Inc. are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. They include, for example, statements relating to our: efforts to continue to reduce costs and increase revenues and profitability, including our cost-reduction initiatives regarding selling, general and administrative expenses; business and operating outlook; assessment of market conditions; prospects, growth strategies and the industry in which we operate; and strategies for achieving our goals generally.  Forward-looking statements may be identified by the use of forward-looking terminology such as the words "should," "would," "could," "will," "may," "expect," "believe," "anticipate," "attempt," "project" and other terms with similar meaning indicating possible future events or potential impact on our business or Resolute's shareholders.

The reader is cautioned not to place undue reliance on these forward-looking statements, which are not guarantees of future performance.  These statements are based on management's current assumptions, beliefs and expectations, all of which involve a number of business risks and uncertainties that could cause actual results to differ materially.  The potential risks and uncertainties that could cause Resolute's actual future financial condition, results of operations and performance to differ materially from those expressed or implied in the presentation referred to above include, but are not limited to, the potential risks and uncertainties set forth under the heading "Risk Factors" in exhibit 99.4 to the current report on Form 8-K filed with the United States Securities and Exchange Commission and the Canadian securities regulatory authorities on April 24, 2013.

All forward-looking statements in the presentation referred to above are expressly qualified by the cautionary statements contained or referred to above and in Resolute's other filings with the SEC and the Canadian securities regulatory authorities. Resolute disclaims any obligation to publicly update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by law.

About Resolute Forest Products

Resolute Forest Products is a global leader in the forest products industry with a diverse range of products, including newsprint, commercial printing papers, market pulp and wood products. The Company owns or operates over 40 pulp and paper mills and wood products facilities in the United States, Canada and South Korea, and power generation assets in Canada. Marketing its products in close to 90 countries, Resolute has third-party certified 100% of its managed woodlands to at least one of three internationally-recognized sustainable forest management standards, including 65% certified to the Forest Stewardship Council^® (FSC^®) standards. The shares of Resolute Forest Products trade under the stock symbol RFP on both the New York Stock Exchange and the Toronto Stock Exchange.

Resolute and other member companies of the Forest Products Association of Canada, as well as a number of environmental organizations, are partners in the Canadian Boreal Forest Agreement. The group works to identify solutions to conservation issues that meet the goal of balancing equally the three pillars of sustainability linked to human activities:  environmental, social and economic. Resolute is also a member of the World Wildlife Fund's Climate Savers program, in which businesses establish ambitious targets to voluntarily reduce greenhouse gas emissions and work aggressively toward achieving them.

RESOLUTE FOREST PRODUCTS INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, in millions except per share amounts)
			Three Months Ended September 30, 2013			Three Months Ended September 30, 2012			Nine Months Ended September 30, 2013			Nine Months Ended September 30, 2012
Sales			$	1,130		$	1,153		$	3,311		$	3,375
Costs and expenses:
	Cost of sales, excluding depreciation and amortization			857			890			2,572			2,602
	Depreciation and amortization			61			59			182			174
	Distribution costs			134			131			387			385
	Selling, general and administrative expenses			38			41			126			114
	Closure costs, impairment and other related charges  (2)			4			5			56			98
	Net gain on disposition of assets			-			(4)			(2)			(28)
Operating income (loss)				36			31			(10)			30
Other (expense) income:
	Interest expense			(12)			(17)			(39)			(51)
	Foreign currency translation gain (loss) (3)			3			18			(9)			21
	Other, net (4)			2			1			(33)			1
Income (loss) before income taxes				29			33			(91)			1
Income tax (provision) benefit (5)				(617)			4			(546)			10
Net (loss) income including noncontrolling interests				(588)			37			(637)			11
Net loss attributable to noncontrolling interests				-			-			1			35
Net (loss) income attributable to Resolute Forest Products Inc.			$	(588)		$	37		$	(636)		$	46
Net (loss) income per share attributable to Resolute Forest Products Inc. common shareholders: (6)
	Basic		$	(6.22)		$	0.38		$	(6.72)		$	0.47
	Diluted			(6.22)			0.38			(6.72)			0.47
Weighted-average number of Resolute Forest Products Inc. common shares outstanding: (6)
	Basic			94.6			98.1			94.7			98.0
	Diluted			94.6			98.1			94.7			98.1

RESOLUTE FOREST PRODUCTS INC. CONSOLIDATED BALANCE SHEETS (Unaudited, in millions)
			September 30  2013			December 31, 2012
Assets
Current assets:
	Cash and cash equivalents		$	271		$	263
	Accounts receivable trade, net			577			576
	Accounts receivable other			127			121
	Inventories, net			528			545
	Deferred income tax assets			44			56
	Other current assets			81			69
		Total current assets		1,628			1,630
Fixed assets, net				2,330			2,440
Amortizable intangible assets, net				66			69
Deferred income tax assets				1,340			2,000
Other assets				191			194
		Total assets	$	5,555		$	6,333
Liabilities and equity
Current liabilities:
	Accounts payable and accrued liabilities		$	560		$	581
	Current portion of long-term debt			7			2
		Total current liabilities		567			583
Long-term debt, net of current portion				597			532
Pension and other postretirement benefit obligations				1,742			1,946
Deferred income tax liabilities				38			75
Other long-term liabilities				65			72
		Total liabilities		3,009			3,208
Commitments and contingencies
Equity:
	Common stock			-			-
	Additional paid-in capital			3,749			3,730
	(Deficit) retained earnings			(589)			47
	Accumulated other comprehensive loss			(565)			(614)
	Treasury stock at cost			(61)			(61)
		Total Resolute Forest Products Inc. shareholders' equity		2,534			3,102
	Noncontrolling interests			12			23
		Total equity		2,546			3,125
		Total liabilities and equity	$	5,555		$	6,333

RESOLUTE FOREST PRODUCTS INC. CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited, in millions)
						Nine Months Ended September 30, 2013			Nine Months Ended September 30, 2012
Cash flows from operating activities:
Net (loss) income including noncontrolling interests						$	(637)		$	11
Adjustments to reconcile net (loss) income including noncontrolling interests to
net cash provided by operating activities:
	Share-based compensation						5			4
	Depreciation and amortization						182			174
	Closure costs, impairment and other related charges						47			89
	Inventory write-downs related to closures						5			7
	Deferred income taxes						546			(6)
	Net pension contributions						(65)			(71)
	Net gain on disposition of assets						(2)			(28)
	Loss (gain) on translation of foreign currency denominated deferred income taxes						53			(49)
	(Gain) loss on translation of foreign currency denominated pension and
	other postretirement benefit obligations						(52)			39
	Note payable forgiveness gain						(12)			-
	Net loss on extinguishment of debt						59			-
	Net planned major maintenance						(6)			(14)
	Dividends received from equity method investees in excess of income						5			2
	Other, net						(12)			(6)
	Changes in working capital:
		Accounts receivable					(8)			51
		Inventories					12			(9)
		Other current assets					(5)			9
		Accounts payable and accrued liabilities					(5)			(11)
			Net change in working capital				(6)			40
				Net cash provided by operating activities			110			192
Cash flows from investing activities:
Cash invested in fixed assets							(124)			(102)
Disposition of assets							4			31
Proceeds from insurance settlements							4			-
Acquisition of Fibrek Inc., net of cash acquired							-			(24)
Decrease in restricted cash							3			76
Increase in deposit requirements for letters of credit, net							-			(12)
				Net cash used in investing activities			(113)			(31)
Cash flows from financing activities:
Issuance of long-term debt							594			-
Premium paid on extinguishment of debt							(84)			-
Purchases of treasury stock							-			(45)
Dividends to noncontrolling interests							(1)			(3)
Acquisition of noncontrolling interest							-			(27)
Payments of debt							(497)			(112)
Payments of financing and credit facility fees							(9)			-
Contribution of capital from noncontrolling interest							8			-
				Net cash provided by (used in) financing activities			11			(187)
Net increase (decrease) in cash and cash equivalents							8			(26)
Cash and cash equivalents:
	Beginning of period						263			369
	End of period					$	271		$	343

RESOLUTE FOREST PRODUCTS INC. STATEMENTS OF OPERATING INCOME AND NET INCOME ADJUSTED FOR SPECIAL ITEMS
A reconciliation of our operating income, net income and net income per share reported before special items is presented in the tables below. See Note 7 to the Unaudited Consolidated Financial Statement Information regarding our use of non-GAAP measures.
Three Months Ended September 30, 2013 (unaudited, in millions except per share amounts)		Operating income (loss)			Net income (loss)			EPS
GAAP as reported		$	36		$	(588)		$	(6.22)
Adjustments for special items:
	Foreign currency translation gain		-			(5)			(0.05)
	Closure costs, impairment and other related charges		4			3			0.04
	Start up costs of idled mill		3			2			0.02
	Other income, net		-			(2)			(0.02)
	U.S. deferred income tax asset valuation allowance		-			619			6.54
GAAP as adjusted for special items		$	43		$	29		$	0.31
Three Months Ended September 30, 2012 (unaudited, in millions except per share amounts)		Operating income (loss)			Net income (loss)			EPS
GAAP as reported		$	31		$	37		$	0.38
Adjustments for special items:
	Foreign currency translation gain		-			(21)			(0.21)
	Closure costs, impairment and other related charges		5			3			0.03
	Start up costs of idled mill		5			4			0.04
	Net gain on disposition of assets		(4)			(3)			(0.03)
	Other income, net		-			(1)			(0.02)
	Reorganization-related and other tax adjustments		-			(6)			(0.06)
GAAP as adjusted for special items		$	37		$	13		$	0.13
Nine Months Ended September 30, 2013 (unaudited, in millions except per share amounts)		Operating income (loss)			Net income (loss)			EPS
GAAP as reported		$	(10)		$	(636)		$	(6.72)
Adjustments for special items:
	Foreign currency translation loss		-			9			0.10
	Closure costs, impairment and other related charges		56			35			0.37
	Inventory write-downs related to closures		5			3			0.03
	Start up costs of idled mill		31			22			0.23
	Net gain on disposition of assets		(2)			(2)			(0.02)
	Net loss on extinguishment of debt		-			38			0.40
	Transaction costs		5			5			0.05
	Other income, net		-			(18)			(0.19)
	U.S. deferred income tax asset valuation allowance		-			619			6.54
GAAP as adjusted for special items		$	85		$	75		$	0.79
Nine Months Ended September 30, 2012 (unaudited, in millions except per share amounts)		Operating income (loss)			Net income (loss)			EPS
GAAP as reported		$	30		$	46		$	0.47
Adjustments for special items:
	Foreign currency translation gain		-			(26)			(0.27)
	Severance		3			2			0.02
	Closure costs, impairment and other related charges		98			52			0.53
	Inventory write-downs related to closures		7			4			0.04
	Start up costs of idled mill		5			4			0.04
	Net gain on disposition of assets		(28)			(16)			(0.16)
	Transaction costs		7			7			0.07
	Reorganization-related and other tax adjustments		-			(16)			(0.16)
GAAP as adjusted for special items		$	122		$	57		$	0.58

RESOLUTE FOREST PRODUCTS INC. STATEMENTS OF EBITDA AND ADJUSTED EBITDA
A reconciliation of our net income including noncontrolling interests to EBITDA and Adjusted EBITDA is presented in the tables below. See Note 7 to the Unaudited Consolidated Financial Statement Information regarding our use of non-GAAP measures EBITDA and Adjusted EBITDA
Three Months Ended September 30, 2013 (unaudited, in millions)	Newsprint			Coated papers			Specialty papers			Market pulp			Wood products			Corporate and other			Total
Net income (loss) including noncontrolling interests	$	13		$	(3)		$	17		$	21		$	-		$	(636)		$	(588)
Interest expense, net																	12			12
Income tax provision																	617			617
Depreciation and amortization		18			9			10			13			9			2			61
EBITDA		31			6			27			34			9			(5)			102
Foreign currency translation gain																	(3)			(3)
Closure costs, impairment and other related charges																	4			4
Start up costs of idled mill																	3			3
Other income, net																	(2)			(2)
Adjusted EBITDA	$	31		$	6		$	27		$	34		$	9		$	(3)		$	104
Three Months Ended September 30, 2012 (unaudited, in millions)	Newsprint			Coated papers			Specialty papers			Market pulp			Wood products			Corporate and other			Total
Net income (loss) including noncontrolling interests	$	26		$	2		$	28		$	(18)		$	6		$	(7)		$	37
Interest expense, net																	17			17
Income tax benefit																	(4)			(4)
Depreciation and amortization		18			9			11			13			8			-			59
EBITDA		44			11			39			(5)			14			6			109
Foreign currency translation gain																	(18)			(18)
Closure costs, impairment and other related charges																	5			5
Start up costs of idled mill																	5			5
Net gain on disposition of assets																	(4)			(4)
Other income, net																	(1)			(1)
Adjusted EBITDA	$	44		$	11		$	39		$	(5)		$	14		$	(7)		$	96
Nine Months Ended September 30, 2013 (unaudited, in millions)	Newsprint			Coated papers			Specialty papers			Market pulp			Wood products			Corporate and other			Total
Net income (loss) including noncontrolling interests	$	21		$	(1)		$	25		$	26		$	32		$	(740)		$	(637)
Interest expense, net																	39			39
Income tax provision																	546			546
Depreciation and amortization		54			27			30			39			27			5			182
EBITDA		75			26			55			65			59			(150)			130
Foreign currency translation loss																	9			9
Closure costs, impairment and other related charges																	56			56
Inventory write-downs related to closures																	5			5
Start up costs of idled mill																	31			31
Net gain on disposition of assets																	(2)			(2)
Net loss on extinguishment of debt																	59			59
Transaction costs																	5			5
Other income, net																	(26)			(26)
Adjusted EBITDA	$	75		$	26		$	55		$	65		$	59		$	(13)		$	267
Nine Months Ended September 30, 2012 (unaudited, in millions)	Newsprint			Coated papers			Specialty papers			Market pulp			Wood products			Corporate and other			Total
Net income (loss) including noncontrolling interests	$	79		$	6		$	70		$	(38)		$	12		$	(118)		$	11
Interest expense, net																	51			51
Income tax benefit																	(10)			(10)
Depreciation and amortization		54			28			35			31			26			-			174
EBITDA		133			34			105			(7)			38			(77)			226
Foreign currency translation gain																	(21)			(21)
Severance																	3			3
Closure costs, impairment and other related charges																	98			98
Inventory write-downs related to closures																	7			7
Start up costs of idled mill																	5			5
Net gain on disposition of assets																	(28)			(28)
Transaction costs																	7			7
Other income, net																	(1)			(1)
Adjusted EBITDA	$	133		$	34		$	105		$	(7)		$	38		$	(7)		$	296

 

RESOLUTE FOREST PRODUCTS INC.
Notes to the Unaudited Consolidated Financial Statement Information

1.	In the second quarter of 2013, we changed our accounting policy for repairs and maintenance costs associated with planned major maintenance activities. Previously, all repairs and maintenance costs, including those associated with planned major maintenance, were expensed as incurred. We elected to change our accounting policy for planned major maintenance costs to the deferral method, whereby the costs of each planned major maintenance activity are amortized on a straight-line basis over the estimated period until the next planned major maintenance activity. All other routine repairs and maintenance costs continue to be expensed as incurred. We believe that the deferral method is preferable as the economic benefit associated with planned major maintenance activities are more appropriately recognized over the period of future benefit, which is not limited to the period the expense is incurred. In addition, the deferral method enhances the comparability of our financial results with our peer companies. In accordance with Financial Accounting Standards Board Accounting Standards Codification 250, "Accounting Changes and Error Corrections," we have applied the change in accounting policy retroactively by adjusting our comparative consolidated financial statements for the effect of this change.
	The effect of the change in accounting policy on our Consolidated Statements of Operations for the three months ended September 30, 2013 and 2012 was as follows:

		Three Months Ended September 30, 2013									Three Months Ended September 30, 2012
(Unaudited, in millions, except per share amounts)		Before Accounting Policy Change			Adjustment			As Reported			As Previously Reported			Effect of Change			As Adjusted
Cost of sales, excluding depreciation and amortization		$	856		$	1		$	857		$	895		$	(5)		$	890
Income tax (provision) benefit			(621)			4			(617)			3			1			4
Net (loss) income attributable to Resolute Forest Products Inc.			(591)			3			(588)			31			6			37
Net (loss) income per share attributable to Resolute Forest Products Inc. common shareholders:
Basic			(6.25)			0.03			(6.22)			0.32			0.06			0.38
Diluted			(6.25)			0.03			(6.22)			0.32			0.06			0.38
The effect of the change in accounting policy on our Consolidated Statements of Operations for the nine months ended September 30, 2013 and 2012 was as follows:
		Nine Months Ended September 30, 2013									Nine Months Ended September 30, 2012
(Unaudited, in millions, except per share amounts)		Before Accounting Policy Change			Adjustment			As Reported			As Previously Reported			Effect of Change			As Adjusted
Cost of sales, excluding depreciation and amortization		$	2,578		$	(6)		$	2,572		$	2,616		$	(14)		$	2,602
Income tax (provision) benefit			(546)			-			(546)			12			(2)			10
Net (loss) income attributable to Resolute Forest Products Inc.			(642)			6			(636)			34			12			46
Net (loss) income per share attributable to Resolute Forest Products Inc. common shareholders:
Basic			(6.78)			0.06			(6.72)			0.35			0.12			0.47
Diluted			(6.78)			0.06			(6.72)			0.35			0.12			0.47
The effect of the change in accounting policy on our Consolidated Balance Sheets as of September 30, 2013 and December 31, 2012 was as follows:
		September 30, 2013									December 31, 2012
(Unaudited, in millions)		Before Accounting Policy Change			Adjustment			As Reported			As Previously Reported			Effect of Change			As Adjusted
Other current assets		$	64		$	17		$	81		$	58		$	11		$	69
Deferred income tax assets (non-current)			1,342			(2)			1,340			2,002			(2)			2,000
(Deficit) retained earnings			(604)			15			(589)			38			9			47

There was no impact on net cash provided by operating activities for all periods as a result of the change in accounting policy.

2.	Closure costs, impairment and other related charges for the three and nine months ended September 30, 2013 were comprised of the following:

(Unaudited, in millions)			Accelerated Depreciation		Pension Plan Curtailment Loss and Settlement (Gain)		Severance and Other Costs		Total
Indefinite idlings:
	Paper machine in Calhoun, Tennessee
		Third quarter 2013	$	-	$	-	$	-	$	-
		First nine months 2013		44		-		5		49
	Kraft mill and paper machine in Fort Frances, Ontario
		Third quarter 2013		-		-		-		-
		First nine months 2013		-		-		4		4
Restructuring initiative:
	Baie-Comeau, Quebec paper mill
		Third quarter 2013		-		2		2		4
		First nine months 2013		-		2		2		4
Other
		Third quarter 2013		-		-		-		-
		First nine months 2013		-		(1)		-		(1)
Total
		Third quarter 2013	$	-	$	2	$	2	$	4
		First nine months 2013		44		1		11		56

Closure costs, impairment and other related charges for the three and nine months ended September 30, 2012 were comprised of the following:

(Unaudited, in millions)			Impairment of Assets		Accelerated Depreciation		Pension plan Curtailment and Settlement Losses		Severance and Other Costs		Total
Indefinite idlings:
	Bowater Mersey Paper Company Limited
		Third quarter 2012	$	(7)	$	-	$	-	$	5	$	(2)
		First nine months 2012		63		-		9		14		86
	Paper machine in Catawba, South Carolina
		Third quarter 2012		1		-		-		-		1
		First nine months 2012		1		-		-		-		1
Restructuring initiatives:
	Catawba paper mill
		Third quarter 2012		-		-		-		3		3
		First nine months 2012		-		-		-		3		3
	Baie-Comeau, paper mill
		Third quarter 2012		-		-		-		-		-
		First nine months 2012		-		-		3		1		4
Other
		Third quarter 2012		-		1		-		2		3
		First nine months 2012		-		1		2		1		4
Total
		Third quarter 2012	$	(6)	$	1	$	-	$	10	$	5
		First nine months 2012		64		1		14		19		98

3.	During the three months ended September 30, 2013, we recorded a foreign currency translation gain of $3 million. This gain is a result of the stronger Canadian dollar relative to the U.S. dollar as of September 30, 2013 and its impact on the translation of Canadian dollar monetary assets in our principal Canadian operating subsidiary. During the nine months ended September 30, 2013, we recorded a foreign currency translation loss of $9 million as a result of the translation of our Canadian dollar balance sheet amounts.
4.	Other, net for the three and nine months ended September 30, 2013 and 2012 was comprised of the following:

	Three Months Ended September 30,					Nine Months Ended September 30,
(Unaudited, in millions)		2013		2012			2013		2012
Net loss on extinguishment of debt	$	-	$	-		$	(59)	$	-
Note payable forgiveness gain		-		-			12		-
Gain on liquidation settlement		3		-			12		-
Post-emergence costs		-		(2)			(1)		(7)
Miscellaneous (expense) income		(1)		3			3		8
	$	2	$	1		$	(33)	$	1

5.	During the three and nine months ended September 30, 2013, we recorded an income tax provision of $617 million and $546 million, respectively. We recorded for the three months ended September 30, 2013 an increase to the income tax provision of $619 million to establish a full valuation allowance against our net U.S. deferred income tax assets. An important factor we considered when reviewing the likelihood of realization is the existence of a three-year cumulative loss in our U.S. operations, as determined under applicable accounting standards.  This cumulative loss limits our ability to rely on projections of future earnings to support continued recognition of our U.S. deferred income tax assets.
6.	For the calculation of basic and diluted (loss) income per share for the three and nine months ended September 30, 2013 and 2012, no adjustments to net (loss) income attributable to Resolute Forest Products Inc. were necessary.
7.	Tables represent a reconciliation of certain financial statement line items reported under generally accepted accounting principles ("GAAP") to our use of non-GAAP measures of operating income (loss), net income (loss) and net income (loss) per share, in each case adjusted for special items, as well as EBITDA and adjusted EBITDA, in each case by reportable segment. We believe that these measures are useful because they allow the reader to more easily compare our ongoing operations, financial performance and EPS from period to period.  They are also consistent with the indicators management uses internally to measure our performance. These non-GAAP measures should be considered in addition to and not a substitute for measures of financial performance calculated and presented in accordance with GAAP in our Consolidated Statement of Operations in our filings with the Securities and Exchange Commission. Consequently, readers should rely on GAAP operating income (loss), operating income (loss) by reportable segment, net income (loss) and net income (loss) per share. Non-GAAP measures included in our press release include:
	Operating income (loss) adjusted for special items - is defined as operating income (loss) from our Consolidated Statements of Operations excluding special items, such as closure costs, impairment and other related charges, severance costs, inventory write-downs, start up costs of idled mills, gains and losses on dispositions of assets, transaction costs and other charges or credits that are excluded from our segment's performance from GAAP operating income (loss).
	Net income (loss) adjusted for special items - is defined as net income (loss) from our Consolidated Statements of Operations excluding the same items as under operating income (loss) adjusted for the special items, in addition to the effects of foreign currency translation, net loss on extinguishment of debt, other income (expense) and reorganization-related and other tax adjustments.
	Net income (loss) per share (EPS) adjusted for special items - is defined as diluted EPS calculated based on the net income (loss) adjusted for special items as described above.
	EBITDA by reportable segment - is defined as net income (loss) including noncontrolling interests from our Consolidated Statements of Operations, allocated to each of our reportable segments (newsprint, coated papers, specialty papers, market pulp and wood products) in accordance with FASB ASC 290, "Segment Reporting," and adjusted for depreciation and amortization.  EBITDA for the corporate and other segment  is defined as net income (loss) including noncontrolling interests from our Consolidated Statements of Operations after the allocation to reportable segments, adjusted for interest expense, income taxes and depreciation and amortization.
	Adjusted EBITDA - is defined as EBITDA excluding the special items described above.

  

SOURCE Resolute Forest Products Inc.