AbitibiBowater announces signing of proposal for sale of Ontario hydro assets and reaffirms expectation of substantial improvement in fourth quarter financial results
ABH (NYSE, TSX)
MONTREAL, Dec. 22 /CNW Telbec/ - AbitibiBowater Inc. today announced it
has accepted a proposal for the sale of its equity interest in ACH Limited
Partnership to a major industrial energy producer. ACH Limited Partnership was
established to hold hydro-electric generating assets in Ontario, Canada by the
Company's Abitibi-Consolidated Company of Canada subsidiary in April 2007. The
Company owns a 75 percent equity interest in ACH Limited Partnership.
The proposal values the hydro assets, which have a combined capacity of
136.8 MW, at C$540 million. The resulting gross proceeds (excluding expenses)
for AbitibiBowater would be C$197.5 million. As part of the transaction, the
buyer would also assume C$250 million of ACH Limited Partnership's term debt.
"The signing of this proposal marks continued progress with our
de-leveraging initiatives," stated David J. Paterson, President and Chief
Executive Officer of AbitibiBowater. "We look forward to continued
de-leveraging progress as we implement additional measures to improve our free
cash flow generation."
The non-binding proposal for the sale of the hydro-electric generating
assets in Ontario is subject to due diligence, among other terms and
conditions. While AbitibiBowater expects that a definitive agreement will be
reached in the first quarter of 2009, no assurances can be provided as to when
or if a definitive agreement will be executed.
The proposal does not include the sale of the Iroquois Falls or Fort
Frances, Ontario mills. AbitibiBowater is pleased with the efforts both mills
have made since the merger in lowering their costs. The mills remain
competitive and the Company continues to look for investment opportunities to
ensure that they remain competitive. AbitibiBowater is committed to keeping
workers and local communities informed about the sale of ACH Limited
Partnership as the process advances.
AbitibiBowater owns additional hydro assets, including an installed share
of capacity of 363 MW in the Province of Quebec.
Q4 2008 Expectations
AbitibiBowater Inc. today also announced that it is reaffirming its
guidance of significant improvement in fourth quarter financial performance.
The Company expects its fourth quarter operating income, excluding gains on
asset sales, impairments and mill closure and other related charges, to be in
the range of $65 million to $95 million compared to a $9 million loss for the
third quarter of 2008. The Company also expects its earnings before interest,
taxes, depreciation and gains on asset sales, impairments and mill closure and
other related charges (Adjusted EBITDA) to be in the range of $245 million to
$275 million for the fourth quarter of 2008. For the third quarter of 2008,
Adjusted EBITDA was $175 million.
"This substantial improvement in the Company's operating performance is a
result of our employees' efforts to achieve synergies as well as reductions in
input costs," stated Paterson. "Our input costs, particularly energy and
fiber, have declined dramatically this quarter. We have also benefited from a
weakening Canadian dollar. Despite lower volumes, as evidenced by our
production curtailments, we expect a substantial improvement in financial
performance in 2009 compared to 2008".
Use of Non-GAAP Measures
This press release includes references to operating income (loss) before
special items and Adjusted EBITDA, which are not recognized measures under
United States generally accepted accounting principles ("GAAP"). The Company
provides these non-GAAP financial measures to assist investors in assessing
the current performance of its core cash operations in the same manner that
management evaluates these operations. The Company believes these measures are
frequently used by securities analysts, investors and other interested parties
in the evaluation of companies like AbitibiBowater, with substantial financial
leverage. However, these non-GAAP financial measures should not be considered
as alternatives to cash flows from operations, as measures of liquidity or as
alternatives to operating income (loss) or net income (loss), as indicators of
the Company's operating performance or any other measures of performance in
accordance with GAAP. Readers are cautioned not to place undue reliance on
these non-GAAP financial measures.
Other companies may define operating income (loss) before special items
and Adjusted EBITDA differently and, as a result, the Company's non-GAAP
financial measures may not be directly comparable to those of other companies.
The Company has determined that it is not practical to provide a
reconciliation of the Company's forecasted operating income (loss) before
special items and Adjusted EBITDA to the most directly comparable GAAP
measures because certain items, such as impairments, mill closure and other
related charges, cannot be reasonably estimated or predicted at this time.
Operating income (loss) before special items is defined as operating
income (loss) from the Company's consolidated statements of operations,
excluding closure costs, impairment and other related charges, severance and
merger-related costs, gains on dispositions of assets and other discretionary
charges or credits. A reconciliation of third quarter operating income (loss)
before special items to GAAP operating income (loss) is included in the
Company's November 6, 2008 earnings release for the third quarter, available
on the Company's website.
Adjusted EBITDA is defined as EBITDA (net income (loss) before interest
expense, interest income, income tax expense (benefit) and depreciation,
amortization and cost of timber harvested) excluding gains on asset sales,
impairments and mill closure and other related charges.
AbitibiBowater produces a wide range of newsprint, commercial printing
papers, market pulp and wood products. It is the eighth largest publicly
traded pulp and paper manufacturer in the world. AbitibiBowater owns or
operates 25 pulp and paper facilities and 30 wood products facilities located
in the United States, Canada, the United Kingdom and South Korea. Marketing
its products in more than 90 countries, the Company is also among the world's
largest recyclers of old newspapers and magazines, and has more third-party
certified sustainable forest land than any other company in the world.
AbitibiBowater's shares trade under the stock symbol ABH on both the New York
Stock Exchange and the Toronto Stock Exchange.
Statements in this news release that are not reported financial results
or other historical information are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. They include,
for example, statements about the resulting gross proceeds of the sale for the
Company, reaching a definitive agreement in the first quarter of 2009,
developing a plan to mitigate the impact of the sale on our operations,
expected earnings, improvements of our operating and financial performance,
the continued momentum in our financial performance, our efforts to reduce
costs, increase revenues and profitability, our assessments of market
conditions, strategies, future plans, future sales, prices for our major
products, inventory levels, capital spending, tax rates, and our business
outlook 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," "may," "expect," "believe," "anticipate"
and other terms with similar meaning indicating possible future events or
potential impact on the business or stockholders of AbitibiBowater.
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. These
risks and uncertainties include, but are not limited to, industry conditions
generally and further growth in alternative media, the ability to finalize the
ACH proposal on terms satisfactory to the Company within the announced time
frame or at all, the prices under which the Company would be able to sell the
assets, the ability to develop a plan to mitigate the sale of the hydro asset
on mill operations, the impact of the global credit crisis on the Company's
ability to meet its $1 billion debt reduction target, the Company's ability to
divest assets on satisfactory terms, the Company's efforts to address its
upcoming debt maturities, the Company's ability to refinance or amend the
terms of its current indebtedness on satisfactory terms, the Company's ability
to realize price increases, the Company's ability to obtain timely
contributions to cost-reduction initiatives from unionized and salaried
employees, the costs of raw materials such as energy, chemicals and fiber, the
risk that the Company could fail to comply with NYSE continued listing
requirements, which could result in immediate delisting of the Company's
common stock, the risk that the Company could fail to achieve the financial
projections set forth in this press release due to the foregoing factors and
other unforeseen factors, and the success of the Company's continuing
post-merger integration activities.
Additional factors are detailed from time to time in AbitibiBowater's
filings with the Securities and Exchange Commission (SEC) and the Canadian
securities regulatory authorities, including those factors contained in the
Company's Annual Report on Form 10-K/A for the year ended December 31, 2007,
filed with the SEC on March 20, 2008, and the Company's Quarterly Report on
Form 10-Q for the period ended September 30, 2008, filed with the SEC on
November 14, 2008, under the caption "Risk Factors" in each respective report.
All forward-looking statements in this news release are expressly qualified by
information contained in the Company's filings with the SEC and the Canadian
securities regulatory authorities. AbitibiBowater disclaims any obligation to
update or revise any forward-looking information.