ABH (TSX, NYSE)
US$
- Annual Synergy Run Rate of Over $270 Million at End of Q2
- Operating Income Improvement of $86 Million, $104 Million
Excluding Special Items
- Newsprint Segment Improves to Break-Even
- Phase 2 Review of Operations OngoingMONTREAL, Aug. 7 /CNW Telbec/ - AbitibiBowater Inc. today reported a net
loss for the second quarter 2008 of $251 million, or $4.36 per diluted share,
on sales of $1.7 billion. These results compare with a net loss of $248
million, or $4.32 per diluted share, on sales of $1.7 billion for the first
quarter of 2008.
Second quarter 2008 special items, net of tax, consisted of the
following: an $11 million loss relating to foreign currency changes, an
$11 million gain on asset sales, a $29 million loss related to asset closures,
impairment and severance and a $72 million charge related to tax adjustments.
Excluding these special items, the net loss for the quarter would have been
$150 million, or $2.60 per diluted share. Reconciliations of non-GAAP measures
are contained in Notes 5 and 6 of this release.
"Although our financial results remain unacceptable, we did see a
significant improvement in our operating performance in the quarter. Our
efforts to offset cost pressures with synergies, combined with our announced
price increases, should provide a significant improvement in both our
operating efficiency and financial performance through the balance of this
year," stated President and CEO David J. Paterson. "Recognizing continued
market and economic challenges, AbitibiBowater is ready to take all actions it
believes necessary, including the elimination of unprofitable production.
Also, as our Phase 2 review of operations continues, an important
consideration will be the renewal on acceptable terms of the CEP labor
agreements of our Canadian operations in 2009."
Segment Detail
--------------
Coated Papers
Income for the coated papers segment of $35 million for the second
quarter was essentially flat compared to the first quarter of 2008. EBITDA
from the segment was $45 million. The Company's average transaction price for
coated papers increased $44 per short ton during the quarter, while average
operating costs increased $28 per short ton mainly due to higher energy
related costs. The Company is implementing the third quarter price increase of
$50 per short ton. Building on the Catawba success, AbitibiBowater is
examining options for a future conversion of a newsprint machine to coated
mechanical paper.
Market Pulp
Income for the market pulp segment of $21 million for the second quarter
was lower by $10 million compared to the first quarter of 2008. EBITDA was
$34 million. The average market pulp transaction price for the Company
increased $6 per metric ton, while average operating costs increased $47 per
metric ton compared to the first quarter, mainly as a result of higher fiber
and energy costs, as well as scheduled annual outages at the Calhoun,
Tennessee and Thunder Bay, Ontario facilities.
Newsprint
For the second quarter, the newsprint segment generated income of
$1 million, compared to a loss of $69 million for the first quarter of 2008,
while EBITDA improved from $14 million to $81 million. The Company's average
transaction price increased $49 per metric ton. Average operating costs
decreased $5 per metric ton, compared to the first quarter as a result of mill
closures or idling in the first quarter and the realization of significant
merger-related synergies. The Company has implemented the previously announced
$20 per metric ton per month price increases for newsprint for the first eight
months of this year and anticipates implementing the September $20 per metric
ton price increase.
Specialty Papers
The specialty papers segment had a loss of $32 million, compared to a
loss of $39 million for the first quarter and EBITDA improved to $37 million.
The Company's average transaction price increased $35 per short ton during the
quarter, while average operating costs increased $29 per short ton, mainly due
to repair spending and higher energy related costs.
Wood Products
For the second quarter, the wood products segment had a loss of
$13 million, compared to a loss of $35 million for the first quarter and
EBITDA improved from a loss of $24 million to a loss of $2 million. The
average transaction price for the Company increased $9 per thousand board
feet, while average operating costs decreased $51 per thousand board feet
compared to the first quarter due to continued cost reduction efforts, the
idling of higher cost facilities and a $15 million benefit as a result of the
sale of log inventory previously subjected to lower of cost or market
adjustments.
Investor Call
-------------
A conference call hosted by Management to discuss Q2 results will be held
today at 10:00 AM (Eastern). Interested parties should dial (866) 898-9626 or
(514) 868-1042 fifteen minutes before the beginning of the call, which will be
webcast at www.abitibibowater.com, under "Webcasts and Presentations" in the
"Investors" section.
Participants not able to listen to the live conference call can access a
replay, which will also be available on the "Investors" section of the
Company's website beginning an hour after the conclusion of the call. Replay
by phone will be available until August 16, 2008, by dialing (514) 861-2272
(Passcode 3265672 #).
About AbitibiBowater
--------------------
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 27 pulp and paper facilities and 34 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.
Forward-Looking Statements
--------------------------
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 our efforts to improve operating and financial
performance, our plans for future price increases for certain of our products,
our Phase 2 Review of Operations, our efforts to reduce costs, increase
revenues and profitability, our potential conversion of manufacturing capacity
to coated and other value-added papers, and our business outlook, our
assessments of market conditions and our 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, our ability to realize
announced price increases, our ability to obtain timely contributions to our
cost-reduction initiatives from our unionized and salaried employees, the
prices and terms under which we would be able to sell targeted assets, the
continued strength of the Canadian dollar against the U.S. dollar, and the
costs of raw materials such as energy, chemicals and fiber. In addition, with
respect to forward-looking statements relating to the combination of
Abitibi-Consolidated Inc. and Bowater Incorporated, the following factors,
among others, could cause actual results to differ materially from those set
forth in the forward-looking statements: the risk that the businesses will not
be integrated successfully or that the improved financial performance, product
quality and product development will not be achieved; the risk that other
combinations within the industry or other factors may limit our ability to
improve our competitive position; the risk that the cost savings and other
expected synergies from the combination may not be fully realized or may take
longer to realize than expected; and disruption from the transaction making it
more difficult to maintain relationships with customers, employees or
suppliers. 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 March 31, 2008, filed with
the SEC on May 12, 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.ABITIBIBOWATER INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in millions except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
2008 2007(1) 2008 2007(1)
---------- ---------- ---------- ----------
Sales $ 1,696 $ 798 $ 3,424 $ 1,570
Costs and expenses:
Cost of sales, excluding
depreciation,
amortization and cost
of timber harvested 1,293 639 2,696 1,240
Depreciation,
amortization and cost
of timber harvested 187 80 378 160
Distribution costs 189 83 388 158
Selling and
administrative
expenses 90 46 187 95
Closure costs,
impairment and other
related charges 17 - 27 -
Net gain on disposition
of assets(2) (17) (65) (40) (123)
---------- ---------- ---------- ----------
Operating (loss) income (63) 15 (212) 40
---------- ---------- ---------- ----------
Other income (expense):
Interest income 3 2 6 4
Interest expense (203) (48) (332) (95)
Foreign exchange
gain (loss) (16) (17) 25 (20)
Other, net 28 2 18 (2)
---------- ---------- ---------- ----------
(188) (61) (283) (113)
---------- ---------- ---------- ----------
Loss before income taxes
and minority interests (251) (46) (495) (73)
Income tax benefit
(provision)(3) 5 (19) 2 (20)
Minority interests,
net of tax (5) 2 (6) (5)
---------- ---------- ---------- ----------
Net loss $ (251) $ (63) $ (499) $ (98)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net loss per common share:
Basic and diluted(4) $ (4.36) $ (2.09) $ (8.68) $ (3.28)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted-average number
of shares outstanding:
Basic and diluted(4) 57.6 29.9 57.5 29.9
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
ABITIBIBOWATER INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, in millions)
June 30, December 31,
2008 2007
---------- ----------
Assets
Current assets:
Cash and cash equivalents $ 341 $ 195
Accounts receivable, net 805 754
Inventories, net 828 906
Assets held for sale(2) 197 184
Other current assets 108 103
---------- ----------
Total current assets 2,279 2,142
---------- ----------
Timber and timberlands 52 58
Fixed assets, net 5,314 5,707
Goodwill 780 779
Other intangible assets, net 1,164 1,203
Other assets 599 430
---------- ----------
Total assets $ 10,188 $ 10,319
---------- ----------
---------- ----------
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued liabilities $ 1,100 $ 1,206
Short-term bank debt 652 589
Current installments of long-term debt 16 364
Liabilities associated with assets
held for sale(2) 12 19
---------- ----------
Total current liabilities 1,780 2,178
---------- ----------
Long-term debt, net of current installments 5,441 4,695
Pension and other postretirement
benefit obligations 884 936
Other long-term liabilities 240 231
Deferred income taxes 218 230
Minority interests in subsidiaries 150 150
Commitments and contingencies
Shareholders' equity 1,475 1,899
---------- ----------
Total liabilities and shareholders' equity $ 10,188 $ 10,319
---------- ----------
---------- ----------
ABITIBIBOWATER INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in millions)
Six Months Ended
June 30,
------------------------
2008 2007(1)
---------- ----------
Cash flows from operating activities:
Net loss $ (499) $ (98)
Adjustments to reconcile net loss to
net cash from operating activities:
Share-based compensation 7 8
Depreciation, amortization and cost
of timber harvested 378 160
Deferred income taxes (9) 23
Minority interests, net of tax 6 5
Net pension contributions (110) (11)
Net gain on disposition of assets (40) (123)
Amortization of debt discount (premium), net 43 (4)
Gain on extinguishment of debt (31) -
Gain on translation of foreign-currency
denominated debt (15) (17)
Changes in working capital:
Accounts receivable (65) 18
Inventories 56 (34)
Income tax receivables and payables 10 -
Accounts payable and accrued liabilities (97) (15)
Other, net (8) 32
---------- ----------
Net cash used for operating activities (374) (56)
---------- ----------
Cash flows from investing activities:
Cash invested in fixed assets, timber
and timberlands (82) (51)
Disposition of assets, including timber
and timberlands 205 147
Direct acquisition costs related to
the Combination - (12)
Cash received in monetization of
financial instruments 4 -
---------- ----------
Net cash provided by investing activities 127 84
---------- ----------
Cash flows from financing activities:
Cash dividends, including minority interests (7) (23)
Short-term financing 93 8
Short-term financing repayments (18) (8)
Issuance of long-term debt 974 -
Payments of long-term debt (508) (15)
Payment of deferred financing and credit
facility fees (71) -
Increase in restricted cash requirements (70) -
---------- ----------
Net cash provided by (used for)
financing activities 393 (38)
---------- ----------
Net increase (decrease) in cash and
cash equivalents 146 (10)
Cash and cash equivalents:
Beginning of period 195 99
---------- ----------
End of period $ 341 $ 89
---------- ----------
---------- ----------
ABITIBIBOWATER INC.
Notes to the Press Release and Unaudited Consolidated Financial
Statement Information
(1) On October 29, 2007, pursuant to a Combination Agreement and
Agreement and Plan of Merger, dated as of January 29, 2007, Abitibi-
Consolidated Inc. ("Abitibi") and Bowater Incorporated ("Bowater")
combined in a merger of equals (the "Combination"), with each
becoming a wholly-owned subsidiary of AbitibiBowater Inc. The
Combination has been accounted for in accordance with Statement of
Financial Accounting Standards No. 141, "Business Combinations."
Bowater is deemed to be the "acquirer" of Abitibi for accounting
purposes, and AbitibiBowater is deemed to be the successor to Bowater
for purposes of U.S. securities laws and regulations governing
financial reporting. Therefore, unless otherwise indicated, our press
release and unaudited Consolidated Financial Statement information,
including related notes, reflect the results of operations and
financial position of both Abitibi and Bowater as of June 30, 2008
and December 31, 2007 and for the three-month and six-month periods
ended June 30, 2008 and those of only Bowater for the three-month and
six-month periods ended June 30, 2007. No significant adjustments
were made to the preliminary purchase price allocation during the six
months ended June 30, 2008.
(2) During the three months ended March 31, 2008, we sold approximately
14,916 acres of timberlands, our Price sawmill and other assets for
proceeds of approximately $29 million, resulting in a net gain on
disposition of assets for the first quarter of 2008 of $23 million.
During the three months ended June 30, 2008, we sold approximately
28,200 acres of timberlands, our Snowflake, Arizona newsprint mill
and certain related assets and liabilities, and other assets for
proceeds of approximately $176 million, resulting in a net gain on
disposition of assets for the second quarter of 2008 of $17 million.
As a result of the restatement of our Snowflake mill to its fair
market value less costs to sell as of the date of the Combination, we
did not recognize a gain or loss on this sale. During the first and
second quarters of 2007, we sold approximately 52,200 acres and
55,600 acres, respectively, of timberlands primarily located in
Tennessee and Canada. At June 30, 2008, we held our Fort William,
Ontario and our Mokpo, Korea facility and some of our timberlands in
the United States and Canada for sale.
(3) During the first and second quarters of 2008, income tax benefits and
tax credits of $93 million and $79 million, respectively, arising
primarily from operating losses outside the United States were
entirely offset by tax charges to increase our tax valuation
allowance. During the first and second quarters of 2007, income tax
benefits and tax credits of $13 million and $24 million,
respectively, were entirely offset by tax charges to increase our tax
valuation allowance.
(4) For the calculation of basic and diluted loss per share for the three
and six months ended June 30, 2008 and 2007, no adjustments to net
loss are necessary. Additionally, no adjustments to our basic
weighted-average number of common shares outstanding are necessary to
compute our diluted weighted-average number of common shares
outstanding for all periods presented as the effect would be anti-
dilutive. In addition, no adjustments to net loss and the diluted
weighted average number of common shares were necessary after giving
effect to the assumed conversion of the convertible notes
representing 35 million additional common shares. As a result of the
Combination, each issued and outstanding share of Bowater common
stock and exchangeable share of Bowater Canada Inc. was converted
into 0.52 of a share of AbitibiBowater common stock and 0.52 of an
exchangeable share of AbitibiBowater Canada Inc., respectively. All
share and share-related information for the periods preceding the
Combination have been restated to reflect the Bowater exchange ratio
of 0.52.
(5) 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 loss and loss per
share reported before special items is presented in the tables below.
We believe that these measures allow investors to more easily compare
our ongoing operations and financial performance from period to
period. These non-GAAP measures should be considered in addition to
and not as a substitute for measures of financial performance
prepared in accordance with GAAP. Consequently, investors should rely
on GAAP operating income (loss), net loss and loss per share.
Non-GAAP measures included in our press release include:
Operating income (loss) before special items - is defined as
operating income (loss) from our Consolidated Statements of
Operations adjusted for special items. Internally, we use a non-GAAP
operating income (loss) measure as an indicator of a segment's
performance and excludes closure costs, impairment and other related
charges, severance and merger-related costs, gains on dispositions of
assets and other discretionary charges or credits from GAAP operating
income. Therefore, this non-GAAP presentation is consistent with our
internal presentation. This non-GAAP measure should be used in
addition to and not as a substitute for operating income (loss)
provided in our Consolidated Statements of Operations. We believe
that this non-GAAP measure is useful because it is consistent with
our internal presentation and performance analysis and allows
investors to more easily compare our ongoing operations and financial
performance from period to period.
Net loss before special items - is defined as net loss from our
Consolidated Statements of Operations adjusted for the special items
discussed above plus foreign exchange gains or losses, and the
adjustment for tax charges that have been taken against income tax
benefits arising primarily from operating losses at certain of our
operations outside the United States (refer to Note 3 above). The
adjustment for these items is consistent with our internal
presentation, and the tax adjustment is provided for our investors to
reflect a more appropriate effective tax rate. This non-GAAP measure
should be used in addition to and not as a substitute for net loss
provided in our Consolidated Statements of Operations. We believe
that this non-GAAP measure is useful because it is consistent with
our internal presentation and allows investors to more easily compare
our ongoing operations and financial performance from period to
period.
Loss per share (EPS) before special items - is defined as diluted EPS
calculated based on the net loss before special items. This non-GAAP
measure should be used in addition to and not as a substitute for our
loss per share calculated in accordance with GAAP as provided in the
Consolidated Statements of Operations. We believe that this non-GAAP
measure is useful because it is consistent with our internal
presentation and allows investors to more easily compare our EPS from
ongoing operations and financial performance from period to period.
-------------------------------------------------------------------------
Three Months Ended
June 30, 2008 Operating Net
(unaudited, in millions (loss) (loss)
except per share amounts) income income EPS
-------------------------------------------------------------------------
-------------------------------------------------------------------------
GAAP as reported $ (63) $ (251) $ (4.36)
Adjustments for special items:
Sale of assets (17) (11) (0.19)
Severance 17 16 0.28
Closure costs, impairment and
other related charges 13 13 0.23
Foreign exchange - 11 0.19
Tax adjustments - 72 1.25
-----------------------------------
GAAP as adjusted for special items $ (50) $ (150) $ (2.60)
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Three Months Ended
March 31, 2008 Operating Net
(unaudited, in millions (loss) (loss)
except per share amounts) income income EPS
-------------------------------------------------------------------------
-------------------------------------------------------------------------
GAAP as reported $ (149) $ (248) $ (4.32)
Adjustments for special items:
Sale of assets (23) (16) (0.27)
Severance 8 7 0.13
Closure costs, impairment and
other related charges 10 10 0.17
Foreign exchange - (44) (0.77)
Tax adjustments - 76 1.32
-----------------------------------
GAAP as adjusted for special items $ (154) $ (215) $ (3.74)
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(6) A reconciliation of our operating income (loss) reported under GAAP
to our use of the non-GAAP measure of EBITDA by reportable segment is
presented in the tables below. EBITDA by reportable segment is
defined as operating income (loss) from our Consolidated Statements
of Operations, allocated to our reportable segments (newsprint,
coated papers, specialty papers, market pulp and wood products) in
accordance with SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information," adjusted by depreciation,
amortization and cost of timber harvested. We believe that this
non-GAAP measure allows investors to more easily compare the ongoing
operations and financial performance of our reportable segments from
period to period. Internally, we use this EBITDA by reportable
segment measure as an indicator of a reportable segment's
performance. Therefore, this non-GAAP measure is consistent with our
internal presentation. We believe that this non-GAAP measure is
useful because it is consistent with our internal presentation and
performance analysis and allows investors to more easily compare our
ongoing financial performance from period to period. This non-GAAP
measure should be used in addition to and not as a substitute for
operating income (loss) by reportable segment provided in the notes
to our Consolidated Financial Statements in our quarterly filings
with the Securities and Exchange Commission.
-------------------------------------------------------------------------
Depreciation,
amortization
Three Months Ended and cost EBITDA by
June 30, 2008 Operating of timber Reportable
(unaudited, in millions) (loss) income harvested Segment
-------------------------------------------------------------------------
-------------------------------------------------------------------------
GAAP as reported $ (63) $ 187
Allocated to reportable
segments:
Newsprint 1 80 $ 81
Coated papers 35 10 45
Specialty papers (32) 69 37
Market pulp 21 13 34
Wood products (13) 11 (2)
Corporate and other (75) 4
------------------------
GAAP as reported $ (63) $ 187
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Depreciation,
amortization
Three Months Ended and cost EBITDA by
March 31, 2008 Operating of timber Reportable
(unaudited, in millions) (loss) income harvested Segment
-------------------------------------------------------------------------
-------------------------------------------------------------------------
GAAP as reported $ (149) $ 191
Allocated to reportable
segments:
Newsprint (69) 83 $ 14
Coated papers 34 10 44
Specialty papers (39) 69 30
Market pulp 31 14 45
Wood products (35) 11 (24)
Corporate and other (71) 4
------------------------
GAAP as reported $ (149) $ 191
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