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Domtar Corporation Reports Preliminary Third Quarter 2020 Financial Results

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(All financial information is in U.S. dollars, and all earnings per share results are diluted, unless otherwise noted).

  • Third quarter 2020 net loss of $1.67 per share; earnings before items1 of $0.33 per share

  • $121 million of cash flow from operations

  • 20% increase in paper volumes vs Q2’20

Domtar Corporation (NYSE: UFS) (TSX: UFS) today reported a net loss of $92 million ($1.67 per share) for the third quarter of 2020 compared to net earnings of $19 million ($0.34 per share) for the second quarter of 2020 and net earnings of $20 million ($0.32 per share) for the third quarter of 2019. Sales for the third quarter of 2020 were $1.1 billion.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20201106005240/en/

Excluding items listed below, the Company had earnings before items1 of $18 million ($0.33 per share) for the third quarter of 2020 compared to earnings before items1 of $20 million ($0.36 per share) for the second quarter of 2020 and earnings before items1 of $55 million ($0.89 per share) for the third quarter of 2019.

ITEMS

Description

Segment

Line item

Amount

After tax
effect

EPS impact
(per share)

(in millions)

Third quarter 2020

Pulp and Paper

Impairment of long-lived
assets

$111

$68

$1.23

Pulp and Paper

Closure and
restructuring costs

$67

$41

$0.75

Corporate

Closure and
restructuring costs

$1

$1

$0.02

Second quarter 2020

Pulp and Paper

Closure and
restructuring costs

$1

$1

$0.02

Third quarter 2019

Pulp and Paper

Impairment of long-lived
assets

$32

$25

$0.40

Pulp and Paper

Closure and
restructuring costs

$5

$4

$0.07

Personal Care

Impairment of long-lived
assets

$1

$1

$0.02

Personal Care

Closure and
restructuring costs

$6

$5

$0.08

QUARTERLY REVIEW

"We performed very well in the quarter in a challenging operating environment. Our teams have demonstrated tremendous resiliency, continuously adapting to changing market conditions, maintaining a keen focus on health and safety and decisively taking actions to serve our customers in the face of unprecedented conditions," said John D. Williams, President and Chief Executive Officer. "We benefited from further market recovery and we made good progress with some of our strategic initiatives."

"Our results in Paper significantly improved in the third quarter reflecting a strong operational performance and our team's fast response in implementing cost savings in a better paper demand environment. In Pulp, prices remain at cyclically low levels but the supply and demand balance is improving."

"The Kingsport conversion to recycled linerboard is going according to plan. All efforts are now being put into enabling a start-up by the end of 2022. We have signed an agreement with Voith to provide equipment and technical services to help build one of the most modern recycled containerboard machines in the world. We expect to receive our first equipment deliveries in the next few months with construction set to begin in the second quarter of 2021. We are also focusing on implementing our commercial strategy while building our various teams that will help lead the business."

Mr. Williams added, "In Personal Care, we had a strong cost performance in the quarter. We continue to execute well against our objectives, both commercially and operationally, which has contributed to our strong year-to-date performance."

Operating loss was $136 million in the third quarter of 2020 compared to operating income of $14 million in the second quarter of 2020. Depreciation and amortization totaled $71 million in the third quarter of 2020.

Operating income before items1 was $43 million in the third quarter of 2020 compared to operating income before items1 of $15 million in the second quarter of 2020.

(In millions of dollars)

3Q 2020

2Q 2020

Sales

$

1,124

$

1,012

Operating (loss) income

Pulp and Paper segment

(140

)

3

Personal Care segment

16

18

Corporate

(12

)

(7

)

Total operating (loss) income

(136

)

14

Operating income before items1

43

15

Depreciation and amortization

71

71

The net operating loss in the third quarter of 2020 was the result of the long-lived assets impairment and closure and restructuring charges related to the cost savings program, lower wage subsidies, higher maintenance costs, higher selling, general and administrative expenses and higher freight costs. These factors were partially offset by favorable productivity, higher volume in paper, lower raw material costs, higher average selling prices for paper and favorable exchange rates.

When compared to the second quarter of 2020, manufactured paper shipments were up 20% and pulp shipments decreased 7%. The shipment-to-production ratio for paper was 105% in the third and second quarters of 2020. Paper inventories decreased by 20,000 tons, and pulp inventories increased by 38,000 metric tons when compared to the second quarter of 2020.

LIQUIDITY AND CAPITAL RESOURCES

Cash flow from operating activities amounted to $121 million and capital expenditures were $28 million, resulting in free cash flow1 of $93 million for the third quarter of 2020. Domtar’s net debt-to-total capitalization ratio1 stood at 28% at September 30, 2020 compared to 30% at June 30, 2020.

OUTLOOK

In the fourth quarter, paper volume is expected to be flat quarter-over-quarter while mix should be unfavorable due to the usual seasonality. We expect near-term pulp markets to continue to gradually improve driven by better demand, maintenance outages and restocking in China. We expect Personal Care to continue to benefit from higher usage and the impact from new customer wins. Overall raw material costs are expected to remain stable while planned maintenance costs will be lower.

EARNINGS CONFERENCE CALL

The Company will hold a conference call today at 10:00 a.m. (ET) to discuss its third quarter 2020 financial results. Financial analysts are invited to participate in the call by dialing 1 (800) 367-2403 at least 10 minutes before start time, 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 fourth quarter 2020 earnings results on February 11, 2021 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 is a leading provider of a wide variety of fiber-based products including communication, specialty and packaging papers, market pulp and absorbent hygiene products. With approximately 8,900 employees serving more than 50 countries around the world, Domtar is driven by a commitment to turn sustainable wood fiber into useful products that people rely on every day. Domtar’s annual sales are approximately $5.2 billion, and its common stock is traded on the New York and Toronto Stock Exchanges. Domtar’s principal executive office is in Fort Mill, South Carolina. To learn more, visit www.domtar.com.

-(30)-

Forward-Looking Statements

Statements in this release about our plans, expectations and future performance, including the statements by Mr. Williams and those contained under "Outlook," are "forward-looking statements." Actual results may differ materially from those suggested by these statements for a number of reasons, including the COVID-19 pandemic and the resulting decrease in paper sales and the challenges we face in maintaining manufacturing operations, changes in customer demand and pricing, changes in manufacturing costs, future acquisitions and divestitures, including facility closings, the failure to achieve our cost containment goals, costs of conversion in excess of our expectations, demand for linerboard, and the other reasons identified under "Risk Factors" in our Form 10-K for 2019 as filed with the SEC and as updated by subsequently-filed Form 10-Qs. Except to the extent required by law, we expressly disclaim any obligation to update or revise these forward-looking statements to reflect new events or circumstances or otherwise.

Domtar Corporation

Highlights

(In millions of dollars, unless otherwise noted)

For the three months ended

For the nine months ended

September 30,
2020

September 30,
2019

September 30,
2020

September 30,
2019

(Unaudited)

$

$

$

$

Selected Segment Information

Sales

Pulp and Paper

899

1,079

2,732

3,342

Personal Care

243

219

738

686

Total for reportable segments

1,142

1,298

3,470

4,028

Intersegment sales

(18

)

(15

)

(56

)

(52

)

Consolidated sales

1,124

1,283

3,414

3,976

Depreciation and amortization

Pulp and Paper

56

57

170

174

Personal Care

15

15

44

45

Total for reportable segments

71

72

214

219

Impairment of long-lived assets - Pulp and Paper

111

32

111

32

Impairment of long-lived assets - Personal Care

1

26

Consolidated depreciation and amortization and impairment of long-lived assets

182

105

325

277

Operating (loss) income

Pulp and Paper

(140

)

31

(133

)

237

Personal Care

16

2

54

(24

)

Corporate

(12

)

(4

)

(24

)

(35

)

Consolidated operating (loss) income

(136

)

29

(103

)

178

Interest expense, net

14

12

43

38

Non-service components of net periodic benefit cost

(4

)

(2

)

(13

)

(7

)

(Loss) earnings before income taxes and equity loss

(146

)

19

(133

)

147

Income tax (benefit) expense

(55

)

(1

)

(67

)

28

Equity loss, net of taxes

1

2

1

Net (loss) earnings

(92

)

20

(68

)

118

Per common share (in dollars)

Net (loss) earnings

Basic

(1.67

)

0.33

(1.23

)

1.89

Diluted

(1.67

)

0.32

(1.23

)

1.88

Weighted average number of common shares outstanding (millions)

Basic

55.2

61.5

55.5

62.5

Diluted

55.2

61.7

55.5

62.7

Cash flows from operating activities

121

108

276

282

Additions to property, plant and equipment

28

56

130

157

As a result of changes in our organization structure, we have changed our segment reporting. Starting January 1, 2020, our materials business EAM Corporation, ("EAM"), a manufacturer of high quality airlaid and ultrathin laminated cores, previously reported under our Personal Care segment is now presented under our Pulp and Paper segment. Prior period segment results have been restated to the new segment presentation with no significant impact on segment results. There were no changes to our consolidated sales or operating income.

Domtar Corporation

Consolidated Statements of Earnings (Loss)

(In millions of dollars, unless otherwise noted)

For the three months ended

For the nine months ended

September 30,
2020

September 30,
2019

September 30,
2020

September 30,
2019

(Unaudited)

$

$

$

$

Sales

1,124

1,283

3,414

3,976

Operating expenses

Cost of sales, excluding depreciation and amortization

911

1,041

2,831

3,172

Depreciation and amortization

71

72

214

219

Selling, general and administrative

99

94

294

322

Impairment of long-lived assets

111

33

111

58

Closure and restructuring costs

68

11

69

23

Other operating loss (income), net

3

(2

)

4

1,260

1,254

3,517

3,798

Operating (loss) income

(136

)

29

(103

)

178

Interest expense, net

14

12

43

38

Non-service components of net periodic benefit cost

(4

)

(2

)

(13

)

(7

)

(Loss) earnings before income taxes and equity loss

(146

)

19

(133

)

147

Income tax (benefit) expense

(55

)

(1

)

(67

)

28

Equity loss, net of taxes

1

2

1

Net (loss) earnings

(92

)

20

(68

)

118

Per common share (in dollars)

Net (loss) earnings

Basic

(1.67

)

0.33

(1.23

)

1.89

Diluted

(1.67

)

0.32

(1.23

)

1.88

Weighted average number of common shares outstanding (millions)

Basic

55.2

61.5

55.5

62.5

Diluted

55.2

61.7

55.5

62.7

Domtar Corporation

Consolidated Balance Sheets at

(In millions of dollars)

September 30,
2020

December 31,
2019

(Unaudited)

$

$

Assets

Current assets

Cash and cash equivalents

218

61

Receivables, less allowances of $11 and $6

543

577

Inventories

764

786

Prepaid expenses

36

33

Income and other taxes receivable

44

61

Total current assets

1,605

1,518

Property, plant and equipment, net

2,378

2,567

Operating lease right-of-use assets

72

81

Intangible assets, net

573

573

Other assets

163

164

Total assets

4,791

4,903

Liabilities and shareholders' equity

Current liabilities

Bank indebtedness

9

Trade and other payables

626

705

Income and other taxes payable

37

23

Operating lease liabilities due within one year

27

28

Long-term debt due within one year

13

1

Total current liabilities

703

766

Long-term debt

1,086

938

Operating lease liabilities

58

69

Deferred income taxes and other

413

479

Other liabilities and deferred credits

320

275

Shareholders' equity

Common stock

1

1

Additional paid-in capital

1,714

1,770

Retained earnings

905

998

Accumulated other comprehensive loss

(409

)

(393

)

Total shareholders' equity

2,211

2,376

Total liabilities and shareholders' equity

4,791

4,903

Domtar Corporation

Consolidated Statements of Cash Flows

(In millions of dollars)

For the three months ended

For the nine months ended

September 30,
2020

September 30,
2019

September 30,
2020

September 30,
2019

(Unaudited)

$

$

$

$

Operating activities

Net (loss) earnings

(92

)

20

(68

)

118

Adjustments to reconcile net (loss) earnings to cash flows from operating activities

Depreciation and amortization

71

72

214

219

Deferred income taxes and tax uncertainties

(48

)

2

(60

)

1

Impairment of long-lived assets

111

33

111

58

Stock-based compensation expense

2

2

5

7

Equity loss, net

1

2

1

Changes in assets and liabilities, excluding the effect of acquisition of business

Receivables

(4

)

10

38

50

Inventories

10

20

30

(34

)

Prepaid expenses

7

7

9

(4

)

Trade and other payables

74

(35

)

(21

)

(111

)

Income and other taxes

(6

)

(13

)

34

(27

)

Difference between employer pension and other post-retirement contributions and pension and other post-retirement expense

(5

)

(4

)

(6

)

(3

)

Other assets and other liabilities

(6

)

(12

)

7

Cash flows from operating activities

121

108

276

282

Investing activities

Additions to property, plant and equipment

(28

)

(56

)

(130

)

(157

)

Proceeds from disposals of property, plant and equipment

1

Acquisition of business, net of cash acquired

(30

)

Cash flows used for investing activities

(28

)

(56

)

(160

)

(156

)

Financing activities

Dividend payments

(28

)

(51

)

(83

)

Stock repurchase

(131

)

(59

)

(139

)

Net change in bank indebtedness

(1

)

(10

)

2

Change in revolving credit facility

45

(80

)

45

Proceeds from receivables securitization facility

70

25

150

Repayments of receivables securitization facility

(80

)

(110

)

Issuance of long-term debt

300

Repayments of long-term debt

(3

)

(3

)

(1

)

Other

1

(3

)

(1

)

Cash flows (used for) provided from financing activities

(2

)

(45

)

39

(137

)

Net increase (decrease) in cash and cash equivalents

91

7

155

(11

)

Impact of foreign exchange on cash

3

(2

)

2

(2

)

Cash and cash equivalents at beginning of period

124

93

61

111

Cash and cash equivalents at end of period

218

98

218

98

Supplemental cash flow information

Net cash payments (refund) for:

Interest

19

16

44

39

Income taxes

(1

)

5

(25

)

55

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 are useful to understand our operating performance and benchmark with peers within the industry. The Company calculates "Earnings before items" and "EBITDA before items" by excluding the after-tax (pre-tax) effect of specified items. These metrics are presented as a complement to enhance the understanding of operating results but not in substitution for GAAP results.

2020

2019

Q1

Q2

Q3

YTD

Q1

Q2

Q3

Q4

Year

Reconciliation of "Earnings before items" to Net earnings (loss)

Net earnings (loss)

($)

5

19

(92

)

(68

)

80

18

20

(34

)

84

(+)

Pension settlement loss

($)

22

22

(+)

Impairment of long-lived assets

($)

68

68

8

12

26

46

(+)

Closure and restructuring costs

($)

1

42

43

3

6

9

14

32

(=)

Earnings before items

($)

5

20

18

43

91

36

55

2

184

(/)

Weighted avg. number of common shares outstanding (diluted)

(millions)

56.2

55.3

55.2

55.5

63.2

63.3

61.7

57.3

61.4

(=)

Earnings before items per diluted share

($)

0.09

0.36

0.33

0.77

1.44

0.57

0.89

0.03

3.00

Reconciliation of "EBITDA" and "EBITDA before items" to Net earnings (loss)

Net earnings (loss)

($)

5

19

(92

)

(68

)

80

18

20

(34

)

84

(+)

Equity loss, net of taxes

($)

1

1

2

1

1

2

(+)

Income tax expense (benefit)

($)

3

(15

)

(55

)

(67

)

24

5

(1

)

(26

)

2

(+)

Interest expense, net

($)

14

15

14

43

13

13

12

14

52

(+)

Depreciation and amortization

($)

72

71

71

214

73

74

72

74

293

(+)

Impairment of long-lived assets

($)

111

111

10

15

33

58

(=)

EBITDA

($)

95

90

50

235

201

125

136

29

491

(/)

Sales

($)

1,278

1,012

1,124

3,414

1,376

1,317

1,283

1,244

5,220

(=)

EBITDA margin

(%)

7

%

9

%

4

%

7

%

15

%

9

%

11

%

2

%

9

%

EBITDA

($)

95

90

50

235

201

125

136

29

491

(+)

Pension settlement loss

($)

30

30

(+)

Closure and restructuring costs

($)

1

68

69

4

8

11

19

42

(=)

EBITDA before items

($)

95

91

118

304

205

133

147

78

563

(/)

Sales

($)

1,278

1,012

1,124

3,414

1,376

1,317

1,283

1,244

5,220

(=)

EBITDA margin before items

(%)

7

%

9

%

10

%

9

%

15

%

10

%

11

%

6

%

11

%

Reconciliation of "Free cash flow" to Cash flows from operating activities

Cash flows from operating activities

($)

88

67

121

276

55

119

108

160

442

(-)

Additions to property, plant and equipment

($)

(62

)

(40

)

(28

)

(130

)

(46

)

(55

)

(56

)

(98

)

(255

)

(=)

Free cash flow

($)

26

27

93

146

9

64

52

62

187

"Net debt-to-total capitalization" computation

Bank indebtedness

($)

3

3

1

9

(+)

Long-term debt due within one year

($)

1

13

13

1

1

1

1

(+)

Long-term debt

($)

1,102

1,089

1,086

853

824

938

938

(=)

Debt

($)

1,103

1,102

1,099

857

828

940

948

(-)

Cash and cash equivalents

($)

(152

)

(124

)

(218

)

(94

)

(93

)

(98

)

(61

)

(=)

Net debt

($)

951

978

881

763

735

842

887

(+)

Shareholders' equity

($)

2,181

2,277

2,211

2,608

2,619

2,439

2,376

(=)

Total capitalization

($)

3,132

3,255

3,092

3,371

3,354

3,281

3,263

Net debt

($)

951

978

881

763

735

842

887

(/)

Total capitalization

($)

3,132

3,255

3,092

3,371

3,354

3,281

3,263

(=)

Net debt-to-total capitalization

(%)

30

%

30

%

28

%

23

%

22

%

26

%

27

%

"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 (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.

Domtar Corporation
Quarterly Reconciliation of Non-GAAP Financial Measures – By Segment 2020
(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 are useful to understand our operating performance and benchmark with peers within the industry. The Company calculates the segmented "Operating income (loss) before items" by excluding the pre-tax effect of specified items. These metrics are presented as a complement to enhance the understanding of operating results but not in substitution for GAAP results.

Pulp and Paper

Personal Care

Corporate

Total

Q1'20

Q2'20

Q3'20

Q4'20

YTD

Q1'20

Q2'20

Q3'20

Q4'20

YTD

Q1'20

Q2'20

Q3'20

Q4'20

YTD

Q1'20

Q2'20

Q3'20

Q4'20

YTD

Reconciliation of Operating income (loss)
to "Operating income (loss) before items"

Operating income (loss)

($)

4

3

(140)

(133)

20

18

16

54

(5)

(7)

(12)

(24)

19

14

(136)

(103)

(+)

Impairment of long-lived assets

($)

111

111

111

111

(+)

Closure and restructuring costs

($)

1

67

68

1

1

1

68

69

(=)

Operating income (loss) before items

($)

4

4

38

46

20

18

16

54

(5)

(7)

(11)

(23)

19

15

43

77

Reconciliation of "Operating income (loss)
before items" to "EBITDA before items"

Operating income (loss) before items

($)

4

4

38

46

20

18

16

54

(5)

(7)

(11)

(23)

19

15

43

77

(+)

Non-service components of net periodic benefit cost

($)

4

6

4

14

(1)

(1)

4

5

4

13

(+)

Depreciation and amortization

($)

58

56

56

170

14

15

15

44

72

71

71

214

(=)

EBITDA before items

($)

66

66

98

230

34

33

31

98

(5)

(8)

(11)

(24)

95

91

118

304

(/)

Sales

($)

1,031

802

899

2,732

266

229

243

738

1,297

1,031

1,142

3,470

(=)

EBITDA margin before items

(%)

6%

8%

11%

8%

13%

14%

13%

13%

7%

9%

10%

9%

"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.

Domtar Corporation
Quarterly Reconciliation of Non-GAAP Financial Measures – By Segment 2019
(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 are useful to understand our operating performance and benchmark with peers within the industry. The Company calculates the segmented "Operating income (loss) before items" by excluding the pre-tax effect of specified items. These metrics are presented as a complement to enhance the understanding of operating results but not in substitution for GAAP results.

Pulp and Paper

Personal Care

Corporate

Total

Q1'19

Q2'19

Q3'19

Q4'19

Year

Q1'19

Q2'19

Q3'19

Q4'19

Year

Q1'19

Q2'19

Q3'19

Q4'19

Year

Q1'19

Q2'19

Q3'19

Q4'19

Year

Reconciliation of Operating income (loss)
to "Operating income (loss) before items"

Operating income (loss)

($)

144

62

31

(11)

226

(8)

(18)

2

8

(16)

(21)

(10)

(4)

(12)

(47)

115

34

29

(15)

163

(+)

Impairment of long-lived assets

($)

32

32

10

15

1

26

10

15

33

58

(+)

Closure and restructuring costs

($)

5

17

22

4

8

6

2

20

4

8

11

19

42

(=)

Operating income (loss) before items

($)

144

62

68

6

280

6

5

9

10

30

(21)

(10)

(4)

(12)

(47)

129

57

73

4

263

Reconciliation of "Operating income (loss)
before items" to "EBITDA before items"

Operating income (loss) before items

($)

144

62

68

6

280

6

5

9

10

30

(21)

(10)

(4)

(12)

(47)

129

57

73

4

263

(+)

Pension settlement loss

($)

30

30

30

30

(+)

Non-service components of net periodic benefit cost

($)

3

3

2

(28)

(20)

(1)

(2)

(3)

3

2

2

(30)

(23)

(+)

Depreciation and amortization

($)

58

59

57

57

231

15

15

15

17

62

73

74

72

74

293

(=)

EBITDA before items

($)

205

124

127

65

521

21

20

24

27

92

(21)

(11)

(4)

(14)

(50)

205

133

147

78

563

(/)

Sales

($)

1,157

1,106

1,079

1,027

4,369

239

228

219

234

920

1,396

1,334

1,298

1,261

5,289

(=)

EBITDA margin before items

(%)

18%

11%

12%

6%

12%

9%

9%

11%

12%

10%

15%

10%

11%

6%

11%

"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.

As a result of changes in our organization structure, we have changed our segment reporting. Starting January 1, 2020, our materials business EAM, a manufacturer of high quality airlaid and ultrathin laminated cores, previously reported under our Personal Care segment is now presented under our Pulp and Paper segment. Prior period segment results have been restated to the new segment presentation with no significant impact on segment results. There were no changes to our consolidated sales or operating income.

Domtar Corporation

Supplemental Segmented Information

(In millions of dollars, unless otherwise noted)

2020

2019

Q1

Q2

Q3

YTD

Q1

Q2

Q3

Q4

Year

Pulp and Paper Segment

Sales

($)

1,031

802

899

2,732

1,157

1,106

1,079

1,027

4,369

Operating income (loss)

($)

4

3

(140

)

(133

)

144

62

31

(11

)

226

Depreciation and amortization

($)

58

56

56

170

58

59

57

57

231

Impairment of long-lived assets

($)

111

111

32

32

Paper

Paper Production

('000 ST)

648

436

524

1,608

757

697

653

619

2,726

Paper Shipments - Manufactured

('000 ST)

679

459

550

1,688

736

681

672

656

2,745

Communication Papers

('000 ST)

569

366

449

1,384

615

567

563

554

2,299

Specialty and Packaging Papers

('000 ST)

110

93

101

304

121

114

109

102

446

Paper Shipments - Sourced from 3rd parties

('000 ST)

22

12

16

50

23

21

25

24

93

Paper Shipments - Total

('000 ST)

701

471

566

1,738

759

702

697

680

2,838

Pulp

Pulp Shipments(a)

('000 ADMT)

389

427

396

1,212

349

370

416

404

1,539

Pulp Shipments mix(b):

Hardwood Kraft Pulp

(%)

3

%

2

%

4

%

3

%

2

%

2

%

5

%

5

%

4

%

Softwood Kraft Pulp

(%)

52

%

57

%

62

%

57

%

53

%

56

%

55

%

54

%

54

%

Fluff Pulp

(%)

45

%

41

%

34

%

40

%

45

%

42

%

40

%

41

%

42

%

Personal Care Segment

Sales

($)

266

229

243

738

239

228

219

234

920

Operating income (loss)

($)

20

18

16

54

(8

)

(18

)

2

8

(16

)

Depreciation and amortization

($)

14

15

15

44

15

15

15

17

62

Impairment of long-lived assets

($)

10

15

1

26

Average Exchange Rates

$US / $CAN

1.344

1.385

1.332

1.354

1.329

1.337

1.321

1.321

1.327

$CAN / $US

0.744

0.722

0.751

0.739

0.752

0.748

0.757

0.757

0.754

€ / $US

1.102

1.101

1.170

1.124

1.136

1.124

1.111

1.107

1.120

As a result of changes in our organization structure, we have changed our segment reporting. Starting January 1, 2020, our materials business EAM, a manufacturer of high quality airlaid and ultrathin laminated cores, previously reported under our Personal Care segment is now presented under our Pulp and Paper segment. Prior period segment results have been restated to the new segment presentation with no significant impact on segment results. There were no changes to our consolidated sales or operating income.

(a) Figures represent Pulp Shipments to third parties.
(b) Percentages include Pulp Shipments to our Personal Care segment.

Note: the term "ST" refers to a short ton and the term "ADMT" refers to an air dry metric ton.

1 Non-GAAP financial measure. Refer to the Reconciliation of Non-GAAP Financial Measures in the appendix.

View source version on businesswire.com: https://www.businesswire.com/news/home/20201106005240/en/

Contacts

INVESTOR RELATIONS
Nicholas Estrela
Director
Investor Relations
Tel.: 514-848-5049

MEDIA RELATIONS
David Struhs
Vice-President
Corporate Services and Sustainability
Tel.: 803-802-8031