Domtar Corporation : Reports Preliminary Fourth Quarter and Fiscal Year 2019 Financial Results

Earnings affected by lower pulp and paper prices and market related downtime in paper (All financial information is in U.S. dollars, and all earnings per share results are diluted, unless otherwise noted). Fourth quarter 2019 net loss of $0.59 per share; earnings before items1 of $0.03 per share 92,000 tons of market-related downtime in paper $80 million of share repurchases

Domtar Corporation (NYSE: UFS) (TSX: UFS) today reported a net loss of $34 million ($0.59 per share) for the fourth quarter of 2019 compared to net earnings of $20 million ($0.32 per share) for the third quarter of 2019 and net earnings of $87 million ($1.38 per share) for the fourth quarter of 2018. Sales for the fourth quarter of 2019 were $1.2 billion.

Excluding items listed below, the Company had earnings before items¹ of $2 million ($0.03 per share) for the fourth quarter of 2019 compared to earnings before items¹ of $55 million ($0.89 per share) for the third quarter of 2019 and earnings before items¹ of $103 million ($1.63 per share) for the fourth quarter of 2018.

ITEMS

Description	Segment	Line item	Amount	After tax effect	EPS impact (per share)
			(in millions)
Fourth quarter 2019
Pension settlement loss	Pulp and Paper	Non-service components of net periodic benefit cost	$30	$22	$0.38
Paper machine closures	Pulp and Paper	Closure and restructuring costs	$17	$13	$0.22
Margin improvement plan	Personal Care	Closure and restructuring costs	$2	$1	$0.02
Third quarter 2019
Paper machine closures	Pulp and Paper	Impairment of long-lived assets	$32	$25	$0.40
Paper machine closures	Pulp and Paper	Closure and restructuring costs	$5	$4	$0.07
Margin improvement plan	Personal Care	Impairment of long-lived assets	$1	$1	$0.02
Margin improvement plan	Personal Care	Closure and restructuring costs	$6	$5	$0.08
Fourth quarter 2018
Margin improvement plan	Personal Care	Impairment of long-lived assets	$7	$5	$0.08
Margin improvement plan	Personal Care	Closure and restructuring costs	$8	$6	$0.09
U.S. Tax Reform	Corporate	Income tax expense	$5	$5	$0.08

FISCAL YEAR 2019 HIGHLIGHTS

For fiscal year 2019, net earnings amounted to $84 million ($1.37 per share) compared to net earnings of $283 million ($4.48 per share) for fiscal year 2018. The Company had earnings before items¹ of $184 million ($3.00 per share) for fiscal year 2019 compared to earnings before items¹ of $291 million ($4.61 per share) for fiscal year 2018. Sales amounted to $5.2 billion for fiscal year 2019.

Commenting on the full-year results, John D. Williams, President and Chief Executive Officer said, “Our teams were agile in adjusting to market changes and executed well on things under our control in a challenging market environment. We had strong cash flow generation and our solid financial position allowed us to continue to reward shareholders with a high free cash flow payout ratio, while strategically investing in our assets.”

QUARTERLY REVIEW

“Our results in the paper business fell short of our expectations. Shipments remained weak in the quarter due to seasonally slower demand and some customer destocking. As a result, we increased market-related downtime to better balance our supply with our customer demand and reduce our inventory to more optimal levels,” said John D. Williams, President and Chief Executive Officer.

Commenting on Personal Care, Mr. Williams added, “We had a strong finish to a good year. EBITDA¹ significantly improved when compared to last year and we reached 12% EBITDA¹ margins, which is the highest level since 2017. We expect to build on the momentum from this past year by continuing to focus on the execution of our margin improvement plan and restore and grow the profitability of the business.”

Operating loss was $15 million in the fourth quarter of 2019 compared to operating income of $29 million in the third quarter of 2019. Depreciation and amortization totaled $74 million in the fourth quarter of 2019.

Operating income before items¹ was $4 million in the fourth quarter of 2019 compared to an operating income before items¹ of $73 million in the third quarter of 2019.

(In millions of dollars)		4Q 2019				3Q 2019
Sales		$	1,244			$	1,283
Operating (loss) income
Pulp and Paper segment			(12	)			31
Personal Care segment			9				2
Corporate			(12	)			(4	)
Total operating (loss) income			(15	)			29
Operating income before items1			4				73
Depreciation and amortization			74				72

The operating loss in the fourth quarter of 2019 was the result of lower average selling prices and unfavorable productivity in pulp and paper, higher selling, general and administrative expenses, and higher maintenance, freight and raw material costs.

When compared to the third quarter of 2019, manufactured paper shipments were down 2% and pulp shipments decreased 3%. The shipment-to-production ratio for paper was 106% in the fourth quarter of 2019, compared to 103% in the third quarter of 2019. Paper inventories decreased by 36,000 tons, and pulp inventories decreased by 15,000 metric tons when compared to the third quarter of 2019.

LIQUIDITY AND CAPITAL

Cash flow from operating activities amounted to $160 million and capital expenditures were $98 million, resulting in free cash flow¹ of $62 million for the fourth quarter of 2019. Domtar’s net debt-to-total capitalization ratio¹ stood at 27% at December 31, 2019 compared to 26% at September 30, 2019.

For fiscal year 2019, cash flow from operating activities amounted to $442 million and capital expenditures were $255 million, resulting in free cash flow¹ of $187 million. Domtar returned a total of $329 million to its shareholders through a combination of dividend and stock buybacks in 2019. Under its stock repurchase program, Domtar repurchased 6,220,658 shares of common stock at an average price of $35.29 throughout 2019. At the end of the year, Domtar had $403 million remaining under the program.

OUTLOOK

In 2020, our paper volumes are expected to trend with market demand while pulp volumes will increase due to higher pulp productivity at our Espanola and Ashdown mills. The Pulp and Paper business will benefit from lower planned maintenance costs. Personal Care is expected to benefit from their margin improvement plan and higher sales following new customer wins. Overall, we anticipate costs, including freight, labor and raw materials, to marginally increase.

EARNINGS CONFERENCE CALL

The Company will hold a conference call today at 10:00 a.m. (ET) to discuss its fourth quarter and fiscal year 2019 financial results. Financial analysts are invited to participate in the call by dialing 1 [phone] 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 first quarter 2020 earnings results on April 30, 2020 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 10,000 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.

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 changes in customer demand and pricing, changes in manufacturing costs, future acquisitions and divestitures, including facility closings, and the other reasons identified under “Risk Factors” in our Form 10-K for 2018 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 twelve months ended
		December 31,				December 31,				December 31,				December 31,
		2019				2018				2019				2018
		(Unaudited)
		$				$				$				$
Selected Segment Information
Sales
Pulp and Paper			1,018				1,154				4,332				4,523
Personal Care			242				254				953				1,000
Total for reportable segments			1,260				1,408				5,285				5,523
Intersegment sales			(16	)			(18	)			(65	)			(68	)
Consolidated sales			1,244				1,390				5,220				5,455
Depreciation and amortization
Pulp and Paper			57				58				228				238
Personal Care			17				17				65				70
Total for reportable segments			74				75				293				308
Impairment of long-lived assets - Pulp and Paper			—				—				32				—
Impairment of long-lived assets - Personal Care			—				7				26				7
Consolidated depreciation and amortization and impairment of long-lived assets			74				82				351				315
Operating (loss) income
Pulp and Paper			(12	)			148				225				438
Personal Care			9				(12	)			(15	)			(5	)
Corporate			(12	)			(3	)			(47	)			(47	)
Consolidated operating (loss) income			(15	)			133				163				386
Interest expense, net			14				15				52				62
Non-service components of net periodic benefit cost			30				(5	)			23				(18	)
(Loss) earnings before income taxes and equity loss			(59	)			123				88				342
Income tax (benefit) expense			(26	)			35				2				57
Equity loss, net of taxes			1				1				2				2
Net (loss) earnings			(34	)			87				84				283
Per common share (in dollars)
Net (loss) earnings
Basic			(0.59	)			1.38				1.37				4.50
Diluted			(0.59	)			1.38				1.37				4.48
Weighted average number of common shares outstanding (millions)
Basic			57.3				62.9				61.2				62.9
Diluted			57.5				63.0				61.4				63.1
Cash flows from operating activities			160				217				442				554
Additions to property, plant and equipment			98				84				255				195

Domtar Corporation
Consolidated Statements of Earnings (Loss)
(In millions of dollars, unless otherwise noted)

		For the three months ended								For the twelve months ended
		December 31,				December 31,				December 31,				December 31,
		2019				2018				2019				2018
		(Unaudited)
		$				$				$				$
Sales			1,244				1,390				5,220				5,455
Operating expenses
Cost of sales, excluding depreciation and amortization			1,053				1,064				4,225				4,303
Depreciation and amortization			74				75				293				308
Selling, general and administrative			112				100				434				443
Impairment of long-lived assets			—				7				58				7
Closure and restructuring costs			19				8				42				8
Other operating loss, net			1				3				5				—
			1,259				1,257				5,057				5,069
Operating (loss) income			(15	)			133				163				386
Interest expense, net			14				15				52				62
Non-service components of net periodic benefit cost			30				(5	)			23				(18	)
(Loss) earnings before income taxes and equity loss			(59	)			123				88				342
Income tax (benefit) expense			(26	)			35				2				57
Equity loss, net of taxes			1				1				2				2
Net (loss) earnings			(34	)			87				84				283
Per common share (in dollars)
Net (loss) earnings
Basic			(0.59	)			1.38				1.37				4.50
Diluted			(0.59	)			1.38				1.37				4.48
Weighted average number of common shares outstanding (millions)
Basic			57.3				62.9				61.2				62.9
Diluted			57.5				63.0				61.4				63.1

Domtar Corporation
Consolidated Balance Sheets at
(In millions of dollars)

		December 31,				December 31,
		2019				2018
		(Unaudited)
		$				$
Assets
Current assets
Cash and cash equivalents			61				111
Receivables, less allowances of $6 and $6			577				670
Inventories			786				762
Prepaid expenses			33				24
Income and other taxes receivable			61				22
Total current assets			1,518				1,589
Property, plant and equipment, net			2,567				2,605
Operating lease right-of-use assets			81				—
Intangible assets, net			573				597
Other assets			164				134
Total assets			4,903				4,925
Liabilities and shareholders' equity
Current liabilities
Bank indebtedness			9				—
Trade and other payables			705				757
Income and other taxes payable			23				25
Operating lease liabilities due within one year			28				—
Long-term debt due within one year			1				1
Total current liabilities			766				783
Long-term debt			938				853
Operating lease liabilities			69				—
Deferred income taxes and other			479				476
Other liabilities and deferred credits			275				275
Shareholders' equity
Common stock			1				1
Additional paid-in capital			1,770				1,981
Retained earnings			998				1,023
Accumulated other comprehensive loss			(393	)			(467	)
Total shareholders' equity			2,376				2,538
Total liabilities and shareholders' equity			4,903				4,925

Domtar Corporation
Consolidated Statements of Cash Flows
(In millions of dollars)

	For the three months ended								For the twelve months ended
	December 31, 2019				December 31, 2018				December 31, 2019				December 31, 2018
	(Unaudited)								(Unaudited)
	$				$				$				$
Operating activities
Net (loss) earnings		(34	)			87				84				283
Adjustments to reconcile net (loss) earnings to cash flows from operating activities
Depreciation and amortization		74				75				293				308
Deferred income taxes and tax uncertainties		(17	)			10				(16	)			13
Impairment of long-lived assets		—				7				58				7
Net gains on disposals of property, plant and equipment		—				—				—				(4	)
Stock-based compensation expense		2				1				9				8
Equity loss, net		1				1				2				2
Other		—				(1	)			—				(1	)
Changes in assets and liabilities
Receivables		46				25				96				18
Inventories		18				(1	)			(16	)			(24	)
Prepaid expenses		6				6				2				2
Trade and other payables		44				30				(67	)			24
Income and other taxes		(16	)			(16	)			(43	)			(32	)
Difference between employer pension and other post-retirement contributions and pension and other post-retirement expense		32				—				29				(46	)
Other assets and other liabilities		4				(7	)			11				(4	)
Cash flows from operating activities		160				217				442				554
Investing activities
Additions to property, plant and equipment		(98	)			(84	)			(255	)			(195	)
Proceeds from disposals of property, plant and equipment		—				1				1				5
Other		—				—				—				(6	)
Cash flows used for investing activities		(98	)			(83	)			(254	)			(196	)
Financing activities
Dividend payments		(27	)			(27	)			(110	)			(108	)
Stock repurchase		(80	)			—				(219	)			—
Net change in bank indebtedness		7				—				9				—
Change in revolving credit facility		35				—				80				—
Proceeds from receivables securitization facility		55				85				205				85
Repayments of receivables securitization facility		(90	)			(35	)			(200	)			(60	)
Repayments of long-term debt		—				(301	)			(1	)			(301	)
Other		—				1				(1	)			2
Cash flows used for financing activities		(100	)			(277	)			(237	)			(382	)
Net decrease in cash and cash equivalents		(38	)			(143	)			(49	)			(24	)
Impact of foreign exchange on cash		1				(2	)			(1	)			(4	)
Cash and cash equivalents at beginning of year		98				256				111				139
Cash and cash equivalents at end of year		61				111				61				111
Supplemental cash flow information
Net cash payments for:
Interest		7				9				46				57
Income taxes		4				31				59				71

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.

						2019																				2018
						Q1				Q2				Q3				Q4				Year				Q1				Q2				Q3				Q4				Year
Reconciliation of "Earnings before items" to Net earnings (loss)
		Net earnings (loss)		($)			80				18				20				(34	)			84				54				43				99				87				283
	(+)	Pension settlement loss		($)			—				—				—				22				22				—				—				—				—				—
	(+)	Impairment of long-lived assets		($)			8				12				26				—				46				—				—				—				5				5
	(+)	Closure and restructuring costs		($)			3				6				9				14				32				—				—				—				6				6
	(+)	Litigation settlement		($)			—				—				—				—				—				2				—				—				—				2
	(-)	Net gains on disposals of property, plant and equipment		($)			—				—				—				—				—				(1	)			(2	)			—				—				(3	)
	(-)	U.S. Tax Reform		($)			—				—				—				—				—				—				—				(7	)			5				(2	)
	(=)	Earnings before items		($)			91				36				55				2				184				55				41				92				103				291
	(/)	Weighted avg. number of common shares outstanding (diluted)		(millions)			63.2				63.3				61.7				57.5				61.4				62.9				63.2				63.2				63.0				63.1
	(=)	Earnings before items per diluted share		($)			1.44				0.57				0.89				0.03				3.00				0.87				0.65				1.46				1.63				4.61
Reconciliation of "EBITDA" and "EBITDA before items" to Net earnings (loss)
		Net earnings (loss)		($)			80				18				20				(34	)			84				54				43				99				87				283
	(+)	Equity loss, net of taxes		($)			1				—				—				1				2				—				—				1				1				2
	(+)	Income tax expense (benefit)		($)			24				5				(1	)			(26	)			2				11				8				3				35				57
	(+)	Interest expense, net		($)			13				13				12				14				52				16				16				15				15				62
	(+)	Depreciation and amortization		($)			73				74				72				74				293				79				79				75				75				308
	(+)	Impairment of long-lived assets		($)			10				15				33				—				58				—				—				—				7				7
	(-)	Net gains on disposals of property, plant and equipment		($)			—				—				—				—				—				(1	)			(3	)			—				—				(4	)
	(=)	EBITDA		($)			201				125				136				29				491				159				143				193				220				715
	(/)	Sales		($)			1,376				1,317				1,283				1,244				5,220				1,345				1,353				1,367				1,390				5,455
	(=)	EBITDA margin		(%)			15	%			9	%			11	%			2	%			9	%			12	%			11	%			14	%			16	%			13	%
		EBITDA		($)			201				125				136				29				491				159				143				193				220				715
	(+)	Pension settlement loss		($)			—				—				—				30				30				—				—				—				—				—
	(+)	Closure and restructuring costs		($)			4				8				11				19				42				—				—				—				8				8
	(+)	Litigation settlement		($)			—				—				—				—				—				2				—				—				—				2
	(=)	EBITDA before items		($)			205				133				147				78				563				161				143				193				228				725
	(/)	Sales		($)			1,376				1,317				1,283				1,244				5,220				1,345				1,353				1,367				1,390				5,455
	(=)	EBITDA margin before items		(%)			15	%			10	%			11	%			6	%			11	%			12	%			11	%			14	%			16	%			13	%
Reconciliation of "Free cash flow" to Cash flows from operating activities
		Cash flows from operating activities		($)			55				119				108				160				442				90				177				70				217				554
	(-)	Additions to property, plant and equipment		($)			(46	)			(55	)			(56	)			(98	)			(255	)			(25	)			(37	)			(49	)			(84	)			(195	)
	(=)	Free cash flow		($)			9				64				52				62				187				65				140				21				133				359
"Net debt-to-total capitalization" computation
		Bank indebtedness		($)			3				3				1				9								—				1				—				—
	(+)	Long-term debt due within one year		($)			1				1				1				1								1				1				1				1
	(+)	Long-term debt		($)			853				824				938				938								1,103				1,103				1,103				853
	(=)	Debt		($)			857				828				940				948								1,104				1,105				1,104				854
	(-)	Cash and cash equivalents		($)			(94	)			(93	)			(98	)			(61	)							(152	)			(264	)			(256	)			(111	)
	(=)	Net debt		($)			763				735				842				887								952				841				848				743
	(+)	Shareholders' equity		($)			2,608				2,619				2,439				2,376								2,493				2,458				2,553				2,538
	(=)	Total capitalization		($)			3,371				3,354				3,281				3,263								3,445				3,299				3,401				3,281
		Net debt		($)			763				735				842				887								952				841				848				743
	(/)	Total capitalization		($)			3,371				3,354				3,281				3,263								3,445				3,299				3,401				3,281
	(=)	Net debt-to-total capitalization		(%)			23	%			22	%			26	%			27	%							28	%			25	%			25	%			23	%

“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 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)		($)		144		62		31		(12)		225		(8)		(18)		2		9		(15)		(21)		(10)		(4)		(12)		(47)		115		34		29		(15)		163
	(+)	Impairment of long-lived assets		($)		—		—		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		5		279		6		5		9		11		31		(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		($)		144		62		68		5		279		6		5		9		11		31		(21)		(10)		(4)		(12)		(47)		129		57		73		4		263
	(+)	Pension settlement loss		($)		—		—		—		30		30		—		—		—		—		—		—		—		—		—		—		—		—		—		30		30
	(+)	Non-service components of net periodic benefit cost		($)		3		3		2		(28)		(20)		—		—		—		—		—		—		(1)		—		(2)		(3)		3		2		2		(30)		(23)
	(+)	Depreciation and amortization		($)		57		58		56		57		228		16		16		16		17		65		—		—		—		—		—		73		74		72		74		293
	(=)	EBITDA before items		($)		204		123		126		64		517		22		21		25		28		96		(21)		(11)		(4)		(14)		(50)		205		133		147		78		563
	(/)	Sales		($)		1,147		1,096		1,071		1,018		4,332		247		237		227		242		953		—		—		—		—		—		1,394		1,333		1,298		1,260		5,285
	(=)	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.

Domtar Corporation
Quarterly Reconciliation of Non-GAAP Financial Measures – By Segment 2018
(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
						Q1'18		Q2'18		Q3'18		Q4'18		Year		Q1'18		Q2'18		Q3'18		Q4'18		Year		Q1'18		Q2'18		Q3'18		Q4'18		Year		Q1'18		Q2'18		Q3'18		Q4'18		Year
Reconciliation of Operating income (loss) to "Operating income (loss) before items"
		Operating income (loss)		($)		76		79		135		148		438		8		2		(3)		(12)		(5)		(7)		(19)		(18)		(3)		(47)		77		62		114		133		386
	(+)	Impairment of long-lived assets		($)		—		—		—		—		—		—		—		—		7		7		—		—		—		—		—		—		—		—		7		7
	(-)	Net gains on disposals of property, plant and equipment		($)		(1)		(3)		—		—		(4)		—		—		—		—		—		—		—		—		—		—		(1)		(3)		—		—		(4)
	(+)	Closure and restructuring costs		($)		—		—		—		—		—		—		—		—		8		8		—		—		—		—		—		—		—		—		8		8
	(+)	Litigation settlement		($)		—		—		—		—		—		—		—		—		—		—		2		—		—		—		2		2		—		—		—		2
	(=)	Operating income (loss) before items		($)		75		76		135		148		434		8		2		(3)		3		10		(5)		(19)		(18)		(3)		(45)		78		59		114		148		399
Reconciliation of "Operating income (loss) before items" to "EBITDA before items"
		Operating income (loss) before items		($)		75		76		135		148		434		8		2		(3)		3		10		(5)		(19)		(18)		(3)		(45)		78		59		114		148		399
	(+)	Non-service components of net periodic benefit cost		($)		4		6		4		5		19		—		—		—		—		—		—		(1)		—		—		(1)		4		5		4		5		18
	(+)	Depreciation and amortization		($)		61		61		58		58		238		18		18		17		17		70		—		—		—		—		—		79		79		75		75		308
	(=)	EBITDA before items		($)		140		143		197		211		691		26		20		14		20		80		(5)		(20)		(18)		(3)		(46)		161		143		193		228		725
	(/)	Sales		($)		1,100		1,123		1,146		1,154		4,523		262		247		237		254		1,000		—		—		—		—		—		1,362		1,370		1,383		1,408		5,523
	(=)	EBITDA margin before items		(%)		13%		13%		17%		18%		15%		10%		8%		6%		8%		8%		—		—		—		—		—		12%		10%		14%		16%		13%

“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
Supplemental Segmented Information
(In millions of dollars, unless otherwise noted)

				2019																				2018
				Q1				Q2				Q3				Q4				Year				Q1				Q2				Q3				Q4				Year
Pulp and Paper Segment
Sales		($)			1,147				1,096				1,071				1,018				4,332				1,100				1,123				1,146				1,154				4,523
Operating income (loss)		($)			144				62				31				(12	)			225				76				79				135				148				438
Depreciation and amortization		($)			57				58				56				57				228				61				61				58				58				238
Impairment of long-lived assets		($)			—				—				32				—				32				—				—				—				—				—
Paper
Paper Production		('000 ST)			757				697				653				619				2,726				739				739				743				757				2,978
Paper Shipments - Manufactured		('000 ST)			736				681				672				656				2,745				769				754				727				721				2,971
Communication Papers		('000 ST)			615				567				563				554				2,299				640				615				596				595				2,446
Specialty and Packaging Papers		('000 ST)			121				114				109				102				446				129				139				131				126				525
Paper Shipments - Sourced from 3rd parties		('000 ST)			23				21				25				24				93				28				26				30				25				109
Paper Shipments - Total		('000 ST)			759				702				697				680				2,838				797				780				757				746				3,080
Pulp
Pulp Shipments(a)		('000 ADMT)			349				370				416				404				1,539				374				377				390				395				1,536
Pulp Shipments mix(b):
Hardwood Kraft Pulp		(%)			2	%			2	%			5	%			5	%			4	%			4	%			3	%			3	%			3	%			4	%
Softwood Kraft Pulp		(%)			53	%			56	%			55	%			54	%			54	%			58	%			56	%			56	%			55	%			56	%
Fluff Pulp		(%)			45	%			42	%			40	%			41	%			42	%			38	%			41	%			41	%			42	%			40	%
Personal Care Segment
Sales		($)			247				237				227				242				953				262				247				237				254				1,000
Operating (loss) income		($)			(8	)			(18	)			2				9				(15	)			8				2				(3	)			(12	)			(5	)
Depreciation and amortization		($)			16				16				16				17				65				18				18				17				17				70
Impairment of long-lived assets		($)			10				15				1				—				26				—				—				—				7				7
Average Exchange Rates		$US / $CAN			1.329				1.337				1.321				1.321				1.327				1.264				1.290				1.307				1.321				1.296
		$CAN / $US			0.752				0.748				0.757				0.757				0.754				0.791				0.775				0.765				0.757				0.772
		€ / $US			1.136				1.124				1.111				1.107				1.120				1.229				1.192				1.163				1.141				1.181
(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.

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