US $
- Q1 GAAP net loss of
$1 million /$0.01 per share - Adjusted EBITDA of
$32 million - Completed acquisition of three
U.S. South sawmills - Operating all segments as essential services, adjusting to economic slowdown
"The first quarter's results reflect a resurgence in market prices for lumber that began late in 2019 together with lower maintenance costs in pulp and paper, but they were unfavorably affected by lower newsprint prices," said
Non-GAAP financial measures, such as adjustments for special items and adjusted EBITDA, are explained and reconciled below.
Operating Income Variance Against Prior Period
Consolidated
The company reported an operating loss of
Market Pulp
The operating loss in the market pulp segment narrowed to
Tissue
The tissue segment reported its first operating income quarter since the start-up of the tissue machine in
Wood Products
Operating income in the wood products segment was
Newsprint
The newsprint segment incurred an operating loss of
Specialty Papers
Operating income in the specialty papers segment was
Consolidated Quarterly Operating Income Variance Against Year-Ago Period
The company reported an operating loss of
Corporate and Finance
On
The company used
The company also drew
The company made
In March, the company announced that its board of directors authorized the repurchase of up to 15% of the company's common stock for aggregate consideration of up to
Outlook
Concerning the coronavirus pandemic,
- Operating our assets in accordance with rigorous protocols around health and safety, including the special measures we've put in place to minimize the spread of the virus at all of our locations;
- Closely managing sources of liquidity and developing opportunities to access additional liquidity, should it be required;
- Working with all levels of government in the regions where we operate to support a speedy economic recovery;
- Closely monitoring the growing risk around credit exposure with some of our customers;
- Advocating with regulators to minimize the risk of rising pension contributions should financial markets remain depressed and interest rates low;
- Adjusting capacity dynamically based on rapidly-changing conditions; and
- Keeping tight control on SG&A expenses and reducing capital spending by about 30%."
Turning to the business outlook,
Earnings Conference Call
The company will hold a conference call to discuss the financial results at
Description of Special Items | |||||
Special items | First quarter | ||||
(in millions) | 2020 | 2019 | |||
Closure costs, impairment and other related charges | $ | (2) | $ | - | |
Non-operating pension and other postretirement benefit credits | (15) | (12) | |||
Other (income) expense, net | (28) | 4 | |||
Income tax effect of special items | 17 | (4) | |||
Total | $ | (28) | $ | (12) |
Additional Information concerning the Annual Meeting of Stockholders on
As previously indicated in the company's proxy materials, the annual meeting of stockholders will be held entirely online on
If you hold shares of common stock indirectly through a broker, bank or similar institution (referred to as an "intermediary institution"), you are a "street name" holder, and the Notice of Internet Availability was sent to you by the intermediary institution through which you hold your shares. If you provide specific voting instructions by mail, telephone or the Internet, your intermediary institution will vote your shares as you have directed. You are also invited to attend the online annual meeting at https://web.lumiagm.com/172118479. However, since you are not a stockholder of record, you may not vote your shares during the online meeting unless you request and obtain, in advance of the meeting, a legal proxy from your intermediary institution. If you obtain a legal proxy from your intermediary institution, you must contact Resolute's transfer agent at proxy@astfinancial.com or help@astfinancial.com, or by telephone at 1 877 283-0324, to secure a proxy card with the 11-digit control number along with the above password in order to vote and ask questions during the meeting. If you do not have a valid control number, you will be able to join as a guest and listen to the meeting only; you will not be able to vote or submit questions during the meeting.
The company strongly encourages all stockholders to vote their shares as early as possible prior to the annual meeting. Stockholders who join the virtual meeting will be able to ask questions during the meeting. In order to facilitate the process, you may forward your questions in advance to ir@resolutefp.com, and the company will respond to as many appropriate questions as time permits during the meeting, to the extent relevant to the business of the meeting. Please make sure your email clearly identifies your name and whether you are a stockholder.
Please monitor the "Annual Meeting of Stockholders" page under the "Investors" section of www.resolutefp.com for any further updates or additional information relating to the virtual meeting.
Cautionary Statements Regarding Forward-Looking Information
Statements in this press release and the earnings conference call and webcast referred to above that are not reported financial results or other historical information of
The reader is cautioned not to place undue reliance on these forward-looking statements, which are not guarantees of future performance. These statements are based on management's current assumptions, beliefs and expectations, all of which involve a number of business risks and uncertainties that could cause actual results to differ materially. The potential risks and uncertainties that could cause our actual future financial condition, results of operations, and performance to differ materially from those expressed or implied in this press release and the earnings conference call and webcast referred to above include, but are not limited to, the impact of: the coronavirus or COVID-19 pandemic and resulting economic conditions, developments in non-print media, and the effectiveness of our responses to these developments; intense competition in the forest products industry; any inability to offer products certified to globally recognized forestry management and chain of custody standards; any inability to successfully implement our strategies to increase our earnings power; the possible failure to successfully integrate acquired businesses with ours or to realize the anticipated benefits of acquisitions, such as our entry into wood manufacturing in the
All forward-looking statements in this press release and in the conference call and webcast referred to above are expressly qualified by the cautionary statements contained or referred to above and in the company's other filings with the
About
Resolute has received regional, North American and global recognition for its leadership in corporate social responsibility and sustainable development, as well as for its business practices. Visit www.resolutefp.com for more information.
CONSOLIDATED STATEMENTS OF OPERATIONS | |||||
(Unaudited, in millions of | |||||
Three months | |||||
ended | |||||
2020 | 2019 | ||||
Sales | $ | 689 | $ | 795 | |
Costs and expenses: | |||||
Cost of sales, excluding depreciation, amortization and distribution costs | 524 | 554 | |||
Depreciation and amortization | 42 | 40 | |||
Distribution costs | 99 | 100 | |||
Selling, general and administrative expenses | 34 | 37 | |||
Closure costs, impairment and other related charges | (2) | - | |||
Operating (loss) income | (8) | 64 | |||
Interest expense | (9) | (9) | |||
Non-operating pension and other postretirement benefit credits | 15 | 12 | |||
Other income (expense), net (1) | 28 | (4) | |||
Income before income taxes | 26 | 63 | |||
Income tax provision | (27) | (21) | |||
Net (loss) income including noncontrolling interest | (1) | 42 | |||
Net income attributable to noncontrolling interest | - | - | |||
Net (loss) income attributable to | $ | (1) | $ | 42 | |
Net (loss) income per share attributable to | |||||
common shareholders: | |||||
Basic | $ | (0.01) | $ | 0.45 | |
Diluted | $ | (0.01) | $ | 0.45 | |
Weighted-average number of | |||||
shares outstanding: | |||||
Basic | 88.1 | 92.4 | |||
Diluted | 88.1 | 93.9 | |||
See Notes to the Unaudited Consolidated Financial Statement Information |
CONSOLIDATED BALANCE SHEETS | ||||
(Unaudited, in millions of | ||||
2020 | 2019 | |||
Assets | ||||
Current assets: | ||||
Cash and cash equivalents | $ | 116 | $ | 3 |
Accounts receivable, net: | ||||
Trade | 299 | 273 | ||
Other | 72 | 76 | ||
Inventories, net | 560 | 522 | ||
Other current assets | 37 | 33 | ||
Total current assets | 1,084 | 907 | ||
Fixed assets, net | 1,583 | 1,459 | ||
Amortizable intangible assets, net | 47 | 48 | ||
Deferred income tax assets | 816 | 915 | ||
Operating lease right-of-use assets | 61 | 61 | ||
Other assets | 268 | 236 | ||
Total assets | $ | 3,859 | $ | 3,626 |
Liabilities and equity | ||||
Current liabilities: | ||||
Accounts payable and accrued liabilities | $ | 328 | $ | 342 |
Current portion of long-term debt | 2 | 1 | ||
Current portion of operating lease liabilities | 8 | 8 | ||
Total current liabilities | 338 | 351 | ||
Long-term debt, net of current portion | 819 | 448 | ||
Pension and other postretirement benefit obligations | 1,343 | 1,460 | ||
Operating lease liabilities, net of current portion | 54 | 57 | ||
Other liabilities | 71 | 75 | ||
Total liabilities | 2,625 | 2,391 | ||
Equity: | ||||
Common stock | - | - | ||
Additional paid-in capital | 3,804 | 3,802 | ||
Deficit | (1,246) | (1,245) | ||
Accumulated other comprehensive loss | (1,181) | (1,179) | ||
(144) | (144) | |||
1,233 | 1,234 | |||
Noncontrolling interest | 1 | 1 | ||
Total equity | 1,234 | 1,235 | ||
Total liabilities and equity | $ | 3,859 | $ | 3,626 |
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||
(Unaudited, in millions of | ||||
Three months | ||||
ended | ||||
2020 | 2019 | |||
Cash flows from operating activities: | ||||
Net (loss) income including noncontrolling interest | $ | (1) | $ | 42 |
Adjustments to reconcile net (loss) income including noncontrolling interest to | ||||
net cash (used in) provided by operating activities: | ||||
Share-based compensation | 3 | 2 | ||
Depreciation and amortization | 42 | 40 | ||
Deferred income taxes | 27 | 21 | ||
Net pension contributions and other postretirement benefit payments | (33) | (26) | ||
Loss (gain) on translation of foreign currency denominated deferred income taxes | 69 | (19) | ||
(Gain) loss on translation of foreign currency denominated pension and | ||||
other postretirement benefit obligations | (82) | 20 | ||
Net planned major maintenance amortization (payments) | 6 | (2) | ||
Changes in working capital: | ||||
Accounts receivable | (20) | 6 | ||
Inventories | (29) | (47) | ||
Other current assets | (6) | (7) | ||
Accounts payable and accrued liabilities | (18) | (6) | ||
Other, net | (7) | (1) | ||
Net cash (used in) provided by operating activities | (49) | 23 | ||
Cash flows from investing activities: | ||||
Cash invested in fixed assets | (21) | (26) | ||
Acquisition of business, net of cash acquired (2) | (174) | - | ||
Decrease in countervailing duty cash deposits on supercalendered paper | - | 1 | ||
Increase in countervailing and anti-dumping duty cash deposits on softwood lumber | (15) | (14) | ||
Decrease in countervailing duty cash deposits on uncoated groundwood paper | - | 6 | ||
Other investing activities, net | 4 | - | ||
Net cash used in investing activities | (206) | (33) | ||
Cash flows from financing activities: | ||||
Net borrowings under revolving credit facilities | 189 | - | ||
Proceeds from long-term debt | 180 | - | ||
Repayments of debt | (1) | (225) | ||
Net cash provided by (used in) financing activities | 368 | (225) | ||
Effect of exchange rate changes on cash and cash equivalents, and restricted cash | (3) | 1 | ||
Net increase (decrease) in cash and cash equivalents, and restricted cash | $ | 110 | $ | (234) |
Cash and cash equivalents, and restricted cash: | ||||
Beginning of period | $ | 42 | $ | 345 |
End of period | $ | 152 | $ | 111 |
Cash and cash equivalents, and restricted cash at period end: | ||||
Cash and cash equivalents | $ | 116 | $ | 69 |
Restricted cash (included in "Other current assets") | $ | - | $ | 1 |
Restricted cash (included in "Other assets") | $ | 36 | $ | 41 |
See Notes to the Unaudited Consolidated Financial Statement Information |
RECONCILIATION OF OPERATING INCOME AND NET INCOME ADJUSTED FOR SPECIAL ITEMS | ||||||
A reconciliation of our operating income, net income and net income per share reported before special items is presented in the tables below. See Note 1 to the Reconciliations of Non-GAAP Measures regarding our use of non-GAAP measures. | ||||||
Three months ended |
Operating | Net loss | EPS | |||
(Unaudited, in millions of | ||||||
GAAP, as reported | $ | (8) | $ | (1) | $ | (0.01) |
Adjustments for special items: | ||||||
Closure costs, impairment and other related charges | (2) | (2) | (0.02) | |||
Non-operating pension and other postretirement benefit credits | - | (15) | (0.17) | |||
Other income, net | - | (28) | (0.32) | |||
Income tax effect of special items | - | 17 | 0.19 | |||
Adjusted for special items | $ | (10) | $ | (29) | $ | (0.33) |
Three months ended |
Operating | Net income | EPS | |||
(Unaudited, in millions of | ||||||
GAAP, as reported | $ | 64 | $ | 42 | $ | 0.45 |
Adjustments for special items: | ||||||
Non-operating pension and other postretirement benefit credits | - | (12) | (0.13) | |||
Other expense, net | - | 4 | 0.04 | |||
Income tax effect of special items | - | (4) | (0.04) | |||
Adjusted for special items | $ | 64 | $ | 30 | $ | 0.32 |
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA | ||||||||||||||
A reconciliation of our net income including noncontrolling interest to EBITDA and Adjusted EBITDA is presented in the tables below. See Note 1 to the Reconciliations of Non-GAAP Measures regarding our use of the non-GAAP measures EBITDA and Adjusted EBITDA. | ||||||||||||||
Three months ended | Market pulp | Tissue | Wood | Newsprint | Specialty | Corporate | Total | |||||||
Net (loss) income including noncontrolling interest | $ | (3) | $ | 2 | $ | 5 | $ | (6) | $ | 3 | $ | (2) | $ | (1) |
Interest expense | 9 | 9 | ||||||||||||
Income tax provision | 27 | 27 | ||||||||||||
Depreciation and amortization | 6 | 4 | 11 | 6 | 11 | 4 | 42 | |||||||
EBITDA | $ | 3 | $ | 6 | $ | 16 | $ | - | $ | 14 | $ | 38 | $ | 77 |
Closure costs, impairment and other related charges | (2) | (2) | ||||||||||||
Non-operating pension and other postretirement benefit credits | (15) | (15) | ||||||||||||
Other income, net | (28) | (28) | ||||||||||||
Adjusted EBITDA | $ | 3 | $ | 6 | $ | 16 | $ | - | $ | 14 | $ | (7) | $ | 32 |
Three months ended | Market pulp | Tissue | Wood | Newsprint | Specialty | Corporate | Total | |||||||
Net income (loss) including noncontrolling interest | $ | 42 | $ | (8) | $ | 6 | $ | 28 | $ | 15 | $ | (41) | $ | 42 |
Interest expense | 9 | 9 | ||||||||||||
Income tax provision | 21 | 21 | ||||||||||||
Depreciation and amortization | 5 | 5 | 8 | 7 | 10 | 5 | 40 | |||||||
EBITDA | $ | 47 | $ | (3) | $ | 14 | $ | 35 | $ | 25 | $ | (6) | $ | 112 |
Non-operating pension and other postretirement benefit credits | (12) | (12) | ||||||||||||
Other expense, net | 4 | 4 | ||||||||||||
Adjusted EBITDA | $ | 47 | $ | (3) | $ | 14 | $ | 35 | $ | 25 | $ | (14) | $ | 104 |
Notes to the Unaudited Consolidated Financial Statement Information
- Other income (expense), net includes foreign exchange gain of
$23 million and foreign exchange loss of$4 million for the three months endedMarch 31, 2020 and 2019, respectively. - On
February 1, 2020 (or, the "Acquisition Date"), we acquired from Conifex Timber Inc. all of the equity securities and membership interests in certain of its subsidiaries, the business of which consists mainly in the operation of three sawmills and related assets inCross City (Florida ) and inGlenwood andEl Dorado (Arkansas ) (or, the "U.S. Sawmill Business"). TheU.S. Sawmill Business acquired produces construction-grade dimensional lumber and decking products from locally sourced southern yellow pine for distribution within theU.S.
The fair value of the consideration, paid in cash at the Acquisition Date, for theU.S. Sawmill Business acquired was$175 million , subject to post-closing working capital adjustments.
This acquisition will diversify our lumber production, and increase our operating capacity in theU.S. South.
Note to the Reconciliations of Non-GAAP Measures
- Operating income (loss), net income (loss) and net income (loss) per share (or, "EPS"), in each case as adjusted for special items, as well as earnings before interest expense, income taxes, and depreciation and amortization (or, "EBITDA"), and adjusted EBITDA, in each case by reportable segment (market pulp, tissue, wood products, newsprint and specialty papers) in accordance with the Financial Accounting Standards Board Accounting Standards Codification 290, "Segment Reporting," are not financial measures recognized under generally accepted accounting principles (or, "GAAP").
We calculate operating income (loss), as adjusted for special items, as operating income (loss) from our Consolidated Statements of Operations, adjusted for items such as closure costs, impairment and other related charges that are excluded from our segment's performance from GAAP operating income (loss).
We calculate net income (loss), as adjusted for special items, as net income (loss) from our Consolidated Statements of Operations, adjusted for the same special items applied to operating income (loss), in addition to non-operating pension and other postretirement benefit costs and credits, other income and expense, net, and the income tax effect of special items.
EPS, as adjusted for special items, is calculated as net income (loss), as adjusted for special items, per diluted share.
EBITDA by reportable segment is calculated as net income (loss) including noncontrolling interest from the Consolidated Statements of Operations, allocated to each of our reportable segments, adjusted for depreciation and amortization. EBITDA for corporate and other is calculated as net income (loss) including noncontrolling interest from the Consolidated Statements of Operations, after the allocation to reportable segments, adjusted for interest expense, income taxes, and depreciation and amortization.
Adjusted EBITDA means EBITDA, excluding the same special items applied to net income (loss).
Liquidity is calculated as cash and cash equivalents from our Consolidated Balance Sheets, and availability under our credit facilities.
We believe that using these non-GAAP measures is useful because they are consistent with the indicators management uses internally to measure the Company's performance, and it allows the reader to compare our operations and financial performance from period to period. Operating income (loss), net income (loss), and EPS, in each case as adjusted for special items, as well as EBITDA, adjusted EBITDA, and EBITDA margin are internal measures, and therefore may not be comparable to those of other companies. These non-GAAP measures should not be viewed as substitutes to financial measures determined under GAAP in our Consolidated Statements of Operations in our filings with theSecurities and Exchange Commission .
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