US $
- Q2 GAAP net income of
$6 million /$0.07 per diluted share - Adjusted EBITDA of
$37 million - Reduced debt by
$191 million ; liquidity up$47 million to$396 million - Successful ntegration of recently-acquired
U.S. sawmills
"The Covid-19 pandemic and ensuing economic slowdown have brought with them unprecedented challenges and business uncertainty," 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 operating income of
Segment Operating Income Variance
As of the second quarter, the company's results from the newsprint and specialty papers segments have been combined into one paper segment. Comparative information, including the information in this earnings release, has been modified to conform with this revised segment presentation.
Market Pulp
Operating income in the market pulp segment was
Tissue
The tissue segment generated an operating loss of
Wood Products
Operating income in the wood products segment was
Paper
The paper segment incurred an operating loss of
Consolidated Quarterly Operating Income Variance Against Year-Ago Period
The company reported operating income of
Corporate and Finance
The company generated
On financing activities, the company reduced borrowings under its credit facilities by
The company also completed the disposition of the Augusta newsprint mill for
Outlook
Concerning the coronavirus pandemic,
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 | Second quarter | |||
(in millions) | 2020 | 2019 | ||
Net gain on disposition of assets | $ | (9) | $ | - |
Non-operating pension and other postretirement benefit credits | (4) | (12) | ||
Other (income) expense, net | (10) | 1 | ||
Income tax effect of special items | (5) | (3) | ||
Total | $ | (28) | $ | (14) |
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 | Six months | ||||||||
ended | ended | ||||||||
2020 | 2019 | 2020 | 2019 | ||||||
Sales | $ | 612 | $ | 755 | $ | 1,301 | $ | 1,550 | |
Costs and expenses: | |||||||||
Cost of sales, excluding depreciation, amortization and distribution costs | 464 | 536 | 988 | 1,090 | |||||
Depreciation and amortization | 40 | 42 | 82 | 82 | |||||
Distribution costs | 79 | 101 | 178 | 201 | |||||
Selling, general and administrative expenses | 32 | 36 | 66 | 73 | |||||
Closure costs, impairment and other related charges | - | - | (2) | - | |||||
Net gain on disposition of assets | (9) | - | (9) | - | |||||
Operating income (loss) | 6 | 40 | (2) | 104 | |||||
Interest expense | (9) | (7) | (18) | (16) | |||||
Non-operating pension and other postretirement benefit credits | 4 | 12 | 19 | 24 | |||||
Other income (expense), net (1) | 10 | (1) | 38 | (5) | |||||
Income before income taxes | 11 | 44 | 37 | 107 | |||||
Income tax provision | (5) | (19) | (32) | (40) | |||||
Net income including noncontrolling interest | 6 | 25 | 5 | 67 | |||||
Net income attributable to noncontrolling interest | - | - | - | - | |||||
Net income attributable to | $ | 6 | $ | 25 | $ | 5 | $ | 67 | |
Net income per share attributable to | |||||||||
Basic | $ | 0.07 | $ | 0.27 | $ | 0.06 | $ | 0.73 | |
Diluted | $ | 0.07 | $ | 0.27 | $ | 0.06 | $ | 0.71 | |
Weighted-average number of | |||||||||
Basic | 88.1 | 92.4 | 88.1 | 92.4 | |||||
Diluted | 88.2 | 93.6 | 88.2 | 93.8 | |||||
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 | $ | 27 | $ | 3 |
Accounts receivable, net: | ||||
Trade | 239 | 273 | ||
Other | 65 | 76 | ||
Inventories, net | 506 | 522 | ||
Other current assets | 45 | 33 | ||
Total current assets | 882 | 907 | ||
Fixed assets, net | 1,524 | 1,459 | ||
Amortizable intangible assets, net | 66 | 48 | ||
31 | - | |||
Deferred income tax assets | 837 | 915 | ||
Operating lease right-of-use assets | 59 | 61 | ||
Other assets | 268 | 236 | ||
Total assets | $ | 3,667 | $ | 3,626 |
Liabilities and equity | ||||
Current liabilities: | ||||
Accounts payable and accrued liabilities | $ | 300 | $ | 342 |
Current portion of long-term debt | 2 | 1 | ||
Current portion of operating lease liabilities | 8 | 8 | ||
Total current liabilities | 310 | 351 | ||
Long-term debt, net of current portion | 628 | 448 | ||
Pension and other postretirement benefit obligations | 1,349 | 1,460 | ||
Operating lease liabilities, net of current portion | 53 | 57 | ||
Other liabilities | 77 | 75 | ||
Total liabilities | 2,417 | 2,391 | ||
Equity: | ||||
Common stock | - | - | ||
Additional paid-in capital | 3,805 | 3,802 | ||
Deficit | (1,240) | (1,245) | ||
Accumulated other comprehensive loss | (1,171) | (1,179) | ||
(145) | (144) | |||
1,249 | 1,234 | |||
Noncontrolling interest | 1 | 1 | ||
Total equity | 1,250 | 1,235 | ||
Total liabilities and equity | $ | 3,667 | $ | 3,626 |
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||
(Unaudited, in millions of | ||||
Six months | ||||
ended | ||||
2020 | 2019 | |||
Cash flows from operating activities: | ||||
Net income including noncontrolling interest | $ | 5 | $ | 67 |
Adjustments to reconcile net income including noncontrolling interest to | ||||
net cash provided by operating activities: | ||||
Share-based compensation | 4 | 3 | ||
Depreciation and amortization | 82 | 82 | ||
Deferred income taxes | 32 | 40 | ||
Net pension contributions and other postretirement benefit payments | (48) | (57) | ||
Net gain on disposition of assets | (9) | - | ||
Loss (gain) on translation of foreign currency denominated deferred income taxes | 39 | (35) | ||
(Gain) loss on translation of foreign currency denominated pension and | ||||
other postretirement benefit obligations | (47) | 37 | ||
Net planned major maintenance (payments) amortization | (2) | 7 | ||
Changes in working capital: | ||||
Accounts receivable | 50 | 38 | ||
Inventories | 25 | (21) | ||
Other current assets | (7) | (3) | ||
Accounts payable and accrued liabilities | (49) | (64) | ||
Other, net | 1 | 1 | ||
Net cash provided by operating activities | 76 | 95 | ||
Cash flows from investing activities: | ||||
Cash invested in fixed assets | (37) | (45) | ||
Acquisition of business, net of cash acquired (2) | (172) | - | ||
Disposition of assets | 9 | 2 | ||
Decrease in countervailing duty cash deposits on supercalendered paper | - | 1 | ||
Increase in countervailing and anti-dumping duty cash deposits on softwood lumber | (32) | (33) | ||
Decrease in countervailing duty cash deposits on uncoated groundwood paper | - | 6 | ||
Other investing activities, net | 5 | - | ||
Net cash used in investing activities | (227) | (69) | ||
Cash flows from financing activities: | ||||
Net repayments under revolving credit facilities | (2) | - | ||
Proceeds from long-term debt | 180 | - | ||
Repayments of debt | (1) | (225) | ||
Purchases of treasury stock | (1) | (5) | ||
Payments of financing and credit facility fees | - | (2) | ||
Net cash provided by (used in) financing activities | 176 | (232) | ||
Effect of exchange rate changes on cash and cash equivalents, and restricted cash | (1) | 1 | ||
Net increase (decrease) in cash and cash equivalents, and restricted cash | $ | 24 | $ | (205) |
Cash and cash equivalents, and restricted cash: | ||||
Beginning of period | $ | 42 | $ | 345 |
End of period | $ | 66 | $ | 140 |
Cash and cash equivalents, and restricted cash at period end: | ||||
Cash and cash equivalents | $ | 27 | $ | 98 |
Restricted cash (included in "Other assets") | $ | 39 | $ | 42 |
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 (Unaudited, in millions of | Operating | Net income | EPS | |||
GAAP, as reported | $ | 6 | $ | 6 | $ | 0.07 |
Adjustments for special items: | ||||||
Net gain on disposition of assets | (9) | (9) | (0.10) | |||
Non-operating pension and other postretirement benefit credits | - | (4) | (0.05) | |||
Other income, net | - | (10) | (0.11) | |||
Income tax effect of special items | - | (5) | (0.06) | |||
Adjusted for special items | $ | (3) | $ | (22) | $ | (0.25) |
Three months ended (Unaudited, in millions of | Operating | Net income | EPS | |||
GAAP, as reported | $ | 40 | $ | 25 | $ | 0.27 |
Adjustments for special items: | ||||||
Non-operating pension and other postretirement benefit credits | - | (12) | (0.13) | |||
Other expense, net | - | 1 | 0.01 | |||
Income tax effect of special items | - | (3) | (0.03) | |||
Adjusted for special items | $ | 40 | $ | 11 | $ | 0.12 |
Six months ended (Unaudited, in millions of | Operating | Net income | EPS | |||
GAAP, as reported | $ | (2) | $ | 5 | $ | 0.06 |
Adjustments for special items: | ||||||
Closure costs, impairment and other related charges | (2) | (2) | (0.02) | |||
Net gain on disposition of assets | (9) | (9) | (0.10) | |||
Non-operating pension and other postretirement benefit credits | - | (19) | (0.22) | |||
Other income, net | - | (38) | (0.43) | |||
Income tax effect of special items | - | 12 | 0.14 | |||
Adjusted for special items | $ | (13) | $ | (51) | $ | (0.57) |
Six months ended (Unaudited, in millions of | Operating | Net income | EPS | |||
GAAP, as reported | $ | 104 | $ | 67 | $ | 0.71 |
Adjustments for special items: | ||||||
Non-operating pension and other postretirement benefit credits | - | (24) | (0.26) | |||
Other expense, net | - | 5 | 0.06 | |||
Income tax effect of special items | - | (7) | (0.07) | |||
Adjusted for special items | $ | 104 | $ | 41 | $ | 0.44 |
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 products | Paper (2) | Corporate | Total | ||||||
Net income (loss) including noncontrolling interest | $ | 10 | $ | (2) | $ | 15 | $ | (12) | $ | (5) | $ | 6 |
Interest expense | 9 | 9 | ||||||||||
Income tax provision | 5 | 5 | ||||||||||
Depreciation and amortization | 6 | 5 | 10 | 16 | 3 | 40 | ||||||
EBITDA | $ | 16 | $ | 3 | $ | 25 | $ | 4 | $ | 12 | $ | 60 |
Net gain on disposition of assets | (9) | (9) | ||||||||||
Non-operating pension and other postretirement benefit credits | (4) | (4) | ||||||||||
Other income, net | (10) | (10) | ||||||||||
Adjusted EBITDA | $ | 16 | $ | 3 | $ | 25 | $ | 4 | $ | (11) | $ | 37 |
Three months ended | Market pulp | Tissue | Wood products | Paper (2) | Corporate | Total | ||||||
Net income (loss) including noncontrolling interest | $ | 27 | $ | (4) | $ | (3) | $ | 32 | $ | (27) | $ | 25 |
Interest expense | 7 | 7 | ||||||||||
Income tax provision | 19 | 19 | ||||||||||
Depreciation and amortization | 5 | 4 | 9 | 19 | 5 | 42 | ||||||
EBITDA | $ | 32 | $ | - | $ | 6 | $ | 51 | $ | 4 | $ | 93 |
Non-operating pension and other postretirement benefit credits | (12) | (12) | ||||||||||
Other expense, net | 1 | 1 | ||||||||||
Adjusted EBITDA | $ | 32 | $ | - | $ | 6 | $ | 51 | $ | (7) | $ | 82 |
Six months ended | Market pulp | Tissue | Wood products | Paper (2) | Corporate | Total | ||||||
Net income (loss) including noncontrolling interest | $ | 7 | $ | - | $ | 20 | $ | (15) | $ | (7) | $ | 5 |
Interest expense | 18 | 18 | ||||||||||
Income tax provision | 32 | 32 | ||||||||||
Depreciation and amortization | 12 | 9 | 21 | 33 | 7 | 82 | ||||||
EBITDA | $ | 19 | $ | 9 | $ | 41 | $ | 18 | $ | 50 | $ | 137 |
Closure costs, impairment and other related charges | (2) | (2) | ||||||||||
Net gain on disposition of assets | (9) | (9) | ||||||||||
Non-operating pension and other postretirement benefit credits | (19) | (19) | ||||||||||
Other income, net | (38) | (38) | ||||||||||
Adjusted EBITDA | $ | 19 | $ | 9 | $ | 41 | $ | 18 | $ | (18) | $ | 69 |
Six months ended | Market pulp | Tissue | Wood products | Paper (2) | Corporate | Total | ||||||
Net income (loss) including noncontrolling interest | $ | 69 | $ | (12) | $ | 3 | $ | 75 | $ | (68) | $ | 67 |
Interest expense | 16 | 16 | ||||||||||
Income tax provision | 40 | 40 | ||||||||||
Depreciation and amortization | 10 | 9 | 17 | 36 | 10 | 82 | ||||||
EBITDA | $ | 79 | $ | (3) | $ | 20 | $ | 111 | $ | (2) | $ | 205 |
Non-operating pension and other postretirement benefit credits | (24) | (24) | ||||||||||
Other expense, net | 5 | 5 | ||||||||||
Adjusted EBITDA | $ | 79 | $ | (3) | $ | 20 | $ | 111 | $ | (21) | $ | 186 |
See Notes to the Reconciliations of Non-GAAP Measures |
Notes to the Unaudited Consolidated Financial Statement Information
1. Other income (expense), net for the three and six months ended
Three Months Ended | Six Months Ended | ||||||||
(Unaudited, in millions) | 2020 | 2019 | 2020 | 2019 | |||||
Foreign exchange (loss) gain | $ | (9) | $ | (6) | $ | 14 | $ | (10) | |
Insurance recovery (1) | 15 | – | 15 | – | |||||
Miscellaneous income | 4 | 5 | 9 | 5 | |||||
$ | 10 | $ | (1) | $ | 38 | $ | (5) |
(1) | We recorded |
2. On
The fair value of the consideration, paid in cash for the
Note to the Reconciliations of Non-GAAP Measures
1. 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 and paper) 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, and gains or losses on disposition of assets 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 the
2. In the second quarter of 2020, the results from our newsprint and specialty papers operations have been combined to form the paper reportable segment. This better reflects management's internal analysis, given the diminishing percentage newsprint and specialty papers represent in our product portfolio. Comparative information has been modified to conform with this revised segment presentation.
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