UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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DOMTAR CORPORATION | ||||
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About Domtar
Domtar Corporation (NYSE: UFS) (TSX: UFS) designs, manufactures, markets and distributes a wide variety of fiber-based products, including communication papers, specialty and packaging papers, and absorbent hygiene products. The foundation of our business is a network of world-class, wood fiber-converting assets that produce papergrade, fluff and specialty pulp. The majority of our pulp production is consumed internally to manufacture paper and consumer products. Domtar is the largest integrated marketer and manufacturer of uncoated freesheet paper in North America with recognized brands such as Cougar®, Lynx® Opaque Ultra, Husky® Opaque Offset, First Choice®, EarthChoice® and Xerox® Paper and Specialty Media. Domtar is also a marketer and producer of a broad line of absorbent hygiene products marketed primarily under the Attends®, IncoPack® and Indasec® brand names. In 2014, Domtar had sales of $5.6 billion from some 50 countries. The Company employs approximately 9,800 people. To learn more, visit domtar.com.
Selected Financial Figures
(In millions of dollars unless otherwise noted)
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2012 | 2013 | 2014 | ||||||||||||||
Sales per segment |
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Pulp and Paper |
5,088 | 4,843 | 4,674 | |||||||||||||
Intersegment salesPulp and Paper |
(5 | ) | (18 | ) | (39 | ) | ||||||||||
Personal Care |
399 | 566 | 928 | |||||||||||||
Consolidated sales |
5,482 | 5,391 | 5,563 | |||||||||||||
Operating income (loss) per segment |
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Pulp and paper |
330 | 171 | 323 | |||||||||||||
Personal care |
45 | 43 | 54 | |||||||||||||
Corporate |
(8 | ) | (53 | ) | (13 | ) | ||||||||||
Operating income |
367 | 161 | 364 | |||||||||||||
Net earnings |
172 | 91 | 431 | |||||||||||||
Cash flow provided from operating activities |
551 | 411 | 634 | |||||||||||||
Capital expenditures |
236 | 242 | 236 | |||||||||||||
Free cash flow1 |
315 | 169 | 398 | |||||||||||||
Total assets |
6,123 | 6,278 | 6,185 | |||||||||||||
Long-term debt, including current portion |
1,207 | 1,514 | 1,350 | |||||||||||||
Net debt-to-total capitalization ratio1 |
16% | 24% | 29% | |||||||||||||
Total shareholders equity |
2,877 | 2,782 | 2,890 | |||||||||||||
Weighted average number of common and exchangeable shares outstanding in millions (diluted) |
72.1 | 66.7 | 64.9 | |||||||||||||
DOMTAR 2014 ANNUAL REPORT 1
MESSAGE TO SHAREHOLDERS | ||||||
JOHN D. WILLIAMS PRESIDENT AND CHIEF EXECUTIVE OFFICER
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FOCUSED EXECUTION DEFINED DOMTAR IN 2014. WE SUCCESSFULLY DELIVERED ON OUR PLAN TO ACHIEVE MEANINGFUL PERFORMANCE IMPROVEMENTS COMPARED TO 2013, AND WE MADE SIGNIFICANT PROGRESS IN EXECUTING OUR GROWTH STRATEGY FOR THE COMPANYS FUTURE.
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With consolidated sales of $5.6 billion, we generated $765 million of EBITDA before items, a considerable improvement when compared to 2013. This performance, combined with our confidence in the execution of our growth strategy, enabled us to increase our dividend by 36% in April 2014 and to further execute on our share buyback program.
Since the start of 2011 we have returned a combined $1.1 billion, or 70% of our free cash flow, to our shareholders through dividends and share buybacks. Looking specifically at 2014, cash flows from operating activities amounted to $634 million and free cash flow amounted to $398 million. |
EXECUTING OUR GROWTH STRATEGY
Our progress in growing new fiber-based businesses reached a convincing tipping point in 2014. We realized our most significant progress thus far in our plan to deliver between $300 and $500 million of annual EBITDA from fiber-based businesses for which there is growing market demand.
In 2014, Indas, one of Spains leading manufacturers of adult incontinence products and baby diapers, became the fifth business to join Domtars Personal Care division. By adding the deep brand equity of Indas to our already strong product mix, we are now well positioned to expand our share of the European market.
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DOMTAR 2014 ANNUAL REPORT 3
4 DOMTAR 2014 ANNUAL REPORT
DOMTAR 2014 ANNUAL REPORT 5
BUSINESS SEGMENTS | ||||||||||
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PULP & PAPER | ||||||||||
DOMTAR IS THE LARGEST INTEGRATED MARKETER AND MANUFACTURER OF UNCOATED FREESHEET PAPER IN NORTH AMERICA, WITH A GROWING BUSINESS IN SPECIALTY AND PACKAGING PAPERS. OUR 13 PULP AND PAPER MILLS ARE LOCATED IN THE UNITED STATES AND CANADA. | ||||||||||
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PAPER
Our communication, specialty and packaging papers are sold to a variety of customers in the United States, Canada and overseas, including merchants, retailers, stationers, printers, publishers, converters and end users. We sell a combination of private labels and well-recognized branded products such as Xerox Paper and Specialty Media, Cougar, Lynx Opaque Ultra, Husky Opaque Offset, First Choice and the EarthChoice product lines of environmentally and socially responsible papers.
Market conditions1
In 2014, 8.6 million short tons of uncoated freesheet paper were manufactured in North America, an 8.9% decline compared to the previous year. North American demand was about 9.1 million short tons, |
a 4.5% decrease compared to 2013. Global demand for uncoated freesheet was estimated at 45.1 million short tons, flat compared to the previous year.
While North American demand for uncoated freesheet paper has declined at an annual rate of about 3.8% since 2000, global demand has increased at a rate of about 0.2% per year over the same period.
According to RISI2, global demand is expected to grow at an annual rate of 0.25% during the next five years, buoyed by strong demand in Southeast Asia and increased consumption in Eastern Europe and Latin America. |
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DOMTAR 2014 ANNUAL REPORT 7
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PULP
We sell softwood, fluff and hardwood market pulp produced in excess of our internal needs. This pulp is marketed and sold overseas, in the United States and in Canada. Sales to overseas customers are made directly or through commission agents, while North American customers are served mainly through our own sales force. Domtar is the fourth-largest chemical market pulp producer in North America.
Market conditions1
North American production of chemical market pulp was 15 million metric tons in 2014, a 2% decrease compared to 2013. Global production was approximately 56.1 million metric tons, a 2.2% increase over the previous year. |
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Review
We manufacture pulp and paper products in nine mills in the United States and four in Canada. In addition, our manufacturing operations are supported by 10 converting and forms manufacturing facilities and a divisional head office in Fort Mill, South Carolina. Our pulp and paper products are sold in more than 50 countries. In 2014, we continued our efforts to size the business appropriately with the closure of two of our converting assets. The closure of our Indianapolis, Indiana, facility will allow us to optimize and increase utilization rates at other locations. In addition, we closed our Guangzhou paper converting operation in order to focus our sales capabilities on our growing pulp customer base in China. |
Key numbers
Sales decreased by 3.5% to $4.7 billion compared to 2013, mainly driven by lower pulp and paper shipments
EBITDA before items2 of $655 million
Capital investments of $161 million in our mill system
Health and safety performance as measured by the total frequency rate (TFR) was 1.06 compared to 0.95 in 2013, Domtars best-ever year on record |
8 DOMTAR 2014 ANNUAL REPORT
DOMTAR 2014 ANNUAL REPORT 9
BUSINESS SEGMENTS |
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PERSONAL CARE |
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OUR PERSONAL CARE BUSINESS ENCOMPASSES THE DESIGN, MANUFACTURE, MARKETING AND DISTRIBUTION OF ADULT INCONTINENCE (AI) PRODUCTS, INFANT DIAPERS AND OTHER ABSORBENT HYGIENE PRODUCTS. WE SELL A COMBINATION OF BRANDED AND PRIVATE-LABEL PRODUCTS, INCLUDING BRIEFS, PROTECTIVE UNDERWEAR, UNDERPADS, PADS, WASHCLOTHS, BABY DIAPERS, INFANT TRAINING PANTS AND RELATED PRODUCTS. | ||||||||
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Review
We distribute our products in healthcare and retail channels. In both North America and Europe, we supply AI products in the healthcare channel, and have a growing presence in retail. Our early 2014 acquisition of Indas, Spains largest branded AI supplier, increased our AI position in southern Europe in both healthcare and retail channels and established our position in infant care in European retail. In North America, we continue to increase our presence in retail channels from our acquisition of AHP in 2013, a leading store-brand manufacturer of infant diapers.
Our Personal Care products are manufactured in six facilities in North America and Europe. The Jesup, Georgia, facility has research and development |
capabilities and production lines that manufacture
high-quality,
Key numbers
Sales increased nearly 64% over 2013 to reach $928 million. The increase was mainly attributable to the acquisition and
EBITDA before items1 increased 54% to $123 million |
10 DOMTAR 2014 ANNUAL REPORT
DOMTAR 2014 ANNUAL REPORT 11
DOMTAR 2014 ANNUAL REPORT 13
DOMTAR 2014 ANNUAL REPORT 15
PAPER: FOREVER FUN
We all need a sweet reminder sometimes that it is fun to use paper. Inspired by the ice cream truck that most of us remember chasing down the street when we were young, we launched a short film about the whimsically decorated Paper Fun Truck and its visits to schools, businesses, retirement communities and even a Los Angeles area beach. People received gifts ranging from office paper to coloring books, best-selling novels to cupcakes wrapped in paper from the trucks window and beamed as they showed their friends. The video marks the latest addition to Domtars award-winning PAPERbecause campaign, which uses humor and facts to debunk myths about the paperless society. The campaign videos have been viewed more than half a million times. The campaign has also been written about by The New York |
Times, honored by readers of Newsweek and named a finalist for an award at the Cannes Lions International Festival of Creativity for marketing excellence.
So check out the Paper Fun Truck on paperbecause.com and see why paper is forever fun. |
LEARNING BY HAND
With many schools eliminating handwriting from classroom curricula, we saw an opportunity to enrich the learning experience with a blend of old-school and new-school methods. So, we picked up our pens and got to work. Guided by Domtars value of Agility and our commitment to education, we launched Project Learning Curve in September 2014. To build awareness of the importance of handwriting to cognitive development, we produced a brief video depicting the research that supports how teachers can adapt todays technology with long-standing educational practices. We worked with software developers on a specialized app, Project Learning Curve, to connect a digital pen to a computer, allowing teachers to measure students progress. The teachers can track how long students spend on handwriting or set classroom goals for students, such as writing enough characters to cross the Golden Gate Bridge. Its a fun way to encourage students to spend more time handwriting, to engage both students and parents, and to help teachers monitor the progress being made at home. Project Learning Curve |
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illustrates how print and pixels can complement each other in the classroom, giving students the best chance to succeed.
To learn more and to watch our video, visit paperbecause.com/projectlearningcurve. |
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16 DOMTAR 2014 ANNUAL REPORT
MILE-LONG CONVEYOR DEMONSTRATES AGILITY
The mile-long conveyor belt that runs from the banks of the Ohio River straight into our Hawesville, Kentucky, mill enables a more efficient delivery of wood chips directly to the mill. This new creative solution eliminated some 54,000 wood chip delivery truck trips per year and drastically reduced traffic-related congestion and pollution. |
ITS IN OUR FIBER TO BE AGILE |
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OUR INDUSTRY IS CONSTANTLY CHANGING, AND WE WILL BE THE ONES LEADING THE WAY. WHEN WE NEED TO CHANGE COURSE, WE DO IT. WE ARE DOERS, NOT TALKERS. BUT WHEN WE ACT, WE ACT THOUGHTFULLY. WE HAVE THE POWER TO MAKE DECISIONS FOR THE BENEFIT OF OUR COMPANY AND OUR CUSTOMERS. WERE ALWAYS LOOKING FOR SIMPLER, MORE EFFICIENT WAYS TO WORK. |
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CONVERSION KEEPS DOMTAR COMPETITIVE
Adapting to new opportunities has long been part of Domtars history. In late 2014, we announced plans to convert one of our paper machines in Ashdown, Arkansas, to manufacture fluff pulp. This converted paper machine will come on-line in the fall of 2016 and will have the capacity to produce more than a half-million metric tons of high-quality fluff pulp annually. |
ITS IN OUR FIBER TO BE CARING
THE PEOPLE OF DOMTAR CARE FOR EACH OTHER. WE TREAT EACH OTHER WITH COMPASSION AND RESPECT. WE LOOK OUT FOR EACH OTHERS SAFETY AS WELL AS OUR OWN. WE NEVER FORGET THAT OUR COMPANY IS WOVEN INTO THE FABRIC OF OUR COMMUNITIES, AND WE TREAT ENVIRONMENTAL STEWARDSHIP AS A SACRED TRUST. WE CARE DEEPLY FOR OUR CUSTOMERS AND INVEST OURSELVES FULLY IN THEIR SUCCESS.
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A SAFE PLACE TO WORK
We take pride in having a safety-conscious work environment across the Company. In 2014, twelve Domtar mills won awards from the Pulp and Paper Safety Association, seven of these for having no OSHA recordable safety incidents. |
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A HEALTHY PLACE TO LIVE
We take our commitment seriously to care for the earth we share and will leave to our children and grandchildren. Throughout the year, Domtar employees, and often their families, lead efforts to preserve and improve the landscape of our communities through our EarthChoice Ambassador program. In 2014, Domtar employees took part in cleanups around community parks and playgrounds, greenways and shorelines in Ashdown, Arkansas; Nekoosa, Wisconsin; Fort Mill, South Carolina; and Montreal, Quebec. In addition to cleanups, groups have planted trees, hosted conservation programs for students and championed recycling in local settings. One of Domtars commitments to sustainability is to have the program at all of our sites by 2020. |
COMMERCIALIZING NEW USES FOR FIBER
Leading the way in fiber-based innovation, we have formed many strategic partnerships to develop new products and applications for fiber-based materials. Revolutionizing aspects of lignin separation and identifying new applications through our BioChoice business has led to many exciting breakthroughs. We have only begun to tap the potential. |
ITS IN OUR FIBER TO BE
INNOVATIVE
WE ALWAYS LOOK TO THE FUTURE BEYOND THE HORIZON. WERE NEVER SATISFIED WITH THINGS AS THEY ARE; WE ALWAYS WANT TO MAKE THEM BETTER, AND WE WORK TOGETHER TO DO IT. WE BRING OUR RESOURCEFULNESS AND CREATIVITY TO BEAR FOR LONG-TERM SUCCESS. WE RELISH CHALLENGES OF ALL KINDS, WHETHER THEY COME FROM OUR CLIENTS OR FROM WITHIN, AND NEVER REST UNTIL WEVE SOLVED THEM.
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EXPERTS IN FLUID MECHANICS AND ABSORPTION TECHNOLOGY
Growing our Personal Care division means staying ahead of the competition. We continue to invest in advanced research and development facilities to create breakthroughs in absorbent-product technology. We are proud of the many patented technologies generated by Domtar scientists and engineers, and we remain optimistic in patents pending to continue our presence as a global industry leader. | |||||
BUILDING THE 21ST CENTURY WORKFORCE
At the heart of innovation is the understanding that one must never stop learning. Domtar has partnered with many top research and development universities and organizations to build a pipeline of new ideas. For example, in Kingsport, Tennessee, our mill works with the Regional Center for Advanced Manufacturing (RCAM) to help build the workforce of the 21st century. Innovation never graduates. |
DOMTAR 2014 ANNUAL REPORT 19
DOMTAR 2014 ANNUAL REPORT 21
CORPORATE
GOVERNANCE AND MANAGEMENT
Domtars Board of Directors and Management Committee are committed to the sustainability of the business and to upholding the highest standards of ethical and socially responsible behavior. They are responsible for the overall stewardship of the Company and ensuring that decisions are taken in the best interests of Domtar and its shareholders. They work closely together in developing and approving business strategies and material corporate actions while always taking into account the economic, social and environmental impacts of their decisions. They continually assess the various risks and opportunities facing the Company while ensuring strict compliance with laws and ethical guidelines.
Domtars commitment to sustainability and to high standards of conduct governs the Companys relationships with customers, suppliers, shareholders, competitors, host communities and employees at every level of the organization. This standard is outlined in Domtars Code of Business Conduct and Ethics applicable to all employees, including directors and officers. The Board also adheres to the Corporate Governance Guidelines required by the New York and Toronto stock exchanges.
For complete information on Domtars policies, procedures and governance documents, please visit domtar.com.
MANAGEMENT COMMITTEE
JOHN D. WILLIAMS PRESIDENT AND CHIEF EXECUTIVE OFFICER
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John D. Williams has been President and Chief Executive Officer of Domtar since January 2009. He is also a member of the Board of Directors.
Mr. Williams has over 30 years of experience in both consumer products and packaging. He began his career in consumer product sales in 1976, gaining insight into key market dynamics in the United Kingdom and the United States. Prior to joining Domtar, he was President of SCA Packaging Europe. |
Mr. Williams is a member of the Board of Directors of Owens Corning (NYSE: OC) and Chairman of the Board of the Montreal Chamber Orchestra. He is also Board Chairman of the American Forest & Paper Association. In 2010, he was named North American CEO of the Year by RISI as well as Global CEO of the Year by Pulp & Paper International (PPI). Mr. Williams was named Executive Papermaker of the Year for 2012 by PaperAge magazine. | |||
DANIEL BURON SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
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Daniel Buron has been Senior Vice President and Chief Financial Officer since May 2004.
Prior to May 2004, he was Vice President, Finance, Pulp and Paper Sales Division and, prior to September 2002, Vice President and Controller. |
He has management oversight and responsibility for all financial functions, including financial reporting, financial risks and debt management, treasury operations, taxation, investor relations and information technology. | |||
MICHAEL FAGAN PRESIDENT, PERSONAL CARE DIVISION*
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Michael Fagan has been Senior Vice President, Personal Care since 2012 and was appointed President of the Division in Febuary 2015.
Prior to joining Domtar, Mr. Fagan held the positions of President and CEO of Attends Healthcare, Inc. since 2006 and Senior Vice President, Sales and Marketing since 1999. Prior to joining Attends, he held a variety of sales development roles with Procter |
& Gamble, the previous owners of the Attends line of products and the creators of the category.
Mr. Fagan has management oversight and responsibility for Domtars Personal Care segment that involves the manufacturing, sale and distribution of infant care and adult incontinence care products. | |||
* These titles are effective at the date of publication of this annual report. |
22 DOMTAR 2014 ANNUAL REPORT
BOARD OF DIRECTORS |
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Robert J. Steacy Chairman of the Board Domtar Corporation Toronto, Ontario, Canada
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Giannella Alvarez Corporate Director Atlanta, Georgia, USA
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Robert E. Apple Chief Operating Officer MasTec, Inc. Miami, Florida, USA
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Louis P. Gignac President G Mining Services Inc. Montreal, Quebec, Canada
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David J. Illingworth Corporate Director Orchid, Florida, USA
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Brian M. Levitt Chairman of the Board TD Bank Group and Vice-Chair Osler, Hoskin & Harcourt LLP Montreal, Quebec, Canada
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David G. Maffucci Corporate Director Charlotte, North Carolina, USA
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Domenic Pilla Corporate Director Toronto, Ontario, Canada
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Pamela B. Strobel Corporate Director Chicago, Illinois, USA
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Denis Turcotte President and CEO North Channel Management Sault Ste. Marie, Ontario, Canada
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John D. Williams President and Chief Executive Officer Domtar Corporation Charlotte, North Carolina, USA
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MICHAEL D. GARCIA PRESIDENT, PULP AND PAPER DIVISION
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Michael D. Garcia has been President of Domtars Pulp and Paper division since May 2014.
Mr. Garcia has over 20 years of international management experience in paper, steel, and aluminum manufacturing and marketing on three continents. Prior to joining Domtar, Mr. Garcia was CEO of Evraz (EHS: SJ) Highveld Steel & Vanadium, in eMalahleni, South Africa. |
Mr. Garcia has management oversight and responsibility for Domtars manufacturing and marketing of pulp and paper. The division operates a network of 13 mills in the United States and Canada and sells pulp and paper in more than 50 countries. | |||
ZYGMUNT JABLONSKI SENIOR VICE PRESIDENT AND CHIEF LEGAL AND ADMINISTRATIVE OFFICER*
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Zygmunt Jablonski has been Senior Vice President, Law and Corporate Affairs since 2009 and was appointed Senior Vice President and Chief Legal and Administrative Officer in February 2015.
Prior to joining Domtar in 2008, he served in various in-house counsel positions for major manufacturing and distribution |
companies in the paper industry for over 13 years. From 1985 to 1994, he practiced law in Washington, D.C.
Mr. Jablonski is responsible for legal affairs, secretariat, sustainability and environmental affairs, corporate communications, government relations, corporate human resources and internal audit. | |||
PATRICK LOULOU SENIOR VICE PRESIDENT, CORPORATE DEVELOPMENT
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Patrick Loulou has been Senior Vice President, Corporate Development since March 2007.
Previously, he held a number of positions in the telecommunications sector as well as in management consulting. He has several years of experience in corporate strategy and business development. |
Mr. Loulou is responsible for managing new business development, corporate strategy, and mergers and acquisitions. | |||
RICHARD L. THOMAS SENIOR VICE PRESIDENT, SALES AND MARKETING, PULP AND PAPER DIVISION
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Richard L. Thomas has been Senior Vice President, Sales and Marketing since 2007, when Domtar acquired Weyerhaeusers Fine Paper division.
Prior to joining Domtar, he was Vice President, Fine Papers, at Weyerhaeuser Company. Mr. Thomas joined Weyerhaeuser in 2002 when Willamette Industries, Inc. was acquired by Weyerhaeuser. At Willamette, he held various management |
positions in operations after joining the company in 1992. Previously, he was with Champion International Corporation for 12 years.
As Senior Vice President, Sales and Marketing, he is responsible for pulp and paper sales, customer service and product development. |
DOMTAR 2014 ANNUAL REPORT 23
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DOMTAR CORPORATION RECONCILIATION
OF NONGAAP 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 presented are frequently used by investors and are useful to evaluate our ability to service debt and our overall credit profile. Management believes these metrics are also useful to measure the operating performance and benchmark with peers within the industry. These metrics are presented as a complement to enhance the understanding of operating results but not in substitution for GAAP results.
The Company calculates Earnings before items and EBITDA before items by excluding the after-tax (pre-tax) effect of items considered by management as not reflecting our current operations. Management uses these measures, as well as EBITDA and Free cash flow, to focus on ongoing operations and believes that it is useful to investors because it enables them to perform meaningful comparisons between periods. Domtar believes that using this information along with Net earnings provides for a more complete analysis of the results of operations. Net earnings and Cash flow provided from operating activities are the most directly comparable GAAP measures.
2012 | 2013 | 2014 | ||||||||||||||
Reconciliation of Earnings before items to Net earnings |
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Net earnings |
($ | ) | 172 | 91 | 431 | |||||||||||
() Cellulose biofuel producer credits |
($ | ) | | (33 | ) | | ||||||||||
(+) Impairment and write-down of PP&E1 and intangible assets |
($ | ) | 9 | 17 | 2 | |||||||||||
(+) Closure and restructuring costs |
($ | ) | 20 | 13 | 21 | |||||||||||
() Net losses on disposals of PP&E1 and sale of business |
($ | ) | 1 | 2 | | |||||||||||
(+) Impact of purchase accounting |
($ | ) | 1 | 2 | 2 | |||||||||||
(+) Alternative fuel tax credits |
($ | ) | | 18 | (18) | |||||||||||
(+) Loss on repurchase of long-term debt |
($ | ) | 30 | 2 | | |||||||||||
(+) Weston litigation settlement |
($ | ) | | 46 | | |||||||||||
() Internal Revenue Service audit settlement items |
($ | ) | | | (204) | |||||||||||
(=) Earnings before items |
($ | ) | 233 | 158 | 234 | |||||||||||
(/) Weighted avg. number of common and exchangeable shares outstanding (diluted) |
(millions | ) | 72.1 | 66.7 | 64.9 | |||||||||||
(=) Earnings before items per diluted share |
($ | ) | 3.23 | 2.37 | 3.61 | |||||||||||
Reconciliation of EBITDA and EBITDA before items to Net earnings |
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Net earnings |
($ | ) | 172 | 91 | 431 | |||||||||||
(+) Equity loss, net of taxes |
($ | ) | 6 | 1 | | |||||||||||
(+) Income tax expense (benefit) |
($ | ) | 58 | (20 | ) | (170) | ||||||||||
(+) Interest expense, net |
($ | ) | 131 | 89 | 103 | |||||||||||
(=) Operating income |
($ | ) | 367 | 161 | 364 | |||||||||||
(+) Depreciation and amortization |
($ | ) | 385 | 376 | 384 | |||||||||||
(+) Impairment and write-down of PP&E1 and intangible assets |
($ | ) | 14 | 22 | 4 | |||||||||||
(-) Net losses on disposals of PP&E1 and sale of business |
($ | ) | 2 | 4 | | |||||||||||
(=) EBITDA |
($ | ) | 768 | 563 | 752 | |||||||||||
(/) Sales |
($ | ) | 5,482 | 5,391 | 5,563 | |||||||||||
(=) EBITDA margin |
(% | ) | 14% | 10% | 14% | |||||||||||
EBITDA |
($ | ) | 768 | 563 | 752 | |||||||||||
(+) Alternative fuel tax credits |
($ | ) | | 26 | (18) | |||||||||||
(+) Closure and restructuring costs |
($ | ) | 30 | 18 | 28 | |||||||||||
(+) Impact of purchase accounting |
($ | ) | 1 | 2 | 3 | |||||||||||
(+) Weston litigation settlement |
($ | ) | | 49 | | |||||||||||
(=) EBITDA before items |
($ | ) | 799 | 658 | 765 | |||||||||||
(/) Sales |
($ | ) | 5,482 | 5,391 | 5,563 | |||||||||||
(=) EBITDA margin before items |
(% | ) | 15% | 12% | 14% | |||||||||||
Reconciliation of Free cash flow to Cash flow provided from operating activities |
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Cash flow provided from operating activities |
($ | ) | 551 | 411 | 634 | |||||||||||
() Additions to PP&E1 |
($ | ) | (236 | ) | (242 | ) | (236) | |||||||||
(=) Free cash flow |
($ | ) | 315 | 169 | 398 |
1 | PP&E: Property, plant and equipment. |
(continued) | 2012 | 2013 | 2014 | |||||||||||||
Net debt-to-total capitalization computation |
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Bank indebtedness |
($ | ) | 18 | 15 | 10 | |||||||||||
(+) Long-term debt due within one year |
($ | ) | 79 | 4 | 169 | |||||||||||
(+) Long-term debt |
($ | ) | 1,128 | 1,510 | 1,181 | |||||||||||
(=) Debt |
($ | ) | 1,225 | 1,529 | 1,360 | |||||||||||
(-) Cash and cash equivalents |
($ | ) | (661 | ) | (655 | ) | (174) | |||||||||
(=) Net debt |
($ | ) | 564 | 874 | 1,186 | |||||||||||
(+) Shareholders equity |
($ | ) | 2,877 | 2,782 | 2,890 | |||||||||||
(=) Total capitalization |
($ | ) | 3,441 | 3,656 | 4,076 | |||||||||||
Net debt |
($ | ) | 564 | 874 | 1,186 | |||||||||||
(/) Total capitalization |
($ | ) | 3,441 | 3,656 | 4,076 | |||||||||||
(=) Net debt-to-total capitalization |
(% | ) | 16% | 24% | 29% |
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, Operating income 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.
RECONCILIATION OF NONGAAP FINANCIAL
MEASURES BY SEGMENT
(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 presented are frequently used by investors and are useful to measure the operating performance and benchmark with peers within the industry. These metrics are presented as a complement to enhance the understanding of operating results but not in substitution for GAAP results.
The Company calculates the segmented Operating income (loss) before items by excluding the pre-tax effect of items considered by management as not reflecting our ongoing operations. Management uses these measures to focus on ongoing operations and believes that it is useful to investors because it enables them to perform meaningful comparisons between periods. Domtar believes that using this information along with Operating income (loss) provides for a more complete analysis of the results of operations. Operating income (loss) by segment is the most directly comparable GAAP measure.
Pulp and Paper1 | Personal Care2 | Corporate | ||||||||||||||||||||||||||||||||||||||
2012 | 2013 | 2014 | 2012 | 2013 | 2014 | 2012 | 2013 | 2014 | ||||||||||||||||||||||||||||||||
Reconciliation of Operating income (loss) to Operating income |
||||||||||||||||||||||||||||||||||||||||
Operating income (loss) |
($ | ) | 330 | 171 | 323 | 45 | 43 | 54 | (8 | ) | (53 | ) | (13 | ) | ||||||||||||||||||||||||||
(-) Alternative fuel tax credits |
($ | ) | | | (18) | | | | | | | |||||||||||||||||||||||||||||
(+) Impairment and write-down of PP&E3 and intangible assets |
($ | ) | 14 | 20 | 4 | | 2 | | | | | |||||||||||||||||||||||||||||
(+) Closure and restructuring costs |
($ | ) | 29 | 10 | 27 | 1 | 2 | 1 | | 6 | | |||||||||||||||||||||||||||||
(-) Net losses (gains) on disposals of PP&E3 and sale of business |
($ | ) | 2 | 10 | | | | | | (6 | ) | | ||||||||||||||||||||||||||||
(+) Reversal of alternative fuel tax credits |
($ | ) | | 26 | | | | | | | | |||||||||||||||||||||||||||||
(+) Impact of purchase accounting |
($ | ) | | | | 1 | 2 | 3 | | | | |||||||||||||||||||||||||||||
(+) Weston litigation settlement |
($ | ) | | | | | | | | 49 | | |||||||||||||||||||||||||||||
(=) Operating income (loss) before items |
($ | ) | 375 | 237 | 336 | 47 | 49 | 58 | (8 | ) | (4 | ) | (13 | ) | ||||||||||||||||||||||||||
Reconciliation of Operating income (loss) before items to |
||||||||||||||||||||||||||||||||||||||||
Operating income (loss) before items |
($ | ) | 375 | 237 | 336 | 47 | 49 | 58 | (8 | ) | (4 | ) | (13 | ) | ||||||||||||||||||||||||||
(+) Depreciation and amortization |
($ | ) | 365 | 345 | 319 | 20 | 31 | 65 | | | | |||||||||||||||||||||||||||||
(=) EBITDA before items |
($ | ) | 740 | 582 | 655 | 67 | 80 | 123 | (8 | ) | (4 | ) | (13 | ) | ||||||||||||||||||||||||||
(/) Sales |
($ | ) | 5,088 | 4,843 | 4,674 | 399 | 566 | 928 | | | | |||||||||||||||||||||||||||||
(=) EBITDA margin before items |
(% | ) | 15% | 12% | 14% | 17% | 14% | 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.
1 | On May 31, 2013, the Company acquired Xeroxs paper print and media products assets in the United States and Canada. |
2 | On January 2, 2014, the Company acquired 100% of the shares of Labotarios Indas, S.A.U. in Spain. |
On July 1, 2013, the Company acquired 100% of the shares of Associated Hygiene Products LLC. |
On May 1, 2012, the Company acquired 100% of the shares of EAM Corporation. |
On March 1, 2012, the Company acquired 100% of the shares of Attends Healthcare Limited. |
3 | PP&E: Property, plant and equipment. |
SHAREHOLDER
INFORMATION
DIVIDEND POLICY
Subject to approval by its Board of Directors, Domtar pays a quarterly dividend on its common stock. (NYSE: UFS) (TSX: UFS) |
DIVIDEND HISTORY
|
|||||||||
Year ended 2014
|
||||||||||
Declared |
Record Date | Payable Date | Amount | |||||||
| ||||||||||
October 29, 2014
|
January 2, 2015
|
January 15, 2015
|
US$0.375
| |||||||
July 30, 2014 |
October 2, 2014 | October 15, 2014 | US$0.375 | |||||||
April 30, 2014 |
July 2, 2014 | July 15, 2014 | US$0.375 | |||||||
February 18, 2014 |
March 14, 2014 | April 15, 2014 | US$0.275 | |||||||
|
SHAREHOLDER SERVICES
For shareholder-related services, including estate settlement, lost stock certificates, change of name or address, stock transfers and duplicate mailings, please contact the transfer agent at:
Computershare Investor Services
Computershare P.O. BOX 30170 College Station, TX 77845-3170 North American Toll Free Number: 1-877-282-1168 Tel.: 1-781-575-2879 computershare.com/investor
Exchange Listings
New York Stock Exchange Toronto Stock Exchange
Stock symbol: UFS |
REQUESTS FOR INFORMATION
For additional copies of the Annual Report or other financial information, please contact:
Investor Relations Department
Domtar Corporation 395 de Maisonneuve Blvd. West Montreal, QC Canada H3A 1L6 Tel.: 514-848-5555 Voice Recognition: Investor Relations Email: ir@domtar.com
Electronic versions of this Annual Report, SEC filings, and other Company publications are available through the corporate website: domtar.com. |
2015 TENTATIVE EARNINGS CALENDAR
First Quarter 2015: Thursday, April 30, 2015
Second Quarter 2015: Thursday, July 30, 2015
Third Quarter 2015: Thursday, October 29, 2015
Fourth Quarter 2015: Thursday, February 4, 2016
ANNUAL MEETING
Domtar Annual Meeting of Stockholders Wednesday, May 6, 2015
Domtar 234 Kingsley Park Drive Fort Mill, SC 29715 |