Resolute Reports Preliminary Second Quarter 2014 Results
PR Newswire Association LLC |
US $
- Q2 adjusted EBITDA of
$108 million / net income of$0.20 per share, excluding special items - Significant cost and margin improvement following weather-affected Q1
- Strong lumber and paper shipments
- GAAP net loss of
$2 million /$0.02 per share
"Costsand margins normalized this quarter after thedisappointing weather-affected first quarter, delivering much stronger performances in each of our four segments," said
Non-GAAP financial measures, such as adjustments for special items and adjusted EBITDA, are explained and reconciled below.
Consolidated Quarterly Operating Income Variance Against Year-Ago Period
The Company recorded an operating loss of
The Company incurred
Segment Operating Income Variance Against Prior Quarter
Newsprint
At
Specialty Papers
Specialty papers generated an operating loss of
Market Pulp
Operating income in the market pulp segment rose by
Wood Products
Compared to the first quarter, operating income in the wood products segment rose by
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 | Second quarter | ||||
(in millions) | 2014 | 2013 | ||||
Foreign currency translation (gain) loss | $ | (17) | $ | 7 | ||
Closure costs, impairment and other related charges | 52 | 12 | ||||
Inventory write-downs related to closures | 3 | 1 | ||||
Start-up costs | 1 | 13 | ||||
Net gain on disposition of assets | (2) | (2) | ||||
Net loss on extinguishment of debt | - | 59 | ||||
Transaction costs | - | 2 | ||||
Other income, net | (3) | (1) | ||||
Income tax effect of special items | (13) | (30) | ||||
Total | $ | 21 | $ | 61 |
Cautionary Statements Regarding Forward-Looking Information
Statements in this press release and the earnings conference call 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 Resolute's actual future financial condition, results of operations and performance to differ materially from those expressed or implied in the presentation referred to above include, but are not limited to, the potential risks and uncertainties set forth under the heading "Risk Factors" in Part 1, Item 1A of Resolute's annual report on Form 10-K for the year ended
All forward-looking statements in the presentation referred to above are expressly qualified by the cautionary statements contained or referred to above and in Resolute's other filings with the
About
Resolute and other member companies of the
Resolute is proud to be ranked by Corporate Knights as one of
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||
(Unaudited, in millions except per share amounts) | ||||||||||||
Three Months | Six Months | |||||||||||
Ended |
Ended |
|||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||
Sales | $ | 1,091 | $ | 1,107 | $ | 2,107 | $ | 2,181 | ||||
Costs and expenses: | ||||||||||||
Cost of sales, excluding depreciation, amortization and distribution costs | 812 | 859 | 1,633 | 1,715 | ||||||||
Depreciation and amortization | 62 | 61 | 124 | 121 | ||||||||
Distribution costs | 134 | 130 | 254 | 253 | ||||||||
Selling, general and administrative expenses | 41 | 44 | 77 | 88 | ||||||||
Closure costs, impairment and other related charges (1) | 52 | 12 | 62 | 52 | ||||||||
Net gain on disposition of assets | (2) | (2) | (2) | (2) | ||||||||
Operating (loss) income | (8) | 3 | (41) | (46) | ||||||||
Other income (expense): | ||||||||||||
Interest expense | (11) | (13) | (23) | (27) | ||||||||
Other income (expense), net (2) | 20 | (65) | 7 | (47) | ||||||||
Income (loss) before income taxes | 1 | (75) | (57) | (120) | ||||||||
Income tax (provision) benefit | (1) | 31 | 7 | 71 | ||||||||
Net loss including noncontrolling interests | - | (44) | (50) | (49) | ||||||||
Net (income) loss attributable to noncontrolling interests | (2) | 1 | (2) | 1 | ||||||||
Net loss attributable to |
$ | (2) | $ | (43) | $ | (52) | $ | (48) | ||||
Net loss per share attributable to |
||||||||||||
Basic | $ | (0.02) | $ | (0.45) | $ | (0.55) | $ | (0.51) | ||||
Diluted | (0.02) | (0.45) | (0.55) | (0.51) | ||||||||
Weighted-average number of |
||||||||||||
Basic | 94.6 | 94.8 | 94.6 | 94.8 | ||||||||
Diluted | 94.6 | 94.8 | 94.6 | 94.8 |
CONSOLIDATED BALANCE SHEETS | |||||||
(Unaudited, in millions) | |||||||
2014 | 2013 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 263 | $ | 322 | |||
Accounts receivable trade, net | 521 | 536 | |||||
Accounts receivable other | 89 | 98 | |||||
Inventories, net | 579 | 529 | |||||
Deferred income tax assets | 32 | 32 | |||||
Other current assets | 62 | 45 | |||||
Total current assets | 1,546 | 1,562 | |||||
Fixed assets, net | 2,184 | 2,289 | |||||
Amortizable intangible assets, net | 64 | 66 | |||||
Deferred income tax assets | 1,237 | 1,266 | |||||
Other assets | 216 | 202 | |||||
Total assets | $ | 5,247 | $ | 5,385 | |||
Liabilities and equity | |||||||
Current liabilities: | |||||||
Accounts payable and accrued liabilities | $ | 556 | $ | 533 | |||
Current portion of long-term debt | 1 | 2 | |||||
Deferred income tax liabilities | 32 | 32 | |||||
Total current liabilities | 589 | 567 | |||||
Long-term debt, net of current portion | 597 | 597 | |||||
Pension and other postretirement benefit obligations | 1,146 | 1,294 | |||||
Deferred income tax liabilities | 25 | 26 | |||||
Other long-term liabilities | 48 | 62 | |||||
Total liabilities | 2,405 | 2,546 | |||||
Commitments and contingencies | |||||||
Equity: | |||||||
Common stock | - | - | |||||
Additional paid-in capital | 3,753 | 3,751 | |||||
Deficit | (644) | (592) | |||||
Accumulated other comprehensive loss | (220) | (271) | |||||
Treasury stock at cost | (61) | (61) | |||||
Total |
2,828 | 2,827 | |||||
Noncontrolling interests | 14 | 12 | |||||
Total equity | 2,842 | 2,839 | |||||
Total liabilities and equity | $ | 5,247 | $ | 5,385 |
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(Unaudited, in millions) | ||||||||
Six Months | ||||||||
Ended |
||||||||
2014 | 2013 | |||||||
Cash flows from operating activities: | ||||||||
Net loss including noncontrolling interests | $ | (50) | $ | (49) | ||||
Adjustments to reconcile net loss including noncontrolling interests to net cash provided by operating activities: | ||||||||
Share-based compensation | 2 | 4 | ||||||
Depreciation and amortization | 124 | 121 | ||||||
Closure costs, impairment and other related charges | 54 | 46 | ||||||
Inventory write-downs related to closures | 4 | 5 | ||||||
Deferred income taxes | (8) | (71) | ||||||
Net pension contributions and other postretirement benefit payments | (74) | (35) | ||||||
Net gain on disposition of assets | (2) | (2) | ||||||
Loss on translation of foreign currency denominated deferred income taxes | 6 | 80 | ||||||
Gain on translation of foreign currency denominated pension and other postretirement benefit obligations | (6) | (78) | ||||||
Gain on forgiveness of note payable | - | (12) | ||||||
Net loss on extinguishment of debt | - | 59 | ||||||
Net planned major maintenance payments | (6) | (7) | ||||||
Dividends received from equity method investees in excess of income | - | 3 | ||||||
Changes in working capital: | ||||||||
Accounts receivable | 36 | (5) | ||||||
Inventories | (55) | 14 | ||||||
Other current assets | (9) | (2) | ||||||
Accounts payable and accrued liabilities | 5 | (16) | ||||||
Other, net | 1 | (7) | ||||||
Net cash provided by operating activities | 22 | 48 | ||||||
Cash flows from investing activities: | ||||||||
Cash invested in fixed assets | (82) | (86) | ||||||
Disposition of assets | 2 | 3 | ||||||
Proceeds from insurance settlements | - | 4 | ||||||
Decrease in restricted cash | 1 | 3 | ||||||
(Increase) decrease in deposit requirements for letters of credit, net | (1) | 1 | ||||||
Net cash used in investing activities | (80) | (75) | ||||||
Cash flows from financing activities: | ||||||||
Issuance of long-term debt | - | 594 | ||||||
Premium paid on extinguishment of debt | - | (84) | ||||||
Payments of debt | (1) | (497) | ||||||
Payments of financing and credit facility fees | (1) | (9) | ||||||
Contribution of capital from noncontrolling interest | - | 8 | ||||||
Net cash (used in) provided by financing activities | (2) | 12 | ||||||
Effect of exchange rate changes on cash and cash equivalents | 1 | - | ||||||
Net decrease in cash and cash equivalents | (59) | (15) | ||||||
Cash and cash equivalents: | ||||||||
Beginning of period | 322 | 263 | ||||||
End of period | $ | 263 | $ | 248 |
STATEMENTS 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 3 to the Unaudited Consolidated Financial Statement Information | |||||||||
regarding our use of non-GAAP measures. | |||||||||
Three Months Ended |
Operating | ||||||||
(unaudited, in millions except per share amounts) | income (loss) | Net income (loss) | EPS | ||||||
GAAP as reported | $ | (8) | $ | (2) | $ | (0.02) | |||
Adjustments for special items: | |||||||||
Foreign currency translation gain | - | (17) | (0.18) | ||||||
Closure costs, impairment and other related charges | 52 | 52 | 0.55 | ||||||
Inventory write-downs related to closures | 3 | 3 </td> | 0.03 | ||||||
Start up costs | 1 | 1 | 0.01 | ||||||
Net gain on disposition of assets | (2) | (2) | (0.02) | ||||||
Other income, net | - | (3) | (0.03) | ||||||
Income tax effect of special items | - | (13) | (0.14) | ||||||
GAAP as adjusted for special items | $ | 46 | $ | 19 | $ | 0.20 | |||
Three Months Ended |
Operating | ||||||||
(unaudited, in millions except per share amounts) | income (loss) | Net income (loss) | EPS | ||||||
GAAP as reported | $</b> | 3 | $ | (43) | $ | (0.45) | |||
Adjustments for special items: | |||||||||
Foreign currency translation loss | - | 7 | 0.07 | ||||||
Closure costs, impairment and other related charges | 12 | 12 | 0.13 | ||||||
Inventory write-downs related to closures | 1 | 1 | 0.01 | ||||||
Start up costs | 13 | 13 | 0.14 | ||||||
Net gain on disposition of assets | (2) | (2) | (0.02) | ||||||
Net loss on extinguishment of debt | - | 59 | 0.62 | ||||||
Transaction costs | 2 | 2 | 0.02 | ||||||
Other income, net | - | (1) | (0.01) | ||||||
Income tax effect of special items | - | (30) | (0.32) | ||||||
GAAP as adjusted for special items | $ | 29 | $ | 18 | $ | 0.19 | |||
Six Months Ended |
Operating | ||||||||
(unaudited, in millions except per share amounts) | income (loss) | Net income (loss) | EPS | ||||||
GAAP as reported | $ | (41) | $ | (52) | $ | (0.55) | |||
Adjustments for special items: | |||||||||
Foreign currency translation gain | - | (3) | (0.03) | ||||||
Closure costs, impairment and other related charges | 62 | 62 | 0.66 | ||||||
Inventory write-downs related to closures | 4 | 4 | 0.04 | ||||||
Start up costs | 1 | 1 | 0.01 | ||||||
Net gain on disposition of assets | (2) | (2) | (0.02) | ||||||
Other income, net | - | (4) | (0.04) | ||||||
Income tax effect of special items | - | (13) | (0.14) | ||||||
GAAP as adjusted for special items | $ | 24 | $ | (7) | $ | (0.07) | |||
Six Months Ended |
Operating | ||||||||
(unaudited, in millions except per share amounts) | income (loss) | Net income (loss) | EPS | ||||||
GAAP as reported | $ | (46) | $ | (48) | $ | (0.51) | |||
Adjustments for special items: | |||||||||
Foreign currency translation loss | - | 12 | 0.13 | ||||||
Closure costs, impairment and other related charges | 52 | 52 | 0.55 | ||||||
Inventory write-downs related to closures | 5 | 5 | 0.05 | ||||||
Start up costs | 28 | 28 | 0.30 | ||||||
Net gain on disposition of assets | (2) | (2) | (0.02) | ||||||
Net loss on extinguishment of debt | - | 59 | 0.62 | ||||||
Transaction costs | 5 | 5 | 0.05 | ||||||
Other income, net | - | (24) | (0.25) | ||||||
Income tax effect of special items | - | (41) | (0.43) | ||||||
GAAP as adjusted for special items | $ | 42 | $ | 46 | $ | 0.49 |
STATEMENTS OF EBITDA AND ADJUSTED EBITDA | ||||||||||||
A reconciliation of our net income including noncontrolling interests to EBITDA and Adjusted EBITDA is presented in the tables below. | ||||||||||||
See Note 3 to the Unaudited Consolidated Financial Statement Information regarding our use of non-GAAP measures EBITDA and Adjusted EBITDA | ||||||||||||
Three Months Ended (unaudited, in millions) |
Newsprint | Specialty papers |
Market pulp | Wood products | Corporate and other |
Total | ||||||
Net income (loss) including noncontrolling interests | $ | 18 | $ | (3) | $ | 24 | $ | 15 | $ | (54) | $ | - |
Interest expense | 11 | 11 | ||||||||||
Income tax provision | 1 | 1 | ||||||||||
Depreciation and amortization | 17 | 22 | 13 | 8 | 2 | 62 | ||||||
EBITDA | 35 | 19 | 37 | 23 | (40) | 74 | ||||||
Foreign currency translation gain | (17) | (17) | ||||||||||
Closure costs, impairment and other related charges | 52 | 52 | ||||||||||
Inventory write-downs related to closures | 3 | 3 | ||||||||||
Start up costs | 1 | 1 | ||||||||||
Net gain on disposition of assets | (2) | (2) | ||||||||||
Other income, net | (3) | (3) | ||||||||||
Adjusted EBITDA | $ | 35 | $ | 19 | $ | 37 | $ | 23 | $ | (6) | $ | 108 |
Three Months Ended (unaudited, in millions) |
Newsprint | Specialty papers |
Market pulp | Wood products | Corporate and other |
Total | ||||||
Net income (loss) including noncontrolling interests | $ | 10 | $ | 2 | $ | 10 | $ | 16 | $ | (82) | $ | (44) |
Interest expense | 13 | 13 | ||||||||||
Income tax benefit | (31) | (31) | ||||||||||
Depreciation and amortization | 18 | 19 | 13 | 9 | 2 | 61 | ||||||
EBITDA | 28 | 21 | 23 | 25 | (98) | (1) | ||||||
Foreign currency translation loss | 7 | 7 | ||||||||||
Closure costs, impairment and other related charges | 12 | 12 | ||||||||||
Inventory write-downs related to closures | 1 | 1 | ||||||||||
Start up costs | 13 | 13 | ||||||||||
Net gain on disposition of assets | (2) | (2) | ||||||||||
Net loss on extinguishment of debt | 59 | 59 | ||||||||||
Transaction costs | 2 | 2 | ||||||||||
Other income, net | (1) | (1) | ||||||||||
Adjusted EBITDA | $ | 28 | $ | 21 | $ | 23 | $ | 25 | $ | (7) | $ | 90 |
Six Months Ended (unaudited, in millions) |
Newsprint | Specialty papers |
Market pulp | Wood products | Corporate and other |
Total | ||||||
Net income (loss) including noncontrolling interests | $ | 3 | $ | (27) | $ | 32 | $ | 27 | $ | (85) | $ | (50) |
Interest expense | 23 | 23 | ||||||||||
Income tax benefit | (7) | (7) | ||||||||||
Depreciation and amortization | 35 | 44 | 26 | 16 | 3 | 124 | ||||||
EBITDA | 38 | 17 | 58 | 43 | (66) | 90 | ||||||
Foreign currency translation gain | (3) | (3) | ||||||||||
Closure costs, impairment and other related charges | 62 | 62 | ||||||||||
Inventory write-downs related to closures | 4 | 4 | ||||||||||
Start up costs | 1 | 1 | ||||||||||
Net gain on disposition of assets | (2) | (2) | ||||||||||
Other income, net | (4) | (4) | ||||||||||
Adjusted EBITDA | $ | 38 | $ | 17 | $ | 58 | $ | 43 | $ | (8) | $ | 148 |
Six Months Ended (unaudited, in millions) |
Specialty papers |
Market pulp | Wood products | Corporate and other |
Total | |||||||
Net income (loss) including noncontrolling interests | $ | 8 | $ | 10 | $ | 5 | $ | 32 | $ | (104) | $ | (49) |
Interest expense | 27 | 27 | ||||||||||
Income tax benefit | (71) | (71) | ||||||||||
Depreciation and amortization | 36 | 38 | 26 | 18 | 3 | 121 | ||||||
EBITDA | 44 | 48 | 31 | 50 | (145) | 28 | ||||||
Foreign currency translation loss | 12 | 12 | ||||||||||
Closure costs, impairment and other related charges | 52 | 52 | ||||||||||
Inventory write-downs related to closures | 5 | 5 | ||||||||||
Start up costs | 28 | 28 | ||||||||||
Net gain on disposition of assets | (2) | (2) | ||||||||||
Net loss on extinguishment of debt | 59 | 59 | ||||||||||
Transaction costs | 5 | 5 | ||||||||||
Other income, net | (24) | (24) | ||||||||||
Adjusted EBITDA | $ | 44 | $ | 48 | $ | 31 | $ | 50 | $ | (10) | $ | 163 |
Notes to the Unaudited Consolidated Financial Statement Information
1. Closure costs, impairment and other related charges for the three and six months ended
(Unaudited, in millions) | Impairment of Assets (1) |
Accelerated Depreciation |
Pension Plan Settlement Gain |
Severance and Other Costs |
Total | |||||||||||
Permanent closures: | ||||||||||||||||
Paper machine in |
||||||||||||||||
Second quarter | $ | - | $ | 45 | $ | - | $ | - | $ | 45 | ||||||
First six months | - | 45 | - | 1 | 46 | |||||||||||
Paper machine in |
||||||||||||||||
Second quarter | - | - | - | 2 | 2 | |||||||||||
First six months | - | - | - | 8 | 8 | |||||||||||
Paper machine in |
||||||||||||||||
Second quarter | - | - | - | - | - | |||||||||||
First six months | - | 3 | - | - | 3 | |||||||||||
Other | ||||||||||||||||
Second quarter | 5 | - | - | - | 5 | |||||||||||
First six months | 6 | - | - | (1) | 5 | |||||||||||
Total | ||||||||||||||||
Second quarter 2014 | $ | 5 | $ | 45 | $ | - | $ | 2 | $ | 52 | ||||||
First six months 2014 | 6 | 48 | - | 8 | 62 | |||||||||||
Second quarter 2013 | $ | - | $ | 9 | $ | - | $ | 3 | $ | 12 | ||||||
First six months 2013 | - | 44 | (1) | 9 | 52 |
(1) | Due to declining market conditions, we recorded long-lived assets impairment charges of |
(2) | On |
2. Other income (expense), net for the three and six months ended
Three Months Ended |
Six Months Ended |
||||||||||
(Unaudited, in millions) | 2014 | 2013 | 2014 | 2013 | |||||||
Foreign exchange gain (loss) | $ | 17 | $ | (7) | $ | 3 | $ | (12) | |||
Net loss on extinguishment of debt | - | (59) | - | (59) | |||||||
Gain on forgiveness of note payable | - | - | - | 12 | |||||||
Gain on liquidation settlement | - | - | - | 9 | |||||||
Miscellaneous income | 3 | 1 | 4 | 3 | |||||||
$ | 20 | $ | (65) | $ | 7 | $ | (47) |
3. Tables represent a reconciliation of certain financial statement line items reported under generally accepted accounting principles ("GAAP") to our use of non-GAAP measures of operating income (loss), net income (loss) and net income (loss) per share ("EPS"), in each case adjusted for special items, as well as EBITDA and adjusted EBITDA, in each case by reportable segment. We believe that these measures are useful because they allow the reader to more easily compare our ongoing operations, financial performance, and EPS from period to period. They are also consistent with the indicators management uses internally to measure our performance. These non-GAAP measures should be considered in addition to and not a substitute for measures of financial performance calculated and presented in accordance with GAAP in our Consolidated Statement of Operations in our filings with the
Operating income (loss) adjusted for special items - is defined as operating income (loss) from our Consolidated Statements of Operations excluding special items, such as closure costs, impairment and other related charges, inventory write-downs related to closures, start up costs,gains and losses on disposition of assets, transaction costs and other charges or credits that are excluded from our segment's performance from GAAP operating income (loss).
Net income (loss) adjusted for special items - is defined as net income (loss) from our Consolidated Statements of Operations excluding the same items as under operating income (loss) adjusted for the special items, in addition to the effects of foreign currency translation, net loss on extinguishment of debt, and other income (expense).
EPS adjusted for special items - is defined as diluted EPS calculated based on the net income (loss) adjusted for special items as described above.
EBITDA by reportable segment - is defined as net income (loss) including noncontrolling interests from our Consolidated Statements of Operations, allocated to each of our reportable segments (newsprint, specialty papers, market pulp and wood products) in accordance with FASB ASC 290, "Segment Reporting," and adjusted for depreciation and amortization. EBITDA for the corporate and other segment is defined as net income (loss) including noncontrolling interests from our Consolidated Statements of Operations after the allocation to reportable segments, adjusted for interest expense, income taxes and depreciation and amortization.
Adjusted EBITDA - is defined as EBITDA excluding the special items described above.
SOURCE
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