Domtar Corporation Reports Preliminary Third Quarter 2020 Financial Results

Rhea-AI Summary

Domtar Corporation (NYSE: UFS) reported a net loss of $92 million ($1.67 per share) for Q3 2020, contrasting with a net earnings of $19 million ($0.34 per share) in Q2 2020 and $20 million ($0.32 per share) in Q3 2019. Total sales reached $1.1 billion, while earnings before items were $18 million ($0.33 per share). Key factors included impairment and restructuring costs totaling $179 million, leading to an operating loss of $136 million. Free cash flow was $93 million, with a net debt-to-total capitalization ratio of 28% at the end of the quarter.

Positive

• Sales increased to $1.1 billion from $1.012 billion in Q2 2020.
• Operating income before items improved to $43 million from $15 million quarter-over-quarter.
• Manufactured paper shipments increased by 20% compared to Q2 2020.
• Free cash flow was a strong $93 million for the quarter.

Negative

• Net loss of $92 million compared to a profit of $19 million in Q2 2020.
• Impairment and restructuring costs totaling $179 million significantly impacted earnings.
• Operating loss of $136 million, down from operating income of $14 million in Q2 2020.
• Pulp shipments decreased by 7% compared to Q2 2020.

FORT MILL, S.C.--(BUSINESS WIRE)--Domtar Corporation (NYSE: UFS) (TSX: UFS) today reported a net loss of $92 million ($1.67 per share) for the third quarter of 2020 compared to net earnings of $19 million ($0.34 per share) for the second quarter of 2020 and net earnings of $20 million ($0.32 per share) for the third quarter of 2019. Sales for the third quarter of 2020 were $1.1 billion.

Excluding items listed below, the Company had earnings before items¹ of $18 million ($0.33 per share) for the third quarter of 2020 compared to earnings before items¹ of $20 million ($0.36 per share) for the second quarter of 2020 and earnings before items¹ of $55 million ($0.89 per share) for the third quarter of 2019.

ITEMS
Description		Segment		Line item		Amount		After tax effect		EPS impact (per share)
						(in millions)
Third quarter 2020
Cost reduction program		Pulp and Paper		Impairment of long-lived assets		$111		$68		$1.23
Cost reduction program		Pulp and Paper		Closure and restructuring costs		$67		$41		$0.75
Closure and restructuring costs		Corporate		Closure and restructuring costs		$1		$1		$0.02
Second quarter 2020
Closure and restructuring costs		Pulp and Paper		Closure and restructuring costs		$1		$1		$0.02
Third quarter 2019
Paper machine closures		Pulp and Paper		Impairment of long-lived assets		$32		$25		$0.40
Paper machine closures		Pulp and Paper		Closure and restructuring costs		$5		$4		$0.07
Margin improvement plan		Personal Care		Impairment of long-lived assets		$1		$1		$0.02
Margin improvement plan		Personal Care		Closure and restructuring costs		$6		$5		$0.08

QUARTERLY REVIEW

“We performed very well in the quarter in a challenging operating environment. Our teams have demonstrated tremendous resiliency, continuously adapting to changing market conditions, maintaining a keen focus on health and safety and decisively taking actions to serve our customers in the face of unprecedented conditions,” said John D. Williams, President and Chief Executive Officer. “We benefited from further market recovery and we made good progress with some of our strategic initiatives.”

“Our results in Paper significantly improved in the third quarter reflecting a strong operational performance and our team's fast response in implementing cost savings in a better paper demand environment. In Pulp, prices remain at cyclically low levels but the supply and demand balance is improving.”

“The Kingsport conversion to recycled linerboard is going according to plan. All efforts are now being put into enabling a start-up by the end of 2022. We have signed an agreement with Voith to provide equipment and technical services to help build one of the most modern recycled containerboard machines in the world. We expect to receive our first equipment deliveries in the next few months with construction set to begin in the second quarter of 2021. We are also focusing on implementing our commercial strategy while building our various teams that will help lead the business.”

Mr. Williams added, “In Personal Care, we had a strong cost performance in the quarter. We continue to execute well against our objectives, both commercially and operationally, which has contributed to our strong year-to-date performance."

Operating loss was $136 million in the third quarter of 2020 compared to operating income of $14 million in the second quarter of 2020. Depreciation and amortization totaled $71 million in the third quarter of 2020.

Operating income before items¹ was $43 million in the third quarter of 2020 compared to operating income before items¹ of $15 million in the second quarter of 2020.

(In millions of dollars)		3Q 2020				2Q 2020
Sales		$	1,124			$	1,012
Operating (loss) income
Pulp and Paper segment			(140	)			3
Personal Care segment			16				18
Corporate			(12	)			(7	)
Total operating (loss) income			(136	)			14
Operating income before items1			43				15
Depreciation and amortization			71				71

The net operating loss in the third quarter of 2020 was the result of the long-lived assets impairment and closure and restructuring charges related to the cost savings program, lower wage subsidies, higher maintenance costs, higher selling, general and administrative expenses and higher freight costs. These factors were partially offset by favorable productivity, higher volume in paper, lower raw material costs, higher average selling prices for paper and favorable exchange rates.

When compared to the second quarter of 2020, manufactured paper shipments were up 20% and pulp shipments decreased 7%. The shipment-to-production ratio for paper was 105% in the third and second quarters of 2020. Paper inventories decreased by 20,000 tons, and pulp inventories increased by 38,000 metric tons when compared to the second quarter of 2020.

LIQUIDITY AND CAPITAL RESOURCES

Cash flow from operating activities amounted to $121 million and capital expenditures were $28 million, resulting in free cash flow¹ of $93 million for the third quarter of 2020. Domtar’s net debt-to-total capitalization ratio¹ stood at 28% at September 30, 2020 compared to 30% at June 30, 2020.

OUTLOOK

In the fourth quarter, paper volume is expected to be flat quarter-over-quarter while mix should be unfavorable due to the usual seasonality. We expect near-term pulp markets to continue to gradually improve driven by better demand, maintenance outages and restocking in China. We expect Personal Care to continue to benefit from higher usage and the impact from new customer wins. Overall raw material costs are expected to remain stable while planned maintenance costs will be lower.

EARNINGS CONFERENCE CALL

The Company will hold a conference call today at 10:00 a.m. (ET) to discuss its third quarter 2020 financial results. Financial analysts are invited to participate in the call by dialing 1 (800) 367-2403 at least 10 minutes before start time, while media and other interested individuals are invited to listen to the live webcast on the Domtar Corporation website at www.domtar.com.

The Company will release its fourth quarter 2020 earnings results on February 11, 2021 before markets open, followed by a conference call at 10:00 a.m. (ET) to discuss results. The date is tentative and will be confirmed approximately three weeks prior to the official earnings release date.

About Domtar

Domtar is a leading provider of a wide variety of fiber-based products including communication, specialty and packaging papers, market pulp and absorbent hygiene products. With approximately 8,900 employees serving more than 50 countries around the world, Domtar is driven by a commitment to turn sustainable wood fiber into useful products that people rely on every day. Domtar’s annual sales are approximately $5.2 billion, and its common stock is traded on the New York and Toronto Stock Exchanges. Domtar’s principal executive office is in Fort Mill, South Carolina. To learn more, visit www.domtar.com.

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Forward-Looking Statements

Statements in this release about our plans, expectations and future performance, including the statements by Mr. Williams and those contained under “Outlook,” are “forward-looking statements.” Actual results may differ materially from those suggested by these statements for a number of reasons, including the COVID-19 pandemic and the resulting decrease in paper sales and the challenges we face in maintaining manufacturing operations, changes in customer demand and pricing, changes in manufacturing costs, future acquisitions and divestitures, including facility closings, the failure to achieve our cost containment goals, costs of conversion in excess of our expectations, demand for linerboard, and the other reasons identified under “Risk Factors” in our Form 10-K for 2019 as filed with the SEC and as updated by subsequently-filed Form 10-Qs. Except to the extent required by law, we expressly disclaim any obligation to update or revise these forward-looking statements to reflect new events or circumstances or otherwise.

Domtar Corporation Highlights (In millions of dollars, unless otherwise noted)
		For the three months ended								For the nine months ended
		September 30, 2020				September 30, 2019				September 30, 2020				September 30, 2019
		(Unaudited)
		$				$				$				$
Selected Segment Information
Sales
Pulp and Paper			899				1,079				2,732				3,342
Personal Care			243				219				738				686
Total for reportable segments			1,142				1,298				3,470				4,028
Intersegment sales			(18	)			(15	)			(56	)			(52	)
Consolidated sales			1,124				1,283				3,414				3,976
Depreciation and amortization
Pulp and Paper			56				57				170				174
Personal Care			15				15				44				45
Total for reportable segments			71				72				214				219
Impairment of long-lived assets - Pulp and Paper			111				32				111				32
Impairment of long-lived assets - Personal Care			—				1				—				26
Consolidated depreciation and amortization and impairment of long-lived assets			182				105				325				277
Operating (loss) income
Pulp and Paper			(140	)			31				(133	)			237
Personal Care			16				2				54				(24	)
Corporate			(12	)			(4	)			(24	)			(35	)
Consolidated operating (loss) income			(136	)			29				(103	)			178
Interest expense, net			14				12				43				38
Non-service components of net periodic benefit cost			(4	)			(2	)			(13	)			(7	)
(Loss) earnings before income taxes and equity loss			(146	)			19				(133	)			147
Income tax (benefit) expense			(55	)			(1	)			(67	)			28
Equity loss, net of taxes			1				—				2				1
Net (loss) earnings			(92	)			20				(68	)			118
Per common share (in dollars)
Net (loss) earnings
Basic			(1.67	)			0.33				(1.23	)			1.89
Diluted			(1.67	)			0.32				(1.23	)			1.88
Weighted average number of common shares outstanding (millions)
Basic			55.2				61.5				55.5				62.5
Diluted			55.2				61.7				55.5				62.7
Cash flows from operating activities			121				108				276				282
Additions to property, plant and equipment			28				56				130				157

As a result of changes in our organization structure, we have changed our segment reporting. Starting January 1, 2020, our materials business EAM Corporation, (“EAM”), a manufacturer of high quality airlaid and ultrathin laminated cores, previously reported under our Personal Care segment is now presented under our Pulp and Paper segment. Prior period segment results have been restated to the new segment presentation with no significant impact on segment results. There were no changes to our consolidated sales or operating income.

Domtar Corporation Consolidated Statements of Earnings (Loss) (In millions of dollars, unless otherwise noted)
		For the three months ended								For the nine months ended
		September 30, 2020				September 30, 2019				September 30, 2020				September 30, 2019
		(Unaudited)
		$				$				$				$
Sales			1,124				1,283				3,414				3,976
Operating expenses
Cost of sales, excluding depreciation and amortization			911				1,041				2,831				3,172
Depreciation and amortization			71				72				214				219
Selling, general and administrative			99				94				294				322
Impairment of long-lived assets			111				33				111				58
Closure and restructuring costs			68				11				69				23
Other operating loss (income), net			—				3				(2	)			4
			1,260				1,254				3,517				3,798
Operating (loss) income			(136	)			29				(103	)			178
Interest expense, net			14				12				43				38
Non-service components of net periodic benefit cost			(4	)			(2	)			(13	)			(7	)
(Loss) earnings before income taxes and equity loss			(146	)			19				(133	)			147
Income tax (benefit) expense			(55	)			(1	)			(67	)			28
Equity loss, net of taxes			1				—				2				1
Net (loss) earnings			(92	)			20				(68	)			118
Per common share (in dollars)
Net (loss) earnings
Basic			(1.67	)			0.33				(1.23	)			1.89
Diluted			(1.67	)			0.32				(1.23	)			1.88
Weighted average number of common shares outstanding (millions)
Basic			55.2				61.5				55.5				62.5
Diluted			55.2				61.7				55.5				62.7

Domtar Corporation Consolidated Balance Sheets at (In millions of dollars)
		September 30, 2020				December 31, 2019
		(Unaudited)
		$				$
Assets
Current assets
Cash and cash equivalents			218				61
Receivables, less allowances of $11 and $6			543				577
Inventories			764				786
Prepaid expenses			36				33
Income and other taxes receivable			44				61
Total current assets			1,605				1,518
Property, plant and equipment, net			2,378				2,567
Operating lease right-of-use assets			72				81
Intangible assets, net			573				573
Other assets			163				164
Total assets			4,791				4,903
Liabilities and shareholders' equity
Current liabilities
Bank indebtedness			—				9
Trade and other payables			626				705
Income and other taxes payable			37				23
Operating lease liabilities due within one year			27				28
Long-term debt due within one year			13				1
Total current liabilities			703				766
Long-term debt			1,086				938
Operating lease liabilities			58				69
Deferred income taxes and other			413				479
Other liabilities and deferred credits			320				275
Shareholders' equity
Common stock			1				1
Additional paid-in capital			1,714				1,770
Retained earnings			905				998
Accumulated other comprehensive loss			(409	)			(393	)
Total shareholders' equity			2,211				2,376
Total liabilities and shareholders' equity			4,791				4,903

Domtar Corporation Consolidated Statements of Cash Flows (In millions of dollars)
		For the three months ended								For the nine months ended
		September 30, 2020				September 30, 2019				September 30, 2020				September 30, 2019
		(Unaudited)
		$				$				$				$
Operating activities
Net (loss) earnings			(92	)			20				(68	)			118
Adjustments to reconcile net (loss) earnings to cash flows from operating activities
Depreciation and amortization			71				72				214				219
Deferred income taxes and tax uncertainties			(48	)			2				(60	)			1
Impairment of long-lived assets			111				33				111				58
Stock-based compensation expense			2				2				5				7
Equity loss, net			1				—				2				1
Changes in assets and liabilities, excluding the effect of acquisition of business
Receivables			(4	)			10				38				50
Inventories			10				20				30				(34	)
Prepaid expenses			7				7				9				(4	)
Trade and other payables			74				(35	)			(21	)			(111	)
Income and other taxes			(6	)			(13	)			34				(27	)
Difference between employer pension and other post-retirement contributions and pension and other post-retirement expense			(5	)			(4	)			(6	)			(3	)
Other assets and other liabilities			—				(6	)			(12	)			7
Cash flows from operating activities			121				108				276				282
Investing activities
Additions to property, plant and equipment			(28	)			(56	)			(130	)			(157	)
Proceeds from disposals of property, plant and equipment			—				—				—				1
Acquisition of business, net of cash acquired			—				—				(30	)			—
Cash flows used for investing activities			(28	)			(56	)			(160	)			(156	)
Financing activities
Dividend payments			—				(28	)			(51	)			(83	)
Stock repurchase			—				(131	)			(59	)			(139	)
Net change in bank indebtedness			—				(1	)			(10	)			2
Change in revolving credit facility			—				45				(80	)			45
Proceeds from receivables securitization facility			—				70				25				150
Repayments of receivables securitization facility			—				—				(80	)			(110	)
Issuance of long-term debt			—				—				300				—
Repayments of long-term debt			(3	)			—				(3	)			(1	)
Other			1				—				(3	)			(1	)
Cash flows (used for) provided from financing activities			(2	)			(45	)			39				(137	)
Net increase (decrease) in cash and cash equivalents			91				7				155				(11	)
Impact of foreign exchange on cash			3				(2	)			2				(2	)
Cash and cash equivalents at beginning of period			124				93				61				111
Cash and cash equivalents at end of period			218				98				218				98
Supplemental cash flow information
Net cash payments (refund) for:
Interest			19				16				44				39
Income taxes			(1	)			5				(25	)			55

Domtar Corporation
Quarterly Reconciliation of Non-GAAP Financial Measures
(In millions of dollars, unless otherwise noted)

The following table sets forth certain non-U.S. generally accepted accounting principles (“GAAP”) financial metrics identified in bold as “Earnings before items”, “Earnings before items per diluted share”, “EBITDA”, “EBITDA margin”, “EBITDA before items”, “EBITDA margin before items”, “Free cash flow”, “Net debt” and “Net debt-to-total capitalization”. Management believes that the financial metrics are useful to understand our operating performance and benchmark with peers within the industry. The Company calculates “Earnings before items” and “EBITDA before items” by excluding the after-tax (pre-tax) effect of specified items. These metrics are presented as a complement to enhance the understanding of operating results but not in substitution for GAAP results.

						2020																2019
						Q1				Q2				Q3				YTD				Q1				Q2				Q3				Q4				Year
Reconciliation of "Earnings before items" to Net earnings (loss)
		Net earnings (loss)		($)			5				19				(92	)			(68	)			80				18				20				(34	)			84
	(+)	Pension settlement loss		($)			—				—				—				—				—				—				—				22				22
	(+)	Impairment of long-lived assets		($)			—				—				68				68				8				12				26				—				46
	(+)	Closure and restructuring costs		($)			—				1				42				43				3				6				9				14				32
	(=)	Earnings before items		($)			5				20				18				43				91				36				55				2				184
	(/)	Weighted avg. number of common shares outstanding (diluted)		(millions)			56.2				55.3				55.2				55.5				63.2				63.3				61.7				57.3				61.4
	(=)	Earnings before items per diluted share		($)			0.09				0.36				0.33				0.77				1.44				0.57				0.89				0.03				3.00
Reconciliation of "EBITDA" and "EBITDA before items" to Net earnings (loss)
		Net earnings (loss)		($)			5				19				(92	)			(68	)			80				18				20				(34	)			84
	(+)	Equity loss, net of taxes		($)			1				—				1				2				1				—				—				1				2
	(+)	Income tax expense (benefit)		($)			3				(15	)			(55	)			(67	)			24				5				(1	)			(26	)			2
	(+)	Interest expense, net		($)			14				15				14				43				13				13				12				14				52
	(+)	Depreciation and amortization		($)			72				71				71				214				73				74				72				74				293
	(+)	Impairment of long-lived assets		($)			—				—				111				111				10				15				33				—				58
	(=)	EBITDA		($)			95				90				50				235				201				125				136				29				491
	(/)	Sales		($)			1,278				1,012				1,124				3,414				1,376				1,317				1,283				1,244				5,220
	(=)	EBITDA margin		(%)			7	%			9	%			4	%			7	%			15	%			9	%			11	%			2	%			9	%
		EBITDA		($)			95				90				50				235				201				125				136				29				491
	(+)	Pension settlement loss		($)			—				—				—				—				—				—				—				30				30
	(+)	Closure and restructuring costs		($)			—				1				68				69				4				8				11				19				42
	(=)	EBITDA before items		($)			95				91				118				304				205				133				147				78				563
	(/)	Sales		($)			1,278				1,012				1,124				3,414				1,376				1,317				1,283				1,244				5,220
	(=)	EBITDA margin before items		(%)			7	%			9	%			10	%			9	%			15	%			10	%			11	%			6	%			11	%
Reconciliation of "Free cash flow" to Cash flows from operating activities
		Cash flows from operating activities		($)			88				67				121				276				55				119				108				160				442
	(-)	Additions to property, plant and equipment		($)			(62	)			(40	)			(28	)			(130	)			(46	)			(55	)			(56	)			(98	)			(255	)
	(=)	Free cash flow		($)			26				27				93				146				9				64				52				62				187
"Net debt-to-total capitalization" computation
		Bank indebtedness		($)			—				—				—								3				3				1				9
	(+)	Long-term debt due within one year		($)			1				13				13								1				1				1				1
	(+)	Long-term debt		($)			1,102				1,089				1,086								853				824				938				938
	(=)	Debt		($)			1,103				1,102				1,099								857				828				940				948
	(-)	Cash and cash equivalents		($)			(152	)			(124	)			(218	)							(94	)			(93	)			(98	)			(61	)
	(=)	Net debt		($)			951				978				881								763				735				842				887
	(+)	Shareholders' equity		($)			2,181				2,277				2,211								2,608				2,619				2,439				2,376
	(=)	Total capitalization		($)			3,132				3,255				3,092								3,371				3,354				3,281				3,263
		Net debt		($)			951				978				881								763				735				842				887
	(/)	Total capitalization		($)			3,132				3,255				3,092								3,371				3,354				3,281				3,263
	(=)	Net debt-to-total capitalization		(%)			30	%			30	%			28	%							23	%			22	%			26	%			27	%

“Earnings before items”, “Earnings before items per diluted share”, “EBITDA”, “EBITDA margin”, “EBITDA before items”, “EBITDA margin before items”, “Free cash flow”, “Net debt” and “Net debt-to-total capitalization” have no standardized meaning prescribed by GAAP and are not necessarily comparable to similar measures presented by other companies and therefore should not be considered in isolation or as a substitute for Net earnings (loss) or any other earnings statement, cash flow statement or balance sheet financial information prepared in accordance with GAAP. It is important for readers to understand that certain items may be presented in different lines by different companies on their financial statements, thereby leading to different measures for different companies.

Domtar Corporation
Quarterly Reconciliation of Non-GAAP Financial Measures – By Segment 2020
(In millions of dollars, unless otherwise noted)

The following table sets forth certain non-U.S. generally accepted accounting principles (“GAAP”) financial metrics identified in bold as “Operating income (loss) before items”, “EBITDA before items” and “EBITDA margin before items” by reportable segment. Management believes that the financial metrics are useful to understand our operating performance and benchmark with peers within the industry. The Company calculates the segmented “Operating income (loss) before items” by excluding the pre-tax effect of specified items. These metrics are presented as a complement to enhance the understanding of operating results but not in substitution for GAAP results.

						Pulp and Paper										Personal Care										Corporate										Total
						Q1'20		Q2'20		Q3'20		Q4'20		YTD		Q1'20		Q2'20		Q3'20		Q4'20		YTD		Q1'20		Q2'20		Q3'20		Q4'20		YTD		Q1'20		Q2'20		Q3'20		Q4'20		YTD
Reconciliation of Operating income (loss) to "Operating income (loss) before items"
		Operating income (loss)		($)		4		3		(140)		—		(133)		20		18		16		—		54		(5)		(7)		(12)		—		(24)		19		14		(136)		—		(103)
	(+)	Impairment of long-lived assets		($)		—		—		111		—		111		—		—		—		—		—		—		—		—		—		—		—		—		111		—		111
	(+)	Closure and restructuring costs		($)		—		1		67		—		68		—		—		—		—		—		—		—		1		—		1		—		1		68		—		69
	(=)	Operating income (loss) before items		($)		4		4		38		—		46		20		18		16		—		54		(5)		(7)		(11)		—		(23)		19		15		43		—		77
Reconciliation of "Operating income (loss) before items" to "EBITDA before items"
		Operating income (loss) before items		($)		4		4		38		—		46		20		18		16		—		54		(5)		(7)		(11)		—		(23)		19		15		43		—		77
	(+)	Non-service components of net periodic benefit cost		($)		4		6		4		—		14		—		—		—		—		—		—		(1)		—		—		(1)		4		5		4		—		13
	(+)	Depreciation and amortization		($)		58		56		56		—		170		14		15		15		—		44		—		—		—		—		—		72		71		71		—		214
	(=)	EBITDA before items		($)		66		66		98		—		230		34		33		31		—		98		(5)		(8)		(11)		—		(24)		95		91		118		—		304
	(/)	Sales		($)		1,031		802		899		—		2,732		266		229		243		—		738		—		—		—		—		—		1,297		1,031		1,142		—		3,470
	(=)	EBITDA margin before items		(%)		6%		8%		11%		—		8%		13%		14%		13%		—		13%		—		—		—		—		—		7%		9%		10%		—		9%

“Operating income (loss) before items”, “EBITDA before items” and “EBITDA margin before items” have no standardized meaning prescribed by GAAP and are not necessarily comparable to similar measures presented by other companies and therefore should not be considered in isolation or as a substitute for Operating income (loss) or any other earnings statement, cash flow statement or balance sheet financial information prepared in accordance with GAAP. It is important for readers to understand that certain items may be presented in different lines by different companies on their financial statements, thereby leading to different measures for different companies.

Domtar Corporation
Quarterly Reconciliation of Non-GAAP Financial Measures – By Segment 2019
(In millions of dollars, unless otherwise noted)

The following table sets forth certain non-U.S. generally accepted accounting principles (“GAAP”) financial metrics identified in bold as “Operating income (loss) before items”, “EBITDA before items” and “EBITDA margin before items” by reportable segment. Management believes that the financial metrics are useful to understand our operating performance and benchmark with peers within the industry. The Company calculates the segmented “Operating income (loss) before items” by excluding the pre-tax effect of specified items. These metrics are presented as a complement to enhance the understanding of operating results but not in substitution for GAAP results.

						Pulp and Paper										Personal Care										Corporate										Total
						Q1'19		Q2'19		Q3'19		Q4'19		Year		Q1'19		Q2'19		Q3'19		Q4'19		Year		Q1'19		Q2'19		Q3'19		Q4'19		Year		Q1'19		Q2'19		Q3'19		Q4'19		Year
Reconciliation of Operating income (loss) to "Operating income (loss) before items"
		Operating income (loss)		($)		144		62		31		(11)		226		(8)		(18)		2		8		(16)		(21)		(10)		(4)		(12)		(47)		115		34		29		(15)		163
	(+)	Impairment of long-lived assets		($)		—		—		32		—		32		10		15		1		—		26		—		—		—		—		—		10		15		33		—		58
	(+)	Closure and restructuring costs		($)		—		—		5		17		22		4		8		6		2		20		—		—		—		—		—		4		8		11		19		42
	(=)	Operating income (loss) before items		($)		144		62		68		6		280		6		5		9		10		30		(21)		(10)		(4)		(12)		(47)		129		57		73		4		263
Reconciliation of "Operating income (loss) before items" to "EBITDA before items"
		Operating income (loss) before items		($)		144		62		68		6		280		6		5		9		10		30		(21)		(10)		(4)		(12)		(47)		129		57		73		4		263
	(+)	Pension settlement loss		($)		—		—		—		30		30		—		—		—		—		—		—		—		—		—		—		—		—		—		30		30
	(+)	Non-service components of net periodic benefit cost		($)		3		3		2		(28)		(20)		—		—		—		—		—		—		(1)		—		(2)		(3)		3		2		2		(30)		(23)
	(+)	Depreciation and amortization		($)		58		59		57		57		231		15		15		15		17		62		—		—		—		—		—		73		74		72		74		293
	(=)	EBITDA before items		($)		205		124		127		65		521		21		20		24		27		92		(21)		(11)		(4)		(14)		(50)		205		133		147		78		563
	(/)	Sales		($)		1,157		1,106		1,079		1,027		4,369		239		228		219		234		920		—		—		—		—		—		1,396		1,334		1,298		1,261		5,289
	(=)	EBITDA margin before items		(%)		18%		11%		12%		6%		12%		9%		9%		11%		12%		10%		—		—		—		—		—		15%		10%		11%		6%		11%

“Operating income (loss) before items”, “EBITDA before items” and “EBITDA margin before items” have no standardized meaning prescribed by GAAP and are not necessarily comparable to similar measures presented by other companies and therefore should not be considered in isolation or as a substitute for Operating income (loss) or any other earnings statement, cash flow statement or balance sheet financial information prepared in accordance with GAAP. It is important for readers to understand that certain items may be presented in different lines by different companies on their financial statements, thereby leading to different measures for different companies.

As a result of changes in our organization structure, we have changed our segment reporting. Starting January 1, 2020, our materials business EAM, a manufacturer of high quality airlaid and ultrathin laminated cores, previously reported under our Personal Care segment is now presented under our Pulp and Paper segment. Prior period segment results have been restated to the new segment presentation with no significant impact on segment results. There were no changes to our consolidated sales or operating income.

Domtar Corporation Supplemental Segmented Information (In millions of dollars, unless otherwise noted)
				2020																2019
				Q1				Q2				Q3				YTD				Q1				Q2				Q3				Q4				Year
Pulp and Paper Segment
Sales		($)			1,031				802				899				2,732				1,157				1,106				1,079				1,027				4,369
Operating income (loss)		($)			4				3				(140	)			(133	)			144				62				31				(11	)			226
Depreciation and amortization		($)			58				56				56				170				58				59				57				57				231
Impairment of long-lived assets		($)			—				—				111				111				—				—				32				—				32
Paper
Paper Production		('000 ST)			648				436				524				1,608				757				697				653				619				2,726
Paper Shipments - Manufactured		('000 ST)			679				459				550				1,688				736				681				672				656				2,745
Communication Papers		('000 ST)			569				366				449				1,384				615				567				563				554				2,299
Specialty and Packaging Papers		('000 ST)			110				93				101				304				121				114				109				102				446
Paper Shipments - Sourced from 3rd parties		('000 ST)			22				12				16				50				23				21				25				24				93
Paper Shipments - Total		('000 ST)			701				471				566				1,738				759				702				697				680				2,838
Pulp
Pulp Shipments(a)		('000 ADMT)			389				427				396				1,212				349				370				416				404				1,539
Pulp Shipments mix(b):
Hardwood Kraft Pulp		(%)			3	%			2	%			4	%			3	%			2	%			2	%			5	%			5	%			4	%
Softwood Kraft Pulp		(%)			52	%			57	%			62	%			57	%			53	%			56	%			55	%			54	%			54	%
Fluff Pulp		(%)			45	%			41	%			34	%			40	%			45	%			42	%			40	%			41	%			42	%
Personal Care Segment
Sales		($)			266				229				243				738				239				228				219				234				920
Operating income (loss)		($)			20				18				16				54				(8	)			(18	)			2				8				(16	)
Depreciation and amortization		($)			14				15				15				44				15				15				15				17				62
Impairment of long-lived assets		($)			—				—				—				—				10				15				1				—				26
Average Exchange Rates		$US / $CAN			1.344				1.385				1.332				1.354				1.329				1.337				1.321				1.321				1.327
		$CAN / $US			0.744				0.722				0.751				0.739				0.752				0.748				0.757				0.757				0.754
		€ / $US			1.102				1.101				1.170				1.124				1.136				1.124				1.111				1.107				1.120

As a result of changes in our organization structure, we have changed our segment reporting. Starting January 1, 2020, our materials business EAM, a manufacturer of high quality airlaid and ultrathin laminated cores, previously reported under our Personal Care segment is now presented under our Pulp and Paper segment. Prior period segment results have been restated to the new segment presentation with no significant impact on segment results. There were no changes to our consolidated sales or operating income.

^(a) Figures represent Pulp Shipments to third parties.
^(b) Percentages include Pulp Shipments to our Personal Care segment.

Note: the term “ST” refers to a short ton and the term “ADMT” refers to an air dry metric ton.

 

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¹ Non-GAAP financial measure. Refer to the Reconciliation of Non-GAAP Financial Measures in the appendix.