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AbitibiBowater Delivers Ongoing Improvements in Q2 Operating Results Aug 7, 2008 7:00:00 AM
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ABH (TSX, NYSE)
US$
- Annual Synergy Run Rate of Over $270 Million at End of Q2
- Operating Income Improvement of $86 Million, $104 Million
Excluding Special Items
- Newsprint Segment Improves to Break-Even
- Phase 2 Review of Operations Ongoing
>>
MONTREAL, Aug. 7 /CNW Telbec/ -
Second quarter 2008 special items, net of tax, consisted of the following: an $11 million loss relating to foreign currency changes, an $11 million gain on asset sales, a $29 million loss related to asset closures, impairment and severance and a $72 million charge related to tax adjustments. Excluding these special items, the net loss for the quarter would have been $150 million, or $2.60 per diluted share. Reconciliations of non-GAAP measures are contained in Notes 5 and 6 of this release. "Although our financial results remain unacceptable, we did see a significant improvement in our operating performance in the quarter. Our efforts to offset cost pressures with synergies, combined with our announced price increases, should provide a significant improvement in both our operating efficiency and financial performance through the balance of this year," stated President and CEO David J. Paterson. "Recognizing continued market and economic challenges, AbitibiBowater is ready to take all actions it believes necessary, including the elimination of unprofitable production. Also, as our Phase 2 review of operations continues, an important consideration will be the renewal on acceptable terms of the CEP labor agreements of our Canadian operations in 2009." Segment Detail -------------- Coated Papers Income for the coated papers segment of $35 million for the second quarter was essentially flat compared to the first quarter of 2008. EBITDA from the segment was $45 million. The Company's average transaction price for coated papers increased $44 per short ton during the quarter, while average operating costs increased $28 per short ton mainly due to higher energy related costs. The Company is implementing the third quarter price increase of $50 per short ton. Building on the Catawba success, AbitibiBowater is examining options for a future conversion of a newsprint machine to coated mechanical paper. Market Pulp Income for the market pulp segment of $21 million for the second quarter was lower by $10 million compared to the first quarter of 2008. EBITDA was $34 million. The average market pulp transaction price for the Company increased $6 per metric ton, while average operating costs increased $47 per metric ton compared to the first quarter, mainly as a result of higher fiber and energy costs, as well as scheduled annual outages at the Calhoun, Tennessee and Thunder Bay, Ontario facilities. Newsprint For the second quarter, the newsprint segment generated income of $1 million, compared to a loss of $69 million for the first quarter of 2008, while EBITDA improved from $14 million to $81 million. The Company's average transaction price increased $49 per metric ton. Average operating costs decreased $5 per metric ton, compared to the first quarter as a result of mill closures or idling in the first quarter and the realization of significant merger-related synergies. The Company has implemented the previously announced $20 per metric ton per month price increases for newsprint for the first eight months of this year and anticipates implementing the September $20 per metric ton price increase. Specialty Papers The specialty papers segment had a loss of $32 million, compared to a loss of $39 million for the first quarter and EBITDA improved to $37 million. The Company's average transaction price increased $35 per short ton during the quarter, while average operating costs increased $29 per short ton, mainly due to repair spending and higher energy related costs. Wood Products For the second quarter, the wood products segment had a loss of $13 million, compared to a loss of $35 million for the first quarter and EBITDA improved from a loss of $24 million to a loss of $2 million. The average transaction price for the Company increased $9 per thousand board feet, while average operating costs decreased $51 per thousand board feet compared to the first quarter due to continued cost reduction efforts, the idling of higher cost facilities and a $15 million benefit as a result of the sale of log inventory previously subjected to lower of cost or market adjustments. Investor Call ------------- A conference call hosted by Management to discuss Q2 results will be held today at 10:00 AM (Eastern). Interested parties should dial (866) 898-9626 or (514) 868-1042 fifteen minutes before the beginning of the call, which will be webcast at www.abitibibowater.com, under "Webcasts and Presentations" in the "Investors" section. Participants not able to listen to the live conference call can access a replay, which will also be available on the "Investors" section of the Company's website beginning an hour after the conclusion of the call. Replay by phone will be available until August 16, 2008, by dialing (514) 861-2272 (Passcode 3265672 #). About AbitibiBowater -------------------- AbitibiBowater produces a wide range of newsprint, commercial printing papers, market pulp and wood products. It is the eighth largest publicly traded pulp and paper manufacturer in the world. AbitibiBowater owns or operates 27 pulp and paper facilities and 34 wood products facilities located in the United States, Canada, the United Kingdom and South Korea. Marketing its products in more than 90 countries, the Company is also among the world's largest recyclers of old newspapers and magazines, and has more third-party certified sustainable forest land than any other company in the world. AbitibiBowater's shares trade under the stock symbol ABH on both the Forward-Looking Statements -------------------------- Statements in this news release that are not reported financial results or other historical information are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. They include, for example, statements about our efforts to improve operating and financial performance, our plans for future price increases for certain of our products, our Phase 2 Review of Operations, our efforts to reduce costs, increase revenues and profitability, our potential conversion of manufacturing capacity to coated and other value-added papers, and our business outlook, our assessments of market conditions and our strategies for achieving our goals generally. Forward-looking statements may be identified by the use of forward-looking terminology such as the words "should," "would," "could," "may," "expect," "believe," "anticipate," and other terms with similar meaning indicating possible future events or potential impact on the business or stockholders of AbitibiBowater. 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. These risks and uncertainties include, but are not limited to, industry conditions generally and further growth in alternative media, our ability to realize announced price increases, our ability to obtain timely contributions to our cost-reduction initiatives from our unionized and salaried employees, the prices and terms under which we would be able to sell targeted assets, the continued strength of the Canadian dollar against the U.S. dollar, and the costs of raw materials such as energy, chemicals and fiber. In addition, with respect to forward-looking statements relating to the combination of
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ABITIBIBOWATER INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in millions except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
2008 2007(1) 2008 2007(1)
---------- ---------- ---------- ----------
Sales $ 1,696 $ 798 $ 3,424 $ 1,570
Costs and expenses:
Cost of sales, excluding
depreciation,
amortization and cost
of timber harvested 1,293 639 2,696 1,240
Depreciation,
amortization and cost
of timber harvested 187 80 378 160
Distribution costs 189 83 388 158
Selling and
administrative
expenses 90 46 187 95
Closure costs,
impairment and other
related charges 17 - 27 -
Net gain on disposition
of assets(2) (17) (65) (40) (123)
---------- ---------- ---------- ----------
Operating (loss) income (63) 15 (212) 40
---------- ---------- ---------- ----------
Other income (expense):
Interest income 3 2 6 4
Interest expense (203) (48) (332) (95)
Foreign exchange
gain (loss) (16) (17) 25 (20)
Other, net 28 2 18 (2)
---------- ---------- ---------- ----------
(188) (61) (283) (113)
---------- ---------- ---------- ----------
Loss before income taxes
and minority interests (251) (46) (495) (73)
Income tax benefit
(provision)(3) 5 (19) 2 (20)
Minority interests,
net of tax (5) 2 (6) (5)
---------- ---------- ---------- ----------
Net loss $ (251) $ (63) $ (499) $ (98)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net loss per common share:
Basic and diluted(4) $ (4.36) $ (2.09) $ (8.68) $ (3.28)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted-average number
of shares outstanding:
Basic and diluted(4) 57.6 29.9 57.5 29.9
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
ABITIBIBOWATER INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, in millions)
June 30, December 31,
2008 2007
---------- ----------
Assets
Current assets:
Cash and cash equivalents $ 341 $ 195
Accounts receivable, net 805 754
Inventories, net 828 906
Assets held for sale(2) 197 184
Other current assets 108 103
---------- ----------
Total current assets 2,279 2,142
---------- ----------
Timber and timberlands 52 58
Fixed assets, net 5,314 5,707
Goodwill 780 779
Other intangible assets, net 1,164 1,203
Other assets 599 430
---------- ----------
Total assets $ 10,188 $ 10,319
---------- ----------
---------- ----------
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued liabilities $ 1,100 $ 1,206
Short-term bank debt 652 589
Current installments of long-term debt 16 364
Liabilities associated with assets
held for sale(2) 12 19
---------- ----------
Total current liabilities 1,780 2,178
---------- ----------
Long-term debt, net of current installments 5,441 4,695
Pension and other postretirement
benefit obligations 884 936
Other long-term liabilities 240 231
Deferred income taxes 218 230
Minority interests in subsidiaries 150 150
Commitments and contingencies
Shareholders' equity 1,475 1,899
---------- ----------
Total liabilities and shareholders' equity $ 10,188 $ 10,319
---------- ----------
---------- ----------
ABITIBIBOWATER INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in millions)
Six Months Ended
June 30,
------------------------
2008 2007(1)
---------- ----------
Cash flows from operating activities:
Net loss $ (499) $ (98)
Adjustments to reconcile net loss to
net cash from operating activities:
Share-based compensation 7 8
Depreciation, amortization and cost
of timber harvested 378 160
Deferred income taxes (9) 23
Minority interests, net of tax 6 5
Net pension contributions (110) (11)
Net gain on disposition of assets (40) (123)
Amortization of debt discount (premium), net 43 (4)
Gain on extinguishment of debt (31) -
Gain on translation of foreign-currency
denominated debt (15) (17)
Changes in working capital:
Accounts receivable (65) 18
Inventories 56 (34)
Income tax receivables and payables 10 -
Accounts payable and accrued liabilities (97) (15)
Other, net (8) 32
---------- ----------
Net cash used for operating activities (374) (56)
---------- ----------
Cash flows from investing activities:
Cash invested in fixed assets, timber
and timberlands (82) (51)
Disposition of assets, including timber
and timberlands 205 147
Direct acquisition costs related to
the Combination - (12)
Cash received in monetization of
financial instruments 4 -
---------- ----------
Net cash provided by investing activities 127 84
---------- ----------
Cash flows from financing activities:
Cash dividends, including minority interests (7) (23)
Short-term financing 93 8
Short-term financing repayments (18) (8)
Issuance of long-term debt 974 -
Payments of long-term debt (508) (15)
Payment of deferred financing and credit
facility fees (71) -
Increase in restricted cash requirements (70) -
---------- ----------
Net cash provided by (used for)
financing activities 393 (38)
---------- ----------
Net increase (decrease) in cash and
cash equivalents 146 (10)
Cash and cash equivalents:
Beginning of period 195 99
---------- ----------
End of period $ 341 $ 89
---------- ----------
---------- ----------
ABITIBIBOWATER INC.
Notes to the Press Release and Unaudited Consolidated Financial
Statement Information
(1) On October 29, 2007, pursuant to a Combination Agreement and
Agreement and Plan of Merger, dated as of January 29, 2007,
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