Domtar Posts Net Earnings of CDN$2 Million in Second Quarter of 2005
Montreal (ots/PRNewswire)
TICKER SYMBOL: (TSX:DTC, NYSE:DTC)
Domtar Inc. announced today net earnings of $2 million ($0.01 per common share) in the second quarter of 2005 compared to a net loss of $1 million ($0.01 per common share) in the second quarter of 2004 and net earnings of $10 million ($0.04 per common share) in the first quarter of 2005.
SUMMARY OF RESULTS
Q2 2005 Q2 2004 Q1 2005(2)
(In millions of Canadian dollars,
unless otherwise noted)
Sales 1,287 1,346 1,259
Operating profit(1) 31 28 34
Net earnings (loss) 2 (1) 10
Net earnings (loss)
per common share (in dollars) 0.01 (0.01) 0.04
Excluding specified
items(1)
Operating profit 33 33 35
Net earnings (loss) 3 4 9
Net earnings (loss) per common share
(in dollars) 0.01 0.02 0.04
(1) For a discussion on specified items and the use of non-GAAP
measures, see "Notes to the summary of results" in the appendix.
(2) Domtar's results for the first quarter of 2005 include a tax recovery
adjustment of $6 million (or $0.03 per common share) following the
reassessment of a prior year's income taxes by tax authorities."Domtar achieved an operating profit in all business segments as a result of efficiency and cost reduction efforts by employees, an increase in average selling prices for pulp and paper, as well as higher pulp and lumber shipments, despite lower demand in the Papers segment, a weak US dollar and elevated levels of costs for freight, fiber, chemicals and energy," said Raymond Royer, President and Chief Executive Officer of Domtar. "Pressure stemming from these high costs continues to negatively impact our profitability. While Domtar progresses internally on its cost reduction initiatives, we have no indications that the increase in costs will ease in the near term. As such, these higher costs should be reflected over time in the selling prices of our products through inflation adjustments. We will continue to work with our customers to provide tailor-made solutions, notably through our supply chain management system and our expanding Domtar EarthChoice(R) line of socially and environmentally responsible papers," added Mr. Royer.
OPERATIONAL REVIEW
SECOND QUARTER 2005
COMPARED TO FIRST QUARTER 2005
PAPERS Q2 2005 Q1 2005 Variance
(In millions of Canadian dollars)
Operating profit 2 6 (4)
Operating profit,
excluding specified items 4 9 (5)The $5 million decline in operating profit excluding specified items in the Papers segment was mainly attributable to lower paper shipments and higher overall costs, namely higher purchased energy, chemicals and fiber costs. In addition, during the second quarter, certain mills undertook capital and maintenance downtime also contributing to higher overall costs. These factors were partially offset by higher average selling prices for paper and pulp and higher pulp shipments as well as the realization of savings stemming from restructuring activities.
PAPER MERCHANTS Q2 2005 Q1 2005 Variance
(In millions of Canadian dollars)
Operating profit 4 5 (1)The $1 million decline in operating profit in the Paper Merchants segment was mainly attributable to lower margins achieved as a result of higher purchased paper costs not being fully reflected in average paper selling prices.
WOOD Q2 2005 Q1 2005 Variance
(In millions of Canadian dollars)
Operating profit 11 6 5The $5 million improvement in operating profit in the Wood segment was mainly attributable to higher lumber shipments, partially offset by higher duties on softwood lumber exports due to a higher level of shipments being exported to the U.S. As of January 1, 2005, the countervailing and antidumping duties rate has decreased from 27.22% to 20.95%. Since May 22, 2002, Domtar has made and expensed cash deposits of $175 million for export duties.
PACKAGING Q2 2005 Q1 2005 Variance
(In millions of Canadian dollars)
Operating profit 11 13 (2)
Operating profit, excluding specified items 14 11 3The $3 million improvement in operating profit excluding specified items in the Packaging segment (our 50% share of Norampac Inc.) was mainly attributable to higher shipments for corrugated containers, partially offset by lower shipments of containerboard and higher overall costs.
LIQUIDITY AND CAPITAL
SECOND QUARTER 2005
COMPARED TO FIRST QUARTER 2005
FREE CASH FLOW(1) Q2 2005 Q1 2005
(in millions of Canadian dollars,
unless otherwise noted)
Cash flows provided from operating activities
before changes in working capital and other items 90 88
Changes in working capital and other items (52) (122)
Cash flows provided by (used for) operating activities 38 (34)
Net additions to property, plant and equipment (38) (28)
Free cash flow - (62)Free cash flow improved by $62 million in the second quarter of 2005 compared to the first quarter of 2005. This improvement mainly reflects reduced working capital requirements, primarily attributable to inventory, trade and other payables and receivables fluctuations. The first quarter of the year is typically impacted by seasonally high requirements for working capital. These factors were partially offset by increased capital expenditures.
Domtar's net debt-to-total capitalization ratio(1) as at June 30, 2005 stood at 51.1% compared to 49.5% as at December 31, 2004. Domtar's total long-term debt increased by $135 million, largely due to additional net borrowings of $102 million and the negative impact of $33 million attributable to a stronger US dollar (based on month-end foreign exchange rates) on its US dollar denominated debt.
(1) For a discussion on the use of non-GAAP measures, see "Notes to the summary of results" in the appendix.
OUTLOOK
Although the Company did experience slightly higher average selling prices for most of its pulp and paper products in the second quarter of 2005 compared to the first quarter of the year, the current business environment, mainly higher costs and lower demand for our products, is expected to remain challenging for the balance of the year. Despite the challenges that lie ahead, Domtar remains intent on delivering annualized targeted savings of $100 million by the end of 2005. As at June 30, 2005, the Company already stands at 60% of its goal.
FORWARD-LOOKING STATEMENTS
This press release may contain forward looking statements relating to trends in, or representing management's beliefs about, Domtar's future growth , results of operations, performance and business prospects and opportunities .These forward-looking statements are generally denoted by the use of words such as "anticipate", "believe", "expect", "intend", "aim", "target", "plan", "continue", "estimate", "may", "will", "should" and similar expressions. These statements reflect management's current beliefs and are based on information currently available to management. Forward looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to known and unknown risks and uncertainties such as, but not limited to, general economic and business conditions, product selling prices, raw material and operating costs, changes in foreign currency exchange rates, the ability to integrate acquired businesses into existing operations, the ability to realize anticipated cost savings, the performance of manufacturing operations and other factors referenced herein and in Domtar's continuous disclosure filings. These factors should be considered carefully and undue reliance should not be placed on the forward looking statements. Although the forward looking statements are based upon what management believes to be reasonable estimates and assumptions, Domtar cannot ensure that actual results will not be materially different from those expressed or implied by these forward looking statements. Domtar assumes no obligation to update or revise these forward looking statements to reflect new events or circumstances. These risks, uncertainties and other factors include, among other things, those discussed under "Risk Factors" in Domtar's Management's Discussion and Analysis (MD&A).
SECOND QUARTER 2005 RESULTS WEBCAST
You are invited to listen to a live broadcast of the conference call with financial analysts that the Company will be holding today to present its second quarter 2005 results. It will take place at 4:00 p.m. (EDT) on the Domtar corporate website at: www.domtar.com .
Domtar's second quarter 2005 Management's Discussion and Analysis (MD&A) is available on the Domtar corporate website at: www.domtar.com .
DOMTAR IS THE THIRD LARGEST PRODUCER OF UNCOATED FREESHEET PAPER IN NORTH AMERICA. IT IS ALSO A LEADING MANUFACTURER OF BUSINESS PAPERS, COMMERCIAL PRINTING AND PUBLICATION PAPERS, AND TECHNICAL AND SPECIALTY PAPERS. DOMTAR MANAGES ACCORDING TO INTERNATIONALLY RECOGNIZED STANDARDS 18 MILLION ACRES OF FORESTLAND IN CANADA AND THE UNITED STATES, AND PRODUCES LUMBER AND OTHER WOOD PRODUCTS. DOMTAR HAS 10,000 EMPLOYEES ACROSS NORTH AMERICA. THE COMPANY ALSO HAS A 50% INVESTMENT INTEREST IN NORAMPAC INC., THE LARGEST CANADIAN PRODUCER OF CONTAINERBOARD.
APPENDIX
NOTES TO THE SUMMARY OF RESULTS
NOTE I.
SPECIFIED ITEMS
In Domtar's view, specified items are items that do not typify normal operating activities. The following table reconciles operating profit (loss), net earnings (loss) and net earnings (loss) per share, determined in accordance with GAAP(x), to operating profit (loss), net earnings (loss) and net earnings (loss) per share excluding specified items.
Q2 2005 Q2 2004
(In millions of Canadian dollars,
unless otherwise noted)
Net
Net earnings
earnings (loss)
per share Net per share
Operating Net (in Operating earnings (in
profit earnings dollars) profit (loss) dollars)
As per GAAP(x) 31 2 0.01 28 (1) (0.01)
Specified items:
Sales of
property,
plant and
equipment(a) (4) (3) - -
Closure and
restructuring
costs(b) 10 6 - -
Unrealized
mark-to-market
gains or
losses(c) (1) (1) 5 3
Foreign exchange
impact
on long-term
debt(d) - 1 - 2
Insurance
recoveries(e) (3) (2) - -
2 1 - 5 5 0.03
Excluding
specified items 33 3 0.01 33 4 0.02
Q1 2005
Net
earnings
per share
Operating Net (in
profit earnings dollars)
As per GAAP(x) 34 10 0.04
Specified items:
Sales of property, plant and
equipment(a) (3) (3)
Closure and
restructuring costs(b) 6 4
Unrealized
mark-to-market
gains or losses(c) (2) (1)
Foreign exchange impact
on long-term debt(d) - (1)
Insurance recoveries(e) - -
1 (1) -
Excluding specified items 35 9 0.04
(x) Except for operating profit which is a non-GAAP measure. See note 2.
a) Sales of property, plant and equipment
Domtar's results include gains or losses on sales of property, plant
and equipment. These gains or losses are presented under "Selling,
general and administrative" expenses in the financial statements.
b) Closure and restructuring costs
Domtar's results include closure and restructuring charges. These
charges are presented under "Closure and restructuring costs" in the
financial statements.
c) Unrealized mark-to-market gains or losses
Domtar's results include unrealized mark-to-market gains or losses on
commodity swap contracts and foreign exchange contracts not considered
as hedges for accounting purposes. Such gains or losses are presented
under "Selling, general and administrative" expenses in the financial
statements.
d) Foreign exchange impact on long-term debt
Domtar's results include foreign exchange gains or losses on the
translation of a portion of its long-term debt. Such gains or losses
are presented under "Financing expenses" in the financial statements.
e) Insurance recoveries
Domtar's results include insurance recoveries. These insurance
recoveries are presented under "Selling, general and administrative"
expenses in the financial statements.NOTE 2.
USE OF NON-GAAP MEASURES
Except where otherwise indicated, all financial information reflected herein is determined on the basis of Canadian GAAP.
Operating profit (loss) is a non-GAAP measure that is calculated within Domtar's financial statements. Domtar focuses on operating profit (loss) as this measure enables it to compare its results between periods without regard to debt service or income taxes.
Operating profit (loss) excluding specified items, net earnings (loss) excluding specified items and net earnings (loss) per common share excluding specified items are non-GAAP measures. Measures excluding specified items are used in evaluating the Company's performance between periods without regard to specified items that adversely or positively affected its GAAP measures.
Free cash flow is a non-GAAP measure that is defined as the amount by which cash flows provided from operating activities, as determined in accordance with GAAP, exceed net additions to property, plant and equipment, as determined in accordance with GAAP. Free cash flow is used in evaluating the Company's ability to service its debt and pay dividends to its shareholders.
Net debt-to-total capitalization ratio is a non-GAAP measure that is calculated as long-term debt and bank indebtedness, net of cash and cash equivalents, to the sum of net debt and shareholders' equity. Domtar's management tracks this ratio on a regular basis in order to assess its debt position.
The above non-GAAP measures 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. Domtar believes that it would be useful for investors and other users to be aware of these measures so they can better assess the Company's performance.
Consolidated Financial
Statements
Three months ended Six months ended
June 30 June 30
CONSOLIDATED EARNINGS 2005 2005 2004 2005 2005 2004
(In millions of Canadian ---- (Unaudited) ---- ---- (Unaudited) ----
dollars, unless US$ $ $ US$ $ $
otherwise noted) (NOTE 3) (NOTE 3)
Sales 1,050 1,287 1,346 2,077 2,546 2,571
Operating expenses
Cost of sales 889 1,089 1,146 1,761 2,159 2,236
Selling, general
and administrative 51 62 78 99 121 147
Amortization 77 95 94 151 185 185
Closure and
restructuring costs
(NOTE 5) 8 10 - 13 16 8
---------------------- ----------------------
1,025 1,256 1,318 2,024 2,481 2,576
---------------------- ----------------------
Operating profit (loss) 25 31 28 53 65 (5)
Financing expenses 32 39 41 60 73 80
Amortization of deferred
gain (1) (1) (1) (2) (2) (2)
---------------------- ----------------------
Loss before income taxes (6) (7) (12) (5) (6) (83)
Income tax recovery (8) (9) (11) (15) (18) (38)
---------------------- ----------------------
Net earnings (loss) 2 2 (1) 10 12 (45)
---------------------- ----------------------
---------------------- ----------------------
Per common share
(in dollars)(NOTE 6)
Net earnings (loss)
Basic 0.01 0.01 (0.01) 0.04 0.05 (0.20)
Diluted 0.01 0.01 (0.01) 0.04 0.05 (0.20)
Weighted average number
of common shares
outstanding (millions)
Basic 229.6 229.6 228.6 229.5 229.5 228.4
Diluted 230.7 230.7 228.6 230.6 230.6 228.4
Three months ended Six months ended
June 30 June 30
CONSOLIDATED RETAINED 2005 2005 2004 2005 2005 2004
EARNINGS
(In millions of Canadian ---- (Unaudited) ---- ---- (Unaudited) ----
dollars, unless US$ $ $ US$ $ $
otherwise noted) (NOTE 3) (NOTE 3)
Retained earnings at
beginning of period -
as reported 333 408 452 336 412 512
Cumulative effect of
change in accounting
policy - - - - - (3)
---------------------- ----------------------
Retained earnings at
beginning of period -
as restated 333 408 452 336 412 509
Net earnings (loss) 2 2 (1) 10 12 (45)
Dividends on common shares (12) (14) (14) (23) (28) (27)
Dividends on preferred
shares (1) (1) (1) (1) (1) (1)
---------------------- ----------------------
Retained earnings at end
of period 322 395 436 322 395 436
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED BALANCE June 30 June 30 December 31
SHEETS As at 2005 2005 2004
(In millions of Canadian dollars, --------- (Unaudited) ---------
unless otherwise noted) US$ $ $
(NOTE 3)
Assets
Current assets
Cash and cash equivalents 57 70 52
Receivables 216 265 233
Inventories 649 796 723
Prepaid expenses 19 23 12
Income and other taxes receivable 15 18 17
Future income taxes 69 84 87
1,025 1,256 1,124
Property, plant and equipment 3,364 4,123 4,215
Goodwill 68 84 84
Other assets 245 300 265
4,702 5,763 5,688
Liabilities and shareholders' equity
Current liabilities
Bank indebtedness 24 29 22
Trade and other payables 509 624 654
Income and other taxes payable 27 33 32
Long-term debt due within one year 1 2 8
561 688 716
Long-term debt 1,768 2,167 2,026
Future income taxes 441 540 557
Other liabilities and deferred credits 268 328 343
Shareholders' equity
Preferred shares 30 37 39
Common shares 1,452 1,780 1,775
Contributed surplus 10 12 10
Retained earnings 322 395 412
Accumulated foreign currency
translation adjustments (NOTE 9) (150) (184) (190)
1,664 2,040 2,046
4,702 5,763 5,688
The accompanying notes are an integral part of the consolidated financial
statements
Three months ended Six months ended
June 30 June 30
CONSOLIDATED CASH FLOWS 2005 2005 2004 2005 2005 2004
(In millions of Canadian ---- (Unaudited) ---- ---- (Unaudited) ----
dollars, unless US$ $ $ US$ $ $
otherwise noted) (NOTE 3) (NOTE 3)
Operating activities
Net earnings (loss) 2 2 (1) 10 12 (45)
Non-cash items:
Amortization and
write-down of property,
plant and equipment
(NOTE 5) 79 97 94 153 187 185
Future income taxes (11) (13) (13) (21) (26) (43)
Amortization of
deferred gain (1) (1) (1) (2) (2) (2)
Closure and restructuring
costs, excluding write-down
of property, plant and
equipment (NOTE 5) 6 8 - 11 14 8
Other (2) (3) 4 (6) (7) (3)
-------------------- --------------------
73 90 83 145 178 100
-------------------- --------------------
Changes in working capital
and other items
Receivables 8 10 (2) (26) (32) (99)
Inventories 3 3 32 (56) (69) 14
Prepaid expenses (2) (2) 5 (8) (10) (9)
Trade and other payables (35) (43) (46) (14) (17) (26)
Income and other taxes - - (3) (1) (1) 6
Early settlement of
interest rate swap
contracts (NOTE 8) - - - - - 20
Other (6) (7) 11 (14) (17) 5
Payments of closure and
restructuring costs (10) (13) (4) (23) (28) (4)
-------------------- --------------------
(42) (52) (7) (142) (174) (93)
-------------------- --------------------
Cash flows provided from
operating activities 31 38 76 3 4 7
-------------------- --------------------
Investing activities
Additions to property, plant
and equipment (38) (47) (51) (65) (80) (95)
Proceeds from disposals
of property, plant and
equipment 7 9 1 11 14 4
Business acquisition (NOTE 4) - - (8) - - (8)
Other 1 1 - (2) (3) -
-------------------- --------------------
Cash flows used for
investing activities (30) (37) (58) (56) (69) (99)
-------------------- --------------------
Financing activities
Dividend payments (11) (14) (14) (23) (28) (28)
Change in bank indebtedness 14 17 4 7 8 8
Change in revolving bank
credit, net of expenses 17 21 (6) 155 190 134
Issuance of long-term debt,
net of expenses - - - - - 1
Repayment of long-term debt (1) (1) - (73) (90) (4)
Common shares issued, net
of expenses 1 1 6 3 4 13
Redemptions of preferred
shares (1) (1) (1) (2) (2) (2)
-------------------- --------------------
Cash flows provided from
(used for) financing
activities 19 23 (11) 67 82 122
-------------------- --------------------
Net increase in cash and
cash equivalents 20 24 7 14 17 30
Translation adjustments
related to cash and cash
equivalents - - (1) 1 1 (1)
Cash and cash equivalents
at beginning of period 37 46 71 42 52 48
-------------------- --------------------
Cash and cash equivalents
at end of period 57 70 77 57 70 77
The accompanying notes are an integral part of the consolidated financial
statements.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SECOND QUARTER 2005 (IN MILLIONS OF CANADIAN DOLLARS, UNLESS OTHERWISE NOTED)
NOTE I.
BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited interim consolidated financial statements, prepared in accordance with Canadian generally accepted accounting principles, contain all adjustments necessary to present fairly Domtar Inc.'s (Domtar) financial position as at June 30, 2005 and December 31, 2004, as well as its results of operations and its cash flows for the three months and six months ended June 30, 2005 and 2004.
While management believes that the disclosures presented are adequate, these unaudited interim consolidated financial statements and notes should be read in conjunction with Domtar's annual consolidated financial statements.
These unaudited interim consolidated financial statements follow the same accounting policies as the most recent annual consolidated financial statements, except as described in Note 2.
NOTE 2.
ACCOUNTING CHANGE
CONSOLIDATION OF VARIABLE INTEREST ENTITIES
In June 2003, the Canadian Institute of Chartered Accountants (CICA) issued Accounting Guideline No. 15 (AcG-15) "Consolidation of Variable Interest Entities." AcG-15 applies to annual and interim periods beginning on or after November 1, 2004. The application of this guideline does not have an impact on Domtar's unaudited interim consolidated financial statements under Canadian GAAP.
NOTE 3.
UNITED STATES DOLLAR AMOUNTS
The unaudited interim consolidated financial statements are expressed in Canadian dollars and, solely for the convenience of the reader, the 2005 unaudited interim consolidated financial statements and the tables of certain related notes have been translated into U.S. dollars at the June 2005 month-end rate of CAN$1.00 equals US$0.8159. This translation should not be construed as an application of the recommendations relating to the accounting for foreign currency translation, but rather as supplemental information for the reader.
NOTE 4.
BUSINESS ACQUISITION
On April 2, 2004, Norampac (a 50-50 joint venture with Cascades Inc.) acquired the shares of Johnson Corrugated Products Corp., a corrugated products plant in Thompson, Connecticut. The Corporation's proportionate share of the consideration is approximately $8 million (US$6 million) excluding fees related to the transaction.
NOTE 5.
CLOSURE AND RESTRUCTURING COSTS
In 2004, Domtar's management committed to workforce reduction and restructuring plans throughout the Corporation in Canada and the United States. In addition to the reconciling items in the table below, for the three months and six months ended June 30, 2005, training costs of $1 million and $2 million, respectively, and other closure related costs of $3 million and $6 million, respectively, were incurred.
During the second quarter of 2005, Norampac decided to close a corrugated products plant, resulting in a write-down of $2 million of property, plant and equipment, representing the Corporation's proportionate share.
The following table provides a reconciliation of all closure and restructuring cost provisions:
June 30 June 30 December 31
2005 2005 2004
--------- (Unaudited) --------
US$ $ $
(NOTE 3)
Balance at beginning of period 31 38 13
Severance payments (16) (20) (12)
Reversal of provision (1) (1) (10)
Proceeds on disposition - - 1
Additions
Labor costs 6 7 45
Dismantling costs - - 1
Balance at end of period 20 24 38
NOTE 6.
_________________
EARNINGS (LOSS) PER SHARE
The following table provides the reconciliation between basic and diluted
earnings (loss) per share:
Three months ended Six months ended
June 30 June 30
2005 2005 2004 2005 2005 2004
---- (Unaudited) ---- ---- (Unaudited) ----
US$ $ $ US$ $ $
(NOTE 3) (NOTE 3)
Net earnings (loss) 2 2 (1) 10 12 (45)
Dividend requirements of
preferred shares 1 1 1 1 1 1
------------------------ ----------------------
Net earnings (loss)
applicable to common shares 1 1 (2) 9 11 (46)
Weighted average number of
common shares outstanding
(millions) 229.6 229.6 228.6 229.5 229.5 228.4
Effect of dilutive stock
options (millions) 1.1 1.1 - 1.1 1.1 -
------------------------ ----------------------
Weighted average number
of diluted common shares
outstanding (millions) 230.7 230.7 228.6 230.6 230.6 228.4
------------------------ ----------------------
Basic earnings (loss)
per share (in dollars) 0.01 0.01 (0.01) 0.04 0.05 (0.20)
Diluted earnings (loss)
per share (in dollars) 0.01 0.01 (0.01) 0.04 0.05 (0.20)
The following table provides the securities that could potentially dilute
basic earnings (loss) per share in the future but were not included in
the computation of diluted earnings (loss) per share because to do so
would have been anti-dilutive for the periods presented:
June 30 June 30
2005 2004
Number of shares
Options 4,890,136 5,537,659
Bonus shares - 230,393
Rights 84,500 93,000NOTE 7.
BANK FACILITY
On March 3, 2005, the Corporation entered into a new five-year unsecured revolving credit facility of US$700 million. This new facility replaced the prior credit facility, which consisted of a US$500 million unsecured revolving credit facility and a US$70 million unsecured term loan that was scheduled to mature in July 2006.
Borrowings under this new unsecured revolving credit facility bear interest at a rate based on the Canadian dollar bankers' acceptance or U.S. dollar LIBOR rate, each with an added spread that varies with Domtar's credit rating, or on the Canadian or U.S. prime rate. This new credit facility also requires commitment fees that vary with Domtar's credit rating.
NOTE 8.
INTEREST RATE RISK
In the first quarter of 2004, the Corporation terminated, prior to maturity, interest rate swap contracts for net cash proceeds of $20 million (US$15 million). The resulting gain of $17 million recorded under "Other liabilities and deferred credits" is being amortized over the original designated hedging period of the underlying 5.375% notes due in November 2013.
NOTE 9.
ACCUMULATED FOREIGN CURRENCY
TRANSLATION ADJUSTMENTS
June 30 June 30 December 31
2005 2005 2004
--------- (Unaudited) --------
US$ $ $
(NOTE 3)
Balance at beginning of period (155) (190) (145)
Effect of changes in exchange rates
during the period:
On net investment in self-sustaining
foreign subsidiaries 25 31 (141)
On certain long-term debt denominated
in foreign currencies designated as
a hedge of net investment in
self-sustaining foreign subsidiaries (26) (32) 117
Future income taxes thereon 6 7 (21)
Balance at end of period (150) (184) (190)
NOTE 10.
_________________
DEFINED BENEFIT PLANS AND
OTHER EMPLOYEE FUTURE BENEFIT PLANS
Three months ended Six months ended
June 30 June 30
2005 2005 2004 2005 2005 2004
---- (Unaudited) ---- ---- (Unaudited) ---
US$ $ $ US$ $ $
(NOTE 3) (NOTE 3)
Net periodic benefit
cost for defined
benefit plans 9 11 13 16 20 22
Net periodic benefit cost
for other employee future
benefit plans 2 3 3 5 6 6NOTE 11.
SEGMENTED DISCLOSURES
Domtar operates in the four reportable segments described below. Each reportable segment offers different products and services and requires different technology and marketing strategies. The following summary briefly describes the operations included in each of Domtar's reportable segments:
- PAPERS - represents the aggregation of the manufacturing and
distribution of business, commercial printing and publication, and
technical and specialty papers, as well as pulp.
- PAPER MERCHANTS - involves the purchasing, warehousing, sale and
distribution of various products made by Domtar and by other
manufacturers. These products include business and printing papers,
graphic arts supplies and certain industrial products.
- WOOD - comprises the manufacturing and marketing of lumber and
wood-based value-added products and the management of forest resources.
- PACKAGING - comprises the Corporation's 50% ownership interest in
Norampac, a company that manufactures and distributes containerboard
and corrugated products.Domtar evaluates performance based on operating profit, which represents sales, reflecting transfer prices between segments at fair value, less allocable expenses before financing expenses and income taxes.
Three months ended Six months ended
June 30 June 30
SEGMENTED DATA 2005 2005 2004 2005 2005 2004
---- (Unaudited) ---- ---- (Unaudited) ----
US$ $ $ US$ $ $
(NOTE 3) (NOTE 3)
Sales
Papers 626 768 836 1,252 1,534 1,624
Paper Merchants 212 260 268 423 519 531
Wood 164 201 191 315 386 334
Packaging 139 170 163 269 330 309
------------------------ ----------------------
Total for reportable
segments 1,141 1,399 1,458 2,259 2,769 2,798
Intersegment sales
- Papers (59) (73) (75) (121) (148) (153)
Intersegment sales
- Wood (31) (38) (35) (59) (72) (70)
Intersegment sales
- Packaging (1) (1) (2) (2) (3) (4)
------------------------ ----------------------
Consolidated sales 1,050 1,287 1,346 2,077 2,546 2,571
------------------------ ----------------------
------------------------ ----------------------
Operating profit (loss)
Papers 2 2 5 6 8 (33)
Paper Merchants 3 4 5 7 9 11
Wood 9 11 6 14 17 (7)
Packaging 9 11 8 20 24 19
------------------------ ----------------------
Total for reportable
segments 23 28 24 47 58 (10)
Corporate 2 3 4 6 7 5
------------------------ ----------------------
Consolidated operating
profit (loss) 25 31 28 53 65 (5)NOTE 12.
COMPARATIVE FIGURES
To conform with the basis of presentation adopted in the current period, certain figures previously reported have been reclassified.
Contact:
For further information: Christian Tardif, Manager, Corporate and
Financial Communications, +1-(514)-848-5515,
christian.tardif@domtar.com ; Source: Daniel Buron, Senior
Vice-President and Chief Financial Officer, +1-(514)-848-5234,
daniel.buron@domtar.com ; To request a free copy of this
organization's annual report, please go to http://www.newswire.ca and
click on reports@cnw