Domtar Corporation reports preliminary fourth quarter and fiscal year 2013 financial results

Acquired Laboratorios Indas, Spanish market leader in adult incontinence - a key milestone in the development of Domtar's Personal Care business
(All financial information is in U.S. dollars, and all earnings per share results are diluted, unless otherwise noted.)

• Fourth quarter 2013 net earnings of $2.00 per share, earnings before items¹ of $2.09 per share
• Announced and completed on January 2, 2014, the acquisition of Laboratorios Indas, Spain's largest manufacturer and marketer of adult incontinence products
• Completed a long-term financing with the successful issuance of 30-year senior notes

TICKER SYMBOL
(NYSE: UFS) (TSX: UFS)

MONTREAL, Feb. 7, 2014 /PRNewswire/ - Domtar Corporation (NYSE: UFS) (TSX: UFS) today reported net earnings of $65 million ($2.00 per share) for the fourth quarter of 2013 compared to net earnings of $27 million ($0.82 per share) for the third quarter of 2013 and net earnings of $19 million ($0.54 per share) for the fourth quarter of 2012. Sales for the fourth quarter of 2013 were $1,359 million.

Excluding items listed below, the Company had earnings before items¹ of $68 million ($2.09 per share) for the fourth quarter of 2013 compared to earnings before items¹ of $41 million ($1.25 per share) for the third quarter of 2013 and earnings before items¹ of $46 million ($1.31 per share) for the fourth quarter of 2012.

Fourth quarter 2013 items:

• Net gain on sale of property, plant and equipment and business for $5 million ($4 million after tax); and
• Charge of $7 million ($7 million after tax) for impairment of property, plant and equipment.

Third quarter 2013 items:

• Loss on sale of business of $19 million ($12 million after tax); and
• Negative impact of purchase accounting of $2 million ($2 million after tax).

Fourth quarter 2012 items:

• Closure and restructuring costs of $27 million ($18 million after tax),
• Charge of $12 million ($8 million after tax) related to the impairment and write-down of property, plant and equipment and intangible assets; and
• Net losses on the sale of property, plant and equipment of $2 million ($1 million after tax).

Commenting on the fourth quarter results, John D. Williams, President and Chief Executive Officer, said, "Our solid results in the fourth quarter were mostly in line with our expectations in all of our businesses. Lower planned maintenance shutdowns and the continued momentum in pulp markets drove quarter over quarter earnings improvement."

FISCAL YEAR 2013 HIGHLIGHTS

For fiscal year 2013, net earnings amounted to $91 million ($2.72 per share) compared to net earnings of $172 million ($4.76 per share) for fiscal year 2012. The Company had earnings before items¹ of $158 million ($4.73 per share) for fiscal 2013 compared to earnings before items¹ of $233 million ($6.45 per share) for fiscal 2012. Sales amounted to $5.4 billion for fiscal year 2013.

"In 2013, we continued to transform the earnings profile of our company through further acquisitions in personal care, strategic investments in the pulp and paper business and the disposal of non-core assets. The recent acquisition of Indas represents a significant step in building out our personal care business, and will further help us achieve our goal of $300-$500 million of EBITDA from growing business by 2017. We have made meaningful progress towards this goal and the businesses we have acquired so far bring us closer to the lower end of our target. The continued execution of our strategy will drive earnings and cash flow growth in 2014 and beyond," added Mr. Williams.

QUARTERLY REVIEW

Operating income before items¹ was $95 million in the fourth quarter of 2013 compared to an operating income before items¹ of $70 million in the third quarter of 2013. Depreciation and amortization totaled $95 million in the fourth quarter of 2013.

The increase in operating income before items¹ in the fourth quarter of 2013 was the result of lower costs for maintenance, higher average selling prices for paper and pulp, favorable exchange rates, higher productivity in pulp, and higher paper shipments. These factors were partially offset by higher raw material costs and an unfavorable mix of paper sold.

When compared to the third quarter of 2013, manufactured paper shipments increased 0.4% and pulp shipments increased 7.1%. The shipments-to-production ratio for paper was 100% in the fourth quarter of 2013, compared to 98% in the third quarter of 2013. Lack-of-order downtime and machine slowdowns in pulp and paper totaled 20,000 short tons in the fourth quarter of 2013. Paper inventories remained unchanged when compared to the end of September.

LIQUIDITY AND CAPITAL

In 2013, cash flow provided from operating activities amounted to $411 million and capital expenditures were $242 million, resulting in free cash flow¹ of $169 million for fiscal 2013. Domtar's net debt-to-total capitalization ratio¹ stood at 24% at December 31, 2013 compared to 16% at December 31, 2012.

Domtar returned a total of $250 million to its shareholders through a combination of dividends and share buybacks in fiscal 2013. Domtar repurchased a total of 11,170,506 shares of common stock at an average price of $78.48 since the implementation of its stock repurchase program in May 2010. At the end of the fourth quarter of 2013, Domtar had $121 million remaining under this program.

OUTLOOK

In 2014, we expect our paper shipments to be in-line with 2013 while we expect the market demand for uncoated free sheet to decline with long-term secular trends. Our paper prices will benefit from the implementation of recently announced price increases. We expect softwood pulp markets to maintain positive momentum but new scheduled industry hardwood pulp capacity makes the latter part of the year more uncertain. Personal care will continue to see earnings growth with the recent acquisition of Indas and with the addition of the new production lines towards the end of the year.

EARNINGS CONFERENCE CALL

The Company will hold a conference call today at 10:00 a.m. (ET) to discuss its fourth quarter and fiscal 2013 financial results. Financial analysts are invited to participate in the call by dialing 1 (866) 321-8231 (toll free - North America) or 1 (416) 642-5213 (International) 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.

A replay will be available by dialing 1 (888) 203-1112 (North America) or 1 (647) 436-0148 (International) using access code 5674179 until February 21, 2014.

About Domtar
Domtar Corporation (NYSE: UFS) (TSX: UFS) designs, manufactures, markets and distributes a wide variety of fiber-based products including communication papers, specialty and packaging papers and absorbent hygiene products. The foundation of its business is a network of world class wood fiber converting assets that produce papergrade, fluff and specialty pulps. The majority of its pulp production is consumed internally to manufacture paper and consumer products. Domtar is the largest integrated marketer of uncoated freesheet paper in North America with recognized brands such as Cougar^®, Lynx^® Opaque Ultra, Husky^® Opaque Offset, First Choice^® and Domtar EarthChoice^®. Domtar is also a leading marketer and producer of a broad line of incontinence care products marketed primarily under the Attends^®, IncoPack and Indasec^® brand names as well as baby diapers. In 2013, Domtar had sales of US$5.4 billion from some 50 countries. The Company employs approximately 10,000 people. To learn more, visit www.domtar.com.

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 changes in customer demand and pricing, changes in manufacturing costs, future acquisitions and divestitures, including facility closings, and the other reasons identified under "Risk Factors" in our Form 10-K for 2012 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.

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

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 presented are frequently used by investors and are useful to evaluate our ability to service debt and our overall credit profile. Management believes these metrics are also useful to measure the operating performance and benchmark with peers within the industry. These metrics are presented as a complement to enhance the understanding of operating results but not in substitution for GAAP results.

The Company calculates "Earnings before items" and "EBITDA before items" by excluding the after-tax (pre-tax) effect of items considered by management as not reflecting our current operations. Management uses these measures, as well as EBITDA and Free cash flow, to focus on ongoing operations and believes that it is useful to investors because it enables them to perform meaningful comparisons between periods. Domtar believes that using this information along with Net earnings provides for a more complete analysis of the results of operations. Net earnings and Cash flow provided from operating activities are the most directly comparable GAAP measures.

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

Domtar Corporation
Quarterly Reconciliation of Non-GAAP Financial Measures - By Segment 2013
(In millions of dollars, unless otherwise noted)

The following table sets forth certain non-U.S. generally accepted accounting principles ("GAAP"), financial metrics identified in bold as "Operating income (loss) before items", "EBITDA before items" and "EBITDA margin before items" by reportable segment. Management believes that the financial metrics presented are frequently used by investors and are useful to measure the operating performance and benchmark with peers within the industry. These metrics are presented as a complement to enhance the understanding of operating results but not in substitution for GAAP results.

The Company calculates the segmented "Operating income (loss) before items" by excluding the pre-tax effect of items considered by management as not reflecting our ongoing operations. Management uses these measures to focus on ongoing operations and believes that it is useful to investors because it enables them to perform meaningful comparisons between periods. Domtar believes that using this information along with Operating income (loss) provides for a more complete analysis of the results of operations. Operating income (loss) by segment is the most directly comparable GAAP measure.

"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 2012
(In millions of dollars, unless otherwise noted)


The following table sets forth certain non-U.S. generally accepted accounting principles ("GAAP"), financial metrics identified in bold as "Operating income (loss) before items", "EBITDA before items" and "EBITDA margin before items" by reportable segment. Management believes that the financial metrics presented are frequently used by investors and are useful to measure the operating performance and benchmark with peers within the industry. These metrics are presented as a complement to enhance the understanding of operating results but not in substitution for GAAP results.

The Company calculates the segmented "Operating income (loss) before items" by excluding the pre-tax effect of items considered by management as not reflecting our ongoing operations. Management uses these measures to focus on ongoing operations and believes that it is useful to investors because it enables them to perform meaningful comparisons between periods. Domtar believes that using this information along with Operating income (loss) provides for a more complete analysis of the results of operations. Operating income (loss) by segment is the most directly comparable GAAP measure.

"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.

SOURCE Domtar Corporation

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