Domtar CORP - FORM 8-K - EX-99.1 - EXHIBIT 99.1

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8-K - FORM 8-K - Domtar CORP	d290889d8k.htm

Exhibit 99.1


		395 de Maisonneuve Blvd. West Montreal, QC H3A 1L6



TICKER SYMBOL										MEDIA AND INVESTOR RELATIONS
(NYSE: UFS) (TSX: UFS)										Pascal Bossé Vice-President Corporate Communications and Investor Relations Tel.: 514-848-5938

DOMTAR CORPORATION REPORTS PRELIMINARY FOURTH QUARTER AND FISCAL YEAR 2011 FINANCIAL RESULTS

Good financial results despite softness in global pulp markets

(All financial information is in U.S. dollars, and all earnings per share results are diluted, unless otherwise noted.)

•

Fourth quarter 2011 net earnings of $1.63 per share, earnings before items¹ of $2.49 per share

•

Personal care segment delivers financial performance in line with expectations

•

Share buyback totaled $494 million in 2011; share count reduced by 14% from December 2010

Montreal, February 3, 2012 – Domtar Corporation (NYSE: UFS) (TSX: UFS) today reported net earnings of $61 million ($1.63 per share) for the fourth quarter of 2011 compared to net earnings of $117 million ($2.95 per share) for the third quarter of 2011 and net earnings of $325 million ($7.59 per share) for the fourth quarter of 2010. Sales for the fourth quarter of 2011 amounted to $1.4 billion. Excluding items listed below, the Company had earnings before items¹ of $93 million ($2.49 per share) for the fourth quarter of 2011 compared to earnings before items¹ of $123 million ($3.10 per share) for the third quarter of 2011 and earnings before items¹ of $103 million ($2.41 per share) for the fourth quarter of 2010.

Fourth quarter 2011 items:

•

Closure and restructuring costs of $38 million ($23 million after tax), mostly related to the restructuring of certain U.S. pension benefit plans; and

•

Charge of $12 million ($9 million after tax) related to the impairment and write-down of property, plant and equipment.

Third quarter 2011 items:

•

Gains on the sale of property, plant and equipment of $4 million ($3 million after tax);

•

Charge of $8 million ($4 million after tax) related to the impairment and write-down of property, plant and equipment;

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

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•

Premium paid on debt repurchase of $4 million ($3 million after tax);

•

Closure and restructuring costs of $1 million ($1 million after tax); and

•

Negative impact of purchase accounting of $1 million ($1 million after tax).

Fourth quarter 2010 items:

•

Benefit from cellulosic biofuel producer income tax credit of $127 million;

•

Benefit from reversal of a valuation allowance on Canadian deferred income tax assets of $100 million;

•

Costs for debt repurchase of $7 million ($4 million after tax); and

•

Closure and restructuring costs of $1 million ($1 million after tax).

“Our pulp earnings were affected by the rapid decline in global pulp prices while earnings from our paper business were impacted by the typical seasonal slowdown of the fourth quarter. Nevertheless, our fourth quarter results are good results and I am pleased to see the Attends business perform to expectations,” said John D. Williams, President and Chief Executive Officer.

FISCAL YEAR 2011 HIGHLIGHTS

For fiscal year 2011, net earnings amounted to $365 million ($9.08 per share) compared to net earnings of $605 million ($14.00 per share) for fiscal year 2010. The Company had earnings before items¹ of $452 million ($11.24 per share) for fiscal 2011 compared to earnings before items¹ of $471 million ($10.90 per share) for fiscal 2010. Sales amounted to $5.6 billion for fiscal year 2011.

Commenting on the 2011 performance, Mr. Williams said, “Looking back at 2011, we delivered another strong performance. The second half was slightly more challenging due to the decline in pulp prices however we maintained our volumes. This solid performance enabled us to pursue our commitment to returning a majority of free cash flow to shareholders. In 2011, we returned over $543 million or $13.50 per share, representing 73% of total free cash flow¹, through a combination of share buyback and regular dividends.”

QUARTERLY REVIEW

Operating income before items¹ was $148 million in the fourth quarter of 2011 compared to an operating income before items¹ of $193 million in the third quarter of 2011. Depreciation and amortization totaled $95 million in the fourth quarter of 2011.

In December 2011, Domtar signed a four-year master agreement with the United Steelworkers that covers approximately 3,000 hourly employees at nine different locations in the United States. Per the agreement, Domtar is restructuring the pension plans covering these negotiated employees. This will result in Domtar’s withdrawal from a multi-employer pension plan and the transition of all covered employees not grandfathered under the existing defined-benefit pension plans to a defined-contribution pension plan for future service. As a result, Domtar incurred a $41 million charge recorded as a component of Closure and restructuring costs.

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

2 / 12


(In millions of dollars)	4Q 2011		3Q 2011

Sales	$	1,369	$	1,417

Operating income (loss)

Pulp and Paper segment		92		189

Distribution segment		—		(1	)

Personal Care segment		7		—

Corporate		—		(1	)


Total		99		187

Operating income before items¹		148		193

Depreciation and amortization		95		93

The decrease in operating income before items¹ in the fourth quarter of 2011 was the result of lower average selling prices for pulp, lower shipments for paper and higher energy costs. These factors were partially offset by lower maintenance costs, lower freight costs, the positive impact of a weaker Canadian dollar and the inclusion of Attends’ earnings for a full quarter.

When compared to the third quarter of 2011, paper shipments decreased 6.5% and pulp shipments increased 12.6%. Paper deliveries of Ariva^TM decreased 8% when compared to the third quarter of 2011. The shipments-to-production ratio for paper was 95% in the fourth quarter of 2011, compared to 102% in the third quarter of 2011. Paper inventories increased by 40,000 tons while pulp inventories decreased by 25,000 metric tons as at the end of December, compared to September levels.

LIQUIDITY AND CAPITAL

Cash flow provided from operating activities amounted to $883 million and capital expenditures amounted to $144 million, resulting in free cash flow¹ of $739 million for fiscal 2011. Domtar’s net debt-to-total capitalization ratio¹ stood at 12% at December 31, 2011 compared to 9% at December 31, 2010.

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

3 / 12

OUTLOOK

Prices for pulp are still expected to remain under pressure in certain geographies while market dynamics in the Asian markets are stabilizing. In fine papers, North American demand is expected to decline at a 2-4% rate in 2012, consistent with long-term trends. Any acceleration in employment growth may help mitigate the structural decline in paper demand. Inflation on input costs is expected to be moderate in 2012.

EARNINGS CONFERENCE CALL

The Company will hold a conference call today at 11:00 a.m. (ET) to discuss its fourth quarter 2011 financial results. Financial analysts are invited to participate in the call by dialing at least 10 minutes before start time 1 (866) 321-8231 (toll free - North America) or 1 (416) 642-5213 (International), 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 first quarter 2012 earnings on April 26, 2012 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 Corporation (NYSE: UFS) (TSX: UFS) is the largest integrated manufacturer and marketer of uncoated freesheet paper in North America and the second largest in the world based on production capacity, and is also a manufacturer of papergrade, fluff and specialty pulp. The Company designs, manufactures, markets and distributes a wide range of business, commercial printing and publishing as well as converting and specialty papers including recognized brands such as Cougar^®, Lynx^® Opaque Ultra, Husky^® Opaque Offset, First Choice^® and Domtar EarthChoice^® Office Paper, part of a family of environmentally and socially responsible papers. Domtar also produces a complete line of incontinence care products and distributes washcloths marketed primarily under the Attends^® brand name. Domtar owns and operates Ariva^TM, an extensive network of strategically located paper distribution facilities. The Company employs approximately 8,700 people. To learn more, visit www.domtar.com.

Forward-Looking Statements

All statements in this news release that are not based on historical fact are “forward-looking statements.” While management has based any forward-looking statements contained herein on its current expectations, the information on which such expectations were based may change. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of risks, uncertainties, and other factors, many of which are outside of our control that could cause actual results to materially differ from such statements. Such risks, uncertainties, and other factors include, but are not necessarily limited to, those set forth under the captions “Forward-Looking Statements” and “Risk Factors” of the latest Form 10-K filed with the SEC as periodically updated by subsequently filed Form 10-Q’s. Unless specifically required by law, we assume no obligation to update or revise these forward-looking statements to reflect new events or circumstances.

- (30) -

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Domtar Corporation

Highlights

(In millions of dollars, unless otherwise noted)


	Three months ended December 31			Three months ended December 31			Twelve months ended December 31			Twelve months ended December 31
	2011			2010			2011			2010
	(Unaudited)

	$			$			$			$

Selected Segment Information

Sales
Pulp and Paper		1,177			1,212			4,953			5,070
Distribution		177			212			781			870
Personal Care		54			—			71			—
Wood		—			—			—			150

Total for reportable segments		1,408			1,424			5,805			6,090
Intersegment sales - Pulp and Paper		(39	)		(51	)		(193	)		(229	)
Intersegment sales - Wood		—			—			—			(11	)

Consolidated sales		1,369			1,373			5,612			5,850


Depreciation and amortization and impairment and write-down of property, plant and equipment
Pulp and Paper		91			94			368			381
Distribution		1			1			4			4
Personal Care		3			—			4			—
Wood		—			—			—			10

Total for reportable segments		95			95			376			395
Impairment and write-down of property, plant and equipment - Pulp and Paper		12			—			85			50

Consolidated depreciation and amortization and impairment and write-down of property, plant and equipment		107			95			461			445


Operating income (loss)
Pulp and Paper		92			161			581			667
Distribution		—			(3	)		—			(3	)
Personal Care		7			—			7			—
Wood		—			—			—			(54	)
Corporate		—			(3	)		4			(7	)

Consolidated operating income		99			155			592			603
Interest expense, net		20			29			87			155

Earnings before income taxes and equity earnings		79			126			505			448
Income tax expense (benefit)		11			(199	)		133			(157	)
Equity loss, net of taxes		7			—			7			—

Net earnings		61			325			365			605


Per common share (in dollars)
Net earnings
Basic		1.64			7.67			9.15			14.14
Diluted		1.63			7.59			9.08			14.00
Weighted average number of common and exchangeable shares outstanding (millions)
Basic		37.1			42.4			39.9			42.8
Diluted		37.4			42.8			40.2			43.2


Cash flows provided from operating activities		172			166			883			1,166
Additions to property, plant and equipment		80			41			144			153

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Domtar Corporation

Consolidated Statements of Earnings

(In millions of dollars, unless otherwise noted)


	Three months ended December 31			Three months ended December 31			Twelve months ended December 31			Twelve months ended December 31
	2011			2010			2011			2010
	(Unaudited)

	$			$			$			$

Sales		1,369			1,373			5,612			5,850
Operating expenses
Cost of sales, excluding depreciation and amortization		1,039			1,020			4,171			4,417
Depreciation and amortization		95			95			376			395
Selling, general and administrative		87			94			340			338
Impairment and write-down of property, plant and equipment		12			—			85			50
Closure and restructuring costs		38			1			52			27
Other operating loss (income), net		(1	)		8			(4	)		20

		1,270			1,218			5,020			5,247


Operating income		99			155			592			603

Interest expense, net		20			29			87			155


Earnings before income taxes and equity earnings		79			126			505			448

Income tax expense (benefit)		11			(199	)		133			(157	)

Equity loss, net of taxes		7			—			7			—


Net earnings		61			325			365			605


Per common share (in dollars)

Net earnings
Basic		1.64			7.67			9.15			14.14
Diluted		1.63			7.59			9.08			14.00
Weighted average number of common and exchangeable shares outstanding (millions)
Basic		37.1			42.4			39.9			42.8
Diluted		37.4			42.8			40.2			43.2

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Domtar Corporation

Consolidated Balance Sheets at

(In millions of dollars)


	December 31			December 31
	2011			2010
	(Unaudited)

	$			$

Assets
Current assets
Cash and cash equivalents		444			530
Receivables, less allowances of $5 and $7		644			601
Inventories		652			648
Prepaid expenses		22			28
Income and other taxes receivable		47			78
Deferred income taxes		125			115

Total current assets		1,934			2,000

Property, plant and equipment, at cost		8,448			9,255
Accumulated depreciation		(4,989	)		(5,488	)

Net property, plant and equipment		3,459			3,767
Goodwill		163			—
Intangible assets, net of amortization		204			56
Other assets		109			203

Total assets		5,869			6,026


Liabilities and shareholders’ equity
Current liabilities
Bank indebtedness		7			23
Trade and other payables		688			678
Income and other taxes payable		17			22
Long-term debt due within one year		4			2

Total current liabilities		716			725

Long-term debt		837			825
Deferred income taxes and other		927			924
Other liabilities and deferred credits		417			350

Shareholders’ equity
Exchangeable shares		49			64
Additional paid-in capital		2,326			2,791
Retained earnings		671			357
Accumulated other comprehensive loss		(74	)		(10	)

Total shareholders’ equity		2,972			3,202

Total liabilities and shareholders’ equity		5,869			6,026

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Domtar Corporation

Consolidated Statements of Cash Flows

(In millions of dollars)


	Twelve months ended December 31			Twelve months ended December 31
	2011			2010
	(Unaudited)

	$			$

Operating activities
Net earnings		365			605
Adjustments to reconcile net earnings to cash flows from operating activities
Depreciation and amortization		376			395
Deferred income taxes and tax uncertainties		40			(174	)
Impairment and write-down of property, plant and equipment		85			50
Loss on repurchase of long-term debt		4			47
Net losses (gains) on disposals of property, plant and equipment and sale of businesses		(6	)		33
Stock-based compensation expense		3			5
Equity loss, net		7			—
Other		—			(2	)
Changes in assets and liabilities, excluding the effects of acquisition and sale of businesses
Receivables		(12	)		(73	)
Inventories		2			39
Prepaid expenses		2			6
Trade and other payables		(17	)		(11	)
Income and other taxes		33			344
Difference between employer pension and other post-retirement contributions and pension and other post-retirement expense		(18	)		(120	)
Other assets and other liabilities		19			22

Cash flows provided from operating activities		883			1,166


Investing activities
Additions to property, plant and equipment		(144	)		(153	)
Proceeds from disposals of property, plant and equipment		34			26
Proceeds from sale of businesses and investments		10			185
Acquisition of business, net of cash acquired		(288	)		—
Other		(7	)		—

Cash flows (used for) provided from investing activities		(395	)		58


Financing activities
Dividend payments		(49	)		(21	)
Net change in bank indebtedness		(16	)		(19	)
Repayment of long-term debt		(18	)		(898	)
Premium paid on debt repurchases		(7	)		(35	)
Stock repurchase		(494	)		(44	)
Prepaid on structured stock repurchase, net		—			2
Other		10			(3	)

Cash flows used for financing activities		(574	)		(1,018	)


Net (decrease) increase in cash and cash equivalents		(86	)		206
Cash and cash equivalents at beginning of year		530			324

Cash and cash equivalents at end of year		444			530


Supplemental cash flow information
Net cash payments for:
Interest		74			107
Income taxes paid		60			28

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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.


				2011															2010
				Q1			Q2			Q3			Q4			YTD			Q1			Q2			Q3			Q4			YTD
Reconciliation of “Earnings before items” to Net earnings
		Net earnings	($)		133			54			117			61			365			58			31			191			325			605
	(-)	Alternative fuel tax credits	($)		—			—			—			—			—			(18	)		—			—			—			(18	)
	(-)	Cellulose biofuel producer credits	($)		—			—			—			—			—			—			—			—			(127	)		(127	)
	(-)	Reversal of valuation allowance on Canadian deferred income tax balances	($)		—			—			—			—			—			—			—			—			(100	)		(100	)
	(+)	Impairment and write-down of property, plant and equipment	($)		2			38			4			9			53			16			9			9			—			34
	(+)	Closure and restructuring costs	($)		8			1			1			23			33			14			4			1			1			20
	(-)	Net losses (gains) on disposals of property, plant and equipment and sale of businesses	($)		(5	)		5			(3	)		—			(3	)		(1	)		48			(18	)		—			29
	(+)	Impact of purchase accounting	($)		—			—			1			—			1			—			—			—			—			—
	(+)	Loss on repurchase of long-term debt	($)		—			—			3			—			3			—			24			—			4			28
	(=)	Earnings before items	($)		138			98			123			93			452			69			116			183			103			471
	( / )	Weighted avg. number of common and exchangeable shares outstanding (diluted)	(millions)		42.4			41.4			39.7			37.4			40.2			43.3			43.4			43.0			42.8			43.2
	(=)	Earnings before items per diluted share	($)		3.25			2.37			3.10			2.49			11.24			1.59			2.67			4.26			2.41			10.90

Reconciliation of “EBITDA” and “EBITDA before items” to Net earnings
		Net earnings	($)		133			54			117			61			365			58			31			191			325			605
	(+)	Equity loss, net of taxes	($)		—			—			—			7			7			—			—			—			—			—
	(+)	Income tax expense (benefit)	($)		57			20			45			11			133			26			(5	)		21			(199	)		(157	)
	(+)	Interest expense, net	($)		21			21			25			20			87			32			70			24			29			155
	(=)	Operating income	($)		211			95			187			99			592			116			96			236			155			603
	(+)	Depreciation and amortization	($)		93			95			93			95			376			102			101			97			95			395
	(+)	Impairment and write-down of property, plant and equipment	($)		3			62			8			12			85			22			14			14			—			50
	(-)	Net losses (gains) on disposals of property, plant and equipment and sale of businesses	($)		(7	)		6			(4	)		(1	)		(6	)		(1	)		48			(14	)		—			33
	(=)	EBITDA	($)		300			258			284			205			1,047			239			259			333			250			1,081
	(/)	Sales	($)		1,423			1,403			1,417			1,369			5,612			1,457			1,547			1,473			1,373			5,850
	(=)	EBITDA margin	(%)		21	%		18	%		20	%		15	%		19	%		16	%		17	%		23	%		18	%		18	%
		EBITDA	($)		300			258			284			205			1,047			239			259			333			250			1,081
	(-)	Alternative fuel tax credits	($)		—			—			—			—			—			(25	)		—			—			—			(25	)
	(+)	Closure and restructuring costs	($)		11			2			1			38			52			20			5			1			1			27
	(+)	Impact of purchase accounting	($)		—			—			1			—			1			—			—			—			—			—
	(=)	EBITDA before items	($)		311			260			286			243			1,100			234			264			334			251			1,083
	(/)	Sales	($)		1,423			1,403			1,417			1,369			5,612			1,457			1,547			1,473			1,373			5,850
	(=)	EBITDA margin before items	(%)		22	%		19	%		20	%		18	%		20	%		16	%		17	%		23	%		18	%		19	%

Reconciliation of “Free cash flow” to Cash flow provided from operating activities
		Cash flow provided from operating activities	($)		148			306			257			172			883			123			610			267			166			1,166
	(-)	Additions to property, plant and equipment	($)		(13	)		(20	)		(31	)		(80	)		(144	)		(31	)		(43	)		(38	)		(41	)		(153	)
	(=)	Free cash flow	($)		135			286			226			92			739			92			567			229			125			1,013

“Net debt-to-total capitalization” computation
		Bank indebtedness	($)		25			25			17			7						19			30			26			23
	(+)	Long-term debt due within one year	($)		2			2			5			4						31			30			22			2
	(+)	Long-term debt	($)		825			824			837			837						1,600			1,186			961			825
	(=)	Debt	($)		852			851			859			848						1,650			1,246			1,009			850
	(-)	Cash and cash equivalents	($)		(604	)		(742	)		(461	)		(444	)					(314	)		(514	)		(537	)		(530	)
	(=)	Net debt	($)		248			109			398			404						1,336			732			472			320
	(+)	Shareholders’ equity	($)		3,288			3,194			2,999			2,972						2,748			2,642			2,811			3,202
	(=)	Total capitalization	($)		3,536			3,303			3,397			3,376						4,084			3,374			3,283			3,522
		Net debt	($)		248			109			398			404						1,336			732			472			320
	( / )	Total capitalization	($)		3,536			3,303			3,397			3,376						4,084			3,374			3,283			3,522
	(=)	Net debt-to-total capitalization	(%)		7	%		3	%		12	%		12	%					33	%		22	%		14	%		9	%

“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.

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Domtar Corporation

Quarterly Reconciliation of Non-GAAP Financial Measures – By Segment 2011

(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.


				Pulp and Paper															Distribution															Personal Care ⁽¹⁾													Corporate														Total
				Q1 ’11			Q2 ’11			Q3 ’11			Q4 ’11			YTD			Q1 ’11			Q2 ’11			Q3 ’11			Q4 ’11			YTD			Q1 ’11		Q2 ’11		Q3 ’11			Q4 ’11			YTD			Q1 ’11			Q2 ’11			Q3 ’11			Q4 ’11		YTD			Q1 ’11			Q2 ’11			Q3 ’11			Q4 ’11			YTD
Reconciliation of Operating income (loss) to “Operating income (loss) before items”
		Operating income (loss)	($)		209			91			189			92			581			3			(2	)		(1	)		—			—			—		—		—			7			7			(1	)		6			(1	)		—		4			211			95			187			99			592
	(+)	Impairment and write-down of property, plant and equipment	($)		3			62			8			12			85			—			—			—			—			—			—		—		—			—			—			—			—			—			—		—			3			62			8			12			85
	(+)	Closure and restructuring costs	($)		11			2			1			37			51			—			—			—			1			1			—		—		—			—			—			—			—			—			—		—			11			2			1			38			52
	(-)	Net losses (gains) on disposals of property, plant and equipment and sale of business	($)		(4	)		12			(4	)		(1	)		3			(3	)		—			—			—			(3	)		—		—		—			—			—			—			(6	)		—			—		(6	)		(7	)		6			(4	)		(1	)		(6	)
	(+)	Impact of purchase accounting	($)		—			—			—			—			—			—			—			—			—			—			—		—		1			—			1			—			—			—			—		—			—			—			1			—			1

	(=)	Operating income (loss) before items	($)		219			167			194			140			720			—			(2	)		(1	)		1			(2	)		—		—		1			7			8			(1	)		—			(1	)		—		(2	)		218			165			193			148			724

Reconciliation of “Operating income (loss) before items” to “EBITDA before items”
		Operating income (loss) before items	($)		219			167			194			140			720			—			(2	)		(1	)		1			(2	)		—		—		1			7			8			(1	)		—			(1	)		—		(2	)		218			165			193			148			724
	(+)	Depreciation and amortization	($)		92			94			91			91			368			1			1			1			1			4			—		—		1			3			4			—			—			—			—		—			93			95			93			95			376

	(=)	EBITDA before items	($)		311			261			285			231			1,088			1			(1	)		—			2			2			—		—		2			10			12			(1	)		—			(1	)		—		(2	)		311			260			286			243			1,100
	(/)	Sales	($)		1,269			1,261			1,246			1,177			4,953			217			190			197			177			781			—		—		17			54			71			—			—			—			—		—			1,486			1,451			1,460			1,408			5,805
	(=)	EBITDA margin before items	(%)		25	%		21	%		23	%		20	%		22	%		—			—			—			1	%		—			—		—		12	%		19	%		17	%		—			—			—			—		—			21	%		18	%		20	%		17	%		19	%

“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.

⁽¹⁾	On September 1, 2011, the Company acquired 100% of the shares of Attends Healthcare, Inc.

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Domtar Corporation

Quarterly Reconciliation of Non-GAAP Financial Measures – By Segment 2010

(In millions of dollars, unless otherwise noted)


				Pulp and Paper															Distribution														Wood ⁽¹⁾													Corporate														Total
				Q1 ’10			Q2 ’10			Q3 ’10			Q4 ’10			YTD			Q1 ’10			Q2 ’10			Q3 ’10		Q4 ’10			YTD			Q1 ’10			Q2 ’10			Q3 ’10		Q4 ’10		YTD			Q1 ’10		Q2 ’10			Q3 ’10			Q4 ’10			YTD			Q1 ’10			Q2 ’10			Q3 ’10			Q4 ’10			YTD
Reconciliation of Operating income (loss) to “Operating income (loss) before items”
		Operating income (loss)	($)		120			149			237			161			667			1			(1	)		—		(3	)		(3	)		(5	)		(49	)		—		—		(54	)		—		(3	)		(1	)		(3	)		(7	)		116			96			236			155			603
	(-)	Alternative fuel tax credits	($)		(25	)		—			—			—			(25	)		—			—			—		—			—			—			—			—		—		—			—		—			—			—			—			(25	)		—			—			—			(25	)
	(+)	Impairment and write-down of property, plant and equipment	($)		22			14			14			—			50			—			—			—		—			—			—			—			—		—		—			—		—			—			—			—			22			14			14			—			50
	(+)	Closure and restructuring costs	($)		20			5			1			—			26			—			—			—		1			1			—			—			—		—		—			—		—			—			—			—			20			5			1			1			27
	(-)	Net losses (gains) on disposals of property, plant and equipment and sale of businesses	($)		—			(3	)		(14	)		—			(17	)		—			—			—		—			—			(1	)		49			—		—		48			—		2			—			—			2			(1	)		48			(14	)		—			33

	(=)	Operating income (loss) before items	($)		137			165			238			161			701			1			(1	)		—		(2	)		(2	)		(6	)		—			—		—		(6	)		—		(1	)		(1	)		(3	)		(5	)		132			163			237			156			688

Reconciliation of “Operating income (loss) before items” to “EBITDA before items”
		Operating income (loss) before items	($)		137			165			238			161			701			1			(1	)		—		(2	)		(2	)		(6	)		—			—		—		(6	)		—		(1	)		(1	)		(3	)		(5	)		132			163			237			156			688
	(+)	Depreciation and amortization	($)		96			95			96			94			381			1			1			1		1			4			5			5			—		—		10			—		—			—			—			—			102			101			97			95			395

	(=)	EBITDA before items	($)		233			260			334			255			1,082			2			—			1		(1	)		2			(1	)		5			—		—		4			—		(1	)		(1	)		(3	)		(5	)		234			264			334			251			1,083
	(/)	Sales	($)		1,245			1,317			1,296			1,212			5,070			212			213			233		212			870			67			83			—		—		150			—		—			—			—			—			1,524			1,613			1,529			1,424			6,090
	(=)	EBITDA margin before items	(%)		19	%		20	%		26	%		21	%		21	%		1	%		—			—		—			—			—			6	%		—		—		3	%		—		—			—			—			—			15	%		16	%		22	%		18	%		18	%

⁽¹⁾	As previously reported, Domtar sold 88% of the Wood segment on June 30, 2010 to EACOM Timber Corporation (“EACOM”). During the fourth quarter of 2010, in an unrelated transaction, Domtar sold the remaining 12% of common stock held in EACOM.

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Domtar Corporation

Supplemental Segmented Information

(In millions of dollars, unless otherwise noted)


		2011															2010
		Q1			Q2			Q3			Q4			YTD			Q1			Q2			Q3			Q4			YTD
Pulp and Paper Segment
Sales	($)		1,269			1,261			1,246			1,177			4,953			1,245			1,317			1,296			1,212			5,070
Intersegment sales - Pulp and Paper	($)		(63	)		(48	)		(43	)		(39	)		(193	)		(62	)		(60	)		(56	)		(51	)		(229	)
Operating income	($)		209			91			189			92			581			120			149			237			161			667
Depreciation and amortization	($)		92			94			91			91			368			96			95			96			94			381
Impairment and write-down of property, plant and equipment	($)		3			62			8			12			85			22			14			14			—			50

Papers
Papers Production	(‘000 ST)		899			890			875			871			3,535			906			882			906			873			3,567
Papers Shipments	(‘000 ST)		913			901			889			831			3,534			960			891			896			850			3,597
Uncoated Freesheet	(‘000 ST)		913			901			889			831			3,534			925			889			896			850			3,560
Coated Groundwood	(‘000 ST)		—			—			—			—			—			35			2			—			—			37

Pulp
Pulp Shipments^(a)	(‘000 ADMT)		375			361			358			403			1,497			388			486			412			376			1,662
Hardwood Kraft Pulp	(%)		20	%		19	%		18	%		19	%		19	%		40	%		38	%		37	%		24	%		35	%
Softwood Kraft Pulp	(%)		55	%		54	%		57	%		58	%		57	%		49	%		52	%		53	%		62	%		54	%
Fluff Pulp	(%)		25	%		27	%		25	%		23	%		24	%		11	%		10	%		10	%		14	%		11	%

Distribution Segment
Sales	($)		217			190			197			177			781			212			213			233			212			870
Operating income (loss)	($)		3			(2	)		(1	)		—			—			1			(1	)		—			(3	)		(3	)
Depreciation and amortization	($)		1			1			1			1			4			1			1			1			1			4

Personal Care Segment
Sales	($)		—			—			17			54			71			—			—			—			—			—
Operating income	($)		—			—			—			7			7			—			—			—			—			—
Depreciation and amortization	($)		—			—			1			3			4			—			—			—			—			—

Wood Segment
Sales	($)		—			—			—			—			—			67			83			—			—			150
Intersegment sales - Wood	($)		—			—			—			—			—			(5	)		(6	)		—			—			(11	)
Operating loss	($)		—			—			—			—			—			(5	)		(49	)		—			—			(54	)
Depreciation and amortization	($)		—			—			—			—			—			5			5			—			—			10

Lumber Production	(Millions FBM)		—			—			—			—			—			172			165			—			—			337
Lumber Shipments	(Millions FBM)		—			—			—			—			—			164			187			—			—			351

Average Exchange Rates	$US / $CAN		0.986			0.968			0.980			1.023			0.989			1.041			1.028			1.039			1.013			1.030
	$CAN / $US		1.014			1.034			1.021			0.977			1.011			0.961			0.973			0.962			0.987			0.971

(a)	Figures are gross of market pulp purchased from other producers on the open market for some of our paper making operations. Pulp Shipments represent the amount of pulp produced in excess of our internal requirement.

Note: the term “ST” refers to a short ton, the term “ADMT” refers to an air dry metric ton, and the term “FBM” refers to foot board measure.

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Domtar CORP - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - February 3, 2012

Attached files

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