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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
|
98-0526415
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. employer identification number)
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111 Duke Street, Suite 5000; Montréal, Québec; Canada H3C 2M1
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(Address of principal executive offices) (Zip Code)
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(514) 875-2515
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(Registrant’s telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last report)
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Large accelerated filer
þ
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Accelerated filer
¨
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Non-accelerated filer
¨
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Smaller reporting company
¨
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(Do not check if a smaller
reporting company)
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Page
Number
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PART I FINANCIAL INFORMATION
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Item 1. Financial Statements:
|
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|
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||
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PART II OTHER INFORMATION
|
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||
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||
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||
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||
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Three Months Ended
September 30, |
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Nine Months Ended
September 30, |
||||||||||||||
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2014
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|
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2013
|
|
|
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2014
|
|
|
2013
|
|
|
||||
Sales
|
$
|
1,096
|
|
|
$
|
1,130
|
|
|
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$
|
3,203
|
|
|
$
|
3,311
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of sales, excluding depreciation, amortization and distribution costs
|
|
816
|
|
|
|
857
|
|
|
|
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2,449
|
|
|
|
2,572
|
|
|
Depreciation and amortization
|
|
60
|
|
|
|
61
|
|
|
|
|
184
|
|
|
|
182
|
|
|
Distribution costs
|
|
134
|
|
|
|
134
|
|
|
|
|
388
|
|
|
|
387
|
|
|
Selling, general and administrative expenses
|
|
41
|
|
|
|
38
|
|
|
|
|
118
|
|
|
|
126
|
|
|
Closure costs, impairment and other related charges
|
|
85
|
|
|
|
4
|
|
|
|
|
147
|
|
|
|
56
|
|
|
Net gain on disposition of assets
|
|
—
|
|
|
|
—
|
|
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
Operating (loss) income
|
|
(40
|
)
|
|
|
36
|
|
|
|
|
(81
|
)
|
|
|
(10
|
)
|
|
Interest expense
|
|
(12
|
)
|
|
|
(12
|
)
|
|
|
|
(35
|
)
|
|
|
(39
|
)
|
|
Other (expense) income, net
|
|
(65
|
)
|
|
|
5
|
|
|
|
|
(58
|
)
|
|
|
(42
|
)
|
|
(Loss) income before income taxes
|
|
(117
|
)
|
|
|
29
|
|
|
|
|
(174
|
)
|
|
|
(91
|
)
|
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Income tax benefit (provision)
|
|
1
|
|
|
|
(617
|
)
|
|
|
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8
|
|
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(546
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)
|
|
Net loss including noncontrolling interests
|
|
(116
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)
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(588
|
)
|
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(166
|
)
|
|
|
(637
|
)
|
|
Net (income) loss attributable to noncontrolling interests
|
|
—
|
|
|
|
—
|
|
|
|
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(2
|
)
|
|
|
1
|
|
|
Net loss attributable to Resolute Forest Products Inc.
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$
|
(116
|
)
|
|
$
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(588
|
)
|
|
|
$
|
(168
|
)
|
|
$
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(636
|
)
|
|
Net loss per share attributable to Resolute Forest Products Inc. common shareholders:
|
|
|
|
|
|
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|
|
|
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Basic
|
$
|
(1.23
|
)
|
|
$
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(6.22
|
)
|
|
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$
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(1.78
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)
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$
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(6.72
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)
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Diluted
|
|
(1.23
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)
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|
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(6.22
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)
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(1.78
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)
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(6.72
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)
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Weighted-average number of Resolute Forest Products Inc. common shares outstanding:
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Basic
|
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94.6
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94.6
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94.6
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94.7
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Diluted
|
|
94.6
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94.6
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|
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94.6
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|
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94.7
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Three Months Ended
September 30, |
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Nine Months Ended
September 30, |
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2014
|
|
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2013
|
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2014
|
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2013
|
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|
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Net loss including noncontrolling interests
|
$
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(116
|
)
|
|
$
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(588
|
)
|
|
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$
|
(166
|
)
|
|
$
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(637
|
)
|
|
Other comprehensive (loss) income:
|
|
|
|
|
|
|
|
|
|
|
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||||
Change in unamortized prior service credits, net of tax of $1 and $33 for the three and nine months ended September 30, 2014, respectively, and $8 and $3 for the three and nine months ended September 30, 2013, respectively
|
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(3
|
)
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|
|
11
|
|
|
|
|
49
|
|
|
|
(3
|
)
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Change in unamortized actuarial losses, net of tax of $11 and $14 for the three and nine months ended September 30, 2014, respectively, and $17 and $30 for the three and nine months ended September 30, 2013, respectively
|
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(31
|
)
|
|
|
31
|
|
|
|
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(32
|
)
|
|
|
55
|
|
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Foreign currency translation
|
|
1
|
|
|
|
2
|
|
|
|
|
1
|
|
|
|
(3
|
)
|
|
Other comprehensive (loss) income, net of tax
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(33
|
)
|
|
|
44
|
|
|
|
|
18
|
|
|
|
49
|
|
|
Comprehensive loss including noncontrolling interests
|
|
(149
|
)
|
|
|
(544
|
)
|
|
|
|
(148
|
)
|
|
|
(588
|
)
|
|
Comprehensive (income) loss attributable to noncontrolling interests
|
|
—
|
|
|
|
—
|
|
|
|
|
(2
|
)
|
|
|
1
|
|
|
Comprehensive loss attributable to Resolute Forest Products Inc.
|
$
|
(149
|
)
|
|
$
|
(544
|
)
|
|
|
$
|
(150
|
)
|
|
$
|
(587
|
)
|
|
|
September 30,
2014 |
December 31,
2013 |
||||||
Assets
|
|
|
|
|
|
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Current assets:
|
|
|
|
|
|
|
||
Cash and cash equivalents
|
$
|
265
|
|
|
$
|
322
|
|
|
Accounts receivable, net:
|
|
|
|
|
|
|
||
Trade
|
|
528
|
|
|
|
536
|
|
|
Other
|
|
85
|
|
|
|
98
|
|
|
Inventories, net
|
|
563
|
|
|
|
529
|
|
|
Deferred income tax assets
|
|
31
|
|
|
|
32
|
|
|
Other current assets
|
|
79
|
|
|
|
45
|
|
|
Total current assets
|
|
1,551
|
|
|
|
1,562
|
|
|
Fixed assets, net
|
|
2,098
|
|
|
|
2,289
|
|
|
Amortizable intangible assets, net
|
|
63
|
|
|
|
66
|
|
|
Deferred income tax assets
|
|
1,174
|
|
|
|
1,266
|
|
|
Other assets
|
|
150
|
|
|
|
202
|
|
|
Total assets
|
$
|
5,036
|
|
|
$
|
5,385
|
|
|
|
|
|
|
|
|
|
||
Liabilities and equity
|
|
|
|
|
|
|
||
Current liabilities:
|
|
|
|
|
|
|
||
Accounts payable and accrued liabilities
|
$
|
550
|
|
|
$
|
533
|
|
|
Current portion of long-term debt
|
|
1
|
|
|
|
2
|
|
|
Deferred income tax liabilities
|
|
32
|
|
|
|
32
|
|
|
Total current liabilities
|
|
583
|
|
|
|
567
|
|
|
Long-term debt, net of current portion
|
|
597
|
|
|
|
597
|
|
|
Pension and other postretirement benefit obligations
|
|
1,094
|
|
|
|
1,294
|
|
|
Deferred income tax liabilities
|
|
5
|
|
|
|
26
|
|
|
Other long-term liabilities
|
|
63
|
|
|
|
62
|
|
|
Total liabilities
|
|
2,342
|
|
|
|
2,546
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
||
Equity:
|
|
|
|
|
|
|
||
Resolute Forest Products Inc. shareholders’ equity:
|
|
|
|
|
|
|
||
Common stock, $0.001 par value. 117.1 shares issued and 94.6 shares outstanding as of September 30, 2014; 117.0 shares issued and 94.5 shares outstanding as of December 31, 2013
|
|
—
|
|
|
|
—
|
|
|
Additional paid-in capital
|
|
3,754
|
|
|
|
3,751
|
|
|
Deficit
|
|
(760
|
)
|
|
|
(592
|
)
|
|
Accumulated other comprehensive loss
|
|
(253
|
)
|
|
|
(271
|
)
|
|
Treasury stock at cost, 22.5 shares as of September 30, 2014 and December 31, 2013
|
|
(61
|
)
|
|
|
(61
|
)
|
|
Total Resolute Forest Products Inc. shareholders’ equity
|
|
2,680
|
|
|
|
2,827
|
|
|
Noncontrolling interests
|
|
14
|
|
|
|
12
|
|
|
Total equity
|
|
2,694
|
|
|
|
2,839
|
|
|
Total liabilities and equity
|
$
|
5,036
|
|
|
$
|
5,385
|
|
|
|
Nine Months Ended September 30, 2014
|
|||||||||||||||||||||||||||
|
Resolute Forest Products Inc. Shareholders’ Equity
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Common
Stock
|
Additional
Paid-In
Capital
|
Deficit
|
Accumulated Other Comprehensive Loss
|
Treasury
Stock
|
Non-
controlling
Interests
|
Total
Equity
|
|||||||||||||||||||||
Balance as of December 31, 2013
|
$
|
—
|
|
|
$
|
3,751
|
|
|
$
|
(592
|
)
|
|
$
|
(271
|
)
|
|
$
|
(61
|
)
|
|
$
|
12
|
|
|
$
|
2,839
|
|
|
Share-based compensation costs for equity-classified awards
|
|
—
|
|
|
|
3
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3
|
|
|
Net (loss) income
|
|
—
|
|
|
|
—
|
|
|
|
(168
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
2
|
|
|
|
(166
|
)
|
|
Other comprehensive income, net of tax
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
18
|
|
|
|
—
|
|
|
|
—
|
|
|
|
18
|
|
|
Balance as of September 30, 2014
|
$
|
—
|
|
|
$
|
3,754
|
|
|
$
|
(760
|
)
|
|
$
|
(253
|
)
|
|
$
|
(61
|
)
|
|
$
|
14
|
|
|
$
|
2,694
|
|
|
|
Nine Months Ended September 30, 2013
|
|||||||||||||||||||||||||||
|
Resolute Forest Products Inc. Shareholders’ Equity
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Common
Stock
|
Additional
Paid-In
Capital
|
Retained Earnings (Deficit)
|
Accumulated Other Comprehensive Loss
|
Treasury
Stock
|
Non-
controlling
Interests
|
Total
Equity
|
|||||||||||||||||||||
Balance as of December 31, 2012
|
$
|
—
|
|
|
$
|
3,730
|
|
|
$
|
47
|
|
|
$
|
(614
|
)
|
|
$
|
(61
|
)
|
|
$
|
23
|
|
|
$
|
3,125
|
|
|
Share-based compensation costs for equity-classified awards
|
|
—
|
|
|
|
5
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5
|
|
|
Net loss
|
|
—
|
|
|
|
—
|
|
|
|
(636
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
(637
|
)
|
|
Contribution of capital from noncontrolling interest (net of tax of $3)
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5
|
|
|
|
5
|
|
|
Acquisition of noncontrolling interest (Note 3)
|
|
—
|
|
|
|
14
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(14
|
)
|
|
|
—
|
|
|
Dividend paid to noncontrolling interest
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
Other comprehensive income, net of tax
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
49
|
|
|
|
—
|
|
|
|
—
|
|
|
|
49
|
|
|
Balance as of September 30, 2013
|
$
|
—
|
|
|
$
|
3,749
|
|
|
$
|
(589
|
)
|
|
$
|
(565
|
)
|
|
$
|
(61
|
)
|
|
$
|
12
|
|
|
$
|
2,546
|
|
|
|
Nine Months Ended
September 30, |
|||||||
|
2014
|
|
|
2013
|
|
|
||
Cash flows from operating activities:
|
|
|
|
|
|
|
||
Net loss including noncontrolling interests
|
$
|
(166
|
)
|
|
$
|
(637
|
)
|
|
Adjustments to reconcile net loss including noncontrolling interests to net cash provided by operating activities:
|
|
|
|
|
|
|
||
Share-based compensation
|
|
3
|
|
|
|
5
|
|
|
Depreciation and amortization
|
|
184
|
|
|
|
182
|
|
|
Closure costs, impairment and other related charges
|
|
139
|
|
|
|
47
|
|
|
Inventory write-downs related to closures
|
|
10
|
|
|
|
5
|
|
|
Deferred income taxes
|
|
(9
|
)
|
|
|
546
|
|
|
Net pension contributions and other postretirement benefit payments
|
|
(128
|
)
|
|
|
(65
|
)
|
|
Net gain on disposition of assets
|
|
(2
|
)
|
|
|
(2
|
)
|
|
Loss on translation of foreign currency denominated deferred income taxes
|
|
63
|
|
|
|
53
|
|
|
Gain on translation of foreign currency denominated pension and other postretirement benefit obligations
|
|
(51
|
)
|
|
|
(52
|
)
|
|
Gain on forgiveness of note payable
|
|
—
|
|
|
|
(12
|
)
|
|
Net loss on extinguishment of debt
|
|
—
|
|
|
|
59
|
|
|
Net planned major maintenance payments
|
|
(1
|
)
|
|
|
(6
|
)
|
|
Write-down of equity method investment
|
|
50
|
|
|
|
—
|
|
|
Dividends received from equity method investees in excess of income
|
|
2
|
|
|
|
5
|
|
|
Changes in working capital:
|
|
|
|
|
|
|
||
Accounts receivable
|
|
35
|
|
|
|
(8
|
)
|
|
Inventories
|
|
(44
|
)
|
|
|
12
|
|
|
Other current assets
|
|
(10
|
)
|
|
|
(5
|
)
|
|
Accounts payable and accrued liabilities
|
|
—
|
|
|
|
(5
|
)
|
|
Other, net
|
|
5
|
|
|
|
(12
|
)
|
|
Net cash provided by operating activities
|
|
80
|
|
|
|
110
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
||
Cash invested in fixed assets
|
|
(142
|
)
|
|
|
(124
|
)
|
|
Disposition of assets
|
|
6
|
|
|
|
4
|
|
|
Proceeds from insurance settlements
|
|
—
|
|
|
|
4
|
|
|
Decrease in restricted cash
|
|
1
|
|
|
|
3
|
|
|
Decrease in deposit requirements for letters of credit, net
|
|
2
|
|
|
|
—
|
|
|
Net cash used in investing activities
|
|
(133
|
)
|
|
|
(113
|
)
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
||
Issuance of long-term debt
|
|
—
|
|
|
|
594
|
|
|
Premium paid on extinguishment of debt
|
|
—
|
|
|
|
(84
|
)
|
|
Payments of debt
|
|
(1
|
)
|
|
|
(497
|
)
|
|
Payments of financing and credit facility fees
|
|
(1
|
)
|
|
|
(9
|
)
|
|
Dividend to noncontrolling interest
|
|
—
|
|
|
|
(1
|
)
|
|
Contribution of capital from noncontrolling interest
|
|
—
|
|
|
|
8
|
|
|
Net cash (used in) provided by financing activities
|
|
(2
|
)
|
|
|
11
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
(2
|
)
|
|
|
—
|
|
|
Net (decrease) increase in cash and cash equivalents
|
|
(57
|
)
|
|
|
8
|
|
|
Cash and cash equivalents:
|
|
|
|
|
|
|
||
Beginning of period
|
|
322
|
|
|
|
263
|
|
|
End of period
|
$
|
265
|
|
|
$
|
271
|
|
|
(Unaudited, in millions)
|
Impairment
of Assets
(5)
|
Accelerated
Depreciation
|
Severance
and Other
Costs
|
Total
|
||||||||||||
Permanent closures:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Laurentide, Québec paper mill
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Third quarter
|
$
|
—
|
|
|
$
|
65
|
|
|
$
|
16
|
|
|
$
|
81
|
|
|
First nine months
|
|
—
|
|
|
|
65
|
|
|
|
16
|
|
|
|
81
|
|
|
Paper machine in Catawba, South Carolina
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Third quarter
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
First nine months
|
|
—
|
|
|
|
45
|
|
|
|
1
|
|
|
|
46
|
|
|
Pulp and paper mill in Fort Frances, Ontario
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Third quarter
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
First nine months
|
|
—
|
|
|
|
—
|
|
|
|
8
|
|
|
|
8
|
|
|
Paper machine in Iroquois Falls, Ontario
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Third quarter
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
First nine months
|
|
—
|
|
|
|
3
|
|
|
|
—
|
|
|
|
3
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Third quarter
|
|
3
|
|
|
|
—
|
|
|
|
1
|
|
|
|
4
|
|
|
First nine months
|
|
9
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Third quarter
|
$
|
3
|
|
|
$
|
65
|
|
|
$
|
17
|
|
|
$
|
85
|
|
|
First nine months
|
|
9
|
|
|
|
113
|
|
|
|
25
|
|
|
|
147
|
|
|
(1)
|
On October 13, 2014, we permanently closed our Laurentide paper mill, following the announcement made on September 2, 2014. For additional information, see
Note 13, “Subsequent Events
.”
|
(2)
|
On May 22, 2014, we announced the permanent closure of the previously idled paper machine in Catawba.
|
(3)
|
On May 6, 2014, we announced the permanent closure of our previously idled pulp mill and paper machine in Fort Frances. For additional information, see
Note 13, “Subsequent Events
.”
|
(4)
|
In April 2014, we permanently closed a paper machine in Iroquois Falls, following the announcement made on October 24, 2013.
|
(5)
|
We recorded long-lived asset impairment charges of
$1 million
and
$6 million
for the three and nine months ended September 30, 2014, respectively, related to our recycling assets, to reduce the carrying value of the assets to fair value less costs to sell. We disposed most of these assets in the third quarter of 2014.
|
(Unaudited, in millions)
|
Accelerated
Depreciation
|
Pension Plan
Curtailment
Loss and
Settlement (Gain)
|
Severance
and Other
Costs
|
Total
|
||||||||||||
Indefinite idlings:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Paper machine in Calhoun, Tennessee
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Third quarter
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
First nine months
|
|
44
|
|
|
|
—
|
|
|
|
5
|
|
|
|
49
|
|
|
Kraft mill and paper machine in Fort Frances
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Third quarter
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
First nine months
|
|
—
|
|
|
|
—
|
|
|
|
4
|
|
|
|
4
|
|
|
Restructuring initiative:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Baie-Comeau, Québec paper mill
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Third quarter
|
|
—
|
|
|
|
2
|
|
|
|
2
|
|
|
|
4
|
|
|
First nine months
|
|
—
|
|
|
|
2
|
|
|
|
2
|
|
|
|
4
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Third quarter
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
First nine months
|
|
—
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
(1
|
)
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Third quarter
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
4
|
|
|
First nine months
|
|
44
|
|
|
|
1
|
|
|
|
11
|
|
|
|
56
|
|
|
(1)
|
Following our acquisition of the noncontrolling interest in Calhoun Newsprint Company (“CNC”), we indefinitely idled a paper machine at the Calhoun mill on March 12, 2013, resulting in accelerated depreciation charges to reduce the carrying value of the assets to reflect their revised estimated remaining useful lives. In 2014, we restarted the paper machine. For additional information regarding our acquisition of the noncontrolling interest in CNC, see
Note 3, “Other (Expense) Income, Net
.”
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||||
(Unaudited, in millions)
|
2014
|
|
|
2013
|
|
|
|
2014
|
|
|
2013
|
|
|
||||
Foreign exchange (loss) gain
|
$
|
(17
|
)
|
|
$
|
3
|
|
|
|
$
|
(14
|
)
|
|
$
|
(9
|
)
|
|
Write-down of equity method investment
(1)
|
|
(50
|
)
|
|
|
—
|
|
|
|
|
(50
|
)
|
|
|
—
|
|
|
Net loss on extinguishment of debt (Note 7)
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
(59
|
)
|
|
Gain on forgiveness of note payable
(2)
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
12
|
|
|
Gain on liquidation settlement
(3)
|
|
—
|
|
|
|
3
|
|
|
|
|
—
|
|
|
|
12
|
|
|
Miscellaneous income (expense)
|
|
2
|
|
|
|
(1
|
)
|
|
|
|
6
|
|
|
|
2
|
|
|
|
$
|
(65
|
)
|
|
$
|
5
|
|
|
|
$
|
(58
|
)
|
|
$
|
(42
|
)
|
|
(1)
|
As a result of the continued deterioration of actual and projected cash flows in Ponderay Newsprint Company, a partnership in which we have a
40%
interest, we recorded an other-than-temporary write-down of
$50 million
during the three months ended September 30, 2014. The carrying value of the investment was reduced to fair value, which was determined using the discounted cash flow method.
|
(2)
|
On March 11, 2013, we acquired the noncontrolling interest in CNC, which was previously owned
51%
by us and included in our consolidated financial statements on a fully consolidated basis. As a result, CNC became a wholly-owned subsidiary of ours. In connection with this transaction, we recognized a gain on the forgiveness of a
$12 million
note issued by CNC. The acquisition of the noncontrolling interest in CNC was accounted for as an equity transaction.
|
(3)
|
On February 2, 2010, Bridgewater Paper Company Limited (“BPCL”), a subsidiary of ours, filed for administration in the United Kingdom pursuant to the United Kingdom
Insolvency Act 1986
, as amended. As a result, we became a creditor of BPCL and lost control over their operations. In connection with our claims, we received a liquidation settlement of
$3 million
and
$12 million
during the three and nine months ended September 30, 2013, respectively.
|
(Unaudited, in millions)
|
Unamortized
Prior Service
Credits
(1)
|
Unamortized
Actuarial
Losses
(1)(2)
|
Foreign
Currency
Translation
|
Total
|
||||||||||||
Balance as of December 31, 2013
|
$
|
18
|
|
|
$
|
(290
|
)
|
|
$
|
1
|
|
|
$
|
(271
|
)
|
|
Other comprehensive income (loss) before reclassifications
|
|
55
|
|
|
|
(34
|
)
|
|
|
1
|
|
|
|
22
|
|
|
Amounts reclassified from accumulated other comprehensive loss
(3)
|
|
(6
|
)
|
|
|
2
|
|
|
|
—
|
|
|
|
(4
|
)
|
|
Net current period other comprehensive income (loss)
|
|
49
|
|
|
|
(32
|
)
|
|
|
1
|
|
|
|
18
|
|
|
Balance as of September 30, 2014
|
$
|
67
|
|
|
$
|
(322
|
)
|
|
$
|
2
|
|
|
$
|
(253
|
)
|
|
(1)
|
During the nine months ended September 30, 2014, we modified our U.S. other postretirement benefit (“OPEB”) plan, whereby unionized post-65 participants will be provided comparable Medicare coverage via a Medicare exchange program available under the U.S. Affordable Care Act, effective January 1, 2015. As a result of this plan amendment, “Pension and other postretirement benefit obligations” and “
Accumulated other comprehensive loss
” in our Consolidated Balance Sheet as of
September 30, 2014
, were decreased by
$84 million
and
$51 million
(net of tax of
$33 million
), respectively, and consisted of
$55 million
(net of tax of
$36 million
) of unamortized prior service credits offset by
$4 million
(net of tax of
$3 million
) of unamortized actuarial losses.
|
(2)
|
On September 2, 2014, we announced the permanent closure of our Laurentide paper mill, resulting in the elimination of approximately
270
positions and the curtailment of
two
of our pension plans (Non-union Plan and Union Plan, as defined below). Accordingly, “Pension and other postretirement benefit obligations” and “
Accumulated other comprehensive loss
” in our Consolidated Balance Sheet as of
September 30, 2014
were increased by
$42 million
and
$30 million
(net of tax of
$12 million
), respectively, in connection with our pension plan for non-unionized employees (“Non-union Plan”). The curtailment gain of our pension plan for unionized employees (“Union Plan”) will be recognized upon their effective termination in the fourth quarter of 2014. For additional information, see
Note 13, “Subsequent Events
.”
|
(3)
|
See the table below for details about these reclassifications.
|
(Unaudited, in millions)
|
Amounts Reclassified From Accumulated Other Comprehensive Loss
|
Affected Line in the Consolidated Statements of Operations
|
|||
Unamortized Prior Service Credits
|
|
|
|
|
|
Amortization of prior service credits
|
$
|
(9
|
)
|
|
Cost of sales, excluding depreciation, amortization and distribution costs
(1)
|
|
|
3
|
|
|
Income tax benefit (provision)
|
|
$
|
(6
|
)
|
|
Net of tax
|
Unamortized Actuarial Losses
|
|
|
|
|
|
Amortization of actuarial losses
|
$
|
3
|
|
|
Cost of sales, excluding depreciation, amortization and distribution costs
(1)
|
|
|
(1
|
)
|
|
Income tax benefit (provision)
|
|
$
|
2
|
|
|
Net of tax
|
Total Reclassifications
|
$
|
(4
|
)
|
|
Net of tax
|
(1)
|
These items are included in the computation of net periodic benefit cost related to our pension and OPEB plans summarized in
Note 8, “Employee Benefit Plans
.”
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||
(Unaudited, in millions)
|
2014
|
|
|
2013
|
|
|
|
2014
|
|
|
2013
|
|
|
Basic weighted-average number of common shares outstanding
|
94.6
|
|
|
94.6
|
|
|
|
94.6
|
|
|
94.7
|
|
|
Diluted weighted-average number of common shares outstanding
|
94.6
|
|
|
94.6
|
|
|
|
94.6
|
|
|
94.7
|
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||
(Unaudited, in millions)
|
2014
|
|
|
2013
|
|
|
|
2014
|
|
|
2013
|
|
|
Share options
|
1.8
|
|
|
1.4
|
|
|
|
1.8
|
|
|
1.4
|
|
|
RSUs and DSUs
|
1.0
|
|
|
0.7
|
|
|
|
1.0
|
|
|
0.7
|
|
|
(Unaudited, in millions)
|
September 30,
2014 |
December 31,
2013 |
||||||
Raw materials and work in process
|
$
|
143
|
|
|
$
|
153
|
|
|
Finished goods
|
|
230
|
|
|
|
195
|
|
|
Mill stores and other supplies
|
|
190
|
|
|
|
181
|
|
|
|
$
|
563
|
|
|
$
|
529
|
|
|
(Unaudited, in millions)
|
September 30,
2014 |
December 31,
2013 |
||||||
5.875% senior notes due 2023:
|
|
|
|
|
|
|
||
Principal amount
|
$
|
600
|
|
|
$
|
600
|
|
|
Unamortized discount
|
|
(5
|
)
|
|
|
(5
|
)
|
|
Total senior notes due 2023
|
|
595
|
|
|
|
595
|
|
|
Other debt:
|
|
|
|
|
|
|
||
PSIF – Investissement Québec loan
|
|
1
|
|
|
|
1
|
|
|
Capital lease obligation
|
|
2
|
|
|
|
3
|
|
|
Total other debt
|
|
3
|
|
|
|
4
|
|
|
Total debt
|
|
598
|
|
|
|
599
|
|
|
Less: Current portion of long-term debt
|
|
(1
|
)
|
|
|
(2
|
)
|
|
Long-term debt, net of current portion
|
$
|
597
|
|
|
$
|
597
|
|
|
•
|
release the liens securing the ABL Credit Facility on that portion of the assets of the U.S. Borrowers and certain of our material U.S. subsidiaries that had secured the 2018 Notes on a first priority basis, primarily consisting of real property, equipment, intellectual property and the equity of our subsidiaries, with the ability to re-implement those liens with a second lien priority should we issue new secured debt that is to be secured by a second lien on our accounts receivable and inventory and other assets that continue to secure the ABL Credit Facility;
|
•
|
reduce the excess availability thresholds that trigger a minimum consolidated fixed charge coverage ratio to the greater of: (i)
$50 million
and (ii)
10%
of the lesser of (A) the total commitments and (B) the borrowing base then in effect;
|
•
|
increase the uncommitted incremental loan facility to
$200 million
;
|
•
|
increase our borrowing capacity by expanding our ability to create liens if the debt incurrence test is met and by increasing minimum baskets for unsecured and secured debt to
$500 million
each, subject to certain conditions; and
|
•
|
increase the borrowing base by including
90%
of eligible international accounts receivable and
100%
of cash deposits, limited to
$100 million
and subject to certain conditions.
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||||
(Unaudited, in millions)
|
2014
|
|
|
2013
|
|
|
|
2014
|
|
|
2013
|
|
|
||||
Service cost
|
$
|
6
|
|
|
$
|
8
|
|
|
|
$
|
20
|
|
|
$
|
24
|
|
|
Interest cost
|
|
69
|
|
|
|
68
|
|
|
|
|
207
|
|
|
|
208
|
|
|
Expected return on plan assets
|
|
(76
|
)
|
|
|
(77
|
)
|
|
|
|
(227
|
)
|
|
|
(232
|
)
|
|
Amortization of actuarial losses
|
|
3
|
|
|
|
7
|
|
|
|
|
6
|
|
|
|
19
|
|
|
Amortization of prior service credits
|
|
—
|
|
|
|
(1
|
)
|
|
|
|
(1
|
)
|
|
|
(2
|
)
|
|
Net periodic benefit cost before special events
|
|
2
|
|
|
|
5
|
|
|
|
|
5
|
|
|
|
17
|
|
|
Curtailment and settlement
|
|
—
|
|
|
|
2
|
|
|
|
|
—
|
|
|
|
1
|
|
|
|
$
|
2
|
|
|
$
|
7
|
|
|
|
$
|
5
|
|
|
$
|
18
|
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||||
(Unaudited, in millions)
|
2014
|
|
|
2013
|
|
|
|
2014
|
|
|
2013
|
|
|
||||
Service cost
|
$
|
—
|
|
|
$
|
1
|
|
|
|
$
|
1
|
|
|
$
|
3
|
|
|
Interest cost
|
|
3
|
|
|
|
3
|
|
|
|
|
9
|
|
|
|
11
|
|
|
Amortization of actuarial gains
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
|
(3
|
)
|
|
|
(1
|
)
|
|
Amortization of prior service credits
|
|
(4
|
)
|
|
|
—
|
|
|
|
|
(8
|
)
|
|
|
—
|
|
|
|
$
|
(2
|
)
|
|
$
|
3
|
|
|
|
$
|
(1
|
)
|
|
$
|
13
|
|
|
•
|
an increase in the annual basic contribution in respect of the solvency deficits in the affected plans from
Cdn$50 million
to
Cdn$80 million
for each year from 2013 through 2020; and
|
•
|
the elimination of the conditional additional contribution feature based on a measure of free cash flow (as determined in accordance with the regulations), which would have applied as of 2013 below a certain solvency threshold.
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||||
(Unaudited, in millions)
|
2014
|
|
|
2013
|
|
|
|
2014
|
|
|
2013
|
|
|
||||
(Loss) income before income taxes
|
$
|
(117
|
)
|
|
$
|
29
|
|
|
|
$
|
(174
|
)
|
|
$
|
(91
|
)
|
|
Income tax benefit (provision):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Expected income tax benefit (provision)
|
|
41
|
|
|
|
(10
|
)
|
|
|
|
61
|
|
|
|
32
|
|
|
Changes resulting from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Valuation allowance
(1)
|
|
(23
|
)
|
|
|
(615
|
)
|
|
|
|
(43
|
)
|
|
|
(582
|
)
|
|
Foreign exchange
|
|
(7
|
)
|
|
|
(1
|
)
|
|
|
|
(9
|
)
|
|
|
(2
|
)
|
|
State income taxes and foreign tax rate differences
|
|
(5
|
)
|
|
|
4
|
|
|
|
|
6
|
|
|
|
8
|
|
|
Other, net
|
|
(5
|
)
|
|
|
5
|
|
|
|
|
(7
|
)
|
|
|
(2
|
)
|
|
|
$
|
1
|
|
|
$
|
(617
|
)
|
|
|
$
|
8
|
|
|
$
|
(546
|
)
|
|
(1)
|
During the three and nine months ended September 30, 2014, we recorded a net increase in our valuation allowance of
$23 million
and
$43 million
, respectively, primarily related to our U.S. operations, where we do not recognize deferred income tax assets. During the three and nine months ended September 30, 2013, we recorded a net increase in valuation allowances of
$615 million
and
$582 million
, respectively, mostly due to a charge of
$619 million
recorded in the third quarter to establish a full valuation allowance against our net U.S. deferred income tax assets, partly offset for the nine month period by the reversal of
$36 million
of valuation allowance related to U.S. capital losses that will be utilized as a result of the 2013 acquisition of the noncontrolling interest in CNC.
|
(Unaudited, in millions)
|
Newsprint
|
Specialty
Papers
|
Market
Pulp
(1)
|
Wood
Products
|
Corporate
and Other
|
Consolidated
Total
|
||||||||||||||||||
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Third quarter 2014
|
$
|
346
|
|
|
$
|
329
|
|
|
$
|
255
|
|
|
$
|
166
|
|
|
$
|
—
|
|
|
$
|
1,096
|
|
|
Third quarter 2013
|
|
376
|
|
|
|
339
|
|
|
|
269
|
|
|
|
146
|
|
|
|
—
|
|
|
|
1,130
|
|
|
First nine months 2014
|
|
1,056
|
|
|
|
955
|
|
|
|
730
|
|
|
|
462
|
|
|
|
—
|
|
|
|
3,203
|
|
|
First nine months 2013
|
|
1,096
|
|
|
|
1,017
|
|
|
|
772
|
|
|
|
426
|
|
|
|
—
|
|
|
|
3,311
|
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Third quarter 2014
|
$
|
17
|
|
|
$
|
20
|
|
|
$
|
13
|
|
|
$
|
8
|
|
|
$
|
2
|
|
|
$
|
60
|
|
|
Third quarter 2013
|
|
18
|
|
|
|
19
|
|
|
|
13
|
|
|
|
9
|
|
|
|
2
|
|
|
|
61
|
|
|
First nine months 2014
|
|
52
|
|
|
|
64
|
|
|
|
39
|
|
|
|
24
|
|
|
|
5
|
|
|
|
184
|
|
|
First nine months 2013
|
|
54
|
|
|
|
57
|
|
|
|
39
|
|
|
|
27
|
|
|
|
5
|
|
|
|
182
|
|
|
Operating income (loss)
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Third quarter 2014
|
$
|
5
|
|
|
$
|
6
|
|
|
$
|
21
|
|
|
$
|
24
|
|
|
$
|
(96
|
)
|
|
$
|
(40
|
)
|
|
Third quarter 2013
|
|
13
|
|
|
|
14
|
|
|
|
21
|
|
|
|
—
|
|
|
|
(12
|
)
|
|
|
36
|
|
|
First nine months 2014
|
|
8
|
|
|
|
(21
|
)
|
|
|
53
|
|
|
|
51
|
|
|
|
(172
|
)
|
|
|
(81
|
)
|
|
First nine months 2013
|
|
21
|
|
|
|
24
|
|
|
|
26
|
|
|
|
32
|
|
|
|
(113
|
)
|
|
|
(10
|
)
|
|
(1)
|
Market pulp sales excluded inter-segment sales of
$5 million
and
$4 million
for the
three months ended September 30, 2014
and
2013
, respectively, and
$15 million
and
$12 million
for the
nine
months ended
September 30, 2014
and
2013
, respectively.
|
(2)
|
Corporate and other
operating loss
for the
three and nine
months ended
September 30, 2014
and
2013
included the following significant items:
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||||
(Unaudited, in millions)
|
2014
|
|
|
2013
|
|
|
|
2014
|
|
|
2013
|
|
|
||||
Net gain on disposition of assets
|
$
|
—
|
|
|
$
|
—
|
|
|
|
$
|
2
|
|
|
$
|
2
|
|
|
Closure costs, impairment and other related charges
|
|
(85
|
)
|
|
|
(4
|
)
|
|
|
|
(147
|
)
|
|
|
(56
|
)
|
|
Inventory write-downs related to closures
|
|
(6
|
)
|
|
|
—
|
|
|
|
|
(10
|
)
|
|
|
(5
|
)
|
|
Transaction costs
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
(5
|
)
|
|
Start-up costs
|
|
(1
|
)
|
|
|
(3
|
)
|
|
|
|
(2
|
)
|
|
|
(31
|
)
|
|
|
$
|
(92
|
)
|
|
$
|
(7
|
)
|
|
|
$
|
(157
|
)
|
|
$
|
(95
|
)
|
|
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
|
||||||||||||||||||||
For the Three Months Ended September 30, 2014
|
||||||||||||||||||||
(Unaudited, in millions)
|
Parent
|
Guarantor
Subsidiaries
|
Non-guarantor
Subsidiaries
|
Consolidating
Adjustments
|
Consolidated
|
|||||||||||||||
Sales
|
$
|
—
|
|
|
$
|
887
|
|
|
$
|
707
|
|
|
$
|
(498
|
)
|
|
$
|
1,096
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cost of sales, excluding depreciation, amortization and distribution costs
|
|
—
|
|
|
|
800
|
|
|
|
518
|
|
|
|
(502
|
)
|
|
|
816
|
|
|
Depreciation and amortization
|
|
—
|
|
|
|
23
|
|
|
|
37
|
|
|
|
—
|
|
|
|
60
|
|
|
Distribution costs
|
|
—
|
|
|
|
44
|
|
|
|
90
|
|
|
|
—
|
|
|
|
134
|
|
|
Selling, general and administrative expenses
|
|
5
|
|
|
|
12
|
|
|
|
24
|
|
|
|
—
|
|
|
|
41
|
|
|
Closure costs, impairment and other related charges
|
|
—
|
|
|
|
1
|
|
|
|
84
|
|
|
|
—
|
|
|
|
85
|
|
|
Operating (loss) income
|
|
(5
|
)
|
|
|
7
|
|
|
|
(46
|
)
|
|
|
4
|
|
|
|
(40
|
)
|
|
Interest expense
|
|
(18
|
)
|
|
|
(1
|
)
|
|
|
(2
|
)
|
|
|
9
|
|
|
|
(12
|
)
|
|
Other expense, net
|
|
(1
|
)
|
|
|
(39
|
)
|
|
|
(16
|
)
|
|
|
(9
|
)
|
|
|
(65
|
)
|
|
Parent’s equity in loss of subsidiaries
|
|
(92
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
92
|
|
|
|
—
|
|
|
Loss before income taxes
|
|
(116
|
)
|
|
|
(33
|
)
|
|
|
(64
|
)
|
|
|
96
|
|
|
|
(117
|
)
|
|
Income tax (provision) benefit
|
|
—
|
|
|
|
(2
|
)
|
|
|
4
|
|
|
|
(1
|
)
|
|
|
1
|
|
|
Net loss including noncontrolling interests
|
|
(116
|
)
|
|
|
(35
|
)
|
|
|
(60
|
)
|
|
|
95
|
|
|
|
(116
|
)
|
|
Net income attributable to noncontrolling interests
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Net loss attributable to Resolute Forest Products Inc.
|
$
|
(116
|
)
|
|
$
|
(35
|
)
|
|
$
|
(60
|
)
|
|
$
|
95
|
|
|
$
|
(116
|
)
|
|
Comprehensive loss attributable to Resolute Forest Products Inc.
|
$
|
(149
|
)
|
|
$
|
(39
|
)
|
|
$
|
(89
|
)
|
|
$
|
128
|
|
|
$
|
(149
|
)
|
|
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
|
||||||||||||||||||||
For the Nine Months Ended September 30, 2014
|
||||||||||||||||||||
(Unaudited, in millions)
|
Parent
|
Guarantor
Subsidiaries
|
Non-guarantor
Subsidiaries
|
Consolidating
Adjustments
|
Consolidated
|
|||||||||||||||
Sales
|
$
|
—
|
|
|
$
|
2,624
|
|
|
$
|
2,140
|
|
|
$
|
(1,561
|
)
|
|
$
|
3,203
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cost of sales, excluding depreciation, amortization and distribution costs
|
|
—
|
|
|
|
2,450
|
|
|
|
1,557
|
|
|
|
(1,558
|
)
|
|
|
2,449
|
|
|
Depreciation and amortization
|
|
—
|
|
|
|
71
|
|
|
|
113
|
|
|
|
—
|
|
|
|
184
|
|
|
Distribution costs
|
|
—
|
|
|
|
123
|
|
|
|
267
|
|
|
|
(2
|
)
|
|
|
388
|
|
|
Selling, general and administrative expenses
|
|
13
|
|
|
|
34
|
|
|
|
71
|
|
|
|
—
|
|
|
|
118
|
|
|
Closure costs, impairment and other related charges
|
|
—
|
|
|
|
51
|
|
|
|
96
|
|
|
|
—
|
|
|
|
147
|
|
|
Net gain on disposition of assets
|
|
—
|
|
|
|
—
|
|
|
|
(2
|
)
|
|
|
—
|
|
|
|
(2
|
)
|
|
Operating (loss) income
|
|
(13
|
)
|
|
|
(105
|
)
|
|
|
38
|
|
|
|
(1
|
)
|
|
|
(81
|
)
|
|
Interest expense
|
|
(53
|
)
|
|
|
(3
|
)
|
|
|
(6
|
)
|
|
|
27
|
|
|
|
(35
|
)
|
|
Other expense, net
|
|
(1
|
)
|
|
|
(20
|
)
|
|
|
(10
|
)
|
|
|
(27
|
)
|
|
|
(58
|
)
|
|
Parent’s equity in loss of subsidiaries
|
|
(101
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
101
|
|
|
|
—
|
|
|
(Loss) income before income taxes
|
|
(168
|
)
|
|
|
(128
|
)
|
|
|
22
|
|
|
|
100
|
|
|
|
(174
|
)
|
|
Income tax benefit (provision)
|
|
—
|
|
|
|
28
|
|
|
|
(20
|
)
|
|
|
—
|
|
|
|
8
|
|
|
Net (loss) income including noncontrolling interests
|
|
(168
|
)
|
|
|
(100
|
)
|
|
|
2
|
|
|
|
100
|
|
|
|
(166
|
)
|
|
Net income attributable to noncontrolling interests
|
|
—
|
|
|
|
—
|
|
|
|
(2
|
)
|
|
|
—
|
|
|
|
(2
|
)
|
|
Net loss attributable to Resolute Forest Products Inc.
|
$
|
(168
|
)
|
|
$
|
(100
|
)
|
|
$
|
—
|
|
|
$
|
100
|
|
|
$
|
(168
|
)
|
|
Comprehensive loss attributable to Resolute Forest Products Inc.
|
$
|
(150
|
)
|
|
$
|
(54
|
)
|
|
$
|
(28
|
)
|
|
$
|
82
|
|
|
$
|
(150
|
)
|
|
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
|
||||||||||||||||||||
For the Three Months Ended September 30, 2013
|
||||||||||||||||||||
(Unaudited, in millions)
|
Parent
|
Guarantor
Subsidiaries
|
Non-guarantor
Subsidiaries
|
Consolidating
Adjustments
|
Consolidated
|
|||||||||||||||
Sales
|
$
|
—
|
|
|
$
|
933
|
|
|
$
|
775
|
|
|
$
|
(578
|
)
|
|
$
|
1,130
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cost of sales, excluding depreciation, amortization and distribution costs
|
|
—
|
|
|
|
848
|
|
|
|
587
|
|
|
|
(578
|
)
|
|
|
857
|
|
|
Depreciation and amortization
|
|
—
|
|
|
|
25
|
|
|
|
36
|
|
|
|
—
|
|
|
|
61
|
|
|
Distribution costs
|
|
—
|
|
|
|
42
|
|
|
|
95
|
|
|
|
(3
|
)
|
|
|
134
|
|
|
Selling, general and administrative expenses
|
|
6
|
|
|
|
9
|
|
|
|
23
|
|
|
|
—
|
|
|
|
38
|
|
|
Closure costs, impairment and other related charges
|
|
—
|
|
|
|
—
|
|
|
|
4
|
|
|
|
—
|
|
|
|
4
|
|
|
Operating (loss) income
|
|
(6
|
)
|
|
|
9
|
|
|
|
30
|
|
|
|
3
|
|
|
|
36
|
|
|
Interest expense
|
|
(16
|
)
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
8
|
|
|
|
(12
|
)
|
|
Other (expense) income, net
|
|
(1
|
)
|
|
|
12
|
|
|
|
2
|
|
|
|
(8
|
)
|
|
|
5
|
|
|
Parent’s equity in loss of subsidiaries
|
|
(521
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
521
|
|
|
|
—
|
|
|
(Loss) income before income taxes
|
|
(544
|
)
|
|
|
19
|
|
|
|
30
|
|
|
|
524
|
|
|
|
29
|
|
|
Income tax (provision) benefit
|
|
(44
|
)
|
|
|
(607
|
)
|
|
|
1
|
|
|
|
33
|
|
|
|
(617
|
)
|
|
Net (loss) income including noncontrolling interests
|
|
(588
|
)
|
|
|
(588
|
)
|
|
|
31
|
|
|
|
557
|
|
|
|
(588
|
)
|
|
Net income attributable to noncontrolling interests
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Net (loss) income attributable to Resolute Forest Products Inc.
|
$
|
(588
|
)
|
|
$
|
(588
|
)
|
|
$
|
31
|
|
|
$
|
557
|
|
|
$
|
(588
|
)
|
|
Comprehensive (loss) income attributable to Resolute Forest Products Inc.
|
$
|
(544
|
)
|
|
$
|
(520
|
)
|
|
$
|
40
|
|
|
$
|
480
|
|
|
$
|
(544
|
)
|
|
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
|
||||||||||||||||||||
For the Nine Months Ended September 30, 2013
|
||||||||||||||||||||
(Unaudited, in millions)
|
Parent
|
Guarantor
Subsidiaries
|
Non-guarantor
Subsidiaries
|
Consolidating
Adjustments
|
Consolidated
|
|||||||||||||||
Sales
|
$
|
—
|
|
|
$
|
2,715
|
|
|
$
|
2,195
|
|
|
$
|
(1,599
|
)
|
|
$
|
3,311
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cost of sales, excluding depreciation, amortization and distribution costs
|
|
—
|
|
|
|
2,481
|
|
|
|
1,681
|
|
|
|
(1,590
|
)
|
|
|
2,572
|
|
|
Depreciation and amortization
|
|
—
|
|
|
|
75
|
|
|
|
107
|
|
|
|
—
|
|
|
|
182
|
|
|
Distribution costs
|
|
—
|
|
|
|
127
|
|
|
|
266
|
|
|
|
(6
|
)
|
|
|
387
|
|
|
Selling, general and administrative expenses
|
|
16
|
|
|
|
36
|
|
|
|
74
|
|
|
|
—
|
|
|
|
126
|
|
|
Closure costs, impairment and other related charges
|
|
—
|
|
|
|
49
|
|
|
|
7
|
|
|
|
—
|
|
|
|
56
|
|
|
Net gain on disposition of assets
|
|
—
|
|
|
|
—
|
|
|
|
(2
|
)
|
|
|
—
|
|
|
|
(2
|
)
|
|
Operating (loss) income
|
|
(16
|
)
|
|
|
(53
|
)
|
|
|
62
|
|
|
|
(3
|
)
|
|
|
(10
|
)
|
|
Interest expense
|
|
(71
|
)
|
|
|
(3
|
)
|
|
|
(6
|
)
|
|
|
41
|
|
|
|
(39
|
)
|
|
Other (expense) income, net
|
|
(60
|
)
|
|
|
57
|
|
|
|
2
|
|
|
|
(41
|
)
|
|
|
(42
|
)
|
|
Parent’s equity in loss of subsidiaries
|
|
(489
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
489
|
|
|
|
—
|
|
|
(Loss) income before income taxes
|
|
(636
|
)
|
|
|
1
|
|
|
|
58
|
|
|
|
486
|
|
|
|
(91
|
)
|
|
Income tax provision
|
|
—
|
|
|
|
(567
|
)
|
|
|
(13
|
)
|
|
|
34
|
|
|
|
(546
|
)
|
|
Net (loss) income including noncontrolling interests
|
|
(636
|
)
|
|
|
(566
|
)
|
|
|
45
|
|
|
|
520
|
|
|
|
(637
|
)
|
|
Net loss attributable to noncontrolling interests
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
1
|
|
|
Net (loss) income attributable to Resolute Forest Products Inc.
|
$
|
(636
|
)
|
|
$
|
(566
|
)
|
|
$
|
46
|
|
|
$
|
520
|
|
|
$
|
(636
|
)
|
|
Comprehensive (loss) income attributable to Resolute Forest Products Inc.
|
$
|
(587
|
)
|
|
$
|
(480
|
)
|
|
$
|
42
|
|
|
$
|
438
|
|
|
$
|
(587
|
)
|
|
CONDENSED CONSOLIDATING BALANCE SHEET
|
||||||||||||||||||||
As of September 30, 2014
|
||||||||||||||||||||
(Unaudited, in millions)
|
Parent
|
Guarantor
Subsidiaries
|
Non-guarantor
Subsidiaries
|
Consolidating
Adjustments
|
Consolidated
|
|||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
50
|
|
|
$
|
215
|
|
|
$
|
—
|
|
|
$
|
265
|
|
|
Accounts receivable, net
|
|
—
|
|
|
|
430
|
|
|
|
183
|
|
|
|
—
|
|
|
|
613
|
|
|
Accounts receivable from affiliates
|
|
—
|
|
|
|
367
|
|
|
|
164
|
|
|
|
(531
|
)
|
|
|
—
|
|
|
Inventories, net
|
|
—
|
|
|
|
254
|
|
|
|
318
|
|
|
|
(9
|
)
|
|
|
563
|
|
|
Deferred income tax assets
|
|
—
|
|
|
|
—
|
|
|
|
31
|
|
|
|
—
|
|
|
|
31
|
|
|
Note and interest receivable from parent
|
|
—
|
|
|
|
290
|
|
|
|
—
|
|
|
|
(290
|
)
|
|
|
—
|
|
|
Notes receivable from affiliates
|
|
—
|
|
|
|
360
|
|
|
|
—
|
|
|
|
(360
|
)
|
|
|
—
|
|
|
Note receivable from subsidiary
|
|
8
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(8
|
)
|
|
|
—
|
|
|
Other current assets
|
|
—
|
|
|
|
49
|
|
|
|
30
|
|
|
|
—
|
|
|
|
79
|
|
|
Total current assets
|
|
8
|
|
|
|
1,800
|
|
|
|
941
|
|
|
|
(1,198
|
)
|
|
|
1,551
|
|
|
Fixed assets, net
|
|
—
|
|
|
|
757
|
|
|
|
1,341
|
|
|
|
—
|
|
|
|
2,098
|
|
|
Amortizable intangible assets, net
|
|
—
|
|
|
|
—
|
|
|
|
63
|
|
|
|
—
|
|
|
|
63
|
|
|
Deferred income tax assets
|
|
—
|
|
|
|
27
|
|
|
|
1,145
|
|
|
|
2
|
|
|
|
1,174
|
|
|
Note receivable from parent
|
|
—
|
|
|
|
376
|
|
|
|
—
|
|
|
|
(376
|
)
|
|
|
—
|
|
|
Notes receivable from affiliates
|
|
—
|
|
|
|
170
|
|
|
|
—
|
|
|
|
(170
|
)
|
|
|
—
|
|
|
Investments in consolidated subsidiaries and affiliates
|
|
4,649
|
|
|
|
2,020
|
|
|
|
—
|
|
|
|
(6,669
|
)
|
|
|
—
|
|
|
Other assets
|
|
8
|
|
|
|
48
|
|
|
|
94
|
|
|
|
—
|
|
|
|
150
|
|
|
Total assets
|
$
|
4,665
|
|
|
$
|
5,198
|
|
|
$
|
3,584
|
|
|
$
|
(8,411
|
)
|
|
$
|
5,036
|
|
|
Liabilities and equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Accounts payable and accrued liabilities
|
$
|
14
|
|
|
$
|
193
|
|
|
$
|
343
|
|
|
$
|
—
|
|
|
$
|
550
|
|
|
Current portion of long-term debt
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
1
|
|
|
Accounts payable to affiliates
|
|
374
|
|
|
|
157
|
|
|
|
—
|
|
|
|
(531
|
)
|
|
|
—
|
|
|
Deferred income tax liabilities
|
|
—
|
|
|
|
32
|
|
|
|
—
|
|
|
|
—
|
|
|
|
32
|
|
|
Note and interest payable to subsidiaries
|
|
290
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(290
|
)
|
|
|
—
|
|
|
Notes payable to affiliates
|
|
—
|
|
|
|
—
|
|
|
|
360
|
|
|
|
(360
|
)
|
|
|
—
|
|
|
Note payable to parent
|
|
—
|
|
|
|
—
|
|
|
|
8
|
|
|
|
(8
|
)
|
|
|
—
|
|
|
Total current liabilities
|
|
678
|
|
|
|
382
|
|
|
|
712
|
|
|
|
(1,189
|
)
|
|
|
583
|
|
|
Long-term debt, net of current portion
|
|
595
|
|
|
|
2
|
|
|
|
—
|
|
|
|
—
|
|
|
|
597
|
|
|
Note payable to subsidiary
|
|
376
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(376
|
)
|
|
|
—
|
|
|
Notes payable to affiliate
|
|
—
|
|
|
|
—
|
|
|
|
170
|
|
|
|
(170
|
)
|
|
|
—
|
|
|
Pension and other postretirement benefit obligations
|
|
—
|
|
|
|
222
|
|
|
|
872
|
|
|
|
—
|
|
|
|
1,094
|
|
|
Deferred income tax liabilities
|
|
—
|
|
|
|
1
|
|
|
|
4
|
|
|
|
—
|
|
|
|
5
|
|
|
Other long-term liabilities
|
|
1
|
|
|
|
27
|
|
|
|
35
|
|
|
|
—
|
|
|
|
63
|
|
|
Total liabilities
|
|
1,650
|
|
|
|
634
|
|
|
|
1,793
|
|
|
|
(1,735
|
)
|
|
|
2,342
|
|
|
Total equity
|
|
3,015
|
|
|
|
4,564
|
|
|
|
1,791
|
|
|
|
(6,676
|
)
|
|
|
2,694
|
|
|
Total liabilities and equity
|
$
|
4,665
|
|
|
$
|
5,198
|
|
|
$
|
3,584
|
|
|
$
|
(8,411
|
)
|
|
$
|
5,036
|
|
|
CONDENSED CONSOLIDATING BALANCE SHEET
|
||||||||||||||||||||
As of December 31, 2013
|
||||||||||||||||||||
(Unaudited, in millions)
|
Parent
|
Guarantor
Subsidiaries
|
Non-guarantor
Subsidiaries
|
Consolidating
Adjustments
|
Consolidated
|
|||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
165
|
|
|
$
|
157
|
|
|
$
|
—
|
|
|
$
|
322
|
|
|
Accounts receivable, net
|
|
—
|
|
|
|
433
|
|
|
|
201
|
|
|
|
—
|
|
|
|
634
|
|
|
Accounts receivable from affiliates
|
|
—
|
|
|
|
335
|
|
|
|
135
|
|
|
|
(470
|
)
|
|
|
—
|
|
|
Inventories, net
|
|
—
|
|
|
|
211
|
|
|
|
326
|
|
|
|
(8
|
)
|
|
|
529
|
|
|
Deferred income tax assets
|
|
—
|
|
|
|
—
|
|
|
|
32
|
|
|
|
—
|
|
|
|
32
|
|
|
Interest receivable from parent
|
|
—
|
|
|
|
14
|
|
|
|
—
|
|
|
|
(14
|
)
|
|
|
—
|
|
|
Note receivable from affiliate
|
|
—
|
|
|
|
350
|
|
|
|
—
|
|
|
|
(350
|
)
|
|
|
—
|
|
|
Note receivable from subsidiary
|
|
13
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(13
|
)
|
|
|
—
|
|
|
Other current assets
|
|
—
|
|
|
|
18
|
|
|
|
27
|
|
|
|
—
|
|
|
|
45
|
|
|
Total current assets
|
|
13
|
|
|
|
1,526
|
|
|
|
878
|
|
|
|
(855
|
)
|
|
|
1,562
|
|
|
Fixed assets, net
|
|
—
|
|
|
|
847
|
|
|
|
1,442
|
|
|
|
—
|
|
|
|
2,289
|
|
|
Amortizable intangible assets, net
|
|
—
|
|
|
|
—
|
|
|
|
66
|
|
|
|
—
|
|
|
|
66
|
|
|
Deferred income tax assets
|
|
—
|
|
|
|
28
|
|
|
|
1,236
|
|
|
|
2
|
|
|
|
1,266
|
|
|
Notes receivable from parent
|
|
—
|
|
|
|
627
|
|
|
|
—
|
|
|
|
(627
|
)
|
|
|
—
|
|
|
Notes receivable from affiliates
|
|
—
|
|
|
|
170
|
|
|
|
—
|
|
|
|
(170
|
)
|
|
|
—
|
|
|
Investments in consolidated subsidiaries and affiliates
|
|
4,734
|
|
|
|
2,085
|
|
|
|
—
|
|
|
|
(6,819
|
)
|
|
|
—
|
|
|
Other assets
|
|
8
|
|
|
|
112
|
|
|
|
82
|
|
|
|
—
|
|
|
|
202
|
|
|
Total assets
|
$
|
4,755
|
|
|
$
|
5,395
|
|
|
$
|
3,704
|
|
|
$
|
(8,469
|
)
|
|
$
|
5,385
|
|
|
Liabilities and equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Accounts payable and accrued liabilities
|
$
|
5
|
|
|
$
|
190
|
|
|
$
|
338
|
|
|
$
|
—
|
|
|
$
|
533
|
|
|
Current portion of long-term debt
|
|
—
|
|
|
|
1
|
|
|
|
1
|
|
|
|
—
|
|
|
|
2
|
|
|
Accounts payable to affiliates
|
|
352
|
|
|
|
118
|
|
|
|
—
|
|
|
|
(470
|
)
|
|
|
—
|
|
|
Deferred income tax liabilities
|
|
—
|
|
|
|
32
|
|
|
|
—
|
|
|
|
—
|
|
|
|
32
|
|
|
Interest payable to subsidiaries
|
|
14
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(14
|
)
|
|
|
—
|
|
|
Note payable to affiliate
|
|
—
|
|
|
|
—
|
|
|
|
350
|
|
|
|
(350
|
)
|
|
|
—
|
|
|
Note payable to parent
|
|
—
|
|
|
|
—
|
|
|
|
13
|
|
|
|
(13
|
)
|
|
|
—
|
|
|
Total current liabilities
|
|
371
|
|
|
|
341
|
|
|
|
702
|
|
|
|
(847
|
)
|
|
|
567
|
|
|
Long-term debt, net of current portion
|
|
595
|
|
|
|
2
|
|
|
|
—
|
|
|
|
—
|
|
|
|
597
|
|
|
Notes payable to subsidiaries
|
|
627
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(627
|
)
|
|
|
—
|
|
|
Notes payable to affiliate
|
|
—
|
|
|
|
—
|
|
|
|
170
|
|
|
|
(170
|
)
|
|
|
—
|
|
|
Pension and other postretirement benefit obligations
|
|
—
|
|
|
|
340
|
|
|
|
954
|
|
|
|
—
|
|
|
|
1,294
|
|
|
Deferred income tax liabilities
|
|
—
|
|
|
|
1
|
|
|
|
25
|
|
|
|
—
|
|
|
|
26
|
|
|
Other long-term liabilities
|
|
—
|
|
|
|
26
|
|
|
|
36
|
|
|
|
—
|
|
|
|
62
|
|
|
Total liabilities
|
|
1,593
|
|
|
|
710
|
|
|
|
1,887
|
|
|
|
(1,644
|
)
|
|
|
2,546
|
|
|
Total equity
|
|
3,162
|
|
|
|
4,685
|
|
|
|
1,817
|
|
|
|
(6,825
|
)
|
|
|
2,839
|
|
|
Total liabilities and equity
|
$
|
4,755
|
|
|
$
|
5,395
|
|
|
$
|
3,704
|
|
|
$
|
(8,469
|
)
|
|
$
|
5,385
|
|
|
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
|
||||||||||||||||||||
For the Nine Months Ended September 30, 2014
|
||||||||||||||||||||
(Unaudited, in millions)
|
Parent
|
Guarantor
Subsidiaries
|
Non-guarantor
Subsidiaries
|
Consolidating
Adjustments
|
Consolidated
|
|||||||||||||||
Net cash (used in) provided by operating activities
|
$
|
—
|
|
|
$
|
(56
|
)
|
|
$
|
136
|
|
|
$
|
—
|
|
|
$
|
80
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash invested in fixed assets
|
|
—
|
|
|
|
(61
|
)
|
|
|
(81
|
)
|
|
|
—
|
|
|
|
(142
|
)
|
|
Disposition of assets
|
|
—
|
|
|
|
4
|
|
|
|
2
|
|
|
|
—
|
|
|
|
6
|
|
|
Decrease in restricted cash
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
1
|
|
|
Decrease in deposit requirements for letters of credit, net
|
|
—
|
|
|
|
—
|
|
|
|
2
|
|
|
|
—
|
|
|
|
2
|
|
|
Net cash used in investing activities
|
|
—
|
|
|
|
(57
|
)
|
|
|
(76
|
)
|
|
|
—
|
|
|
|
(133
|
)
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Payments of debt
|
|
—
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
Payments of financing and credit facility fees
|
|
—
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
Net cash used in financing activities
|
|
—
|
|
|
|
(2
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(2
|
)
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
—
|
|
|
|
—
|
|
|
|
(2
|
)
|
|
|
—
|
|
|
|
(2
|
)
|
|
Net (decrease) increase in cash and cash equivalents
|
|
—
|
|
|
|
(115
|
)
|
|
|
58
|
|
|
|
—
|
|
|
|
(57
|
)
|
|
Cash and cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Beginning of period
|
|
—
|
|
|
|
165
|
|
|
|
157
|
|
|
|
—
|
|
|
|
322
|
|
|
End of period
|
$
|
—
|
|
|
$
|
50
|
|
|
$
|
215
|
|
|
$
|
—
|
|
|
$
|
265
|
|
|
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
|
||||||||||||||||||||
For the Nine Months Ended September 30, 2013
|
||||||||||||||||||||
(Unaudited, in millions)
|
Parent
|
Guarantor
Subsidiaries
|
Non-guarantor
Subsidiaries
|
Consolidating
Adjustments
|
Consolidated
|
|||||||||||||||
Net cash provided by operating activities
|
$
|
—
|
|
|
$
|
37
|
|
|
$
|
73
|
|
|
$
|
—
|
|
|
$
|
110
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash invested in fixed assets
|
|
—
|
|
|
|
(45
|
)
|
|
|
(79
|
)
|
|
|
—
|
|
|
|
(124
|
)
|
|
Disposition of assets
|
|
—
|
|
|
|
—
|
|
|
|
4
|
|
|
|
—
|
|
|
|
4
|
|
|
Proceeds from insurance settlements
|
|
—
|
|
|
|
—
|
|
|
|
4
|
|
|
|
—
|
|
|
|
4
|
|
|
Decrease in restricted cash
|
|
—
|
|
|
|
—
|
|
|
|
3
|
|
|
|
—
|
|
|
|
3
|
|
|
Advances (to) from affiliates
|
|
(10
|
)
|
|
|
10
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Net cash used in investing activities
|
|
(10
|
)
|
|
|
(35
|
)
|
|
|
(68
|
)
|
|
|
—
|
|
|
|
(113
|
)
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Issuance of long-term debt
|
|
594
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
594
|
|
|
Premium paid on extinguishment of debt
|
|
(84
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(84
|
)
|
|
Dividend to noncontrolling interest
|
|
—
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
(1
|
)
|
|
Payments of debt
|
|
(496
|
)
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
(497
|
)
|
|
Payments of financing and credit facility fees
|
|
(9
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(9
|
)
|
|
Contribution of capital from noncontrolling interest
|
|
—
|
|
|
|
8
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8
|
|
|
Net cash provided by (used in) financing activities
|
|
5
|
|
|
|
8
|
|
|
|
(2
|
)
|
|
|
—
|
|
|
|
11
|
|
|
Net (decrease) increase in cash and cash equivalents
|
|
(5
|
)
|
|
|
10
|
|
|
|
3
|
|
|
|
—
|
|
|
|
8
|
|
|
Cash and cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Beginning of period
|
|
5
|
|
|
|
171
|
|
|
|
87
|
|
|
|
—
|
|
|
|
263
|
|
|
End of period
|
$
|
—
|
|
|
$
|
181
|
|
|
$
|
90
|
|
|
$
|
—
|
|
|
$
|
271
|
|
|
•
|
On September 2, 2014, we announced the permanent closure of our Laurentide paper mill, resulting in the elimination of approximately
270
positions and the curtailment of
two
of our pension plans (Non-union Plan and Union Plan). As described in
Note 4, “Accumulated Other Comprehensive Loss
,” we recognized the curtailment of the Non-union Plan in the third quarter of 2014, including an increase of
$42 million
in “Pension and other postretirement benefit obligations” and
$30 million
(net of tax of
$12 million
) in “
Accumulated other comprehensive loss
” in our Consolidated Balance Sheet as of
September 30, 2014
. We will recognize the curtailment of the Union Plan as of the actual closure date, and the
effective termination of the unionized employees, in the fourth quarter, which will result in an increase of
$110 million
in “Pension and other postretirement benefit obligations” and
$80 million
(net of tax of
$30 million
) in “Accumulated other comprehensive loss” in our consolidated balance sheet as of that date.
|
•
|
On October 30, 2014, we received a notice from the Ministry of Natural Resources and Forestry of Ontario directing us to repay a conditional incentive of Cdn
$23 million
(
$20 million
based on the exchange rate in effect on September 30, 2014) offered in 2007 toward the construction of an electricity-producing turbine, should we fail to restart our Fort Frances pulp and paper mill by December 2, 2014, or otherwise implement an alternative remedy that is acceptable to the ministry. We announced the permanent closure of the mill in the second quarter of 2014 and have since been exploring a number of opportunities for the mill, including continuing to operate the biomass boiler and electricity-producing turbine. We are not presently able to determine the outcome of this process, but we currently believe that we could reach an acceptable outcome for the ministry within the time limit prescribed. Accordingly, we have recorded
no
contingent liability in respect of this notice in our Consolidated Balance Sheet as of September 30, 2014.
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
Competitive cost structure
- as a result of aggressive cost reductions and mill rationalizations, today we compete as a leading, lower-cost North American producer. Maintaining this competitive advantage is our key focus. By challenging ourselves to optimize assets - maximizing the utilization of our most cost-effective mills and streamlining production to adapt to changing market dynamics - we seek to remain an industry cost leader and to maximize shareholder value and earnings power.
|
•
|
Synergistic and diversified asset base
- our harvesting rights and extensive network of Canadian sawmills not only make us a significant lumber producer in eastern North America, but also give us the fiber management advantage of integration from the harvested log through the finished pulp or paper product at more than half of our facilities. In the U.S., we source primarily from the lower-cost southeastern fiber basket. The diversified and complementary nature of our asset base also provides earnings from multiple products.
|
•
|
Financial strength
- we make disciplined capital management a priority; we believe in maintaining a flexible and conservative capital structure.
|
Three Months Ended September 30, 2014
|
Operating
Income
(Loss)
|
Net
Income
(Loss)
|
EPS
|
|
|
|||||||
(unaudited, in millions, except per share amounts)
|
||||||||||||
GAAP, as reported
|
$
|
(40
|
)
|
|
$
|
(116
|
)
|
|
$
|
(1.23
|
)
|
|
Adjustments for special items
(1)
:
|
|
|
|
|
|
|
|
|
|
|||
Foreign exchange translation loss
|
|
—
|
|
|
|
17
|
|
|
|
0.18
|
|
|
Closure costs, impairment and other related charges
|
|
85
|
|
|
|
85
|
|
|
|
0.90
|
|
|
Inventory write-downs related to closures
|
|
6
|
|
|
|
6
|
|
|
|
0.06
|
|
|
Start-up costs
|
|
1
|
|
|
|
1
|
|
|
|
0.01
|
|
|
Write-down of equity method investment
|
|
—
|
|
|
|
50
|
|
|
|
0.53
|
|
|
Other income, net
|
|
—
|
|
|
|
(2
|
)
|
|
|
(0.02
|
)
|
|
Income tax effect of special items
|
|
—
|
|
|
|
(24
|
)
|
|
|
(0.25
|
)
|
|
GAAP, as adjusted for special items
|
$
|
52
|
|
|
$
|
17
|
|
|
$
|
0.18
|
|
|
Three Months Ended September 30, 2013
|
Operating
Income
(Loss)
|
Net
Income
(Loss)
|
EPS
|
|
|
|||||||
(unaudited, in millions, except per share amounts)
|
||||||||||||
GAAP, as reported
|
$
|
36
|
|
|
$
|
(588
|
)
|
|
$
|
(6.22
|
)
|
|
Adjustments for special items
(1)
:
|
|
|
|
|
|
|
|
|
|
|||
Foreign exchange translation gain
|
|
—
|
|
|
|
(3
|
)
|
|
|
(0.03
|
)
|
|
Closure costs, impairment and other related charges
|
|
4
|
|
|
|
4
|
|
|
|
0.04
|
|
|
Start-up costs
|
|
3
|
|
|
|
3
|
|
|
|
0.04
|
|
|
Other income, net
|
|
—
|
|
|
|
(2
|
)
|
|
|
(0.02
|
)
|
|
U.S. deferred income tax asset valuation allowance
|
|
—
|
|
|
|
619
|
|
|
|
6.54
|
|
|
Income tax effect of special items
|
|
—
|
|
|
|
(4
|
)
|
|
|
(0.04
|
)
|
|
GAAP, as adjusted for special items
|
$
|
43
|
|
|
$
|
29
|
|
|
$
|
0.31
|
|
|
(1)
|
Operating income (loss), net income (loss) and net income (loss) per share (or “
EPS
”), in each case as adjusted for special items, are not financial measures recognized under generally accepted accounting principles, or “
GAAP
”. We calculate operating income (loss), as adjusted for special items, as operating income (loss) from our consolidated statements of operations, adjusted for items such as closure costs, impairment and other related charges, inventory write-downs related to closures, start-up costs, gains and losses on disposition of assets, transaction costs, and other charges or credits that are excluded from our segment’s performance from GAAP operating income (loss). We calculate net income (loss), as adjusted for special items, as net income (loss) from our consolidated statements of operations, adjusted for the same special items applied to operating income (loss), plus the effects of foreign currency translation, net loss on extinguishment of debt, write-down of equity method investment, other income (expense) and U.S. deferred income tax asset valuation allowance. EPS, as adjusted for special items, is calculated as net income (loss), as adjusted for special items, per diluted share. We believe that using these measures is useful because they are consistent with the indicators management uses internally to measure the Company’s performance, and it allows the reader to more easily compare our ongoing operations and financial performance from period to period.
|
Nine Months Ended September 30, 2014
|
Operating
Income
(Loss)
|
Net
Income
(Loss)
|
EPS
|
|
|
|||||||
(unaudited, in millions, except per share amounts)
|
||||||||||||
GAAP, as reported
|
$
|
(81
|
)
|
|
$
|
(168
|
)
|
|
$
|
(1.78
|
)
|
|
Adjustments for special items
(1)
:
|
|
|
|
|
|
|
|
|
|
|||
Foreign exchange translation loss
|
|
—
|
|
|
|
14
|
|
|
|
0.15
|
|
|
Closure costs, impairment and other related charges
|
|
147
|
|
|
|
147
|
|
|
|
1.55
|
|
|
Inventory write-downs related to closures
|
|
10
|
|
|
|
10
|
|
|
|
0.11
|
|
|
Start-up costs
|
|
2
|
|
|
|
2
|
|
|
|
0.02
|
|
|
Net gain on disposition of assets
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
(0.02
|
)
|
|
Write-down of equity method investment
|
|
—
|
|
|
|
50
|
|
|
|
0.53
|
|
|
Other income, net
|
|
—
|
|
|
|
(6
|
)
|
|
|
(0.06
|
)
|
|
Income tax effect of special items
|
|
—
|
|
|
|
(37
|
)
|
|
|
(0.39
|
)
|
|
GAAP, as adjusted for special items
|
$
|
76
|
|
|
$
|
10
|
|
|
$
|
0.11
|
|
|
Nine Months Ended September 30, 2013
|
Operating
Income
(Loss)
|
Net
Income
(Loss)
|
EPS
|
|
|
|||||||
(unaudited, in millions, except per share amounts)
|
||||||||||||
GAAP, as reported
|
$
|
(10
|
)
|
|
$
|
(636
|
)
|
|
$
|
(6.72
|
)
|
|
Adjustments for special items
(1)
:
|
|
|
|
|
|
|
|
|
|
|||
Foreign exchange translation loss
|
|
—
|
|
|
|
9
|
|
|
|
0.10
|
|
|
Closure costs, impairment and other related charges
|
|
56
|
|
|
|
56
|
|
|
|
0.59
|
|
|
Inventory write-downs related to closures
|
|
5
|
|
|
|
5
|
|
|
|
0.05
|
|
|
Start-up costs
|
|
31
|
|
|
|
31
|
|
|
|
0.33
|
|
|
Net gain on disposition of assets
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
(0.02
|
)
|
|
Net loss on extinguishment of debt
|
|
—
|
|
|
|
59
|
|
|
|
0.62
|
|
|
Transaction costs
|
|
5
|
|
|
|
5
|
|
|
|
0.05
|
|
|
Other income, net
|
|
—
|
|
|
|
(26
|
)
|
|
|
(0.27
|
)
|
|
U.S. deferred income tax asset valuation allowance
|
|
—
|
|
|
|
619
|
|
|
|
6.54
|
|
|
Income tax effect of special items
|
|
—
|
|
|
|
(45
|
)
|
|
|
(0.48
|
)
|
|
GAAP, as adjusted for special items
|
$
|
85
|
|
|
$
|
75
|
|
|
$
|
0.79
|
|
|
(1)
|
Operating income (loss), net income (loss) and EPS, in each case as adjusted for special items, are non-GAAP financial measures. For more information on the calculation and reason we include this measure, see note 1 under “
Overview –
Third Quarter
Overview
” above.
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||||
(unaudited, in millions, except per share amounts)
|
2014
|
2013
|
|
2014
|
2013
|
||||||||||||
Sales
|
$
|
1,096
|
|
|
$
|
1,130
|
|
|
|
$
|
3,203
|
|
|
$
|
3,311
|
|
|
Operating income (loss) per segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Newsprint
|
|
5
|
|
|
|
13
|
|
|
|
|
8
|
|
|
|
21
|
|
|
Specialty papers
|
|
6
|
|
|
|
14
|
|
|
|
|
(21
|
)
|
|
|
24
|
|
|
Market pulp
|
|
21
|
|
|
|
21
|
|
|
|
|
53
|
|
|
|
26
|
|
|
Wood products
|
|
24
|
|
|
|
—
|
|
|
|
|
51
|
|
|
|
32
|
|
|
Corporate / other
|
|
(96
|
)
|
|
|
(12
|
)
|
|
|
|
(172
|
)
|
|
|
(113
|
)
|
|
Total
|
|
(40
|
)
|
|
|
36
|
|
|
|
|
(81
|
)
|
|
|
(10
|
)
|
|
Net loss
|
|
(116
|
)
|
|
|
(588
|
)
|
|
|
|
(168
|
)
|
|
|
(636
|
)
|
|
Net loss per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic
|
$
|
(1.23
|
)
|
|
$
|
(6.22
|
)
|
|
|
$
|
(1.78
|
)
|
|
$
|
(6.72
|
)
|
|
Diluted
|
|
(1.23
|
)
|
|
|
(6.22
|
)
|
|
|
|
(1.78
|
)
|
|
|
(6.72
|
)
|
|
Adjusted EBITDA
(1)
|
$
|
112
|
|
|
$
|
104
|
|
|
|
$
|
260
|
|
|
$
|
267
|
|
|
Adjusted EBITDA margin
(1)
|
|
10.2
|
%
|
|
|
9.2
|
%
|
|
|
|
8.1
|
%
|
|
|
8.1
|
%
|
|
|
As of
September 30, |
As of December 31,
|
||||||
(unaudited, in millions)
|
2014
|
2013
|
||||||
Cash and cash equivalents
|
$
|
265
|
|
|
$
|
322
|
|
|
Total assets
|
|
5,036
|
|
|
|
5,385
|
|
|
(1)
|
Earnings before interest expense, income taxes, and depreciation and amortization, or “
EBITDA
”, adjusted EBITDA and adjusted EBITDA margin are non-GAAP financial measures. EBITDA is calculated as net income (loss) including noncontrolling interests from the consolidated statements of operations, adjusted for interest expense, income taxes, and depreciation and amortization. Adjusted EBITDA means EBITDA, excluding special items, such as foreign exchange translation gains and losses, closure costs, impairment and other related charges, inventory write-downs related to closures, start-up costs, gains and losses on disposition of assets, net loss on extinguishment of debt, write-down of equity method investment, transaction costs and other charges or credits. Adjusted EBITDA margin is adjusted EBITDA expressed as a percentage of sales. We believe that using measures such as EBITDA, adjusted EBITDA and adjusted EBITDA margin is useful because they are consistent with the indicators management uses internally to measure the Company’s performance and it allows the reader to more easily compare our ongoing operations and financial performance from period to period.
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||||
(Unaudited, in millions)
|
2014
|
|
|
2013
|
|
|
|
2014
|
|
|
2013
|
|
|
||||
Net loss including noncontrolling interests
|
$
|
(116
|
)
|
|
$
|
(588
|
)
|
|
|
$
|
(166
|
)
|
|
$
|
(637
|
)
|
|
Interest expense
|
|
12
|
|
|
|
12
|
|
|
|
|
35
|
|
|
|
39
|
|
|
Income tax (benefit) provision
|
|
(1
|
)
|
|
|
617
|
|
|
|
|
(8
|
)
|
|
|
546
|
|
|
Depreciation and amortization
|
|
60
|
|
|
|
61
|
|
|
|
|
184
|
|
|
|
182
|
|
|
EBITDA
|
$
|
(45
|
)
|
|
$
|
102
|
|
|
|
$
|
45
|
|
|
$
|
130
|
|
|
Foreign exchange translation loss (gain)
|
|
17
|
|
|
|
(3
|
)
|
|
|
|
14
|
|
|
|
9
|
|
|
Closure costs, impairment and other related charges
|
|
85
|
|
|
|
4
|
|
|
|
|
147
|
|
|
|
56
|
|
|
Inventory write-downs related to closures
|
|
6
|
|
|
|
—
|
|
|
|
|
10
|
|
|
|
5
|
|
|
Start-up costs
|
|
1
|
|
|
|
3
|
|
|
|
|
2
|
|
|
|
31
|
|
|
Net gain on disposition of assets
|
|
—
|
|
|
|
—
|
|
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
Write-down of equity method investment
|
|
50
|
|
|
|
—
|
|
|
|
|
50
|
|
|
|
—
|
|
|
Net loss on extinguishment of debt
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
59
|
|
|
Transaction costs
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
5
|
|
|
Other income, net
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
|
(6
|
)
|
|
|
(26
|
)
|
|
Adjusted EBITDA
|
$
|
112
|
|
|
$
|
104
|
|
|
|
$
|
260
|
|
|
$
|
267
|
|
|
•
|
lower pension and other postretirement benefit, or “
OPEB
”, expenses as a result of the lower unfunded pension liability and an amendment to one of our U.S. OPEB plans ($8 million);
|
•
|
the recognition of an energy savings incentive in the U.S. southeast ($6 million);
|
•
|
lower labor costs ($3 million); and
|
•
|
the recognition of additional tax credits in connection with infrastructure investments ($3 million);
|
•
|
higher natural gas prices ($5 million);
|
•
|
the write-down of stores inventory in connection with the permanent closure of our Laurentide, Québec, mill ($5 million);
|
•
|
higher wood costs ($5 million);
|
•
|
lower contribution from cogeneration facilities ($4 million); and
|
•
|
timing of insurance proceeds ($3 million).
|
•
|
the abnormally cold winter ($40 million);
|
•
|
higher stumpage fees and other costs associated with the comprehensive modification of the forest tenure system in the province of Québec ($15 million);
|
•
|
operational disruptions ($12 million);
|
•
|
asset preservation costs at our closed Fort Frances, Ontario, facility and additional stores inventory write-downs in connection with closures ($11 million);
|
•
|
lower contribution from our cogeneration facilities because of higher bark costs at one mill, natural gas usage at another and repairs and additional maintenance at the Thunder Bay, Ontario, cogeneration facility ($8 million);
|
•
|
natural gas costs ($7 million);
|
•
|
higher maintenance costs ($5 million); and
|
•
|
the timing of insurance proceeds ($3 million);
|
•
|
lower start-up costs, the most significant of which were costs incurred in 2013 in connection with the restart of the Gatineau, Québec, mill ($31 million);
|
•
|
lower pension and OPEB expenses ($26 million);
|
•
|
the recognition of an energy savings incentive in the U.S. southeast, the recognition of additional tax credits in connection with infrastructure investments and other tax, research and development and insurance credits ($13 million);
|
•
|
the full period operation of the Thunder Bay cogeneration assets ($10 million);
|
•
|
better fiber and chemical costs ($8 million); and
|
•
|
the effect of asset optimization initiatives and lower labor costs ($5 million).
|
•
|
the tender premium paid to holders of 2018 notes in the refinancing, net of the write-down of the associated unamortized premium ($59 million); and
|
•
|
a non-cash loss on translation of Canadian dollar net monetary assets ($9 million);
|
•
|
the forgiveness of a note payable in connection with our acquisition of a former joint venture partner’s interest in Calhoun Newsprint Company (“
CNC
”) ($12 million); and
|
•
|
a distribution from the liquidation of a former U.K. subsidiary ($12 million).
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||||
(unaudited, in millions, except where otherwise stated)
|
2014
|
|
|
2013
|
|
|
|
2014
|
|
|
2013
|
|
|
||||
Sales
|
$
|
346
|
|
|
$
|
376
|
|
|
|
$
|
1,056
|
|
|
$
|
1,096
|
|
|
Operating income
(1)
|
|
5
|
|
|
|
13
|
|
|
|
|
8
|
|
|
|
21
|
|
|
EBITDA
(2)
|
|
22
|
|
|
|
31
|
|
|
|
|
60
|
|
|
|
75
|
|
|
(in thousands of metric tons)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Shipments
|
|
584
|
|
|
|
616
|
|
|
|
|
1,774
|
|
|
|
1,775
|
|
|
Downtime
|
|
83
|
|
|
|
28
|
|
|
|
|
151
|
|
|
|
105
|
|
|
Inventory at end of period
|
|
123
|
|
|
|
109
|
|
|
|
|
123
|
|
|
|
109
|
|
|
(1)
|
Net income including noncontrolling interests
is equal to
operating income
in this segment.
|
(2)
|
EBITDA, a non-GAAP financial measure, is reconciled below. For more information on the calculation and reason we include this measure, see note 1 under “
Results of Operations – Consolidated Results – Selected Financial Information
” above.
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||||
(unaudited, in millions)
|
2014
|
|
|
2013
|
|
|
|
2014
|
|
|
2013
|
|
|
||||
Net income including noncontrolling interests
|
$
|
5
|
|
|
$
|
13
|
|
|
|
$
|
8
|
|
|
$
|
21
|
|
|
Depreciation and amortization
|
|
17
|
|
|
|
18
|
|
|
|
|
52
|
|
|
|
54
|
|
|
EBITDA
|
|
22
|
|
|
|
31
|
|
|
|
|
60
|
|
|
|
75
|
|
|
•
|
full-period contribution of the Thunder Bay cogeneration facility ($8 million), which started operations at the end of the first quarter of 2013;
|
•
|
the recognition of an energy savings incentive in the U.S. southeast ($6 million);
|
•
|
lower internal chip prices ($4 million); and
|
•
|
lower pension and OPEB expenses ($3 million).
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||||
(unaudited, in millions, except where otherwise stated)
|
2014
|
|
|
2013
|
|
|
|
2014
|
|
|
2013
|
|
|
||||
Sales
|
$
|
329
|
|
|
$
|
339
|
|
|
|
$
|
955
|
|
|
$
|
1,017
|
|
|
Operating income (loss)
(1)
|
|
6
|
|
|
|
14
|
|
|
|
|
(21
|
)
|
|
|
24
|
|
|
EBITDA
(2)
|
|
26
|
|
|
|
33
|
|
|
|
|
43
|
|
|
|
81
|
|
|
(in thousands of short tons)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Shipments
|
|
463
|
|
|
|
457
|
|
|
|
|
1,335
|
|
|
|
1,365
|
|
|
Downtime
|
|
13
|
|
|
|
40
|
|
|
|
|
113
|
|
|
|
135
|
|
|
Inventory at end of period
|
|
122
|
|
|
|
95
|
|
|
|
|
122
|
|
|
|
95
|
|
|
(1)
|
Net income (loss) including noncontrolling interests
is equal to
operating income (loss)
in this segment.
|
(2)
|
EBITDA, a non-GAAP financial measure, is reconciled below. For more information on the calculation and reason we include this measure, see note 1 under “
Results of Operations – Consolidated Results – Selected Financial Information
” above.
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||||
(unaudited, in millions)
|
2014
|
|
|
2013
|
|
|
|
2014
|
|
|
2013
|
|
|
||||
Net income (loss) including noncontrolling interests
|
$
|
6
|
|
|
$
|
14
|
|
|
|
$
|
(21
|
)
|
|
$
|
24
|
|
|
Depreciation and amortization
|
|
20
|
|
|
|
19
|
|
|
|
|
64
|
|
|
|
57
|
|
|
EBITDA
|
|
26
|
|
|
|
33
|
|
|
|
|
43
|
|
|
|
81
|
|
|
•
|
the abnormally cold winter in the first quarter ($11 million), including a significant increase in steam costs, particularly at our U.S. southeast mills;
|
•
|
higher natural gas costs ($5 million);
|
•
|
costs associated with mechanical failures ($4 million);
|
•
|
higher cost of bark at the Dolbeau, Québec, cogeneration facility ($3 million); and
|
•
|
the timing of the insurance proceeds ($3 million);
|
•
|
the lower pension and OPEB expenses ($12 million);
|
•
|
lower internal chip prices as well as better fiber and chemical costs ($6 million); and
|
•
|
asset optimization initiatives ($3 million).
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||||
(unaudited, in millions, except where otherwise stated)
|
2014
|
|
|
2013
|
|
|
|
2014
|
|
|
2013
|
|
|
||||
Sales
|
$
|
255
|
|
|
$
|
269
|
|
|
|
$
|
730
|
|
|
$
|
772
|
|
|
Operating income
(1)
|
|
21
|
|
|
|
21
|
|
|
|
|
53
|
|
|
|
26
|
|
|
EBITDA
(2)
|
|
34
|
|
|
|
34
|
|
|
|
|
92
|
|
|
|
65
|
|
|
(in thousands of metric tons)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Shipments
|
|
363
|
|
|
|
399
|
|
|
|
|
1,032
|
|
|
|
1,166
|
|
|
Downtime
|
|
27
|
|
|
|
13
|
|
|
|
|
63
|
|
|
|
43
|
|
|
Inventory at end of period
|
|
94
|
|
|
|
102
|
|
|
|
|
94
|
|
|
|
102
|
|
|
(1)
|
Net income including noncontrolling interests
is equal to
operating income
in this segment.
|
(2)
|
EBITDA, a non-GAAP financial measure, is reconciled below. For more information on the calculation and reason we include this measure, see note 1 under “
Results of Operations – Consolidated Results – Selected Financial Information
” above.
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||||
(unaudited, in millions)
|
2014
|
|
|
2013
|
|
|
|
2014
|
|
|
2013
|
|
|
||||
Net income including noncontrolling interests
|
$
|
21
|
|
|
$
|
21
|
|
|
|
$
|
53
|
|
|
$
|
26
|
|
|
Depreciation and amortization
|
|
13
|
|
|
|
13
|
|
|
|
|
39
|
|
|
|
39
|
|
|
EBITDA
|
|
34
|
|
|
|
34
|
|
|
|
|
92
|
|
|
|
65
|
|
|
•
|
better labor costs and lower maintenance ($5 million);
|
•
|
lower pension and OPEB expenses ($5 million); and
|
•
|
lower internal chip costs and other miscellaneous improvements ($4 million);
|
•
|
the abnormally cold winter ($8 million), including higher steam costs and wood prices in the U.S. southeast;
|
•
|
operational disruptions ($6 million), most of which occurred in the first quarter; and
|
•
|
lower contribution from the cogeneration facility at Saint-Félicien because of an increase in natural gas usage ($3 million).
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||||
(unaudited, in millions, except where otherwise stated)
|
2014
|
|
|
2013
|
|
|
|
2014
|
|
|
2013
|
|
|
||||
Sales
|
$
|
166
|
|
|
$
|
146
|
|
|
|
$
|
462
|
|
|
$
|
426
|
|
|
Operating income
(1)
|
|
24
|
|
|
|
—
|
|
|
|
|
51
|
|
|
|
32
|
|
|
EBITDA
(2)
|
|
32
|
|
|
|
9
|
|
|
|
|
75
|
|
|
|
59
|
|
|
(in millions of board feet)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Shipments
|
|
422
|
|
|
|
417
|
|
|
|
|
1,195
|
|
|
|
1,100
|
|
|
Downtime
|
|
46
|
|
|
|
144
|
|
|
|
|
119
|
|
|
|
402
|
|
|
Inventory at end of period
|
|
124
|
|
|
|
107
|
|
|
|
|
124
|
|
|
|
107
|
|
|
(1)
|
Net income including noncontrolling interests
is equal to
operating income
in this segment.
|
(2)
|
EBITDA, a non-GAAP financial measure, is reconciled below. For more information on the calculation and reason we include this measure, see note 1 under “
Results of Operations – Consolidated Results– Selected Financial Information
” above.
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||||
(unaudited, in millions)
|
2014
|
|
|
2013
|
|
|
|
2014
|
|
|
2013
|
|
|
||||
Net income including noncontrolling interests
|
$
|
24
|
|
|
$
|
—
|
|
|
|
$
|
51
|
|
|
$
|
32
|
|
|
Depreciation and amortization
|
|
8
|
|
|
|
9
|
|
|
|
|
24
|
|
|
|
27
|
|
|
EBITDA
|
|
32
|
|
|
|
9
|
|
|
|
|
75
|
|
|
|
59
|
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||||
(unaudited, in millions)
|
2014
|
|
|
2013
|
|
|
|
2014
|
|
|
2013
|
|
|
||||
Cost of sales, excluding depreciation, amortization and distribution costs
|
$
|
(7
|
)
|
|
$
|
(3
|
)
|
|
|
$
|
(15
|
)
|
|
$
|
(38
|
)
|
|
Depreciation and amortization
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
|
(5
|
)
|
|
|
(5
|
)
|
|
Selling, general and administrative expenses
|
|
(2
|
)
|
|
|
(3
|
)
|
|
|
|
(7
|
)
|
|
|
(16
|
)
|
|
Closure costs, impairment and other related charges
|
|
(85
|
)
|
|
|
(4
|
)
|
|
|
|
(147
|
)
|
|
|
(56
|
)
|
|
Net gain on disposition of assets
|
|
—
|
|
|
|
—
|
|
|
|
|
2
|
|
|
|
2
|
|
|
Operating loss
|
$
|
(96
|
)
|
|
$
|
(12
|
)
|
|
|
$
|
(172
|
)
|
|
$
|
(113
|
)
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||||
(unaudited, in millions)
|
2014
|
|
|
2013
|
|
|
|
2014
|
|
|
2013
|
|
|
||||
Net loss including noncontrolling interests
|
$
|
(172
|
)
|
|
$
|
(636
|
)
|
|
|
$
|
(257
|
)
|
|
$
|
(740
|
)
|
|
Interest expense
|
|
12
|
|
|
|
12
|
|
|
|
|
35
|
|
|
|
39
|
|
|
Income tax (benefit) provision
|
|
(1
|
)
|
|
|
617
|
|
|
|
|
(8
|
)
|
|
|
546
|
|
|
Depreciation and amortization
|
|
2
|
|
|
|
2
|
|
|
|
|
5
|
|
|
|
5
|
|
|
EBITDA
|
$
|
(159
|
)
|
|
$
|
(5
|
)
|
|
|
$
|
(225
|
)
|
|
$
|
(150
|
)
|
|
Foreign exchange translation loss (gain)
|
|
17
|
|
|
|
(3
|
)
|
|
|
|
14
|
|
|
|
9
|
|
|
Closure costs, impairment and other related charges
|
|
85
|
|
|
|
4
|
|
|
|
|
147
|
|
|
|
56
|
|
|
Inventory write-downs related to closures
|
|
6
|
|
|
|
—
|
|
|
|
|
10
|
|
|
|
5
|
|
|
Start-up costs
|
|
1
|
|
|
|
3
|
|
|
|
|
2
|
|
|
|
31
|
|
|
Net gain on disposition of assets
|
|
—
|
|
|
|
—
|
|
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
Write-down of equity method investment
|
|
50
|
|
|
|
—
|
|
|
|
|
50
|
|
|
|
—
|
|
|
Net loss on extinguishment of debt
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
59
|
|
|
Transaction costs
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
5
|
|
|
Other income, net
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
|
(6
|
)
|
|
|
(26
|
)
|
|
Adjusted EBITDA
|
$
|
(2
|
)
|
|
$
|
(3
|
)
|
|
|
$
|
(10
|
)
|
|
$
|
(13
|
)
|
|
•
|
start-up costs recorded in 2013 in connection with the restart of the Gatineau mill ($31 million), which began operation in June of 2013;
|
•
|
the recognition of research and development and insurance credits ($3 million); and
|
•
|
lower pension and OPEB expenses ($3 million);
|
•
|
higher asset preservation costs ($7 million), related mainly to the Fort Frances mill; and
|
•
|
higher stores inventory write-downs ($5 million) in connection with the closure of a machine at our Catawba mill and the permanent closure of the Laurentide mill.
|
•
|
$65 million of accelerated depreciation, $11 million for severance and other termination benefits, and $5 million for other closure costs, including environmental remediation obligations, in connection with the permanent closure of the Laurentide mill;
|
•
|
accelerated depreciation following our decision in the second quarter to permanently close the idled paper machine at Catawba ($45 million);
|
•
|
idling and cleaning costs in the first quarter and severance charges in the second quarter at the Fort Frances mill ($8 million);
|
•
|
long-lived asset impairment charges in connection with our recycling assets ($6 million); and
|
•
|
accelerated depreciation in the first quarter for a paper machine closed at Iroquois Falls, Ontario ($3 million).
|
•
|
accelerated depreciation and severance costs associated with the idling of a newsprint machine at our Calhoun, Tennessee, mill ($49 million);
|
•
|
additional severance and clean-up costs for the 2012 idling of two machines in Fort Frances ($4 million); and
|
•
|
severance charges and a pension curtailment loss related to manning reductions at our Baie-Comeau mill ($4 million).
|
•
|
release the second priority liens on the collateral of the covered borrowers and guarantors previously pledged to secure the 2018 notes, with an ability to re-implement that second lien should we issue new secured debt with a second lien on the ABL collateral;
|
•
|
reduce the excess availability thresholds that trigger a minimum consolidated fixed charge coverage ratio;
|
•
|
increase the uncommitted incremental loan facility;
|
•
|
improve our borrowing capacity by providing more flexibility under the debt incurrence covenant, including significant expansion to baskets for unsecured and secured debt, subject to certain conditions; and
|
•
|
increase certain advance rates for purposes of calculating the borrowing base.
|
|
Nine Months Ended
September 30, |
|||||||
(unaudited, in millions)
|
2014
|
|
|
2013
|
|
|
||
Net cash provided by operating activities
|
$
|
80
|
|
|
$
|
110
|
|
|
Net cash used in investing activities
|
|
(133
|
)
|
|
|
(113
|
)
|
|
Net cash (used in) provided by financing activities
|
|
(2
|
)
|
|
|
11
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
(2
|
)
|
|
|
—
|
|
|
Net (decrease) increase in cash and cash equivalents
|
$
|
(57
|
)
|
|
$
|
8
|
|
|
•
|
an increase in the annual basic contribution in respect of the solvency deficits in the affected plans from Cdn$50 million to Cdn$80 million for each year from 2013 through 2020; and
|
•
|
the elimination of the additional contribution, starting in 2013, based on a measure of free cash flow (as determined in accordance with the regulations) when solvency is below a certain threshold.
|
Exhibit No.
|
|
Description
|
|
|
|
†
10.1*
|
|
Resolute Forest Products Equity Incentive Plan Form of Performance Stock Unit Agreement.
|
|
|
|
†10.2*
|
|
Resolute Forest Products Equity Incentive Plan Form of Restricted Stock Unit Agreement.
|
|
|
|
31.1*
|
|
Certification of President and Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
31.2*
|
|
Certification of Senior Vice President and Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32.1*
|
|
Certification of President and Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32.2*
|
|
Certification of Senior Vice President and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
101.INS**
|
|
XBRL Instance Document.
|
|
|
|
101.SCH**
|
|
XBRL Taxonomy Extension Schema Document.
|
|
|
|
101.CAL**
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
|
|
101.LAB**
|
|
XBRL Taxonomy Extension Label Linkbase Document.
|
|
|
|
101.PRE**
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
|
|
101.DEF**
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
*
|
Filed with this Form 10-Q.
|
†
|
This is a management contract or compensatory plan or arrangement.
|
**
|
Interactive data files furnished with this Form 10-Q, which represent the following materials from this Form 10-Q formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Operations, (ii) the Consolidated Statements of Comprehensive Loss, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Changes in Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to Unaudited Interim Consolidated Financial Statements.
|
RESOLUTE FOREST PRODUCTS INC.
|
||
|
|
|
By
|
|
/s/ Jo-Ann Longworth
|
|
|
Jo-Ann Longworth
|
|
|
Senior Vice President and Chief Financial Officer
|
|
|
|
By
|
|
/s/ Silvana Travaglini
|
|
|
Silvana Travaglini
|
|
|
Vice President and Chief Accounting Officer
|
Exhibit No.
|
|
Description
|
|
|
|
†10.1*
|
|
Resolute Forest Products Equity Incentive Plan Form of Performance Stock Unit Agreement.
|
|
|
|
†10.2*
|
|
Resolute Forest Products Equity Incentive Plan Form of Restricted Stock Unit Agreement.
|
|
|
|
31.1*
|
|
Certification of President and Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
31.2*
|
|
Certification of Senior Vice President and Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32.1*
|
|
Certification of President and Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32.2*
|
|
Certification of Senior Vice President and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
101.INS**
|
|
XBRL Instance Document.
|
|
|
|
101.SCH**
|
|
XBRL Taxonomy Extension Schema Document.
|
|
|
|
101.CAL**
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
|
|
101.LAB**
|
|
XBRL Taxonomy Extension Label Linkbase Document.
|
|
|
|
101.PRE**
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
|
|
101.DEF**
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
*
|
Filed with this Form 10-Q.
|
†
|
This is a management contract or compensatory plan or arrangement.
|
**
|
Interactive data files furnished with this Form 10-Q, which represent the following materials from this Form 10-Q formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Operations, (ii) the Consolidated Statements of Comprehensive Loss, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Changes in Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to Unaudited Interim Consolidated Financial Statements.
|
1.
|
I have reviewed this quarterly report on Form 10-Q for the quarterly period ended
September 30, 2014
of RESOLUTE FOREST PRODUCTS INC.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report; |
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and |
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and |
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: November 10, 2014
|
|
/s/ Richard Garneau
|
Richard Garneau
|
President and Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q for the quarterly period ended
September 30, 2014
of RESOLUTE FOREST PRODUCTS INC.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report; |
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and |
d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and |
5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: November 10, 2014
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/s/ Jo-Ann Longworth
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Jo-Ann Longworth
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Senior Vice President and Chief Financial Officer
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Date: November 10, 2014
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/s/ Richard Garneau
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Name: Richard Garneau
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Title: President and Chief Executive Officer
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Date: November 10, 2014
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/s/ Jo-Ann Longworth
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Name: Jo-Ann Longworth
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Title: Senior Vice President and Chief Financial Officer
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