|
|
þ
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
98-0526415
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. employer identification number)
|
111 Duke Street, Suite 5000; Montréal, Quebec; Canada H3C 2M1
|
(Address of principal executive offices) (Zip Code)
|
(514) 875-2160
|
(Registrant’s telephone number, including area code)
|
|
(Former name, former address and former fiscal year, if changed since last report)
|
Large accelerated filer
¨
|
|
Accelerated filer
þ
|
Non-accelerated filer
¨
(Do not check if a smaller reporting company)
|
|
Smaller reporting company
¨
|
|
|
Emerging growth company
¨
|
|
|
Page
Number
|
|
PART I. FINANCIAL INFORMATION
|
|
|
|
|
|
Item 1. Financial Statements:
|
|
|
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
PART II. OTHER INFORMATION
|
|
|
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
PART I.
|
FINANCIAL INFORMATION
|
ITEM 1.
|
FINANCIAL STATEMENTS
|
|
Three Months Ended
March 31, |
|||||||
|
2017
|
|
|
2016
|
|
|
||
Sales
|
$
|
872
|
|
|
$
|
877
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
||
Cost of sales, excluding depreciation, amortization and distribution costs
|
|
667
|
|
|
|
677
|
|
|
Depreciation and amortization
|
|
51
|
|
|
|
52
|
|
|
Distribution costs
|
|
110
|
|
|
|
112
|
|
|
Selling, general and administrative expenses
|
|
43
|
|
|
|
38
|
|
|
Closure costs, impairment and other related charges
|
|
7
|
|
|
|
—
|
|
|
Net gain on disposition of assets
|
|
—
|
|
|
|
(2
|
)
|
|
Operating loss
|
|
(6
|
)
|
|
|
—
|
|
|
Interest expense
|
|
(11
|
)
|
|
|
(10
|
)
|
|
Other income, net
|
|
—
|
|
|
|
13
|
|
|
(Loss) income before income taxes
|
|
(17
|
)
|
|
|
3
|
|
|
Income tax provision
|
|
(29
|
)
|
|
|
(10
|
)
|
|
Net loss including noncontrolling interests
|
|
(46
|
)
|
|
|
(7
|
)
|
|
Net income attributable to noncontrolling interests
|
|
(1
|
)
|
|
|
(1
|
)
|
|
Net loss attributable to Resolute Forest Products Inc.
|
$
|
(47
|
)
|
|
$
|
(8
|
)
|
|
Net loss per share attributable to Resolute Forest Products Inc. common shareholders:
|
|
|
|
|
|
|
||
Basic
|
$
|
(0.52
|
)
|
|
$
|
(0.09
|
)
|
|
Diluted
|
|
(0.52
|
)
|
|
|
(0.09
|
)
|
|
Weighted-average number of Resolute Forest Products Inc. common shares outstanding:
|
|
|
|
|
|
|
||
Basic
|
|
90.2
|
|
|
|
89.6
|
|
|
Diluted
|
|
90.2
|
|
|
|
89.6
|
|
|
|
Three Months Ended
March 31, |
|||||||
|
2017
|
|
|
2016
|
|
|
||
Net loss including noncontrolling interests
|
$
|
(46
|
)
|
|
$
|
(7
|
)
|
|
Other comprehensive income:
|
|
|
|
|
|
|
||
Unamortized prior service credits
|
|
|
|
|
|
|
||
Change in unamortized prior service credits
|
|
(4
|
)
|
|
|
(4
|
)
|
|
Income tax provision
|
|
—
|
|
|
|
—
|
|
|
Change in unamortized prior service credits, net of tax
|
|
(4
|
)
|
|
|
(4
|
)
|
|
Unamortized actuarial losses
|
|
|
|
|
|
|
||
Change in unamortized actuarial losses
|
|
14
|
|
|
|
12
|
|
|
Income tax provision
|
|
(2
|
)
|
|
|
(3
|
)
|
|
Change in unamortized actuarial losses, net of tax
|
|
12
|
|
|
|
9
|
|
|
Foreign currency translation
|
|
1
|
|
|
|
—
|
|
|
Other comprehensive income, net of tax
|
|
9
|
|
|
|
5
|
|
|
Comprehensive loss including noncontrolling interests
|
|
(37
|
)
|
|
|
(2
|
)
|
|
Comprehensive income attributable to noncontrolling interests
|
|
(1
|
)
|
|
|
(1
|
)
|
|
Comprehensive loss attributable to Resolute Forest Products Inc.
|
$
|
(38
|
)
|
|
$
|
(3
|
)
|
|
|
March 31,
2017 |
December 31,
2016 |
||||||
Assets
|
|
|
|
|
|
|
||
Current assets:
|
|
|
|
|
|
|
||
Cash and cash equivalents
|
$
|
39
|
|
|
$
|
35
|
|
|
Accounts receivable, net:
|
|
|
|
|
|
|
||
Trade
|
|
370
|
|
|
|
358
|
|
|
Other
|
|
84
|
|
|
|
83
|
|
|
Inventories, net
|
|
608
|
|
|
|
570
|
|
|
Other current assets
|
|
36
|
|
|
|
35
|
|
|
Total current assets
|
|
1,137
|
|
|
|
1,081
|
|
|
Fixed assets, less accumulated depreciation of $1,464 and $1,415 as of March 31, 2017 and December 31, 2016, respectively
|
|
1,866
|
|
|
|
1,842
|
|
|
Amortizable intangible assets, less accumulated amortization of $18 and $16 as of March 31, 2017 and December 31, 2016, respectively
|
|
68
|
|
|
|
70
|
|
|
Goodwill
|
|
81
|
|
|
|
81
|
|
|
Deferred income tax assets
|
|
1,054
|
|
|
|
1,039
|
|
|
Other assets
|
|
129
|
|
|
|
164
|
|
|
Total assets
|
$
|
4,335
|
|
|
$
|
4,277
|
|
|
|
|
|
|
|
|
|
||
Liabilities and equity
|
|
|
|
|
|
|
||
Current liabilities:
|
|
|
|
|
|
|
||
Accounts payable and accrued liabilities
|
$
|
468
|
|
|
$
|
466
|
|
|
Current portion of long-term debt
|
|
1
|
|
|
|
1
|
|
|
Total current liabilities
|
|
469
|
|
|
|
467
|
|
|
Long-term debt, net of current portion
|
|
880
|
|
|
|
761
|
|
|
Pension and other postretirement benefit obligations
|
|
1,251
|
|
|
|
1,281
|
|
|
Deferred income tax liabilities
|
|
5
|
|
|
|
2
|
|
|
Other liabilities
|
|
56
|
|
|
|
55
|
|
|
Total liabilities
|
|
2,661
|
|
|
|
2,566
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
||
Equity:
|
|
|
|
|
|
|
||
Resolute Forest Products Inc. shareholders’ equity:
|
|
|
|
|
|
|
||
Common stock, $0.001 par value. 117.8 shares issued and 89.8 shares outstanding as of March 31, 2017 and December 31, 2016
|
|
—
|
|
|
|
—
|
|
|
Additional paid-in capital
|
|
3,778
|
|
|
|
3,775
|
|
|
Deficit
|
|
(1,257
|
)
|
|
|
(1,207
|
)
|
|
Accumulated other comprehensive loss
|
|
(746
|
)
|
|
|
(755
|
)
|
|
Treasury stock at cost, 28.0 shares as of March 31, 2017 and December 31, 2016
|
|
(120
|
)
|
|
|
(120
|
)
|
|
Total Resolute Forest Products Inc. shareholders’ equity
|
|
1,655
|
|
|
|
1,693
|
|
|
Noncontrolling interests
|
|
19
|
|
|
|
18
|
|
|
Total equity
|
|
1,674
|
|
|
|
1,711
|
|
|
Total liabilities and equity
|
$
|
4,335
|
|
|
$
|
4,277
|
|
|
|
Three Months Ended March 31, 2017
|
|||||||||||||||||||||||||||
|
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, 2016
|
$
|
—
|
|
|
$
|
3,775
|
|
|
$
|
(1,207
|
)
|
|
$
|
(755
|
)
|
|
$
|
(120
|
)
|
|
$
|
18
|
|
|
$
|
1,711
|
|
|
Share-based compensation costs for equity-classified awards
|
|
—
|
|
|
|
3
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3
|
|
|
Net (loss) income
|
|
—
|
|
|
|
—
|
|
|
|
(47
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
(46
|
)
|
|
Cumulative-effect adjustment upon deferred tax charge elimination (Note 9)
|
|
—
|
|
|
|
—
|
|
|
|
(3
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(3
|
)
|
|
Other comprehensive income, net of tax
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9
|
|
|
Balance as of March 31, 2017
|
$
|
—
|
|
|
$
|
3,778
|
|
|
$
|
(1,257
|
)
|
|
$
|
(746
|
)
|
|
$
|
(120
|
)
|
|
$
|
19
|
|
|
$
|
1,674
|
|
|
|
Three Months Ended March 31, 2016
|
|||||||||||||||||||||||||||
|
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, 2015
|
$
|
—
|
|
|
$
|
3,765
|
|
|
$
|
(1,126
|
)
|
|
$
|
(587
|
)
|
|
$
|
(120
|
)
|
|
$
|
13
|
|
|
$
|
1,945
|
|
|
Share-based compensation costs for equity-classified awards
|
|
—
|
|
|
|
3
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3
|
|
|
Net (loss) income
|
|
—
|
|
|
|
—
|
|
|
|
(8
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
(7
|
)
|
|
Other comprehensive income, net of tax
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5
|
|
|
Balance as of March 31, 2016
|
$
|
—
|
|
|
$
|
3,768
|
|
|
$
|
(1,134
|
)
|
|
$
|
(582
|
)
|
|
$
|
(120
|
)
|
|
$
|
14
|
|
|
$
|
1,946
|
|
|
|
Three Months Ended
March 31, |
|||||||
|
2017
|
|
|
2016
|
|
|
||
Cash flows from operating activities:
|
|
|
|
|
|
|
||
Net loss including noncontrolling interests
|
$
|
(46
|
)
|
|
$
|
(7
|
)
|
|
Adjustments to reconcile net loss including noncontrolling interests to net cash (used in) provided by operating activities:
|
|
|
|
|
|
|
||
Share-based compensation
|
|
4
|
|
|
|
3
|
|
|
Depreciation and amortization
|
|
51
|
|
|
|
52
|
|
|
Inventory write-downs related to closures
|
|
4
|
|
|
|
—
|
|
|
Deferred income taxes
|
|
28
|
|
|
|
10
|
|
|
Net pension contributions and other postretirement benefit payments
|
|
(30
|
)
|
|
|
(21
|
)
|
|
Net gain on disposition of assets
|
|
—
|
|
|
|
(2
|
)
|
|
Gain on translation of foreign currency denominated deferred income taxes
|
|
(10
|
)
|
|
|
(63
|
)
|
|
Loss on translation of foreign currency denominated pension and other postretirement benefit obligations
|
|
9
|
|
|
|
52
|
|
|
Gain on disposition of equity method investment
|
|
—
|
|
|
|
(5
|
)
|
|
Net planned major maintenance amortization
|
|
1
|
|
|
|
—
|
|
|
Changes in working capital:
|
|
|
|
|
|
|
||
Accounts receivable
|
|
(11
|
)
|
|
|
(12
|
)
|
|
Inventories
|
|
(40
|
)
|
|
|
(20
|
)
|
|
Accounts payable and accrued liabilities
|
|
1
|
|
|
|
22
|
|
|
Other, net
|
|
—
|
|
|
|
(3
|
)
|
|
Net cash (used in) provided by operating activities
|
|
(39
|
)
|
|
|
6
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
||
Cash invested in fixed assets
|
|
(69
|
)
|
|
|
(47
|
)
|
|
Disposition of assets
|
|
—
|
|
|
|
5
|
|
|
Increase in countervailing duty cash deposits
|
|
(5
|
)
|
|
|
(6
|
)
|
|
Increase in restricted cash
|
|
(2
|
)
|
|
|
—
|
|
|
Decrease in deposit requirements for letters of credit, net
|
|
1
|
|
|
|
—
|
|
|
Net cash used in investing activities
|
|
(75
|
)
|
|
|
(48
|
)
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
||
Net borrowings under revolving credit facilities
|
|
118
|
|
|
|
20
|
|
|
Net cash provided by financing activities
|
|
118
|
|
|
|
20
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
—
|
|
|
|
1
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
4
|
|
|
|
(21
|
)
|
|
Cash and cash equivalents:
|
|
|
|
|
|
|
||
Beginning of period
|
|
35
|
|
|
|
58
|
|
|
End of period
|
$
|
39
|
|
|
$
|
37
|
|
|
|
|
|
Three Months Ended
March 31, |
|||||||
(Unaudited, in millions)
|
2017
|
|
|
2016
|
|
|
||
Foreign exchange gain
|
$
|
—
|
|
|
$
|
6
|
|
|
Gain on disposition of equity method investment
(1)
|
|
—
|
|
|
|
5
|
|
|
Miscellaneous income
|
|
—
|
|
|
|
2
|
|
|
|
$
|
—
|
|
|
$
|
13
|
|
|
(1)
|
On February 1, 2016, we sold for total consideration of
$5 million
our interest in Produits Forestiers Petit-Paris Inc., an unconsolidated entity located in Saint-Ludger-de-Milot, Quebec, in which we had a
50%
interest, resulting in a gain on disposition of
$5 million
.
|
(Unaudited, in millions)
|
Unamortized Prior Service Credits
|
Unamortized Actuarial Losses
|
Foreign
Currency
Translation
|
Total
|
||||||||||||
Balance as of December 31, 2016
|
$
|
67
|
|
|
$
|
(819
|
)
|
|
$
|
(3
|
)
|
|
$
|
(755
|
)
|
|
Other comprehensive income before reclassifications
|
|
—
|
|
|
|
1
|
|
|
|
1
|
|
|
|
2
|
|
|
Amounts reclassified from accumulated other comprehensive loss
(1)
|
|
(4
|
)
|
|
|
11
|
|
|
|
—
|
|
|
|
7
|
|
|
Net current period other comprehensive (loss) income
|
|
(4
|
)
|
|
|
12
|
|
|
|
1
|
|
|
|
9
|
|
|
Balance as of March 31, 2017
|
$
|
63
|
|
|
$
|
(807
|
)
|
|
$
|
(2
|
)
|
|
$
|
(746
|
)
|
|
(1)
|
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
|
$
|
(4
|
)
|
|
Cost of sales, excluding depreciation, amortization and distribution costs
(1)
|
|
|
—
|
|
|
Income tax provision
|
|
$
|
(4
|
)
|
|
Net of tax
|
Unamortized Actuarial Losses
|
|
|
|
|
|
Amortization of actuarial losses
|
$
|
13
|
|
|
Cost of sales, excluding depreciation, amortization and distribution costs
(1)
|
|
|
(2
|
)
|
|
Income tax provision
|
|
$
|
11
|
|
|
Net of tax
|
Total Reclassifications
|
$
|
7
|
|
|
Net of tax
|
(1)
|
These items are included in the computation of net periodic benefit cost related to our pension and other postretirement benefit (“OPEB”) plans summarized in
Note 8, “Employee Benefit Plans
.”
|
|
Three Months Ended
March 31, |
|||||
(Unaudited, in millions)
|
2017
|
|
|
2016
|
|
|
Stock options
|
1.4
|
|
|
1.5
|
|
|
Stock unit awards
(1)
|
4.6
|
|
|
2.5
|
|
|
(1)
|
Excludes contingently issuable shares that are included in the basic weighted-average number of common shares outstanding, given that all the necessary conditions have been satisfied.
|
(Unaudited, in millions)
|
March 31,
2017 |
December 31,
2016 |
||||||
Raw materials and work in process
|
$
|
184
|
|
|
$
|
171
|
|
|
Finished goods
|
|
201
|
|
|
|
183
|
|
|
Mill stores and other supplies
|
|
223
|
|
|
|
216
|
|
|
|
$
|
608
|
|
|
$
|
570
|
|
|
(Unaudited, in millions)
|
March 31,
2017 |
December 31,
2016 |
||||||
5.875% senior notes due 2023:
|
|
|
|
|
|
|
||
Principal amount
|
$
|
600
|
|
|
$
|
600
|
|
|
Deferred financing costs
|
|
(5
|
)
|
|
|
(6
|
)
|
|
Unamortized discount
|
|
(4
|
)
|
|
|
(4
|
)
|
|
Total senior notes due 2023
|
|
591
|
|
|
|
590
|
|
|
Term loan due 2025
|
|
46
|
|
|
|
46
|
|
|
Borrowings under revolving credit facilities
|
|
243
|
|
|
|
125
|
|
|
Capital lease obligation
|
|
1
|
|
|
|
1
|
|
|
Total debt
|
|
881
|
|
|
|
762
|
|
|
Less: Current portion of long-term debt
|
|
(1
|
)
|
|
|
(1
|
)
|
|
Long-term debt, net of current portion
|
$
|
880
|
|
|
$
|
761
|
|
|
|
Three Months Ended
March 31, |
|||||||
(Unaudited, in millions)
|
2017
|
|
|
2016
|
|
|
||
Service cost
|
$
|
5
|
|
|
$
|
5
|
|
|
Interest cost
|
|
49
|
|
|
|
52
|
|
|
Expected return on plan assets
|
|
(63
|
)
|
|
|
(60
|
)
|
|
Amortization of actuarial losses
|
|
14
|
|
|
|
13
|
|
|
|
$
|
5
|
|
|
$
|
10
|
|
|
|
Three Months Ended
March 31, |
|||||||
(Unaudited, in millions)
|
2017
|
|
|
2016
|
|
|
||
Interest cost
|
|
2
|
|
|
|
2
|
|
|
Amortization of actuarial gains
|
|
(1
|
)
|
|
|
(1
|
)
|
|
Amortization of prior service credits
|
|
(4
|
)
|
|
|
(4
|
)
|
|
|
$
|
(3
|
)
|
|
$
|
(3
|
)
|
|
|
Three Months Ended
March 31, |
|||||||
(Unaudited, in millions)
|
2017
|
|
|
2016
|
|
|
||
(Loss) income before income taxes
|
$
|
(17
|
)
|
|
$
|
3
|
|
|
Income tax provision:
|
|
|
|
|
|
|
||
Expected income tax benefit (provision)
|
|
6
|
|
|
|
(1
|
)
|
|
Changes resulting from:
|
|
|
|
|
|
|
||
Valuation allowance
(1)
|
|
(26
|
)
|
|
|
(18
|
)
|
|
Enactment of change in foreign tax rate
|
|
(12
|
)
|
|
|
—
|
|
|
Foreign exchange
|
|
(1
|
)
|
|
|
3
|
|
|
State income taxes, net of federal income tax benefit
|
|
2
|
|
|
|
2
|
|
|
Foreign tax rate differences
|
|
3
|
|
|
|
4
|
|
|
Other, net
|
|
(1
|
)
|
|
|
—
|
|
|
|
$
|
(29
|
)
|
|
$
|
(10
|
)
|
|
(1)
|
We recorded a valuation allowance of $26 million and $18 million for the three months ended March 31, 2017 and 2016, respectively, primarily related to our U.S. operations where we recognize a full valuation allowance against our net deferred income tax assets.
|
(1)
|
Inter-segment sales of $9 million and $5 million, which are transacted at cost, were excluded from market pulp sales for the three months ended March 31, 2017 and 2016, respectively.
|
(2)
|
Wood products sales to our joint ventures, which are transacted at arm’s length negotiated prices, were $4 million and $5 million f
or the three months ended March 31, 2017 and 2016, respectively.
|
|
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
|
||||||||||||||||||||
For the Three Months Ended March 31, 2017
|
||||||||||||||||||||
(Unaudited, in millions)
|
Parent
|
Guarantor
Subsidiaries
|
Non-guarantor
Subsidiaries
|
Consolidating
Adjustments
|
Consolidated
|
|||||||||||||||
Sales
|
$
|
—
|
|
|
$
|
709
|
|
|
$
|
550
|
|
|
$
|
(387
|
)
|
|
$
|
872
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cost of sales, excluding depreciation, amortization and distribution costs
|
|
—
|
|
|
|
677
|
|
|
|
378
|
|
|
|
(388
|
)
|
|
|
667
|
|
|
Depreciation and amortization
|
|
—
|
|
|
|
19
|
|
|
|
32
|
|
|
|
—
|
|
|
|
51
|
|
|
Distribution costs
|
|
—
|
|
|
|
41
|
|
|
|
69
|
|
|
|
—
|
|
|
|
110
|
|
|
Selling, general and administrative expenses
|
|
9
|
|
|
|
17
|
|
|
|
17
|
|
|
|
—
|
|
|
|
43
|
|
|
Closure costs, impairment and other related charges
|
|
—
|
|
|
|
—
|
|
|
|
7
|
|
|
|
—
|
|
|
|
7
|
|
|
Operating (loss) income
|
|
(9
|
)
|
|
|
(45
|
)
|
|
|
47
|
|
|
|
1
|
|
|
|
(6
|
)
|
|
Interest expense
|
|
(20
|
)
|
|
|
(1
|
)
|
|
|
(3
|
)
|
|
|
13
|
|
|
|
(11
|
)
|
|
Other income, net
|
|
—
|
|
|
|
13
|
|
|
|
—
|
|
|
|
(13
|
)
|
|
|
—
|
|
|
Equity in (loss) income of subsidiaries
|
|
(18
|
)
|
|
|
1
|
|
|
|
—
|
|
|
|
17
|
|
|
|
—
|
|
|
(Loss) income before income taxes
|
|
(47
|
)
|
|
|
(32
|
)
|
|
|
44
|
|
|
|
18
|
|
|
|
(17
|
)
|
|
Income tax provision
|
|
—
|
|
|
|
—
|
|
|
|
(29
|
)
|
|
|
—
|
|
|
|
(29
|
)
|
|
Net (loss) income including noncontrolling interests
|
|
(47
|
)
|
|
|
(32
|
)
|
|
|
15
|
|
|
|
18
|
|
|
|
(46
|
)
|
|
Net income attributable to noncontrolling interests
|
|
—
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
(1
|
)
|
|
Net (loss) income attributable to Resolute Forest Products Inc.
|
$
|
(47
|
)
|
|
$
|
(32
|
)
|
|
$
|
14
|
|
|
$
|
18
|
|
|
$
|
(47
|
)
|
|
Comprehensive (loss) income attributable to Resolute Forest Products Inc.
|
$
|
(38
|
)
|
|
$
|
(33
|
)
|
|
$
|
24
|
|
|
$
|
9
|
|
|
$
|
(38
|
)
|
|
|
|
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
|
||||||||||||||||||||
For the Three Months Ended March 31, 2016
|
||||||||||||||||||||
(Unaudited, in millions)
|
Parent
|
Guarantor
Subsidiaries
|
Non-guarantor
Subsidiaries
|
Consolidating
Adjustments
|
Consolidated
|
|||||||||||||||
Sales
|
$
|
—
|
|
|
$
|
741
|
|
|
$
|
516
|
|
|
$
|
(380
|
)
|
|
$
|
877
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cost of sales, excluding depreciation, amortization and distribution costs
|
|
—
|
|
|
|
705
|
|
|
|
353
|
|
|
|
(381
|
)
|
|
|
677
|
|
|
Depreciation and amortization
|
|
—
|
|
|
|
22
|
|
|
|
30
|
|
|
|
—
|
|
|
|
52
|
|
|
Distribution costs
|
|
—
|
|
|
|
43
|
|
|
|
69
|
|
|
|
—
|
|
|
|
112
|
|
|
Selling, general and administrative expenses
|
|
5
|
|
|
|
16
|
|
|
|
17
|
|
|
|
—
|
|
|
|
38
|
|
|
Net gain on disposition of assets
|
|
—
|
|
|
|
—
|
|
|
|
(2
|
)
|
|
|
—
|
|
|
|
(2
|
)
|
|
Operating (loss) income
|
|
(5
|
)
|
|
|
(45
|
)
|
|
|
49
|
|
|
|
1
|
|
|
|
—
|
|
|
Interest expense
|
|
(18
|
)
|
|
|
—
|
|
|
|
(4
|
)
|
|
|
12
|
|
|
|
(10
|
)
|
|
Other income, net
|
|
—
|
|
|
|
19
|
|
|
|
6
|
|
|
|
(12
|
)
|
|
|
13
|
|
|
Equity in income (loss) of subsidiaries
|
|
15
|
|
|
|
(13
|
)
|
|
|
—
|
|
|
|
(2
|
)
|
|
|
—
|
|
|
(Loss) income before income taxes
|
|
(8
|
)
|
|
|
(39
|
)
|
|
|
51
|
|
|
|
(1
|
)
|
|
|
3
|
|
|
Income tax provision
|
|
—
|
|
|
|
—
|
|
|
|
(10
|
)
|
|
|
—
|
|
|
|
(10
|
)
|
|
Net (loss) income including noncontrolling interests
|
|
(8
|
)
|
|
|
(39
|
)
|
|
|
41
|
|
|
|
(1
|
)
|
|
|
(7
|
)
|
|
Net income attributable to noncontrolling interests
|
|
—
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
(1
|
)
|
|
Net (loss) income attributable to Resolute Forest Products Inc.
|
$
|
(8
|
)
|
|
$
|
(39
|
)
|
|
$
|
40
|
|
|
$
|
(1
|
)
|
|
$
|
(8
|
)
|
|
Comprehensive (loss) income attributable to Resolute Forest Products Inc.
|
$
|
(3
|
)
|
|
$
|
(42
|
)
|
|
$
|
48
|
|
|
$
|
(6
|
)
|
|
$
|
(3
|
)
|
|
CONDENSED CONSOLIDATING BALANCE SHEET
|
||||||||||||||||||||
As of March 31, 2017
|
||||||||||||||||||||
(Unaudited, in millions)
|
Parent
|
Guarantor
Subsidiaries
|
Non-guarantor
Subsidiaries
|
Consolidating
Adjustments
|
Consolidated
|
|||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
37
|
|
|
$
|
—
|
|
|
$
|
39
|
|
|
Accounts receivable, net
|
|
—
|
|
|
|
285
|
|
|
|
169
|
|
|
|
—
|
|
|
|
454
|
|
|
Accounts receivable from affiliates
|
|
1
|
|
|
|
484
|
|
|
|
403
|
|
|
|
(888
|
)
|
|
|
—
|
|
|
Inventories, net
|
|
—
|
|
|
|
273
|
|
|
|
346
|
|
|
|
(11
|
)
|
|
|
608
|
|
|
Note, advance and interest receivable from parent
|
|
—
|
|
|
|
66
|
|
|
|
—
|
|
|
|
(66
|
)
|
|
|
—
|
|
|
Notes and interest receivable from affiliates
|
|
—
|
|
|
|
59
|
|
|
|
—
|
|
|
|
(59
|
)
|
|
|
—
|
|
|
Other current assets
|
|
—
|
|
|
|
15
|
|
|
|
21
|
|
|
|
—
|
|
|
|
36
|
|
|
Total current assets
|
|
1
|
|
|
|
1,184
|
|
|
|
976
|
|
|
|
(1,024
|
)
|
|
|
1,137
|
|
|
Fixed assets, net
|
|
—
|
|
|
|
778
|
|
|
|
1,088
|
|
|
|
—
|
|
|
|
1,866
|
|
|
Amortizable intangible assets, net
|
|
—
|
|
|
|
14
|
|
|
|
54
|
|
|
|
—
|
|
|
|
68
|
|
|
Goodwill
|
|
—
|
|
|
|
81
|
|
|
|
—
|
|
|
|
—
|
|
|
|
81
|
|
|
Deferred income tax assets
|
|
—
|
|
|
|
—
|
|
|
|
1,051
|
|
|
|
3
|
|
|
|
1,054
|
|
|
Notes receivable from parent
|
|
—
|
|
|
|
761
|
|
|
|
—
|
|
|
|
(761
|
)
|
|
|
—
|
|
|
Note receivable from affiliate
|
|
—
|
|
|
|
110
|
|
|
|
—
|
|
|
|
(110
|
)
|
|
|
—
|
|
|
Investments in consolidated subsidiaries and affiliates
|
|
3,909
|
|
|
|
2,069
|
|
|
|
—
|
|
|
|
(5,978
|
)
|
|
|
—
|
|
|
Other assets
|
|
—
|
|
|
|
63
|
|
|
|
66
|
|
|
|
—
|
|
|
|
129
|
|
|
Total assets
|
$
|
3,910
|
|
|
$
|
5,060
|
|
|
$
|
3,235
|
|
|
$
|
(7,870
|
)
|
|
$
|
4,335
|
|
|
Liabilities and equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Accounts payable and accrued liabilities
|
$
|
14
|
|
|
$
|
221
|
|
|
$
|
233
|
|
|
$
|
—
|
|
|
$
|
468
|
|
|
Current portion of long-term debt
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
Accounts payable to affiliates
|
|
484
|
|
|
|
403
|
|
|
|
1
|
|
|
|
(888
|
)
|
|
|
—
|
|
|
Note, advance and interest payable to subsidiaries
|
|
66
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(66
|
)
|
|
|
—
|
|
|
Notes and interest payable to affiliate
|
|
—
|
|
|
|
—
|
|
|
|
59
|
|
|
|
(59
|
)
|
|
|
—
|
|
|
Total current liabilities
|
|
564
|
|
|
|
625
|
|
|
|
293
|
|
|
|
(1,013
|
)
|
|
|
469
|
|
|
Long-term debt, net of current portion
|
|
591
|
|
|
|
289
|
|
|
|
—
|
|
|
|
—
|
|
|
|
880
|
|
|
Note payable to subsidiaries
|
|
761
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(761
|
)
|
|
|
—
|
|
|
Note payable to affiliate
|
|
—
|
|
|
|
—
|
|
|
|
110
|
|
|
|
(110
|
)
|
|
|
—
|
|
|
Pension and other postretirement benefit obligations
|
|
—
|
|
|
|
389
|
|
|
|
862
|
|
|
|
—
|
|
|
|
1,251
|
|
|
Deferred income tax liabilities
|
|
—
|
|
|
|
1
|
|
|
|
4
|
|
|
|
—
|
|
|
|
5
|
|
|
Other liabilities
|
|
1
|
|
|
|
24
|
|
|
|
31
|
|
|
|
—
|
|
|
|
56
|
|
|
Total liabilities
|
|
1,917
|
|
|
|
1,328
|
|
|
|
1,300
|
|
|
|
(1,884
|
)
|
|
|
2,661
|
|
|
Total equity
|
|
1,993
|
|
|
|
3,732
|
|
|
|
1,935
|
|
|
|
(5,986
|
)
|
|
|
1,674
|
|
|
Total liabilities and equity
|
$
|
3,910
|
|
|
$
|
5,060
|
|
|
$
|
3,235
|
|
|
$
|
(7,870
|
)
|
|
$
|
4,335
|
|
|
CONDENSED CONSOLIDATING BALANCE SHEET
|
||||||||||||||||||||
As of December 31, 2016
|
||||||||||||||||||||
(Unaudited, in millions)
|
Parent
|
Guarantor
Subsidiaries
|
Non-guarantor
Subsidiaries
|
Consolidating
Adjustments
|
Consolidated
|
|||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
33
|
|
|
$
|
—
|
|
|
$
|
35
|
|
|
Accounts receivable, net
|
|
—
|
|
|
|
283
|
|
|
|
158
|
|
|
|
—
|
|
|
|
441
|
|
|
Accounts receivable from affiliates
|
|
—
|
|
|
|
479
|
|
|
|
395
|
|
|
|
(874
|
)
|
|
|
—
|
|
|
Inventories, net
|
|
—
|
|
|
|
259
|
|
|
|
323
|
|
|
|
(12
|
)
|
|
|
570
|
|
|
Note, advance and interest receivable from parent
|
|
—
|
|
|
|
373
|
|
|
|
—
|
|
|
|
(373
|
)
|
|
|
—
|
|
|
Notes and interest receivable from affiliates
|
|
—
|
|
|
|
54
|
|
|
|
—
|
|
|
|
(54
|
)
|
|
|
—
|
|
|
Other current assets
|
|
—
|
|
|
|
16
|
|
|
|
19
|
|
|
|
—
|
|
|
|
35
|
|
|
Total current assets
|
|
—
|
|
|
|
1,466
|
|
|
|
928
|
|
|
|
(1,313
|
)
|
|
|
1,081
|
|
|
Fixed assets, net
|
|
—
|
|
|
|
733
|
|
|
|
1,109
|
|
|
|
—
|
|
|
|
1,842
|
|
|
Amortizable intangible assets, net
|
|
—
|
|
|
|
14
|
|
|
|
56
|
|
|
|
—
|
|
|
|
70
|
|
|
Goodwill
|
|
—
|
|
|
|
81
|
|
|
|
—
|
|
|
|
—
|
|
|
|
81
|
|
|
Deferred income tax assets
|
|
—
|
|
|
|
—
|
|
|
|
1,036
|
|
|
|
3
|
|
|
|
1,039
|
|
|
Note receivable from parent
|
|
—
|
|
|
|
443
|
|
|
|
—
|
|
|
|
(443
|
)
|
|
|
—
|
|
|
Note receivable from affiliate
|
|
—
|
|
|
|
109
|
|
|
|
—
|
|
|
|
(109
|
)
|
|
|
—
|
|
|
Investments in consolidated subsidiaries and affiliates
|
|
3,918
|
|
|
|
2,068
|
|
|
|
—
|
|
|
|
(5,986
|
)
|
|
|
—
|
|
|
Other assets
|
|
—
|
|
|
|
62
|
|
|
|
102
|
|
|
|
—
|
|
|
|
164
|
|
|
Total assets
|
$
|
3,918
|
|
|
$
|
4,976
|
|
|
$
|
3,231
|
|
|
$
|
(7,848
|
)
|
|
$
|
4,277
|
|
|
Liabilities and equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Accounts payable and accrued liabilities
|
$
|
5
|
|
|
$
|
222
|
|
|
$
|
239
|
|
|
$
|
—
|
|
|
$
|
466
|
|
|
Current portion of long-term debt
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
Accounts payable to affiliates
|
|
479
|
|
|
|
395
|
|
|
|
—
|
|
|
|
(874
|
)
|
|
|
—
|
|
|
Note, advance and interest payable to subsidiaries
|
|
373
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(373
|
)
|
|
|
—
|
|
|
Notes and interest payable to affiliate
|
|
—
|
|
|
|
—
|
|
|
|
54
|
|
|
|
(54
|
)
|
|
|
—
|
|
|
Total current liabilities
|
|
857
|
|
|
|
618
|
|
|
|
293
|
|
|
|
(1,301
|
)
|
|
|
467
|
|
|
Long-term debt, net of current portion
|
|
590
|
|
|
|
171
|
|
|
|
—
|
|
|
|
—
|
|
|
|
761
|
|
|
Note payable to subsidiary
|
|
443
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(443
|
)
|
|
|
—
|
|
|
Note payable to affiliate
|
|
—
|
|
|
|
—
|
|
|
|
109
|
|
|
|
(109
|
)
|
|
|
—
|
|
|
Pension and other postretirement benefit obligations
|
|
—
|
|
|
|
397
|
|
|
|
884
|
|
|
|
—
|
|
|
|
1,281
|
|
|
Deferred income tax liabilities
|
|
—
|
|
|
|
1
|
|
|
|
1
|
|
|
|
—
|
|
|
|
2
|
|
|
Other liabilities
|
|
—
|
|
|
|
24
|
|
|
|
31
|
|
|
|
—
|
|
|
|
55
|
|
|
Total liabilities
|
|
1,890
|
|
|
|
1,211
|
|
|
|
1,318
|
|
|
|
(1,853
|
)
|
|
|
2,566
|
|
|
Total equity
|
|
2,028
|
|
|
|
3,765
|
|
|
|
1,913
|
|
|
|
(5,995
|
)
|
|
|
1,711
|
|
|
Total liabilities and equity
|
$
|
3,918
|
|
|
$
|
4,976
|
|
|
$
|
3,231
|
|
|
$
|
(7,848
|
)
|
|
$
|
4,277
|
|
|
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
|
||||||||||||||||||||
For the Three Months Ended March 31, 2017
|
||||||||||||||||||||
(Unaudited, in millions)
|
Parent
|
Guarantor
Subsidiaries
|
Non-guarantor
Subsidiaries
|
Consolidating
Adjustments
|
Consolidated
|
|||||||||||||||
Net cash (used in) provided by operating activities
|
$
|
—
|
|
|
$
|
(47
|
)
|
|
$
|
8
|
|
|
$
|
—
|
|
|
$
|
(39
|
)
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash invested in fixed assets
|
|
—
|
|
|
|
(59
|
)
|
|
|
(10
|
)
|
|
|
—
|
|
|
|
(69
|
)
|
|
Increase in countervailing duty cash deposits
|
|
—
|
|
|
|
(5
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(5
|
)
|
|
Increase in restricted cash
|
|
—
|
|
|
|
—
|
|
|
|
(2
|
)
|
|
|
—
|
|
|
|
(2
|
)
|
|
Decrease in deposit requirements for letters of credit, net
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
1
|
|
|
Increase in notes receivable from affiliate
|
|
—
|
|
|
|
(7
|
)
|
|
|
—
|
|
|
|
7
|
|
|
|
—
|
|
|
Net cash used in investing activities
|
|
—
|
|
|
|
(71
|
)
|
|
|
(11
|
)
|
|
|
7
|
|
|
|
(75
|
)
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net borrowings under revolving credit facilities
|
|
—
|
|
|
|
118
|
|
|
|
—
|
|
|
|
—
|
|
|
|
118
|
|
|
Increase in notes payable to affiliate
|
|
—
|
|
|
|
—
|
|
|
|
7
|
|
|
|
(7
|
)
|
|
|
—
|
|
|
Net cash provided by financing activities
|
|
—
|
|
|
|
118
|
|
|
|
7
|
|
|
|
(7
|
)
|
|
|
118
|
|
|
Net increase in cash and cash equivalents
|
|
—
|
|
|
|
—
|
|
|
|
4
|
|
|
|
—
|
|
|
|
4
|
|
|
Cash and cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Beginning of period
|
|
—
|
|
|
|
2
|
|
|
|
33
|
|
|
|
—
|
|
|
|
35
|
|
|
End of period
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
37
|
|
|
$
|
—
|
|
|
$
|
39
|
|
|
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
|
||||||||||||||||||||
For the Three Months Ended March 31, 2016
|
||||||||||||||||||||
(Unaudited, in millions)
|
Parent
|
Guarantor
Subsidiaries
|
Non-guarantor
Subsidiaries
|
Consolidating
Adjustments
|
Consolidated
|
|||||||||||||||
Net cash provided by (used in) operating activities
|
$
|
—
|
|
|
$
|
17
|
|
|
$
|
(11
|
)
|
|
$
|
—
|
|
|
$
|
6
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash invested in fixed assets
|
|
—
|
|
|
|
(31
|
)
|
|
|
(16
|
)
|
|
|
—
|
|
|
|
(47
|
)
|
|
Disposition of assets
|
|
—
|
|
|
|
—
|
|
|
|
5
|
|
|
|
—
|
|
|
|
5
|
|
|
Increase in countervailing duties cash deposits
|
|
—
|
|
|
|
(6
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(6
|
)
|
|
Increase in notes receivable from affiliate
|
|
—
|
|
|
|
(3
|
)
|
|
|
—
|
|
|
|
3
|
|
|
|
—
|
|
|
Net cash used in investing activities
|
|
—
|
|
|
|
(40
|
)
|
|
|
(11
|
)
|
|
|
3
|
|
|
|
(48
|
)
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Borrowings under revolving credit facility
|
|
—
|
|
|
|
20
|
|
|
|
—
|
|
|
|
—
|
|
|
|
20
|
|
|
Increase in notes payable to affiliate
|
|
—
|
|
|
|
—
|
|
|
|
3
|
|
|
|
(3
|
)
|
|
|
—
|
|
|
Net cash provided by financing activities
|
|
—
|
|
|
|
20
|
|
|
|
3
|
|
|
|
(3
|
)
|
|
|
20
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
1
|
|
|
Net decrease in cash and cash equivalents
|
|
—
|
|
|
|
(3
|
)
|
|
|
(18
|
)
|
|
|
—
|
|
|
|
(21
|
)
|
|
Cash and cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Beginning of period
|
|
—
|
|
|
|
13
|
|
|
|
45
|
|
|
|
—
|
|
|
|
58
|
|
|
End of period
|
$
|
—
|
|
|
$
|
10
|
|
|
$
|
27
|
|
|
$
|
—
|
|
|
$
|
37
|
|
|
•
|
On November 25, 2016, countervailing duty and anti-dumping petitions were filed with Commerce and the U.S. International Trade Commission by certain U.S. softwood lumber producers requesting that the U.S. government impose countervailing and anti-dumping duties on Canadian-origin softwood lumber products exported to the U.S. One of our subsidiaries was identified in the petition as being a Canadian exporting producer of softwood lumber products to the U.S. and was selected as a mandatory respondent to be investigated by Commerce in both the countervailing and anti-dumping duty investigations. On April 24, 2017, Commerce announced its preliminary determinations in the countervailing duty investigation, and, as a result, since April 28, 2017, we have been required to pay cash deposits to the U.S. at a rate of
12.82%
for estimated countervailing duties on our imports to the U.S. of the majority of the softwood lumber products produced at our Canadian sawmills. The rate and the requirement to pay cash deposits do not have retroactive effect. Commerce has not yet issued its preliminary determination in the anti-dumping investigation.
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
Competitive cost structure and diversified asset base
- Through our large-scale, efficient and integrated operations, competitive sources of energy and fiber, strategically located mills, and cost-effective management structure, we believe we are well positioned to compete in the global marketplace. We maintain a rigorous focus on reducing costs, optimizing production across our network, adjusting to market dynamics, as well as capitalizing on our access to international markets.
|
•
|
Conservative capital structure
- Our low debt and solid liquidity levels are key to our continued transformation to a more sustainable company. In order to maintain financial strength and flexibility, we continue to spend our capital in a disciplined, strategic and focused manner, concentrating on our most successful sites.
|
•
|
Strategic perspectives
- We pursue initiatives that improve our cost position, advance diversification, provide synergies or position us to expand into future growth markets. All are key to our long-term success. To that end, we take an opportunistic approach that aligns with our strategic plan and that we believe positions us favorably for the long-term evolution of the paper and forest products industry.
|
Three Months Ended March 31, 2017
|
Operating
Income
(Loss)
|
Net
Income
(Loss)
|
EPS
|
|
|
|||||||
(Unaudited, in millions, except per share amounts)
|
||||||||||||
GAAP, as reported
|
$
|
(6
|
)
|
|
$
|
(47
|
)
|
|
$
|
(0.52
|
)
|
|
Adjustments for special items:
|
|
|
|
|
|
|
|
|
|
|||
Closure costs, impairment and other related charges
|
|
7
|
|
|
|
7
|
|
|
|
0.08
|
|
|
Inventory write-downs related to closures
|
|
4
|
|
|
|
4
|
|
|
|
0.04
|
|
|
Start-up costs
|
|
8
|
|
|
|
8
|
|
|
|
0.09
|
|
|
Non-operating pension and OPEB credits
|
|
(3
|
)
|
|
|
(3
|
)
|
|
|
(0.03
|
)
|
|
Income tax effect of special items
|
|
—
|
|
|
|
1
|
|
|
|
0.01
|
|
|
Adjusted for special items
(1)
|
$
|
10
|
|
|
$
|
(30
|
)
|
|
$
|
(0.33
|
)
|
|
Three Months Ended March 31, 2016
|
Operating
Income
(Loss)
|
Net
Income
(Loss)
|
EPS
|
|
|
|||||||
(Unaudited, in millions, except per share amounts)
|
||||||||||||
GAAP, as reported
|
$
|
—
|
|
|
$
|
(8
|
)
|
|
$
|
(0.09
|
)
|
|
Adjustments for special items:
|
|
|
|
|
|
|
|
|
|
|||
Foreign exchange translation gain
|
|
—
|
|
|
|
(6
|
)
|
|
|
(0.07
|
)
|
|
Start-up costs
|
|
3
|
|
|
|
3
|
|
|
|
0.03
|
|
|
Net gain on disposition of assets
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
(0.02
|
)
|
|
Non-operating pension and OPEB costs
|
|
2
|
|
|
|
2
|
|
|
|
0.02
|
|
|
Other income, net
|
|
—
|
|
|
|
(7
|
)
|
|
|
(0.08
|
)
|
|
Income tax effect of special items
|
|
—
|
|
|
|
(4
|
)
|
|
|
(0.04
|
)
|
|
Adjusted for special items
(1)
|
$
|
3
|
|
|
$
|
(22
|
)
|
|
$
|
(0.25
|
)
|
|
(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, non-operating pension and OPEB costs and credits, 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), in addition to foreign exchange translation gains and losses, other income (expense), net, and the income tax effect of the special items. 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 non-GAAP 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 operations and financial performance from period to period. Operating income (loss), net income (loss) and EPS, in each case as adjusted for special items, are internal measures, and therefore may not be comparable to those of other companies. These non-GAAP measures should not be viewed as substitutes to financial measures determined under GAAP.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, |
|||||||
(Unaudited, in millions, except per share amounts)
|
2017
|
2016
|
||||||
Sales
|
$
|
872
|
|
|
$
|
877
|
|
|
Operating income (loss) per segment:
|
|
|
|
|
|
|
||
Market pulp
|
|
7
|
|
|
|
19
|
|
|
Tissue
|
|
—
|
|
|
|
(2
|
)
|
|
Wood products
|
|
20
|
|
|
|
(4
|
)
|
|
Newsprint
|
|
(4
|
)
|
|
|
(5
|
)
|
|
Specialty papers
|
|
4
|
|
|
|
5
|
|
|
Segment total
|
|
27
|
|
|
|
13
|
|
|
Corporate and other
|
|
(33
|
)
|
|
|
(13
|
)
|
|
Operating loss
|
|
(6
|
)
|
|
|
—
|
|
|
Net loss attributable to Resolute Forest Products Inc.
|
|
(47
|
)
|
|
|
(8
|
)
|
|
Net loss per common share attributable to Resolute Forest Products Inc. common shareholders:
|
|
|
|
|
|
|
||
Basic
|
$
|
(0.52
|
)
|
|
$
|
(0.09
|
)
|
|
Diluted
|
|
(0.52
|
)
|
|
|
(0.09
|
)
|
|
Adjusted EBITDA
(1)
|
$
|
61
|
|
|
$
|
55
|
|
|
(Unaudited, in millions)
|
March 31,
2017 |
December 31,
2016 |
||||||
Cash and cash equivalents
|
$
|
39
|
|
|
$
|
35
|
|
|
Total assets
|
|
4,335
|
|
|
|
4,277
|
|
|
(1)
|
Earnings before interest expense, income taxes, and depreciation and amortization, or “
EBITDA
” and adjusted EBITDA are not financial measures recognized under GAAP. 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, non-operating pension and OPEB costs and credits, and other charges or credits. We believe that using non-GAAP measures such as EBITDA and adjusted EBITDA 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 operations and financial performance from period to period. EBITDA and adjusted EBITDA are internal measures, and therefore may not be comparable to those of other companies. These non-GAAP measures should not be viewed as substitutes to financial measures determined under GAAP.
|
|
Three Months Ended
March 31, |
|||||||
(Unaudited, in millions)
|
2017
|
|
|
2016
|
|
|
||
Net loss including noncontrolling interests
|
$
|
(46
|
)
|
|
$
|
(7
|
)
|
|
Interest expense
|
|
11
|
|
|
|
10
|
|
|
Income tax provision
|
|
29
|
|
|
|
10
|
|
|
Depreciation and amortization
|
|
51
|
|
|
|
52
|
|
|
EBITDA
|
$
|
45
|
|
|
$
|
65
|
|
|
Foreign exchange translation gain
|
|
—
|
|
|
|
(6
|
)
|
|
Closure costs, impairment and other related charges
|
|
7
|
|
|
|
—
|
|
|
Inventory write-downs related to closures
|
|
4
|
|
|
|
—
|
|
|
Start-up costs
|
|
8
|
|
|
|
3
|
|
|
Net gain on disposition of assets
|
|
—
|
|
|
|
(2
|
)
|
|
Non-operating pension and OPEB (credits) costs
|
|
(3
|
)
|
|
|
2
|
|
|
Other income, net
|
|
—
|
|
|
|
(7
|
)
|
|
Adjusted EBITDA
|
$
|
61
|
|
|
$
|
55
|
|
|
•
|
the effect of asset optimization initiatives ($8 million), including the permanent closure of a newsprint machine at our Augusta, Georgia, mill in 2016, and the indefinite idling of our Thorold, Ontario, paper mill;
|
•
|
lower defined benefit pension and OPEB plans costs ($5 million), mostly due to lower interest costs, as a result of the lower discount rates;
|
•
|
favorable chemical costs ($5 million), due to cost reduction initiatives; and
|
•
|
improved costs at our Atlas Tissue mills ($3 million), primarily attributable to improved productivity on tissue machines and converting lines, lower labor costs and material usage, as well as one-off integration costs recorded in the year-ago period;
|
•
|
start-up costs related to the Calhoun tissue manufacturing and converting facility ($7 million), compared to start-up costs incurred in the year-ago period ($2 million) for the continuous pulp digester project in Calhoun;
|
•
|
higher steam costs ($4 million), mainly due to higher natural gas prices;
|
•
|
write-downs of mill stores and other supplies ($4 million), primarily as a result of the permanent closure of our Mokpo, South Korea, paper mill;
|
•
|
asset preservation costs ($4 million), primarily related to the indefinite idling of our Thorold paper mill and our permanently closed Fort Frances, Ontario, mill; and
|
•
|
unfavorable fiber costs ($3 million), mostly price-related.
|
|
Three Months Ended
March 31, |
|||||||
(Unaudited, in millions, except where otherwise stated)
|
2017
|
|
|
2016
|
|
|
||
Sales
|
$
|
209
|
|
|
$
|
211
|
|
|
Operating income
(1)
|
|
7
|
|
|
|
19
|
|
|
EBITDA
(2)
|
|
15
|
|
|
|
26
|
|
|
(In thousands of metric tons)
|
|
|
|
|
|
|
||
Shipments
|
|
353
|
|
|
|
352
|
|
|
Downtime
|
|
11
|
|
|
|
12
|
|
|
|
March 31,
|
|||||||
(Unaudited, in thousands of metric tons)
|
2017
|
2016
|
||||||
Finished goods inventory
|
|
92
|
|
|
|
94
|
|
|
(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 reasons we include this measure, see note 1 under “
Results of Operations – Consolidated Results – Selected Financial Information
” above.
|
|
Three Months Ended
March 31, |
|||||||
(Unaudited, in millions)
|
2017
|
|
|
2016
|
|
|
||
Net income including noncontrolling interests
|
$
|
7
|
|
|
$
|
19
|
|
|
Depreciation and amortization
|
|
8
|
|
|
|
7
|
|
|
EBITDA
|
|
15
|
|
|
|
26
|
|
|
|
Three Months Ended
March 31, |
|||||||
(Unaudited, in millions, except where otherwise stated)
|
2017
|
|
|
2016
|
|
|
||
Sales
|
$
|
20
|
|
|
$
|
23
|
|
|
Operating loss
(1)
|
|
—
|
|
|
|
(2
|
)
|
|
EBITDA
(2)
|
|
1
|
|
|
|
—
|
|
|
(In thousands of short tons)
|
|
|
|
|
|
|
||
Shipments
|
|
14
|
|
|
|
15
|
|
|
Downtime
|
|
—
|
|
|
|
—
|
|
|
|
March 31,
|
|||||||
(Unaudited, in thousands of short tons)
|
2017
|
2016
|
||||||
Finished goods inventory
|
|
8
|
|
|
|
5
|
|
|
(1)
|
Net loss including noncontrolling interests
is equal to
operating loss
in this segment.
|
(2)
|
EBITDA, a non-GAAP financial measure, is reconciled below. For more information on the calculation and reasons we include this measure, see note 1 under “
Results of Operations – Consolidated Results – Selected Financial Information
” above.
|
|
Three Months Ended
March 31, |
|||||||
(Unaudited, in millions)
|
2017
|
|
|
2016
|
|
|
||
Net loss including noncontrolling interests
|
$
|
—
|
|
|
$
|
(2
|
)
|
|
Depreciation and amortization
|
|
1
|
|
|
|
2
|
|
|
EBITDA
|
|
1
|
|
|
|
—
|
|
|
|
Three Months Ended
March 31, |
|||||||
(Unaudited, in millions, except where otherwise stated)
|
2017
|
|
|
2016
|
|
|
||
Sales
|
$
|
177
|
|
|
$
|
119
|
|
|
Operating income (loss)
(1)
|
|
20
|
|
|
|
(4
|
)
|
|
EBITDA
(2)
|
|
29
|
|
|
|
3
|
|
|
(In millions of board feet)
|
|
|
|
|
|
|
||
Shipments
(3)
|
|
505
|
|
|
|
390
|
|
|
Downtime
|
|
41
|
|
|
|
75
|
|
|
|
March 31,
|
|||||||
(Unaudited, in millions of board feet)
|
2017
|
2016
|
||||||
Finished goods inventory
(3)
|
|
147
|
|
|
|
126
|
|
|
(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 reasons we include this measure, see note 1 under “
Results of Operations – Consolidated Results – Selected Financial Information
” above.
|
(3)
|
Includes wood pellets measured by mass, converted to board feet using a density-based conversion ratio.
|
|
Three Months Ended
March 31, |
|||||||
(Unaudited, in millions)
|
2017
|
|
|
2016
|
|
|
||
Net income (loss) including noncontrolling interests
|
$
|
20
|
|
|
$
|
(4
|
)
|
|
Depreciation and amortization
|
|
9
|
|
|
|
7
|
|
|
EBITDA
|
|
29
|
|
|
|
3
|
|
|
|
Three Months Ended
March 31, |
|||||||
(Unaudited, in millions, except where otherwise stated)
|
2017
|
|
|
2016
|
|
|
||
Sales
|
$
|
226
|
|
|
$
|
257
|
|
|
Operating loss
(1)
|
|
(4
|
)
|
|
|
(5
|
)
|
|
EBITDA
(2)
|
|
12
|
|
|
|
15
|
|
|
(In thousands of metric tons)
|
|
|
|
|
|
|
||
Shipments
|
|
443
|
|
|
|
519
|
|
|
Downtime
|
|
—
|
|
|
|
13
|
|
|
|
March 31,
|
|||||||
(Unaudited, in thousands of metric tons)
|
2017
|
2016
|
||||||
Finished goods inventory
|
|
107
|
|
|
|
104
|
|
|
(1)
|
Net loss including noncontrolling interests
is equal to
operating loss
in this segment.
|
(2)
|
EBITDA, a non-GAAP financial measure, is reconciled below. For more information on the calculation and reasons we include this measure, see note 1 under “
Results of Operations – Consolidated Results – Selected Financial Information
” above.
|
|
Three Months Ended
March 31, |
|||||||
(Unaudited, in millions)
|
2017
|
|
|
2016
|
|
|
||
Net loss including noncontrolling interests
|
$
|
(4
|
)
|
|
$
|
(5
|
)
|
|
Depreciation and amortization
|
|
16
|
|
|
|
20
|
|
|
EBITDA
|
|
12
|
|
|
|
15
|
|
|
|
Three Months Ended
March 31, |
|||||||
(Unaudited, in millions, except where otherwise stated)
|
2017
|
|
|
2016
|
|
|
||
Sales
|
$
|
240
|
|
|
$
|
267
|
|
|
Operating income
(1)
|
|
4
|
|
|
|
5
|
|
|
EBITDA
(2)
|
|
16
|
|
|
|
18
|
|
|
(In thousands of short tons)
|
|
|
|
|
|
|
||
Shipments
|
|
364
|
|
|
|
393
|
|
|
Downtime
|
|
6
|
|
|
|
2
|
|
|
|
March 31,
|
|||||||
(Unaudited, in thousands of short tons)
|
2017
|
2016
|
||||||
Finished goods inventory
|
|
100
|
|
|
|
78
|
|
|
(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 reasons we include this measure, see note 1 under “
Results of Operations – Consolidated Results – Selected Financial Information
” above.
|
|
Three Months Ended
March 31, |
|||||||
(Unaudited, in millions)
|
2017
|
|
|
2016
|
|
|
||
Net income including noncontrolling interests
|
$
|
4
|
|
|
$
|
5
|
|
|
Depreciation and amortization
|
|
12
|
|
|
|
13
|
|
|
EBITDA
|
|
16
|
|
|
|
18
|
|
|
•
|
lower maintenance and labor costs ($5 million);
|
•
|
favorable chemical costs ($4 million) due to cost reduction initiatives; and
|
•
|
lower fiber costs ($2 million).
|
|
Three Months Ended
March 31, |
|||||||
(Unaudited, in millions)
|
2017
|
|
|
2016
|
|
|
||
Cost of sales, excluding depreciation, amortization and distribution costs
|
$
|
(11
|
)
|
|
$
|
(4
|
)
|
|
Depreciation and amortization
|
|
(5
|
)
|
|
|
(3
|
)
|
|
Selling, general and administrative expenses
|
|
(10
|
)
|
|
|
(8
|
)
|
|
Closure costs, impairment and other related charges
|
|
(7
|
)
|
|
|
—
|
|
|
Net gain on disposition of assets
|
|
—
|
|
|
|
2
|
|
|
Operating loss
|
$
|
(33
|
)
|
|
$
|
(13
|
)
|
|
Interest expense
|
|
(11
|
)
|
|
|
(10
|
)
|
|
Other income, net
|
|
—
|
|
|
|
13
|
|
|
Income tax provision
|
|
(29
|
)
|
|
|
(10
|
)
|
|
Net loss including noncontrolling interests
|
$
|
(73
|
)
|
|
$
|
(20
|
)
|
|
|
Three Months Ended
March 31, |
|||||||
(Unaudited, in millions)
|
2017
|
|
|
2016
|
|
|
||
Net loss including noncontrolling interests
|
$
|
(73
|
)
|
|
$
|
(20
|
)
|
|
Interest expense
|
|
11
|
|
|
|
10
|
|
|
Income tax provision
|
|
29
|
|
|
|
10
|
|
|
Depreciation and amortization
|
|
5
|
|
|
|
3
|
|
|
EBITDA
|
$
|
(28
|
)
|
|
$
|
3
|
|
|
Foreign exchange translation gain
|
|
—
|
|
|
|
(6
|
)
|
|
Closure costs, impairment and other related charges
|
|
7
|
|
|
|
—
|
|
|
Inventory write-downs related to closures
|
|
4
|
|
|
|
—
|
|
|
Start-up costs
|
|
8
|
|
|
|
3
|
|
|
Net gain on disposition of assets
|
|
—
|
|
|
|
(2
|
)
|
|
Non-operating pension and OPEB (credits) costs
|
|
(3
|
)
|
|
|
2
|
|
|
Other income, net
|
|
—
|
|
|
|
(7
|
)
|
|
Adjusted EBITDA
|
$
|
(12
|
)
|
|
$
|
(7
|
)
|
|
•
|
start-up costs ($7 million) for the Calhoun tissue manufacturing and converting facility;
|
•
|
write-downs of mill stores and other supplies ($4 million), primarily as a result of the permanent closure of our Mokpo paper mill; and
|
•
|
asset preservation costs ($4 million), primarily related to the indefinite idling of our Thorold paper mill and our permanently closed Fort Frances mill;
|
|
Three Months Ended
March 31, |
|||||||
(Unaudited, in millions)
|
2017
|
|
|
2016
|
|
|
||
Net cash (used in) provided by operating activities
|
$
|
(39
|
)
|
|
$
|
6
|
|
|
Net cash used in investing activities
|
|
(75
|
)
|
|
|
(48
|
)
|
|
Net cash provided by financing activities
|
|
118
|
|
|
|
20
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
—
|
|
|
|
1
|
|
|
Net increase (decrease) in cash and cash equivalents
|
$
|
4
|
|
|
$
|
(21
|
)
|
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
PART II.
|
OTHER INFORMATION
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
ITEM 1A.
|
RISK FACTORS
|
ITEM 6.
|
EXHIBITS
|
Exhibit No.
|
|
Description
|
|
|
|
†10.1*
|
|
2017 Resolute Forest Products Inc. Short-Term Incentive Plan.
|
|
|
|
†10.2*
|
|
2017 Resolute Forest Products Inc. Short-Term Incentive Plan - U.S.
|
|
|
|
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*
|
|
2017 Resolute Forest Products Inc. Short-Term Incentive Plan.
|
|
|
|
†10.2*
|
|
2017 Resolute Forest Products Inc. Short-Term Incentive Plan - U.S.
|
|
|
|
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.
|
|
EXHIBIT 10.1
|
2017 Short-Term Incentive Plan
Canada/International |
Purpose
|
As a means of rewarding employees for their contribution toward the success of the Company, a 2017 Short‑Term Incentive Plan (STIP) has been implemented. The STIP is designed to link a portion of employees’ total compensation to the attainment of specific, measurable, and bottom-line oriented key company performance indicators.
|
Eligibility
|
The Plan applies to non-unionized, regular, salaried employees working in Canada and in other countries, except the United States. Eligibility for or receipt of incentive pay should not be considered as automatic, retroactive or precedent-based.
|
Performance Period
|
The STIP relates to the achievement of performance goals over the period from January 1, 2017 to December 31, 2017.
|
Plan Design
|
The STIP is designed to reflect the different employee accountabilities and diversity of positions. In order to tie incentive payouts to employee performance and the achievement of key performance indicators, the STIP’s design is adapted to all groups of employees: Operations, Sales and Corporate.
The amount of award that participants are eligible to receive is expressed as a certain percentage of employees’ base salary as determined by their grade level. Base salary is the rate in effect at December 31, 2017. The Company determines the threshold, target and maximum incentive payouts to participants, which payout levels vary per grade level. Immediate managers are responsible to inform their employees of their respective threshold, target and maximum incentive award payouts.
|
Discretionary Plan and Plan Administration
|
}
Incentive payouts are within the complete and sole discretion of the Company.
|
|
}
The Company will approve actual achievement of performance metrics and individual awards based on actual achievement before awards are granted and paid, subject to the overall maximum incentive payout described below under “Maximum and Minimum Payout”.
|
|
}
The Company has the right to adjust any or all awards; this includes the right to eliminate any or all awards for any year despite achievement of performance metrics, even if such decision is made after the end of the performance period.
|
|
}
The Company may modify, suspend, amend or terminate the STIP at any time.
|
|
}
Any payment made under this plan is subject to the Company's recoupment policy.
|
|
}
With respect to any employee, the Company reserves the right to reduce or even cancel incentive awards in the event an employee has demonstrated an inadequate level of performance, whether or not the applicable performance metrics have been met.
|
|
}
Adjustments may be made to the financial metrics for closure costs, impairment charges and other related charges, severance costs, net loss or gain on the disposition of assets, strategic capital expenditures and similar items.
|
|
}
Adjustments may be made to the cost metrics for specific reasons such as market downtime, major variation in grade mix, major changes in input price, restructuring or reorganization costs, and similar items.
|
|
}
Any adjustment to the performance metrics has to be formally approved before implementation.
|
|
}
Awards under the STIP are to be paid in a lump sum no later than March 15, 2018.
|
|
|
2017 Short-Term Incentive Plan
Canada/International |
Performance Metrics & Weighting
|
Performance Metrics
1
|
||||
|
Criteria
|
Threshold
|
Target
|
Exceeding Target
|
|
|
Income from operations – Resolute
|
$170M (80% of budget)
|
$212M (budget)
|
$255M (120% of budget)
|
|
|
Manufacturing costs – division
2
|
2% > budget
|
budget
|
2% < budget
|
|
|
SG&A costs
3
|
$155.8M (3.5% > budget)
|
$150.5M (budget)
|
$145.2M (3.5% < budget)
|
|
|
Pulp and paper sales – Profit per metric ton
4
|
80% of budget
|
budget
|
120% of budget
|
|
|
Pulp and paper sales – Improvement of account receivable collection time
|
Improvement of payment terms
|
0.8%
|
1.3%
|
1.8%
|
|
Improvement of DSO
5
|
0.8%
|
1.3%
|
1.8%
|
|
|
Safety – OSHA rate
6
|
1.00
|
0.90
|
≤ 0.70
|
|
|
Safety – Severity rate
7
|
27
|
24
|
≤ 20
|
|
|
Number of Class 1 & 2 environmental incidents
8
|
No payout if more than 38 incidents
|
≤ 38
|
25
|
|
|
2017 Short-Term Incentive Plan
Canada/International |
Weighting
|
||||
Weighting
|
Pulp and Paper
mills
|
Wood Products divisions
|
Sales
1
|
Corporate
|
Income from operations (RFP)
|
35%
|
35%
|
55%
|
55%
|
Manufacturing costs (mill/division)
|
40%
|
40%
|
|
|
SG&A costs (RFP)
|
|
|
3%
|
20%
|
Profit per metric ton
|
|
|
9%
|
|
Monthly days sales outstanding – terms
|
|
|
4%
|
|
Monthly days sales outstanding – days
|
|
|
4%
|
|
Safety – OSHA (mill/division) (RFP)
|
15% (mill)
|
15% (division)
|
15% (RFP)
|
15% (RFP)
|
Safety – Severity (mill/division) (RFP)
|
5% (mill)
|
5% (division)
|
5% (RFP)
|
5% (RFP)
|
Environmental incidents (RFP)
2
|
5%
|
5%
|
5%
|
5%
|
|
|
2017 Short-Term Incentive Plan
Canada/International |
|
|
2017 Short-Term Incentive Plan
Canada/International |
Administrative Guidelines
|
New Hires
Employees hired into a regular position on or before September 30, 2017 are eligible to participate in the STIP on a prorated basis, effective upon their date of hire. Employees hired into a regular position on or after October 1, 2017 are not eligible for participation in the STIP.
|
|
Promotion or Status Changes
|
|
}
If an employee is promoted or demoted to a position covered by a different incentive payout level, any incentive payout calculation will be prorated for time spent in respective positions. In either case, the base salary rate used to determine the prorated incentive payout will be the base salary rate in effect at December 31, 2017.
|
|
}
If an employee is transferred internally, any incentive payout calculation will be prorated for time spent in respective locations or groups. The base salary rate used to determine the prorated incentive payout will be the base salary rate in effect at December 31, 2017.
|
|
}
If an employee’s status changes from temporary salaried, unionized salaried or hourly to regular non-unionized salaried (and vice versa) during the performance period, the employee will be eligible to participate for time spent as a regular non-unionized salaried employee, and any incentive payout calculation will be prorated for time spent as a regular non-unionized salaried employee. The base salary rate used to determine the prorated incentive payout will be the base salary rate in effect at December 31, 2017.
|
|
|
|
Termination
}
An employee who retires or who dies during the performance period will be entitled to receive a prorated incentive payout, based on actual achievement for time as an active eligible employee, if and when the Board approves the incentive payouts and does not otherwise cancel payment. For the purpose of this plan, employees are deemed to retire if they are age 57 or above on their last day of active work and have completed at least 2 years of continuous service. Nevertheless, employees who hand in their resignation to start new employment within 3 months of their last day of work are considered to have resigned and not deemed to retire. Notwithstanding the above, the Company reserves the right, at its discretion, to make the final decision on award eligibility.
|
|
}
Employees who are involuntarily terminated and whose last day of active work is on or before June 30, 2017 will not be entitled to receive an incentive payout, unless they are deemed to retire pursuant to the previous paragraph.
|
|
}
An employee who is involuntarily terminated and whose last day of active work is on or after July 1, 2017 will be entitled to receive a prorata amount of an incentive payout, based on actual achievement for time as an active eligible employee, if and when the Board approves the incentive payouts and does not otherwise cancel payment.
|
|
}
Employees who hand in their resignation before payment is made will not be eligible to receive an award.
|
|
|
2017 Short-Term Incentive Plan
Canada/International |
Administrative Guidelines
|
}
Notwithstanding anything to the contrary, employees who are terminated for cause, as determined at the discretion of the Company or their specific employer, whether during the performance period or after the performance period and before actual payouts, will not receive an award.
|
|
Leaves
|
|
}
Maternity/parental/adoption leave: The length of the leave is not included in the calculation of any incentive payout.
|
|
}
Leave without pay: The length of the leave is not included in the calculation of any incentive payout.
|
|
}
Short-term absence due to illness: The length of the absence is included in the calculation of the incentive payout if it is a bona fide absence pursuant to the disability medical leave procedure.
|
|
}
Long-term absence due to illness (time on long-term disability): The length of the absence is not included in the calculation of the incentive payout.
|
|
EXHIBIT 10.2
|
2017 Short-Term Incentive Plan
United States
|
Purpose
|
As a means of rewarding employees for their contribution towards the success of the Company, a 2017 Short‑Term Incentive Plan (STIP) has been implemented. The STIP is designed to link a portion of employees’ total compensation to the attainment of specific, measurable, and bottom-line oriented key company performance indicators.
|
Eligibility
|
The Plan applies to non-unionized, regular, salaried, employees of the Pulp and Paper Group and Wood Products Group working in the Unites States. Eligibility for or receipt of incentive pay should not be considered as automatic, retroactive or precedent based.
|
Performance Period
|
The STIP relates to the achievement of performance goals over the period from January 1, 2017 to December 31, 2017.
|
Plan Design
|
The STIP is designed to reflect the different employee accountabilities and diversity of positions. In order to tie incentive payouts to employee performance and the achievement of key performance indicators, the STIP’s design is adapted to all groups of employees: Operations, Sales and Corporate.
The amount of award that participants are eligible to receive is expressed as a certain percentage of employees’ base salary (eligible earnings in the case of non-exempt salaried employees) as determined by their grade level. Base salary is the rate in effect at December 31, 2017. The Company determines the threshold, target and maximum incentive payouts to participants, which payout levels vary per grade level. Immediate managers are responsible to inform their employees of their respective threshold, target and maximum incentive award payouts.
|
Discretionary Plan and Plan Administration
|
}
Incentive payouts are within the complete and sole discretion of the Company.
|
|
}
The Company will approve actual achievement of performance metrics and individual awards based on actual achievement before awards are granted and paid, subject to the overall maximum incentive payout described below under “Maximum and Minimum Payout”.
|
|
}
The Company has the right to adjust any or all awards; this includes the right to eliminate any or all awards for any year despite achievement of performance metrics, even if such decision is made after the end of the performance period.
|
|
}
The Company may modify, suspend, amend or terminate the STIP at any time.
|
|
}
Any payment made under this plan is subject to the Company's recoupment policy.
|
|
}
With respect to any employee, the Company reserves the right to reduce or even cancel incentive awards in the event an employee has demonstrated an inadequate level of performance, whether or not the applicable performance metrics have been met.
|
|
}
Adjustments may be made to the financial metrics for closure costs, impairment charges and other related charges, severance costs, net loss or gain on the disposition of assets, strategic capital expenditures and similar items.
|
|
}
Adjustments may be made to the cost metrics for specific reasons such as market downtime, major variation in grade mix, major changes in input price, restructuring or reorganization costs, and similar items.
|
|
}
Any adjustment to the performance metrics has to be formally approved before implementation.
|
|
}
Awards under the STIP are to be paid in a lump sum no later than March 15, 2018.
|
|
|
2017 Short-Term Incentive Plan
United States |
Performance Metrics & Weighting
|
Performance Metrics
1
|
||||
|
Criteria
|
Threshold
|
Target
|
Exceeding Target
|
|
|
Income from operations – Resolute
|
$170M (80% of budget)
|
$212M (budget)
|
$255M (120% of budget)
|
|
|
Manufacturing costs – division
2
|
2% > budget
|
budget
|
2% < budget
|
|
|
SG&A costs
3
|
$155.8M (3.5% > budget)
|
$150.5M (budget)
|
$145.2M (3.5% < budget)
|
|
|
Pulp and paper sales – Profit per metric ton
|
80% of budget
|
budget
|
120% of budget
|
|
|
Pulp and paper sales – Improvement of account receivable collection time
|
Improvement of payment terms
|
0.8%
|
1.3%
|
1.8%
|
|
Improvement of DSO
4
|
0.8%
|
1.3%
|
1.8%
|
|
|
Safety – OSHA rate
5
|
1.00
|
0.90
|
≤ 0.70
|
|
|
Safety – Severity rate
6
|
27
|
24
|
≤ 20
|
|
|
Number of Class 1 & 2 environmental incidents
7
|
No payout if more than 38 incidents
|
≤ 38
|
25
|
|
|
2017 Short-Term Incentive Plan
United States |
Weighting
|
||||
Weighting
|
Pulp and Paper
mills
|
Wood Products divisions
|
Sales
|
Corporate
|
Income from operations (RFP)
|
35%
|
35%
|
55%
|
55%
|
Manufacturing costs (mill/division)
|
40%
|
40%
|
|
|
SG&A costs (RFP)
|
|
|
3%
|
20%
|
Profit per metric ton
|
|
|
9%
|
|
Monthly days sales outstanding – terms
|
|
|
4%
|
|
Monthly days sales outstanding – days
|
|
|
4%
|
|
Safety – OSHA (mill/division) (RFP)
|
15% (mill)
|
15% (division)
|
15% (RFP)
|
15% (RFP)
|
Safety – Severity (mill/division) (RFP)
|
5% (mill)
|
5% (division)
|
5% (RFP)
|
5% (RFP)
|
Environmental incidents (RFP)
1
|
5%
|
5%
|
5%
|
5%
|
|
|
2017 Short-Term Incentive Plan
United States |
|
|
2017 Short-Term Incentive Plan
United States |
Administrative Guidelines
|
New Hires
Employees hired into a regular position on or before September 30, 2017 are eligible to participate in the STIP on a prorated basis, effective upon their date of hire. Employees hired into a regular position on or after October 1, 2017 are not eligible for participation in the STIP.
|
|
Promotion or Status Changes
|
|
}
If an employee is promoted or demoted to a position covered by a different incentive payout level, any incentive payout calculation will be prorated for time spent in respective positions. In either case, the base salary rate used to determine the prorated incentive payout will be the base salary rate in effect at December 31, 2017.
|
|
}
If an employee is transferred internally, any incentive payout calculation will be prorated for time spent in respective locations or groups. The base salary rate used to determine the prorated incentive payout will be the base salary rate in effect at December 31, 2017.
|
|
}
If an employee’s status changes from temporary salaried, unionized salaried or hourly to regular non-unionized salaried (and vice versa) during the performance period, the employee will be eligible to participate for time spent as a regular non-unionized salaried employee, and any incentive payout calculation will be prorated for time spent as a regular non-unionized salaried employee. The base salary rate used to determine the prorated incentive payout will be the base salary rate in effect at December 31, 2017.
}
If an employee’s status changes between non-exempt and exempt during the year, the incentive payout will be calculated based on eligible earnings for time spent as a non-exempt employee and on the base salary as of December 31, 2017 for time spent as an exempt employee.
|
|
|
|
Termination
}
An employee who retires or who dies during the performance period will be entitled to receive a prorated incentive payout, based on actual achievement for time as an active eligible employee, if and when the Board approves the incentive payouts and does not otherwise cancel payment. For the purpose of this plan, employees are deemed to retire if they are age 58 or above on their last day of active work and have completed at least 2 years of continuous service. Nevertheless, employees who hand in their resignation to start new employment within 3 months of their last day of work are considered to have resigned and not deemed to retire. Notwithstanding the above, the Company reserves the right, at its discretion, to make the final decision on award eligibility.
|
|
}
Employees who are involuntarily terminated and whose last day of active work is on or before June 30, 2017 will not be entitled to receive an incentive payout, unless they are deemed to retire pursuant to the previous paragraph.
|
|
}
An employee who is involuntarily terminated and whose last day of active work is on or after July 1, 2017 will be entitled to receive a prorata amount of an incentive payout, based on actual achievement for time as an active eligible employee, if and when the Board approves the incentive payouts and does not otherwise cancel payment.
|
|
}
Employees who hand in their resignation before payment is made will not be eligible to receive an award.
|
|
|
2017 Short-Term Incentive Plan
United States |
Administrative Guidelines
|
}
Notwithstanding anything to the contrary, employees who are terminated for cause, as determined at the discretion of the Company or their specific employer, whether during the performance period or after the performance period and before actual payouts, will not receive an award.
|
|
Leaves
|
|
}
Leave without pay: The length of the leave is not included in the calculation of any incentive payout.
|
|
}
Short-term absence due to illness: The length of the absence is included in the calculation of the incentive payout if it is a bona fide absence pursuant to the disability medical leave procedure.
|
|
}
Long-term absence due to illness (time on long-term disability): The length of the absence is not included in the calculation of the incentive payout.
|
1.
|
I have reviewed this quarterly report on Form 10-Q for the quarterly period ended
March 31, 2017
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: May 10, 2017
|
|
/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
March 31, 2017
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: May 10, 2017
|
|
/s/ Jo-Ann Longworth
|
Jo-Ann Longworth
|
Senior Vice President and Chief Financial Officer
|
Date: May 10, 2017
|
/s/ Richard Garneau
|
|
Name: Richard Garneau
|
|
Title: President and Chief Executive Officer
|
Date: May 10, 2017
|
/s/ Jo-Ann Longworth
|
|
Name: Jo-Ann Longworth
|
|
Title: Senior Vice President and Chief Financial Officer
|