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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
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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 Robert-Bourassa Boulevard, Suite 5000; Montreal, Quebec; Canada H3C 2M1
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(Address of principal executive offices) (Zip Code)
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(514) 875-2160
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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
¨
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Accelerated filer
þ
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Non-accelerated filer
¨
(Do not check if a smaller reporting company)
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Smaller reporting company
¨
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Emerging growth 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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PART II. OTHER INFORMATION
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PART I.
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FINANCIAL INFORMATION
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ITEM 1.
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FINANCIAL STATEMENTS
|
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Three Months Ended
June 30, |
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Six Months Ended
June 30, |
||||||||||||||
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2018
|
|
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2017
|
|
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2018
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|
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2017
|
|
|
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Sales
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$
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976
|
|
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$
|
858
|
|
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$
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1,850
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$
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1,730
|
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Costs and expenses:
|
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Cost of sales, excluding depreciation, amortization and distribution costs
|
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639
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646
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1,253
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|
|
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1,317
|
|
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Depreciation and amortization
|
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54
|
|
|
|
50
|
|
|
|
|
107
|
|
|
|
101
|
|
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Distribution costs
|
|
123
|
|
|
|
108
|
|
|
|
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239
|
|
|
|
218
|
|
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Selling, general and administrative expenses
|
|
42
|
|
|
|
37
|
|
|
|
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85
|
|
|
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79
|
|
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Closure costs, impairment and other related charges
|
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1
|
|
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65
|
|
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|
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1
|
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72
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|
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Net gain on disposition of assets
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(4
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)
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—
|
|
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(4
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)
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—
|
|
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Operating income (loss)
|
|
121
|
|
|
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(48
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)
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169
|
|
|
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(57
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)
|
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Interest expense
|
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(11
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)
|
|
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(12
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)
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(24
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)
|
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(23
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)
|
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Non-operating pension and other postretirement benefit credits
|
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12
|
|
|
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1
|
|
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25
|
|
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4
|
|
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Other (expense) income, net
|
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(3
|
)
|
|
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5
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|
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(10
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)
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5
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Income (loss) before income taxes
|
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119
|
|
|
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(54
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)
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160
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(71
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)
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Income tax provision
|
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(47
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)
|
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(19
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)
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(78
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)
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(48
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)
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Net income (loss) including noncontrolling interests
|
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72
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|
|
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(73
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)
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82
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(119
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)
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Net income attributable to noncontrolling interests
|
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—
|
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(1
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)
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|
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—
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|
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(2
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)
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Net income (loss) attributable to Resolute Forest Products Inc.
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$
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72
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|
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$
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(74
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)
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$
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82
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$
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(121
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)
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Net income (loss) per share attributable to Resolute Forest Products Inc. common shareholders:
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Basic
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$
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0.79
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$
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(0.82
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)
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$
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0.90
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$
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(1.34
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)
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Diluted
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0.77
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(0.82
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)
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0.88
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(1.34
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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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91.3
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90.3
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91.2
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90.3
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Diluted
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93.2
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90.3
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93.1
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90.3
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Three Months Ended
June 30, |
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Six Months Ended
June 30, |
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2018
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2017
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2018
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2017
|
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Net income (loss) including noncontrolling interests
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$
|
72
|
|
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$
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(73
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)
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$
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82
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$
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(119
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)
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Other comprehensive income:
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Unamortized prior service credits
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Change in unamortized prior service credits
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(4
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)
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(3
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)
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(8
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)
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|
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(7
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)
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Income tax provision
|
|
—
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—
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—
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—
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Change in unamortized prior service credits, net of tax
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(4
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)
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(3
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)
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(8
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)
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(7
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)
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Unamortized actuarial losses
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|
|
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|
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|
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Change in unamortized actuarial losses
|
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9
|
|
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|
13
|
|
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18
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|
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27
|
|
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Income tax provision
|
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(2
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)
|
|
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(3
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)
|
|
|
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(4
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)
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(5
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)
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Change in unamortized actuarial losses, net of tax
|
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7
|
|
|
|
10
|
|
|
|
|
14
|
|
|
|
22
|
|
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Foreign currency translation
|
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—
|
|
|
|
(1
|
)
|
|
|
|
—
|
|
|
|
—
|
|
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Other comprehensive income, net of tax
|
|
3
|
|
|
|
6
|
|
|
|
|
6
|
|
|
|
15
|
|
|
Comprehensive income (loss) including noncontrolling interests
|
|
75
|
|
|
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(67
|
)
|
|
|
|
88
|
|
|
|
(104
|
)
|
|
Comprehensive income attributable to noncontrolling interests
|
|
—
|
|
|
|
(1
|
)
|
|
|
|
—
|
|
|
|
(2
|
)
|
|
Comprehensive income (loss) attributable to Resolute Forest Products Inc.
|
$
|
75
|
|
|
$
|
(68
|
)
|
|
|
$
|
88
|
|
|
$
|
(106
|
)
|
|
|
June 30,
2018 |
December 31,
2017 |
||||||
Assets
|
|
|
|
|
|
|
||
Current assets:
|
|
|
|
|
|
|
||
Cash and cash equivalents
|
$
|
6
|
|
|
$
|
6
|
|
|
Accounts receivable, net:
|
|
|
|
|
|
|
||
Trade
|
|
387
|
|
|
|
399
|
|
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Other
|
|
129
|
|
|
|
80
|
|
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Inventories, net
|
|
547
|
|
|
|
526
|
|
|
Other current assets
|
|
39
|
|
|
|
33
|
|
|
Total current assets
|
|
1,108
|
|
|
|
1,044
|
|
|
Fixed assets, less accumulated depreciation of $1,719 and $1,614 as of June 30, 2018 and December 31, 2017, respectively
|
|
1,669
|
|
|
|
1,716
|
|
|
Amortizable intangible assets, less accumulated amortization of $23 and $21 as of June 30, 2018 and December 31, 2017, respectively
|
|
63
|
|
|
|
65
|
|
|
Goodwill
|
|
81
|
|
|
|
81
|
|
|
Deferred income tax assets
|
|
941
|
|
|
|
1,076
|
|
|
Other assets
|
|
163
|
|
|
|
165
|
|
|
Total assets
|
$
|
4,025
|
|
|
$
|
4,147
|
|
|
Liabilities and equity
|
|
|
|
|
|
|
||
Current liabilities:
|
|
|
|
|
|
|
||
Accounts payable and accrued liabilities
|
$
|
438
|
|
|
$
|
420
|
|
|
Current portion of long-term debt
|
|
1
|
|
|
|
1
|
|
|
Total current liabilities
|
|
439
|
|
|
|
421
|
|
|
Long-term debt, net of current portion
|
|
674
|
|
|
|
788
|
|
|
Pension and other postretirement benefit obligations
|
|
1,148
|
|
|
|
1,257
|
|
|
Deferred income tax liabilities
|
|
1
|
|
|
|
13
|
|
|
Other liabilities
|
|
71
|
|
|
|
68
|
|
|
Total liabilities
|
|
2,333
|
|
|
|
2,547
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
||
Equity:
|
|
|
|
|
|
|
||
Resolute Forest Products Inc. shareholders’ equity:
|
|
|
|
|
|
|
||
Common stock, $0.001 par value. 118.3 shares issued and 90.3 shares outstanding as of June 30, 2018; 118.2 shares issued and 90.2 shares outstanding as of December 31, 2017
|
|
—
|
|
|
|
—
|
|
|
Additional paid-in capital
|
|
3,797
|
|
|
|
3,793
|
|
|
Deficit
|
|
(1,212
|
)
|
|
|
(1,294
|
)
|
|
Accumulated other comprehensive loss
|
|
(774
|
)
|
|
|
(780
|
)
|
|
Treasury stock at cost, 28.0 shares as of June 30, 2018 and December 31, 2017
|
|
(120
|
)
|
|
|
(120
|
)
|
|
Total Resolute Forest Products Inc. shareholders’ equity
|
|
1,691
|
|
|
|
1,599
|
|
|
Noncontrolling interests
|
|
1
|
|
|
|
1
|
|
|
Total equity
|
|
1,692
|
|
|
|
1,600
|
|
|
Total liabilities and equity
|
$
|
4,025
|
|
|
$
|
4,147
|
|
|
|
Six Months Ended June 30, 2018
|
|||||||||||||||||||||||||||
|
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, 2017
|
$
|
—
|
|
|
$
|
3,793
|
|
|
$
|
(1,294
|
)
|
|
$
|
(780
|
)
|
|
$
|
(120
|
)
|
|
$
|
1
|
|
|
$
|
1,600
|
|
|
Share-based compensation costs for equity-classified awards
|
|
—
|
|
|
|
4
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4
|
|
|
Net income
|
|
—
|
|
|
|
—
|
|
|
|
82
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
82
|
|
|
Stock unit awards vested (0.1 shares), net of shares forfeited for employee withholding taxes
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Other comprehensive income, net of tax
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6
|
|
|
Balance as of June 30, 2018
|
$
|
—
|
|
|
$
|
3,797
|
|
|
$
|
(1,212
|
)
|
|
$
|
(774
|
)
|
|
$
|
(120
|
)
|
|
$
|
1
|
|
|
$
|
1,692
|
|
|
|
Six Months Ended June 30, 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
|
|
—
|
|
|
|
6
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6
|
|
|
Net (loss) income
|
|
—
|
|
|
|
—
|
|
|
|
(121
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
2
|
|
|
|
(119
|
)
|
|
Cumulative-effect adjustment upon deferred tax charge elimination (Note 9)
|
|
—
|
|
|
|
—
|
|
|
|
(3
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(3
|
)
|
|
Other comprehensive income, net of tax
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
15
|
|
|
|
—
|
|
|
|
—
|
|
|
|
15
|
|
|
Balance as of June 30, 2017
|
$
|
—
|
|
|
$
|
3,781
|
|
|
$
|
(1,331
|
)
|
|
$
|
(740
|
)
|
|
$
|
(120
|
)
|
|
$
|
20
|
|
|
$
|
1,610
|
|
|
|
Six Months Ended
June 30, |
|||||||
|
2018
|
|
|
2017
|
|
|
||
Cash flows from operating activities:
|
|
|
|
|
|
|
||
Net income (loss) including noncontrolling interests
|
$
|
82
|
|
|
$
|
(119
|
)
|
|
Adjustments to reconcile net income (loss) including noncontrolling interests to net cash provided by operating activities:
|
|
|
|
|
|
|
||
Share-based compensation
|
|
5
|
|
|
|
7
|
|
|
Depreciation and amortization
|
|
107
|
|
|
|
101
|
|
|
Closure costs, impairment and other related charges
|
|
—
|
|
|
|
60
|
|
|
(Reversal of) inventory write-downs related to closures
|
|
(1
|
)
|
|
|
13
|
|
|
Deferred income taxes
|
|
75
|
|
|
|
46
|
|
|
Net pension contributions and other postretirement benefit payments
|
|
(70
|
)
|
|
|
(57
|
)
|
|
Net gain on disposition of assets
|
|
(4
|
)
|
|
|
—
|
|
|
Loss (gain) on translation of foreign currency denominated deferred income taxes
|
|
44
|
|
|
|
(38
|
)
|
|
(Gain) loss on translation of foreign currency denominated pension and other postretirement benefit obligations
|
|
(36
|
)
|
|
|
32
|
|
|
Net planned major maintenance payments
|
|
(3
|
)
|
|
|
(8
|
)
|
|
Changes in working capital:
|
|
|
|
|
|
|
||
Accounts receivable
|
|
17
|
|
|
|
35
|
|
|
Inventories
|
|
(20
|
)
|
|
|
10
|
|
|
Other current assets
|
|
(1
|
)
|
|
|
2
|
|
|
Accounts payable and accrued liabilities
|
|
18
|
|
|
|
(27
|
)
|
|
Other, net
|
|
7
|
|
|
|
3
|
|
|
Net cash provided by operating activities
|
|
220
|
|
|
|
60
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
||
Cash invested in fixed assets
|
|
(53
|
)
|
|
|
(116
|
)
|
|
Disposition of assets
|
|
2
|
|
|
|
—
|
|
|
Increase in countervailing duty cash deposits on supercalendered paper
|
|
(11
|
)
|
|
|
(12
|
)
|
|
Increase in countervailing and anti-dumping duty cash deposits on softwood lumber
|
|
(41
|
)
|
|
|
(4
|
)
|
|
Increase in countervailing duty cash deposits on uncoated groundwood paper
|
|
(6
|
)
|
|
|
—
|
|
|
Net cash used in investing activities
|
|
(109
|
)
|
|
|
(132
|
)
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
||
Net (repayments) borrowings under revolving credit facilities
|
|
(114
|
)
|
|
|
77
|
|
|
Payments of financing and credit facility fees
|
|
(1
|
)
|
|
|
—
|
|
|
Net cash (used in) provided by financing activities
|
|
(115
|
)
|
|
|
77
|
|
|
Effect of exchange rate changes on cash and cash equivalents, and restricted cash
|
|
(2
|
)
|
|
|
3
|
|
|
Net (decrease) increase in cash and cash equivalents, and restricted cash
|
|
(6
|
)
|
|
|
8
|
|
|
Cash and cash equivalents, and restricted cash:
|
|
|
|
|
|
|
||
Beginning of period
|
|
49
|
|
|
|
73
|
|
|
End of period
|
$
|
43
|
|
|
$
|
81
|
|
|
Cash and cash equivalents, and restricted cash at period end:
|
|
|
|
|
|
|
||
Cash and cash equivalents
|
$
|
6
|
|
|
$
|
44
|
|
|
Restricted cash (included in “Other current assets” and “Other assets”)
|
|
37
|
|
|
|
37
|
|
|
|
Three Months Ended June 30, 2018
|
Three Months Ended June 30, 2017
|
||||||||||||||||||||||
(Unaudited, in millions
)
|
Before
Accounting
Standards
Update
|
Effect of Change
|
As
Reported
|
As
Previously
Reported
|
Effect of
Change
|
As Adjusted
|
||||||||||||||||||
Cost of sales, excluding depreciation, amortization and distribution costs
|
$
|
627
|
|
|
$
|
12
|
|
|
$
|
639
|
|
|
$
|
645
|
|
|
$
|
1
|
|
|
$
|
646
|
|
|
Operating income (loss)
|
|
133
|
|
|
|
(12
|
)
|
|
|
121
|
|
|
|
(47
|
)
|
|
|
(1
|
)
|
|
|
(48
|
)
|
|
Non-operating pension and other postretirement benefit credits
|
|
—
|
|
|
|
12
|
|
|
|
12
|
|
|
|
—
|
|
|
|
1
|
|
|
|
1
|
|
|
|
Six Months Ended June 30, 2018
|
Six Months Ended June 30, 2017
|
||||||||||||||||||||||
(Unaudited, in millions
)
|
Before
Accounting
Standards
Update
|
Effect of Change
|
As
Reported
|
As
Previously
Reported
|
Effect of
Change
|
As Adjusted
|
||||||||||||||||||
Cost of sales, excluding depreciation, amortization and distribution costs
|
$
|
1,227
|
|
|
$
|
26
|
|
|
$
|
1,253
|
|
|
$
|
1,312
|
|
|
$
|
5
|
|
|
$
|
1,317
|
|
|
Selling, general and administrative expenses
|
|
86
|
|
|
|
(1
|
)
|
|
|
85
|
|
|
|
80
|
|
|
|
(1
|
)
|
|
|
79
|
|
|
Operating income (loss)
|
|
194
|
|
|
|
(25
|
)
|
|
|
169
|
|
|
|
(53
|
)
|
|
|
(4
|
)
|
|
|
(57
|
)
|
|
Non-operating pension and other postretirement benefit credits
|
|
—
|
|
|
|
25
|
|
|
|
25
|
|
|
|
—
|
|
|
|
4
|
|
|
|
4
|
|
|
|
(Unaudited, in millions)
|
Impairment
of Assets
|
Severance
and Other
Costs
|
Total
|
|||||||||
Pulp mill in Coosa Pines (Alabama)
(1)
|
|
|
|
|
|
|
|
|
|
|||
Second quarter
|
$
|
55
|
|
|
$
|
—
|
|
|
$
|
55
|
|
|
First six months
|
|
55
|
|
|
|
—
|
|
|
|
55
|
|
|
Permanent closures
|
|
|
|
|
|
|
|
|
|
|||
Paper machine in Catawba (South Carolina)
|
|
|
|
|
|
|
|
|
|
|||
Second quarter
|
|
5
|
|
|
|
4
|
|
|
|
9
|
|
|
First six months
|
|
5
|
|
|
|
4
|
|
|
|
9
|
|
|
Paper mill in Mokpo (South Korea)
|
|
|
|
|
|
|
|
|
|
|||
Second quarter
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
First six months
|
|
—
|
|
|
|
7
|
|
|
|
7
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|||
Second quarter
|
|
—
|
|
|
|
1
|
|
|
|
1
|
|
|
First six months
|
|
—
|
|
|
|
1
|
|
|
|
1
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|||
Second quarter
|
$
|
60
|
|
|
$
|
5
|
|
|
$
|
65
|
|
|
First six months
|
|
60
|
|
|
|
12
|
|
|
|
72
|
|
|
|
(Unaudited, in millions)
|
Unamortized Prior Service Credits
|
Unamortized Actuarial Losses
|
Foreign
Currency
Translation
|
Total
|
||||||||||||
Balance as of December 31, 2017
|
$
|
52
|
|
|
$
|
(826
|
)
|
|
$
|
(6
|
)
|
|
$
|
(780
|
)
|
|
Amounts reclassified from accumulated other comprehensive loss
(1)
|
|
(8
|
)
|
|
|
14
|
|
|
|
—
|
|
|
|
6
|
|
|
Balance as of June 30, 2018
|
$
|
44
|
|
|
$
|
(812
|
)
|
|
$
|
(6
|
)
|
|
$
|
(774
|
)
|
|
(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
|
$
|
(8
|
)
|
|
Non-operating pension and other postretirement benefit credits
(1)
|
|
|
—
|
|
|
Income tax provision
|
|
$
|
(8
|
)
|
|
Net of tax
|
Unamortized Actuarial Losses
|
|
|
|
|
|
Amortization of actuarial losses
|
$
|
17
|
|
|
Non-operating pension and other postretirement benefit credits
(1)
|
Settlement loss
|
|
1
|
|
|
Non-operating pension and other postretirement benefit credits
(1)
|
|
|
(4
|
)
|
|
Income tax provision
|
|
$
|
14
|
|
|
Net of tax
|
Total Reclassifications
|
$
|
6
|
|
|
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
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||
(Unaudited, in millions, except per share amounts)
|
2018
|
|
|
2017
|
|
|
|
2018
|
|
|
2017
|
|
|
||||
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) attributable to Resolute Forest Products Inc.
|
$
|
72
|
|
|
$
|
(74
|
)
|
|
|
$
|
82
|
|
|
$
|
(121
|
)
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic weighted-average number of Resolute Forest Products Inc. common shares outstanding
|
|
91.3
|
|
|
|
90.3
|
|
|
|
|
91.2
|
|
|
|
90.3
|
|
|
Dilutive impact of nonvested stock unit awards
|
|
1.9
|
|
|
|
—
|
|
|
|
|
1.9
|
|
|
|
—
|
|
|
Diluted weighted-average number of Resolute Forest Products Inc. common shares outstanding
|
|
93.2
|
|
|
|
90.3
|
|
|
|
|
93.1
|
|
|
|
90.3
|
|
|
Net income (loss) per share attributable to Resolute Forest Products Inc. common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic
|
$
|
0.79
|
|
|
$
|
(0.82
|
)
|
|
|
$
|
0.90
|
|
|
$
|
(1.34
|
)
|
|
Diluted
|
|
0.77
|
|
|
|
(0.82
|
)
|
|
|
|
0.88
|
|
|
|
(1.34
|
)
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||
(Unaudited, in millions)
|
2018
|
|
|
2017
|
|
|
|
2018
|
|
|
2017
|
|
|
Stock options
|
1.3
|
|
|
1.4
|
|
|
|
1.3
|
|
|
1.4
|
|
|
Stock unit awards
|
—
|
|
|
4.7
|
|
|
|
—
|
|
|
4.6
|
|
|
(Unaudited, in millions)
|
June 30,
2018 |
December 31,
2017 |
||||||
Raw materials
|
$
|
100
|
|
|
$
|
108
|
|
|
Work in process
|
|
44
|
|
|
|
38
|
|
|
Finished goods
|
|
188
|
|
|
|
175
|
|
|
Mill stores and other supplies
|
|
215
|
|
|
|
205
|
|
|
|
$
|
547
|
|
|
$
|
526
|
|
|
(Unaudited, in millions)
|
June 30,
2018 |
December 31,
2017 |
||||||
Trade accounts payable
|
$
|
330
|
|
|
$
|
306
|
|
|
Payroll, bonuses and severance payable
|
|
50
|
|
|
|
55
|
|
|
Accrued interest
|
|
5
|
|
|
|
5
|
|
|
Pension and other postretirement benefit obligations
|
|
18
|
|
|
|
18
|
|
|
Income and other taxes payable
|
|
8
|
|
|
|
10
|
|
|
Environmental liabilities
|
|
2
|
|
|
|
2
|
|
|
Other
|
|
25
|
|
|
|
24
|
|
|
|
$
|
438
|
|
|
$
|
420
|
|
|
(Unaudited, in millions)
|
June 30,
2018 |
December 31,
2017 |
||||||
5.875% senior unsecured notes due 2023:
|
|
|
|
|
|
|
||
Principal amount
|
$
|
600
|
|
|
$
|
600
|
|
|
Deferred financing costs
|
|
(5
|
)
|
|
|
(5
|
)
|
|
Unamortized discount
|
|
(3
|
)
|
|
|
(3
|
)
|
|
Total senior notes due 2023
|
|
592
|
|
|
|
592
|
|
|
Term loan due 2025
|
|
46
|
|
|
|
46
|
|
|
Borrowings under revolving credit facilities
|
|
30
|
|
|
|
144
|
|
|
Capital lease obligation
|
|
7
|
|
|
|
7
|
|
|
Total debt
|
|
675
|
|
|
|
789
|
|
|
Less: Current portion of long-term debt
|
|
(1
|
)
|
|
|
(1
|
)
|
|
Long-term debt, net of current portion
|
$
|
674
|
|
|
$
|
788
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||
(Unaudited, in millions)
|
2018
|
|
|
2017
|
|
|
|
2018
|
|
|
2017
|
|
|
||||
Interest cost
|
$
|
48
|
|
|
$
|
49
|
|
|
|
$
|
96
|
|
|
$
|
98
|
|
|
Expected return on plan assets
|
|
(67
|
)
|
|
|
(61
|
)
|
|
|
|
(134
|
)
|
|
|
(124
|
)
|
|
Amortization of actuarial losses
|
|
10
|
|
|
|
14
|
|
|
|
|
20
|
|
|
|
28
|
|
|
Amortization of prior service credits
|
|
—
|
|
|
|
—
|
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
Non-operating pension (credits) costs
|
|
(9
|
)
|
|
|
2
|
|
|
|
|
(19
|
)
|
|
|
2
|
|
|
Service cost
|
|
4
|
|
|
|
4
|
|
|
|
|
9
|
|
|
|
9
|
|
|
Net periodic benefit (credits) costs before special events
|
|
(5
|
)
|
|
|
6
|
|
|
|
|
(10
|
)
|
|
|
11
|
|
|
Settlement loss
|
|
1
|
|
|
|
1
|
|
|
|
|
1
|
|
|
|
1
|
|
|
|
$
|
(4
|
)
|
|
$
|
7
|
|
|
|
$
|
(9
|
)
|
|
$
|
12
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||
(Unaudited, in millions)
|
2018
|
|
|
2017
|
|
|
|
2018
|
|
|
2017
|
|
|
||||
Interest cost
|
$
|
2
|
|
|
$
|
1
|
|
|
|
$
|
3
|
|
|
$
|
3
|
|
|
Amortization of actuarial gains
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
|
(3
|
)
|
|
|
(3
|
)
|
|
Amortization of prior service credits
|
|
(4
|
)
|
|
|
(3
|
)
|
|
|
|
(7
|
)
|
|
|
(7
|
)
|
|
Non-operating other postretirement benefit credits
|
|
(4
|
)
|
|
|
(4
|
)
|
|
|
|
(7
|
)
|
|
|
(7
|
)
|
|
Service cost
|
|
1
|
|
|
|
1
|
|
|
|
|
1
|
|
|
|
1
|
|
|
|
$
|
(3
|
)
|
|
$
|
(3
|
)
|
|
|
$
|
(6
|
)
|
|
$
|
(6
|
)
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||
(Unaudited, in millions)
|
2018
|
|
|
2017
|
|
|
|
2018
|
|
|
2017
|
|
|
||||
Income (loss) before income taxes
|
$
|
119
|
|
|
$
|
(54
|
)
|
|
|
$
|
160
|
|
|
$
|
(71
|
)
|
|
Income tax provision:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Expected income tax (provision) benefit
|
|
(25
|
)
|
|
|
11
|
|
|
|
|
(34
|
)
|
|
|
15
|
|
|
Changes resulting from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. federal tax rate change reconciliation
|
|
—
|
|
|
|
8
|
|
|
|
|
—
|
|
|
|
10
|
|
|
Valuation allowance
(1)
|
|
13
|
|
|
|
(49
|
)
|
|
|
|
8
|
|
|
|
(75
|
)
|
|
Enactment of change in foreign tax rate
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
(12
|
)
|
|
Foreign exchange
|
|
(7
|
)
|
|
|
2
|
|
|
|
|
(14
|
)
|
|
|
1
|
|
|
State income taxes, net of federal income tax benefit
|
|
—
|
|
|
|
4
|
|
|
|
|
2
|
|
|
|
6
|
|
|
Foreign tax rate differences
(2)
|
|
(25
|
)
|
|
|
5
|
|
|
|
|
(37
|
)
|
|
|
8
|
|
|
Other, net
|
|
(3
|
)
|
|
|
—
|
|
|
|
|
(3
|
)
|
|
|
(1
|
)
|
|
|
$
|
(47
|
)
|
|
$
|
(19
|
)
|
|
|
$
|
(78
|
)
|
|
$
|
(48
|
)
|
|
(1)
|
Relates to our U.S. operations for the three and six months ended June 30, 2018, and primarily to our U.S. operations for the three and six months ended June 30, 2017.
|
(2)
|
Includes an income tax provision attributable to the GILTI inclusion of
$18 million
and
$25 million
, before valuation allowance, for the three months and six months ended June 30, 2018, respectively.
|
(Unaudited,
in millions)
|
Market Pulp
(1)
|
Tissue
(2)
|
Wood Products
(3)
|
Newsprint
|
Specialty
Papers
|
Segment
Total
|
Corporate
and Other
|
Total
|
||||||||||||||||||||||||
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Second quarter
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
2018
|
$
|
264
|
|
|
$
|
35
|
|
|
$
|
254
|
|
|
$
|
230
|
|
|
$
|
193
|
|
|
$
|
976
|
|
|
$
|
—
|
|
|
$
|
976
|
|
|
2017
|
|
213
|
|
|
|
20
|
|
|
|
197
|
|
|
|
201
|
|
|
|
227
|
|
|
|
858
|
|
|
|
—
|
|
|
|
858
|
|
|
First six months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
2018
|
|
521
|
|
|
|
57
|
|
|
|
463
|
|
|
|
428
|
|
|
|
381
|
|
|
|
1,850
|
|
|
|
—
|
|
|
|
1,850
|
|
|
2017
|
|
422
|
|
|
|
40
|
|
|
|
374
|
|
|
|
427
|
|
|
|
467
|
|
|
|
1,730
|
|
|
|
—
|
|
|
|
1,730
|
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Second quarter
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
2018
|
$
|
8
|
|
|
$
|
5
|
|
|
$
|
7
|
|
|
$
|
17
|
|
|
$
|
12
|
|
|
$
|
49
|
|
|
$
|
5
|
|
|
$
|
54
|
|
|
2017
|
|
8
|
|
|
|
1
|
|
|
|
7
|
|
|
|
17
|
|
|
|
11
|
|
|
|
44
|
|
|
|
6
|
|
|
|
50
|
|
|
First six months
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
2018
|
|
15
|
|
|
|
6
|
|
|
|
15
|
|
|
|
33
|
|
|
|
24
|
|
|
|
93
|
|
|
|
14
|
|
|
|
107
|
|
|
2017
|
|
16
|
|
|
|
2
|
|
|
|
16
|
|
|
|
33
|
|
|
|
23
|
|
|
|
90
|
|
|
|
11
|
|
|
|
101
|
|
|
Operating income (loss)
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Second quarter
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
2018
|
$
|
41
|
|
|
$
|
(10
|
)
|
|
$
|
79
|
|
|
$
|
18
|
|
|
$
|
4
|
|
|
$
|
132
|
|
|
$
|
(11
|
)
|
|
$
|
121
|
|
|
2017
|
|
16
|
|
|
|
(1
|
)
|
|
|
45
|
|
|
|
(7
|
)
|
|
|
(7
|
)
|
|
|
46
|
|
|
|
(94
|
)
|
|
|
(48
|
)
|
|
First six months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
2018
|
|
74
|
|
|
|
(11
|
)
|
|
|
132
|
|
|
|
14
|
|
|
|
(3
|
)
|
|
|
206
|
|
|
|
(37
|
)
|
|
|
169
|
|
|
2017
|
|
23
|
|
|
|
(1
|
)
|
|
|
65
|
|
|
|
(11
|
)
|
|
|
(3
|
)
|
|
|
73
|
|
|
|
(130
|
)
|
|
|
(57
|
)
|
|
(1)
|
Inter-segment sales of $9 million and $10 million for the three months ended June 30, 2018 and 2017, respectively, and $19 million for both the six months ended June 30, 2018 and 2017, which are transacted at cost, were excluded from market pulp sales.
|
(2)
|
The operating results of our Calhoun tissue operations, previously recorded under “corporate and other,” have been recorded in our tissue segment since April 1, 2018.
|
(3)
|
Wood products sales to our joint ventures, which are transacted at arm’s length negotiated prices, were $8 million and $6 million for the three months ended June 30, 2018 and 2017, respectively, and $16 million and $10 million for the six months ended June 30, 2018 and 2017, respectively.
|
(4)
|
In the first quarter of 2018, we changed our presentation of operating income in accordance with FASB ASU 2017-07, to present only the service cost component of net periodic pension cost and OPEB cost in operating expenses (together with other employee compensation costs arising during the period). The non-operating pension and OPEB costs,
|
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
|
||||||||||||||||||||
For the Three Months Ended June 30, 2018
|
||||||||||||||||||||
(Unaudited, in millions)
|
Parent
|
Guarantor
Subsidiaries
|
Non-guarantor
Subsidiaries
|
Consolidating
Adjustments
|
Consolidated
|
|||||||||||||||
Sales
|
$
|
—
|
|
|
$
|
731
|
|
|
$
|
674
|
|
|
$
|
(429
|
)
|
|
$
|
976
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cost of sales, excluding depreciation, amortization and distribution costs
|
|
—
|
|
|
|
666
|
|
|
|
396
|
|
|
|
(423
|
)
|
|
|
639
|
|
|
Depreciation and amortization
|
|
—
|
|
|
|
21
|
|
|
|
33
|
|
|
|
—
|
|
|
|
54
|
|
|
Distribution costs
|
|
—
|
|
|
|
38
|
|
|
|
85
|
|
|
|
—
|
|
|
|
123
|
|
|
Selling, general and administrative expenses
|
|
7
|
|
|
|
14
|
|
|
|
21
|
|
|
|
—
|
|
|
|
42
|
|
|
Closure costs, impairment and other related charges
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
1
|
|
|
Net gain on disposition of assets
|
|
—
|
|
|
|
—
|
|
|
|
(4
|
)
|
|
|
—
|
|
|
|
(4
|
)
|
|
Operating (loss) income
|
|
(7
|
)
|
|
|
(8
|
)
|
|
|
142
|
|
|
|
(6
|
)
|
|
|
121
|
|
|
Interest expense
|
|
(24
|
)
|
|
|
(1
|
)
|
|
|
(3
|
)
|
|
|
17
|
|
|
|
(11
|
)
|
|
Non-operating pension and other postretirement benefit credits
|
|
—
|
|
|
|
3
|
|
|
|
9
|
|
|
|
—
|
|
|
|
12
|
|
|
Other income (expense), net
|
|
—
|
|
|
|
19
|
|
|
|
(5
|
)
|
|
|
(17
|
)
|
|
|
(3
|
)
|
|
Equity in income of subsidiaries
|
|
103
|
|
|
|
28
|
|
|
|
—
|
|
|
|
(131
|
)
|
|
|
—
|
|
|
Income before income taxes
|
|
72
|
|
|
|
41
|
|
|
|
143
|
|
|
|
(137
|
)
|
|
|
119
|
|
|
Income tax provision
|
|
—
|
|
|
|
—
|
|
|
|
(48
|
)
|
|
|
1
|
|
|
|
(47
|
)
|
|
Net income including noncontrolling interests
|
|
72
|
|
|
|
41
|
|
|
|
95
|
|
|
|
(136
|
)
|
|
|
72
|
|
|
Net income attributable to noncontrolling interests
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Net income attributable to Resolute Forest Products Inc.
|
$
|
72
|
|
|
$
|
41
|
|
|
$
|
95
|
|
|
$
|
(136
|
)
|
|
$
|
72
|
|
|
Comprehensive income attributable to Resolute Forest Products Inc.
|
$
|
75
|
|
|
$
|
39
|
|
|
$
|
100
|
|
|
$
|
(139
|
)
|
|
$
|
75
|
|
|
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
|
||||||||||||||||||||
For the Six Months Ended June 30, 2018
|
||||||||||||||||||||
(Unaudited, in millions)
|
Parent
|
Guarantor
Subsidiaries
|
Non-guarantor
Subsidiaries
|
Consolidating
Adjustments
|
Consolidated
|
|||||||||||||||
Sales
|
$
|
—
|
|
|
$
|
1,540
|
|
|
$
|
1,266
|
|
|
$
|
(956
|
)
|
|
$
|
1,850
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cost of sales, excluding depreciation, amortization and distribution costs
|
|
—
|
|
|
|
1,437
|
|
|
|
762
|
|
|
|
(946
|
)
|
|
|
1,253
|
|
|
Depreciation and amortization
|
|
—
|
|
|
|
41
|
|
|
|
66
|
|
|
|
—
|
|
|
|
107
|
|
|
Distribution costs
|
|
—
|
|
|
|
77
|
|
|
|
164
|
|
|
|
(2
|
)
|
|
|
239
|
|
|
Selling, general and administrative expenses
|
|
12
|
|
|
|
31
|
|
|
|
42
|
|
|
|
—
|
|
|
|
85
|
|
|
Closure costs, impairment and other related charges
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
1
|
|
|
Net gain on disposition of assets
|
|
—
|
|
|
|
—
|
|
|
|
(4
|
)
|
|
|
—
|
|
|
|
(4
|
)
|
|
Operating (loss) income
|
|
(12
|
)
|
|
|
(46
|
)
|
|
|
235
|
|
|
|
(8
|
)
|
|
|
169
|
|
|
Interest expense
|
|
(47
|
)
|
|
|
(4
|
)
|
|
|
(6
|
)
|
|
|
33
|
|
|
|
(24
|
)
|
|
Non-operating pension and other postretirement benefit credits
|
|
—
|
|
|
|
7
|
|
|
|
18
|
|
|
|
—
|
|
|
|
25
|
|
|
Other income (expense), net
|
|
—
|
|
|
|
33
|
|
|
|
(10
|
)
|
|
|
(33
|
)
|
|
|
(10
|
)
|
|
Equity in income of subsidiaries
|
|
141
|
|
|
|
49
|
|
|
|
—
|
|
|
|
(190
|
)
|
|
|
—
|
|
|
Income before income taxes
|
|
82
|
|
|
|
39
|
|
|
|
237
|
|
|
|
(198
|
)
|
|
|
160
|
|
|
Income tax provision
|
|
—
|
|
|
|
—
|
|
|
|
(80
|
)
|
|
|
2
|
|
|
|
(78
|
)
|
|
Net income including noncontrolling interests
|
|
82
|
|
|
|
39
|
|
|
|
157
|
|
|
|
(196
|
)
|
|
|
82
|
|
|
Net income attributable to noncontrolling interests
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Net income attributable to Resolute Forest Products Inc.
|
$
|
82
|
|
|
$
|
39
|
|
|
$
|
157
|
|
|
$
|
(196
|
)
|
|
$
|
82
|
|
|
Comprehensive income attributable to Resolute Forest Products Inc.
|
$
|
88
|
|
|
$
|
34
|
|
|
$
|
168
|
|
|
$
|
(202
|
)
|
|
$
|
88
|
|
|
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
|
||||||||||||||||||||
For the Three Months Ended June 30, 2017
|
||||||||||||||||||||
(Unaudited, in millions)
|
Parent
|
Guarantor
Subsidiaries
|
Non-guarantor
Subsidiaries
|
Consolidating
Adjustments
|
Consolidated
|
|||||||||||||||
Sales
|
$
|
—
|
|
|
$
|
706
|
|
|
$
|
540
|
|
|
$
|
(388
|
)
|
|
$
|
858
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cost of sales, excluding depreciation, amortization and distribution costs
|
|
—
|
|
|
|
682
|
|
|
|
350
|
|
|
|
(386
|
)
|
|
|
646
|
|
|
Depreciation and amortization
|
|
—
|
|
|
|
18
|
|
|
|
32
|
|
|
|
—
|
|
|
|
50
|
|
|
Distribution costs
|
|
—
|
|
|
|
39
|
|
|
|
70
|
|
|
|
(1
|
)
|
|
|
108
|
|
|
Selling, general and administrative expenses
|
|
5
|
|
|
|
17
|
|
|
|
15
|
|
|
|
—
|
|
|
|
37
|
|
|
Closure costs, impairment and other related charges
|
|
—
|
|
|
|
64
|
|
|
|
1
|
|
|
|
—
|
|
|
|
65
|
|
|
Operating (loss) income
|
|
(5
|
)
|
|
|
(114
|
)
|
|
|
72
|
|
|
|
(1
|
)
|
|
|
(48
|
)
|
|
Interest expense
|
|
(22
|
)
|
|
|
(3
|
)
|
|
|
(3
|
)
|
|
|
16
|
|
|
|
(12
|
)
|
|
Non-operating pension and other postretirement benefit credits
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
1
|
|
|
Other income, net
|
|
—
|
|
|
|
20
|
|
|
|
1
|
|
|
|
(16
|
)
|
|
|
5
|
|
|
Equity in loss of subsidiaries
|
|
(47
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
47
|
|
|
|
—
|
|
|
(Loss) income before income taxes
|
|
(74
|
)
|
|
|
(97
|
)
|
|
|
71
|
|
|
|
46
|
|
|
|
(54
|
)
|
|
Income tax provision
|
|
—
|
|
|
|
(1
|
)
|
|
|
(18
|
)
|
|
|
—
|
|
|
|
(19
|
)
|
|
Net (loss) income including noncontrolling interests
|
|
(74
|
)
|
|
|
(98
|
)
|
|
|
53
|
|
|
|
46
|
|
|
|
(73
|
)
|
|
Net income attributable to noncontrolling interests
|
|
—
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
(1
|
)
|
|
Net (loss) income attributable to Resolute Forest Products Inc.
|
$
|
(74
|
)
|
|
$
|
(98
|
)
|
|
$
|
52
|
|
|
$
|
46
|
|
|
$
|
(74
|
)
|
|
Comprehensive (loss) income attributable to Resolute Forest Products Inc.
|
$
|
(68
|
)
|
|
$
|
(99
|
)
|
|
$
|
59
|
|
|
$
|
40
|
|
|
$
|
(68
|
)
|
|
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
|
||||||||||||||||||||
For the Six Months Ended June 30, 2017
|
||||||||||||||||||||
(Unaudited, in millions)
|
Parent
|
Guarantor
Subsidiaries
|
Non-guarantor
Subsidiaries
|
Consolidating
Adjustments
|
Consolidated
|
|||||||||||||||
Sales
|
$
|
—
|
|
|
$
|
1,415
|
|
|
$
|
1,090
|
|
|
$
|
(775
|
)
|
|
$
|
1,730
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cost of sales, excluding depreciation, amortization and distribution costs
|
|
—
|
|
|
|
1,360
|
|
|
|
731
|
|
|
|
(774
|
)
|
|
|
1,317
|
|
|
Depreciation and amortization
|
|
—
|
|
|
|
37
|
|
|
|
64
|
|
|
|
—
|
|
|
|
101
|
|
|
Distribution costs
|
|
—
|
|
|
|
80
|
|
|
|
139
|
|
|
|
(1
|
)
|
|
|
218
|
|
|
Selling, general and administrative expenses
|
|
14
|
|
|
|
34
|
|
|
|
31
|
|
|
|
—
|
|
|
|
79
|
|
|
Closure costs, impairment and other related charges
|
|
—
|
|
|
|
64
|
|
|
|
8
|
|
|
|
—
|
|
|
|
72
|
|
|
Operating (loss) income
|
|
(14
|
)
|
|
|
(160
|
)
|
|
|
117
|
|
|
|
—
|
|
|
|
(57
|
)
|
|
Interest expense
|
|
(42
|
)
|
|
|
(4
|
)
|
|
|
(6
|
)
|
|
|
29
|
|
|
|
(23
|
)
|
|
Non-operating pension and other postretirement benefit credits
|
|
—
|
|
|
|
1
|
|
|
|
3
|
|
|
|
—
|
|
|
|
4
|
|
|
Other income, net
|
|
—
|
|
|
|
33
|
|
|
|
1
|
|
|
|
(29
|
)
|
|
|
5
|
|
|
Equity in (loss) income of subsidiaries
|
|
(65
|
)
|
|
|
1
|
|
|
|
—
|
|
|
|
64
|
|
|
|
—
|
|
|
(Loss) income before income taxes
|
|
(121
|
)
|
|
|
(129
|
)
|
|
|
115
|
|
|
|
64
|
|
|
|
(71
|
)
|
|
Income tax provision
|
|
—
|
|
|
|
(1
|
)
|
|
|
(47
|
)
|
|
|
—
|
|
|
|
(48
|
)
|
|
Net (loss) income including noncontrolling interests
|
|
(121
|
)
|
|
|
(130
|
)
|
|
|
68
|
|
|
|
64
|
|
|
|
(119
|
)
|
|
Net income attributable to noncontrolling interests
|
|
—
|
|
|
|
—
|
|
|
|
(2
|
)
|
|
|
—
|
|
|
|
(2
|
)
|
|
Net (loss) income attributable to Resolute Forest Products Inc.
|
$
|
(121
|
)
|
|
$
|
(130
|
)
|
|
$
|
66
|
|
|
$
|
64
|
|
|
$
|
(121
|
)
|
|
Comprehensive (loss) income attributable to Resolute Forest Products Inc.
|
$
|
(106
|
)
|
|
$
|
(132
|
)
|
|
$
|
83
|
|
|
$
|
49
|
|
|
$
|
(106
|
)
|
|
CONDENSED CONSOLIDATING BALANCE SHEET
|
||||||||||||||||||||
As of June 30, 2018
|
||||||||||||||||||||
(Unaudited, in millions)
|
Parent
|
Guarantor
Subsidiaries
|
Non-guarantor
Subsidiaries
|
Consolidating
Adjustments
|
Consolidated
|
|||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
5
|
|
|
$
|
—
|
|
|
$
|
6
|
|
|
Accounts receivable, net
|
|
—
|
|
|
|
376
|
|
|
|
140
|
|
|
|
—
|
|
|
|
516
|
|
|
Accounts receivable from affiliates
|
|
—
|
|
|
|
562
|
|
|
|
919
|
|
|
|
(1,481
|
)
|
|
|
—
|
|
|
Inventories, net
|
|
—
|
|
|
|
259
|
|
|
|
305
|
|
|
|
(17
|
)
|
|
|
547
|
|
|
Note, advance and interest receivable from parent
|
|
—
|
|
|
|
409
|
|
|
|
—
|
|
|
|
(409
|
)
|
|
|
—
|
|
|
Notes and interest receivable from affiliates
|
|
—
|
|
|
|
33
|
|
|
|
—
|
|
|
|
(33
|
)
|
|
|
—
|
|
|
Other current assets
|
|
—
|
|
|
|
18
|
|
|
|
21
|
|
|
|
—
|
|
|
|
39
|
|
|
Total current assets
|
|
—
|
|
|
|
1,658
|
|
|
|
1,390
|
|
|
|
(1,940
|
)
|
|
|
1,108
|
|
|
Fixed assets, net
|
|
—
|
|
|
|
679
|
|
|
|
990
|
|
|
|
—
|
|
|
|
1,669
|
|
|
Amortizable intangible assets, net
|
|
—
|
|
|
|
12
|
|
|
|
51
|
|
|
|
—
|
|
|
|
63
|
|
|
Goodwill
|
|
—
|
|
|
|
81
|
|
|
|
—
|
|
|
|
—
|
|
|
|
81
|
|
|
Deferred income tax assets
|
|
—
|
|
|
|
1
|
|
|
|
936
|
|
|
|
4
|
|
|
|
941
|
|
|
Note receivable from parent
|
|
—
|
|
|
|
488
|
|
|
|
—
|
|
|
|
(488
|
)
|
|
|
—
|
|
|
Note receivable from affiliate
|
|
—
|
|
|
|
111
|
|
|
|
—
|
|
|
|
(111
|
)
|
|
|
—
|
|
|
Investments in consolidated subsidiaries and affiliates
|
|
4,086
|
|
|
|
2,160
|
|
|
|
—
|
|
|
|
(6,246
|
)
|
|
|
—
|
|
|
Other assets
|
|
—
|
|
|
|
93
|
|
|
|
70
|
|
|
|
—
|
|
|
|
163
|
|
|
Total assets
|
$
|
4,086
|
|
|
$
|
5,283
|
|
|
$
|
3,437
|
|
|
$
|
(8,781
|
)
|
|
$
|
4,025
|
|
|
Liabilities and equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Accounts payable and accrued liabilities
|
$
|
5
|
|
|
$
|
186
|
|
|
$
|
247
|
|
|
$
|
—
|
|
|
$
|
438
|
|
|
Current portion of long-term debt
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
Accounts payable to affiliates
|
|
562
|
|
|
|
964
|
|
|
|
—
|
|
|
|
(1,526
|
)
|
|
|
—
|
|
|
Note, advance and interest payable to subsidiaries
|
|
409
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(409
|
)
|
|
|
—
|
|
|
Notes and interest payable to affiliate
|
|
—
|
|
|
|
—
|
|
|
|
33
|
|
|
|
(33
|
)
|
|
|
—
|
|
|
Total current liabilities
|
|
976
|
|
|
|
1,151
|
|
|
|
280
|
|
|
|
(1,968
|
)
|
|
|
439
|
|
|
Long-term debt, net of current portion
|
|
592
|
|
|
|
82
|
|
|
|
—
|
|
|
|
—
|
|
|
|
674
|
|
|
Note payable to subsidiary
|
|
488
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(488
|
)
|
|
|
—
|
|
|
Note payable to affiliate
|
|
—
|
|
|
|
—
|
|
|
|
111
|
|
|
|
(111
|
)
|
|
|
—
|
|
|
Pension and other postretirement benefit obligations
|
|
—
|
|
|
|
361
|
|
|
|
787
|
|
|
|
—
|
|
|
|
1,148
|
|
|
Deferred income tax liabilities
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
1
|
|
|
Other liabilities
|
|
4
|
|
|
|
25
|
|
|
|
42
|
|
|
|
—
|
|
|
|
71
|
|
|
Total liabilities
|
|
2,060
|
|
|
|
1,619
|
|
|
|
1,221
|
|
|
|
(2,567
|
)
|
|
|
2,333
|
|
|
Total equity
|
|
2,026
|
|
|
|
3,664
|
|
|
|
2,216
|
|
|
|
(6,214
|
)
|
|
|
1,692
|
|
|
Total liabilities and equity
|
$
|
4,086
|
|
|
$
|
5,283
|
|
|
$
|
3,437
|
|
|
$
|
(8,781
|
)
|
|
$
|
4,025
|
|
|
CONDENSED CONSOLIDATING BALANCE SHEET
|
||||||||||||||||||||
As of December 31, 2017
|
||||||||||||||||||||
(Unaudited, in millions)
|
Parent
|
Guarantor
Subsidiaries
|
Non-guarantor
Subsidiaries
|
Consolidating
Adjustments
|
Consolidated
|
|||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
6
|
|
|
Accounts receivable, net
|
|
—
|
|
|
|
319
|
|
|
|
160
|
|
|
|
—
|
|
|
|
479
|
|
|
Accounts receivable from affiliates
|
|
—
|
|
|
|
535
|
|
|
|
729
|
|
|
|
(1,264
|
)
|
|
|
—
|
|
|
Inventories, net
|
|
—
|
|
|
|
243
|
|
|
|
292
|
|
|
|
(9
|
)
|
|
|
526
|
|
|
Note, advance and interest receivable from parent
|
|
—
|
|
|
|
538
|
|
|
|
—
|
|
|
|
(538
|
)
|
|
|
—
|
|
|
Notes and interest receivable from affiliates
|
|
—
|
|
|
|
32
|
|
|
|
—
|
|
|
|
(32
|
)
|
|
|
—
|
|
|
Other current assets
|
|
—
|
|
|
|
16
|
|
|
|
17
|
|
|
|
—
|
|
|
|
33
|
|
|
Total current assets
|
|
—
|
|
|
|
1,686
|
|
|
|
1,201
|
|
|
|
(1,843
|
)
|
|
|
1,044
|
|
|
Fixed assets, net
|
|
—
|
|
|
|
692
|
|
|
|
1,024
|
|
|
|
—
|
|
|
|
1,716
|
|
|
Amortizable intangible assets, net
|
|
—
|
|
|
|
13
|
|
|
|
52
|
|
|
|
—
|
|
|
|
65
|
|
|
Goodwill
|
|
—
|
|
|
|
81
|
|
|
|
—
|
|
|
|
—
|
|
|
|
81
|
|
|
Deferred income tax assets
|
|
—
|
|
|
|
1
|
|
|
|
1,073
|
|
|
|
2
|
|
|
|
1,076
|
|
|
Notes receivable from parent
|
|
—
|
|
|
|
330
|
|
|
|
—
|
|
|
|
(330
|
)
|
|
|
—
|
|
|
Note receivable from affiliate
|
|
—
|
|
|
|
116
|
|
|
|
—
|
|
|
|
(116
|
)
|
|
|
—
|
|
|
Investments in consolidated subsidiaries and affiliates
|
|
3,939
|
|
|
|
2,111
|
|
|
|
—
|
|
|
|
(6,050
|
)
|
|
|
—
|
|
|
Other assets
|
|
—
|
|
|
|
98
|
|
|
|
67
|
|
|
|
—
|
|
|
|
165
|
|
|
Total assets
|
$
|
3,939
|
|
|
$
|
5,128
|
|
|
$
|
3,417
|
|
|
$
|
(8,337
|
)
|
|
$
|
4,147
|
|
|
Liabilities and equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Accounts payable and accrued liabilities
|
$
|
4
|
|
|
$
|
171
|
|
|
$
|
245
|
|
|
$
|
—
|
|
|
$
|
420
|
|
|
Current portion of long-term debt
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
Accounts payable to affiliates
|
|
536
|
|
|
|
728
|
|
|
|
—
|
|
|
|
(1,264
|
)
|
|
|
—
|
|
|
Note, advance and interest payable to subsidiaries
|
|
538
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(538
|
)
|
|
|
—
|
|
|
Notes and interest payable to affiliate
|
|
—
|
|
|
|
—
|
|
|
|
32
|
|
|
|
(32
|
)
|
|
|
—
|
|
|
Total current liabilities
|
|
1,078
|
|
|
|
900
|
|
|
|
277
|
|
|
|
(1,834
|
)
|
|
|
421
|
|
|
Long-term debt, net of current portion
|
|
592
|
|
|
|
196
|
|
|
|
—
|
|
|
|
—
|
|
|
|
788
|
|
|
Note payable to subsidiary
|
|
330
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(330
|
)
|
|
|
—
|
|
|
Note payable to affiliate
|
|
—
|
|
|
|
—
|
|
|
|
116
|
|
|
|
(116
|
)
|
|
|
—
|
|
|
Pension and other postretirement benefit obligations
|
|
—
|
|
|
|
378
|
|
|
|
879
|
|
|
|
—
|
|
|
|
1,257
|
|
|
Deferred income tax liabilities
|
|
—
|
|
|
|
—
|
|
|
|
13
|
|
|
|
—
|
|
|
|
13
|
|
|
Other liabilities
|
|
5
|
|
|
|
24
|
|
|
|
39
|
|
|
|
—
|
|
|
|
68
|
|
|
Total liabilities
|
|
2,005
|
|
|
|
1,498
|
|
|
|
1,324
|
|
|
|
(2,280
|
)
|
|
|
2,547
|
|
|
Total equity
|
|
1,934
|
|
|
|
3,630
|
|
|
|
2,093
|
|
|
|
(6,057
|
)
|
|
|
1,600
|
|
|
Total liabilities and equity
|
$
|
3,939
|
|
|
$
|
5,128
|
|
|
$
|
3,417
|
|
|
$
|
(8,337
|
)
|
|
$
|
4,147
|
|
|
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
|
||||||||||||||||||||
For the Six Months Ended June 30, 2018
|
||||||||||||||||||||
(Unaudited, in millions)
|
Parent
|
Guarantor
Subsidiaries
|
Non-guarantor
Subsidiaries
|
Consolidating
Adjustments
|
Consolidated
|
|||||||||||||||
Net cash provided by operating activities
|
$
|
—
|
|
|
$
|
187
|
|
|
$
|
33
|
|
|
$
|
—
|
|
|
$
|
220
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash invested in fixed assets
|
|
—
|
|
|
|
(16
|
)
|
|
|
(37
|
)
|
|
|
—
|
|
|
|
(53
|
)
|
|
Disposition of assets
|
|
—
|
|
|
|
—
|
|
|
|
2
|
|
|
|
—
|
|
|
|
2
|
|
|
Increase in countervailing duty cash deposits on supercalendered paper
|
|
—
|
|
|
|
(11
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(11
|
)
|
|
Increase in countervailing and anti-dumping duty cash deposits on softwood lumber
|
|
—
|
|
|
|
(41
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(41
|
)
|
|
Increase in countervailing duty cash deposits on uncoated groundwood paper
|
|
—
|
|
|
|
(6
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(6
|
)
|
|
Advance to parent
|
|
—
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
Net cash used in investing activities
|
|
—
|
|
|
|
(75
|
)
|
|
|
(35
|
)
|
|
|
1
|
|
|
|
(109
|
)
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net repayments under revolving credit facilities
|
|
—
|
|
|
|
(114
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(114
|
)
|
|
Payments of financing and credit facility fees
|
|
(1
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
Advance from subsidiary
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
Net cash used in financing activities
|
|
—
|
|
|
|
(114
|
)
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
(115
|
)
|
|
Effect of exchange rate changes on cash and cash equivalents, and restricted cash
|
|
—
|
|
|
|
—
|
|
|
|
(2
|
)
|
|
|
—
|
|
|
|
(2
|
)
|
|
Net decrease in cash and cash equivalents, and restricted cash
|
|
—
|
|
|
|
(2
|
)
|
|
|
(4
|
)
|
|
|
—
|
|
|
|
(6
|
)
|
|
Cash and cash equivalents, and restricted cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Beginning of period
|
|
—
|
|
|
|
3
|
|
|
|
46
|
|
|
|
—
|
|
|
|
49
|
|
|
End of period
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
42
|
|
|
$
|
—
|
|
|
$
|
43
|
|
|
Cash and cash equivalents, and restricted cash at period end:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
5
|
|
|
$
|
—
|
|
|
$
|
6
|
|
|
Restricted cash
|
|
—
|
|
|
|
—
|
|
|
|
37
|
|
|
|
—
|
|
|
|
37
|
|
|
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
|
||||||||||||||||||||
For the Six Months Ended June 30, 2017
|
||||||||||||||||||||
(Unaudited, in millions)
|
Parent
|
Guarantor
Subsidiaries
|
Non-guarantor
Subsidiaries
|
Consolidating
Adjustments
|
Consolidated
|
|||||||||||||||
Net cash provided by operating activities
|
$
|
—
|
|
|
$
|
39
|
|
|
$
|
21
|
|
|
$
|
—
|
|
|
$
|
60
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash invested in fixed assets
|
|
—
|
|
|
|
(95
|
)
|
|
|
(21
|
)
|
|
|
—
|
|
|
|
(116
|
)
|
|
Increase in countervailing duty cash deposits on supercalendered paper
|
|
—
|
|
|
|
(12
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(12
|
)
|
|
Increase in countervailing and anti-dumping duty cash deposits on softwood lumber
|
|
—
|
|
|
|
(4
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(4
|
)
|
|
Increase in notes receivable from affiliate
|
|
—
|
|
|
|
(7
|
)
|
|
|
—
|
|
|
|
7
|
|
|
|
—
|
|
|
Cash used in investing activities
|
|
—
|
|
|
|
(118
|
)
|
|
|
(21
|
)
|
|
|
7
|
|
|
|
(132
|
)
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net borrowings under revolving credit facilities
|
|
—
|
|
|
|
77
|
|
|
|
—
|
|
|
|
—
|
|
|
|
77
|
|
|
Increase in notes payable to affiliate
|
|
—
|
|
|
|
—
|
|
|
|
7
|
|
|
|
(7
|
)
|
|
|
—
|
|
|
Net cash provided by financing activities
|
|
—
|
|
|
|
77
|
|
|
|
7
|
|
|
|
(7
|
)
|
|
|
77
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
—
|
|
|
|
—
|
|
|
|
3
|
|
|
|
—
|
|
|
|
3
|
|
|
Net (decrease) increase in cash and cash equivalents, and restricted cash
|
|
—
|
|
|
|
(2
|
)
|
|
|
10
|
|
|
|
—
|
|
|
|
8
|
|
|
Cash and cash equivalents, and restricted cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Beginning of period
|
|
—
|
|
|
|
2
|
|
|
|
71
|
|
|
|
—
|
|
|
|
73
|
|
|
End of period
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
81
|
|
|
$
|
—
|
|
|
$
|
81
|
|
|
Cash and cash equivalents, and restricted cash at period end:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
44
|
|
|
$
|
—
|
|
|
$
|
44
|
|
|
Restricted cash
|
|
—
|
|
|
|
—
|
|
|
|
37
|
|
|
|
—
|
|
|
|
37
|
|
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
Competitive cost structure and diversified asset base
- With 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, which has favorable pricing and flexibility, 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 competitive 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 continuing transformation: focus on pulp, tissue operations, and wood products, and keep pace with structurally-declining paper demand. 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, including bioproducts.
|
Three Months Ended June 30, 2018
|
Operating
Income
(Loss)
|
Net
Income
(Loss)
|
EPS
|
|
|
|||||||
(Unaudited, in millions, except per share amounts)
|
||||||||||||
GAAP, as reported
|
$
|
121
|
|
|
$
|
72
|
|
|
$
|
0.77
|
|
|
Adjustments for special items:
|
|
|
|
|
|
|
|
|
|
|||
Foreign exchange loss
|
|
—
|
|
|
|
1
|
|
|
|
0.01
|
|
|
Closure costs, impairment and other related charges
|
|
1
|
|
|
|
1
|
|
|
|
0.01
|
|
|
Net gain on disposition of assets
|
|
(4
|
)
|
|
|
(4
|
)
|
|
|
(0.04
|
)
|
|
Non-operating pension and other postretirement benefit credits
|
|
—
|
|
|
|
(12
|
)
|
|
|
(0.13
|
)
|
|
Other expense, net
|
|
—
|
|
|
|
2
|
|
|
|
0.02
|
|
|
Income tax effect of special items
|
|
—
|
|
|
|
6
|
|
|
|
0.07
|
|
|
Adjusted for special items
(1)
|
$
|
118
|
|
|
$
|
66
|
|
|
$
|
0.71
|
|
|
Three Months Ended June 30, 2017
|
Operating
Income
(Loss)
|
Net
Income
(Loss)
|
EPS
|
|
|
|||||||
(Unaudited, in millions, except per share amounts)
|
||||||||||||
GAAP, as reported
|
$
|
(48
|
)
|
|
$
|
(74
|
)
|
|
$
|
(0.82
|
)
|
|
Adjustments for special items:
|
|
|
|
|
|
|
|
|
|
|||
Foreign exchange gain
|
|
—
|
|
|
|
(3
|
)
|
|
|
(0.03
|
)
|
|
Closure costs, impairment and other related charges
|
|
65
|
|
|
|
65
|
|
|
|
0.72
|
|
|
Inventory write-downs related to closures
|
|
9
|
|
|
|
9
|
|
|
|
0.10
|
|
|
Start-up costs
|
|
7
|
|
|
|
7
|
|
|
|
0.08
|
|
|
Non-operating pension and other postretirement benefit credits
|
|
—
|
|
|
|
(1
|
)
|
|
|
(0.01
|
)
|
|
Other income, net
|
|
—
|
|
|
|
(2
|
)
|
|
|
(0.02
|
)
|
|
Income tax effect of special items
|
|
—
|
|
|
|
(4
|
)
|
|
|
(0.05
|
)
|
|
Adjusted for special items
(1)
|
$
|
33
|
|
|
$
|
(3
|
)
|
|
$
|
(0.03
|
)
|
|
(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 U.S. 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, 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 gains and losses, non-operating pension and OPEB costs and credits, 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.
|
Six Months Ended June 30, 2018
|
Operating
Income
(Loss)
|
Net
Income
(Loss)
|
EPS
|
|
|
|||||||
(Unaudited, in millions, except per share amounts)
|
||||||||||||
GAAP, as reported
|
$
|
169
|
|
|
$
|
82
|
|
|
$
|
0.88
|
|
|
Adjustments for special items:
|
|
|
|
|
|
|
|
|
|
|||
Foreign exchange loss
|
|
—
|
|
|
|
2
|
|
|
|
0.02
|
|
|
Closure costs, impairment and other related charges
|
|
1
|
|
|
|
1
|
|
|
|
0.01
|
|
|
Reversal of inventory write-downs related to closures
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
(0.01
|
)
|
|
Start-up costs
|
|
8
|
|
|
|
8
|
|
|
|
0.09
|
|
|
Net gain on disposition of assets
|
|
(4
|
)
|
|
|
(4
|
)
|
|
|
(0.05
|
)
|
|
Non-operating pension and other postretirement benefit credits
|
|
—
|
|
|
|
(25
|
)
|
|
|
(0.27
|
)
|
|
Other expense, net
|
|
—
|
|
|
|
8
|
|
|
|
0.09
|
|
|
Income tax effect of special items
|
|
—
|
|
|
|
12
|
|
|
|
0.13
|
|
|
Adjusted for special items
(1)
|
$
|
173
|
|
|
$
|
83
|
|
|
$
|
0.89
|
|
|
Six Months Ended June 30, 2017
|
Operating
Income
(Loss)
|
Net
Income
(Loss)
|
EPS
|
|
|
|||||||
(Unaudited, in millions, except per share amounts)
|
||||||||||||
GAAP, as reported
|
$
|
(57
|
)
|
|
$
|
(121
|
)
|
|
$
|
(1.34
|
)
|
|
Adjustments for special items:
|
|
|
|
|
|
|
|
|
|
|||
Foreign exchange gain
|
|
—
|
|
|
|
(3
|
)
|
|
|
(0.03
|
)
|
|
Closure costs, impairment and other related charges
|
|
72
|
|
|
|
72
|
|
|
|
0.80
|
|
|
Inventory write-downs related to closures
|
|
13
|
|
|
|
13
|
|
|
|
0.14
|
|
|
Start-up costs
|
|
15
|
|
|
|
15
|
|
|
|
0.16
|
|
|
Non-operating pension and other postretirement benefit credits
|
|
—
|
|
|
|
(4
|
)
|
|
|
(0.05
|
)
|
|
Other income, net
|
|
—
|
|
|
|
(2
|
)
|
|
|
(0.02
|
)
|
|
Income tax effect of special items
|
|
—
|
|
|
|
(3
|
)
|
|
|
(0.03
|
)
|
|
Adjusted for special items
(1)
|
$
|
43
|
|
|
$
|
(33
|
)
|
|
$
|
(0.37
|
)
|
|
(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 reasons we include these measures, see note 1 under “
Overview –
Second Quarter
Overview
”
above.
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||
(Unaudited, in millions, except per share amounts)
|
2018
|
2017
|
|
2018
|
2017
|
||||||||||||
Sales
|
$
|
976
|
|
|
$
|
858
|
|
|
|
$
|
1,850
|
|
|
$
|
1,730
|
|
|
Operating income (loss) per segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Market pulp
|
|
41
|
|
|
|
16
|
|
|
|
|
74
|
|
|
|
23
|
|
|
Tissue
|
|
(10
|
)
|
|
|
(1
|
)
|
|
|
|
(11
|
)
|
|
|
(1
|
)
|
|
Wood products
|
|
79
|
|
|
|
45
|
|
|
|
|
132
|
|
|
|
65
|
|
|
Newsprint
|
|
18
|
|
|
|
(7
|
)
|
|
|
|
14
|
|
|
|
(11
|
)
|
|
Specialty papers
|
|
4
|
|
|
|
(7
|
)
|
|
|
|
(3
|
)
|
|
|
(3
|
)
|
|
Segment total
|
|
132
|
|
|
|
46
|
|
|
|
|
206
|
|
|
|
73
|
|
|
Corporate and other
|
|
(11
|
)
|
|
|
(94
|
)
|
|
|
|
(37
|
)
|
|
|
(130
|
)
|
|
Operating income (loss)
|
|
121
|
|
|
|
(48
|
)
|
|
|
|
169
|
|
|
|
(57
|
)
|
|
Net income (loss) attributable to Resolute Forest Products Inc.
|
|
72
|
|
|
|
(74
|
)
|
|
|
|
82
|
|
|
|
(121
|
)
|
|
Net income (loss) per common share attributable to Resolute Forest Products Inc. common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic
|
$
|
0.79
|
|
|
$
|
(0.82
|
)
|
|
|
$
|
0.90
|
|
|
$
|
(1.34
|
)
|
|
Diluted
|
|
0.77
|
|
|
|
(0.82
|
)
|
|
|
|
0.88
|
|
|
|
(1.34
|
)
|
|
Adjusted EBITDA
(1)
|
$
|
172
|
|
|
$
|
83
|
|
|
|
$
|
280
|
|
|
$
|
144
|
|
|
(Unaudited, in millions)
|
June 30,
2018 |
December 31,
2017 |
||||||
Cash and cash equivalents
|
$
|
6
|
|
|
$
|
6
|
|
|
Total assets
|
|
4,025
|
|
|
|
4,147
|
|
|
(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 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
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||
(Unaudited, in millions)
|
2018
|
|
|
2017
|
|
|
|
2018
|
|
|
2017
|
|
|
||||
Net income (loss) including noncontrolling interests
|
$
|
72
|
|
|
$
|
(73
|
)
|
|
|
$
|
82
|
|
|
$
|
(119
|
)
|
|
Interest expense
|
|
11
|
|
|
|
12
|
|
|
|
|
24
|
|
|
|
23
|
|
|
Income tax provision
|
|
47
|
|
|
|
19
|
|
|
|
|
78
|
|
|
|
48
|
|
|
Depreciation and amortization
|
|
54
|
|
|
|
50
|
|
|
|
|
107
|
|
|
|
101
|
|
|
EBITDA
|
$
|
184
|
|
|
$
|
8
|
|
|
|
$
|
291
|
|
|
$
|
53
|
|
|
Foreign exchange loss (gain)
|
|
1
|
|
|
|
(3
|
)
|
|
|
|
2
|
|
|
|
(3
|
)
|
|
Closure costs, impairment and other related charges
|
|
1
|
|
|
|
65
|
|
|
|
|
1
|
|
|
|
72
|
|
|
Inventory write-downs (reversal) related to closures
|
|
—
|
|
|
|
9
|
|
|
|
|
(1
|
)
|
|
|
13
|
|
|
Start-up costs
|
|
—
|
|
|
|
7
|
|
|
|
|
8
|
|
|
|
15
|
|
|
Net gain on disposition of assets
|
|
(4
|
)
|
|
|
—
|
|
|
|
|
(4
|
)
|
|
|
—
|
|
|
Non-operating pension and other postretirement benefit credits
|
|
(12
|
)
|
|
|
(1
|
)
|
|
|
|
(25
|
)
|
|
|
(4
|
)
|
|
Other expense (income), net
|
|
2
|
|
|
|
(2
|
)
|
|
|
|
8
|
|
|
|
(2
|
)
|
|
Adjusted EBITDA
|
$
|
172
|
|
|
$
|
83
|
|
|
|
$
|
280
|
|
|
$
|
144
|
|
|
•
|
higher maintenance and related labor costs ($13 million), mostly related to scheduled outages; and
|
•
|
unfavorable fiber costs ($13 million), mostly due to higher market-based stumpage fees and diesel fuel expense, both included in log cost, and recycled fiber prices;
|
•
|
write-downs of mill stores and other supplies incurred in the year-ago period ($9 million), primarily as a result of the permanent closure of a paper machine in Catawba (South Carolina), and of our Mokpo (South Korea) paper mill; and
|
•
|
lower wood chip prices ($4 million).
|
•
|
higher maintenance and labor costs ($27 million);
|
•
|
unfavorable fiber costs ($18 million), mostly due to higher market-based stumpage fees and diesel fuel expense, both included in log cost, and recycled fiber prices; and
|
•
|
unfavorable power and steam costs ($10 million), largely related to the unusually cold weather in the southern U.S. in the first quarter of 2018;
|
•
|
write-downs of mill stores and other supplies incurred in the year-ago period ($13 million), primarily as a result of the permanent closure of a paper machine in Catawba, and of our Mokpo paper mill; and
|
•
|
lower wood chip prices ($8 million).
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||
(Unaudited, in millions, except where otherwise stated)
|
2018
|
|
|
2017
|
|
|
|
2018
|
|
|
2017
|
|
|
||||
Sales
|
$
|
264
|
|
|
$
|
213
|
|
|
|
$
|
521
|
|
|
$
|
422
|
|
|
Operating income
(1)
|
|
41
|
|
|
|
16
|
|
|
|
|
74
|
|
|
|
23
|
|
|
EBITDA
(2)
|
|
49
|
|
|
|
24
|
|
|
|
|
89
|
|
|
|
39
|
|
|
(In thousands of metric tons)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Shipments
|
|
353
|
|
|
|
336
|
|
|
|
|
715
|
|
|
|
689
|
|
|
Downtime
|
|
22
|
|
|
|
36
|
|
|
|
|
28
|
|
|
|
47
|
|
|
|
June 30,
|
|||||||
(Unaudited, in thousands of metric tons)
|
2018
|
2017
|
||||||
Finished goods inventory
|
|
108
|
|
|
|
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
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||
(Unaudited, in millions)
|
2018
|
|
|
2017
|
|
|
|
2018
|
|
|
2017
|
|
|
||||
Net income including noncontrolling interests
|
$
|
41
|
|
|
$
|
16
|
|
|
|
$
|
74
|
|
|
$
|
23
|
|
|
Depreciation and amortization
|
|
8
|
|
|
|
8
|
|
|
|
|
15
|
|
|
|
16
|
|
|
EBITDA
|
|
49
|
|
|
|
24
|
|
|
|
|
89
|
|
|
|
39
|
|
|
•
|
higher maintenance and labor costs ($14 million);
|
•
|
unfavorable fiber costs ($6 million), mainly related to higher recycled fiber prices;
|
•
|
higher chemical costs ($3 million); and
|
•
|
unfavorable steam costs ($3 million), mostly due to higher natural gas prices;
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||
(Unaudited, in millions, except where otherwise stated)
|
2018
|
|
|
2017
|
|
|
|
2018
|
|
|
2017
|
|
|
||||
Sales
|
$
|
35
|
|
|
$
|
20
|
|
|
|
$
|
57
|
|
|
$
|
40
|
|
|
Operating loss
(1)
|
|
(10
|
)
|
|
|
(1
|
)
|
|
|
|
(11
|
)
|
|
|
(1
|
)
|
|
EBITDA
(2)
|
|
(5
|
)
|
|
|
—
|
|
|
|
|
(5
|
)
|
|
|
1
|
|
|
(In thousands of short tons)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Shipments
(3) (4)
|
|
23
|
|
|
|
13
|
|
|
|
|
38
|
|
|
|
26
|
|
|
Downtime
|
|
1
|
|
|
|
—
|
|
|
|
|
1
|
|
|
|
—
|
|
|
|
June 30,
|
|||||||
(Unaudited, in thousands of short tons)
|
2018
|
2017
|
||||||
Finished goods inventory
(3)
|
|
8
|
|
|
|
8
|
|
|
(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.
|
(3)
|
Tissue converted products, which are measured in cases, are converted to short tons.
|
(4)
|
The conversion ratio to short tons for tissue converted products was revised in the fourth quarter of 2017. Prior period data has been adjusted for comparative purposes.
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||
(Unaudited, in millions)
|
2018
|
|
|
2017
|
|
|
|
2018
|
|
|
2017
|
|
|
||||
Net loss including noncontrolling interests
|
$
|
(10
|
)
|
|
$
|
(1
|
)
|
|
|
$
|
(11
|
)
|
|
$
|
(1
|
)
|
|
Depreciation and amortization
|
|
5
|
|
|
|
1
|
|
|
|
|
6
|
|
|
|
2
|
|
|
EBITDA
|
|
(5
|
)
|
|
|
—
|
|
|
|
|
(5
|
)
|
|
|
1
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||
(Unaudited, in millions, except where otherwise stated)
|
2018
|
|
|
2017
|
|
|
|
2018
|
|
|
2017
|
|
|
||||
Sales
|
$
|
254
|
|
|
$
|
197
|
|
|
|
$
|
463
|
|
|
$
|
374
|
|
|
Operating income
(1)
|
|
79
|
|
|
|
45
|
|
|
|
|
132
|
|
|
|
65
|
|
|
EBITDA
(2)
|
|
86
|
|
|
|
52
|
|
|
|
|
147
|
|
|
|
81
|
|
|
(In millions board feet)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Shipments
(3)
|
|
494
|
|
|
|
509
|
|
|
|
|
949
|
|
|
|
1,014
|
|
|
Downtime
|
|
26
|
|
|
|
39
|
|
|
|
|
49
|
|
|
|
80
|
|
|
|
June 30,
|
|||||||
(Unaudited, in millions board feet)
|
2018
|
2017
|
||||||
Finished goods inventory
(3)
|
|
128
|
|
|
|
125
|
|
|
(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.
|
(3)
|
Includes wood pellets measured by mass, converted to board feet using a density-based conversion ratio.
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||
(Unaudited, in millions)
|
2018
|
|
|
2017
|
|
|
|
2018
|
|
|
2017
|
|
|
||||
Net income including noncontrolling interests
|
$
|
79
|
|
|
$
|
45
|
|
|
|
$
|
132
|
|
|
$
|
65
|
|
|
Depreciation and amortization
|
|
7
|
|
|
|
7
|
|
|
|
|
15
|
|
|
|
16
|
|
|
EBITDA
|
|
86
|
|
|
|
52
|
|
|
|
|
147
|
|
|
|
81
|
|
|
•
|
higher fiber costs ($8 million), including higher market-based stumpage fees and diesel fuel expense;
|
•
|
lower internal wood chip selling prices ($5 million); and
|
•
|
unfavorable maintenance and labor costs ($3 million).
|
•
|
higher fiber costs ($10 million), including higher market-based stumpage fees, transportation costs and diesel fuel expense;
|
•
|
lower internal wood chip selling prices ($7 million); and
|
•
|
unfavorable maintenance and labor costs ($3 million).
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||
(Unaudited, in millions, except where otherwise stated)
|
2018
|
|
|
2017
|
|
|
|
2018
|
|
|
2017
|
|
|
||||
Sales
|
$
|
230
|
|
|
$
|
201
|
|
|
|
$
|
428
|
|
|
$
|
427
|
|
|
Operating income (loss)
(1)
|
|
18
|
|
|
|
(7
|
)
|
|
|
|
14
|
|
|
|
(11
|
)
|
|
EBITDA
(2)
|
|
35
|
|
|
|
10
|
|
|
|
|
47
|
|
|
|
22
|
|
|
(In thousands of metric tons)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Shipments
|
|
393
|
|
|
|
397
|
|
|
|
|
748
|
|
|
|
840
|
|
|
Downtime
|
|
6
|
|
|
|
17
|
|
|
|
|
14
|
|
|
|
17
|
|
|
|
June 30,
|
|||||||
(Unaudited, in thousands of metric tons)
|
2018
|
2017
|
||||||
Finished goods inventory
|
|
85
|
|
|
|
114
|
|
|
(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.
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||
(Unaudited, in millions)
|
2018
|
|
|
2017
|
|
|
|
2018
|
|
|
2017
|
|
|
||||
Net income (loss) including noncontrolling interests
|
$
|
18
|
|
|
$
|
(7
|
)
|
|
|
$
|
14
|
|
|
$
|
(11
|
)
|
|
Depreciation and amortization
|
|
17
|
|
|
|
17
|
|
|
|
|
33
|
|
|
|
33
|
|
|
EBITDA
|
|
35
|
|
|
|
10
|
|
|
|
|
47
|
|
|
|
22
|
|
|
•
|
higher maintenance and related labor costs ($6 million); and
|
•
|
unfavorable power and steam costs ($4 million);
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||
(Unaudited, in millions, except where otherwise stated)
|
2018
|
|
|
2017
|
|
|
|
2018
|
|
|
2017
|
|
|
||||
Sales
|
$
|
193
|
|
|
$
|
227
|
|
|
|
$
|
381
|
|
|
$
|
467
|
|
|
Operating income (loss)
(1)
|
|
4
|
|
|
|
(7
|
)
|
|
|
|
(3
|
)
|
|
|
(3
|
)
|
|
EBITDA
(2)
|
|
16
|
|
|
|
4
|
|
|
|
|
21
|
|
|
|
20
|
|
|
(In thousands of short tons)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Shipments
|
|
275
|
|
|
|
349
|
|
|
|
|
554
|
|
|
|
713
|
|
|
Downtime
|
|
12
|
|
|
|
17
|
|
|
|
|
15
|
|
|
|
23
|
|
|
|
June 30,
|
|||||||
(Unaudited, in thousands of short tons)
|
2018
|
2017
|
||||||
Finished goods inventory
|
|
70
|
|
|
|
93
|
|
|
(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.
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||
(Unaudited, in millions)
|
2018
|
|
|
2017
|
|
|
|
2018
|
|
|
2017
|
|
|
||||
Net income (loss) including noncontrolling interests
|
$
|
4
|
|
|
$
|
(7
|
)
|
|
|
$
|
(3
|
)
|
|
$
|
(3
|
)
|
|
Depreciation and amortization
|
|
12
|
|
|
|
11
|
|
|
|
|
24
|
|
|
|
23
|
|
|
EBITDA
|
|
16
|
|
|
|
4
|
|
|
|
|
21
|
|
|
|
20
|
|
|
•
|
lower wood chip prices ($5 million); and
|
•
|
higher internal hydroelectric generation ($3 million);
|
•
|
unfavorable power and steam costs ($3 million); and
|
•
|
higher maintenance costs ($2 million).
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||
(Unaudited, in millions)
|
2018
|
|
|
2017
|
|
|
|
2018
|
|
|
2017
|
|
|
||||
Cost of sales, excluding depreciation, amortization and distribution costs
|
$
|
(2
|
)
|
|
$
|
(16
|
)
|
|
|
$
|
(9
|
)
|
|
$
|
(31
|
)
|
|
Depreciation and amortization
|
|
(5
|
)
|
|
|
(6
|
)
|
|
|
|
(14
|
)
|
|
|
(11
|
)
|
|
Selling, general and administrative expenses
|
|
(7
|
)
|
|
|
(7
|
)
|
|
|
|
(17
|
)
|
|
|
(16
|
)
|
|
Closure costs, impairment and other related charges
|
|
(1
|
)
|
|
|
(65
|
)
|
|
|
|
(1
|
)
|
|
|
(72
|
)
|
|
Net gain on disposition of assets
|
|
4
|
|
|
|
—
|
|
|
|
|
4
|
|
|
|
—
|
|
|
Operating loss
|
$
|
(11
|
)
|
|
$
|
(94
|
)
|
|
|
$
|
(37
|
)
|
|
$
|
(130
|
)
|
|
Interest expense
|
|
(11
|
)
|
|
|
(12
|
)
|
|
|
|
(24
|
)
|
|
|
(23
|
)
|
|
Non-operating pension and other postretirement benefit credits
|
|
12
|
|
|
|
1
|
|
|
|
|
25
|
|
|
|
4
|
|
|
Other (expense) income, net
|
|
(3
|
)
|
|
|
5
|
|
|
|
|
(10
|
)
|
|
|
5
|
|
|
Income tax provision
|
|
(47
|
)
|
|
|
(19
|
)
|
|
|
|
(78
|
)
|
|
|
(48
|
)
|
|
Net loss including noncontrolling interests
|
$
|
(60
|
)
|
|
$
|
(119
|
)
|
|
|
$
|
(124
|
)
|
|
$
|
(192
|
)
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||
(Unaudited, in millions)
|
2018
|
|
|
2017
|
|
|
|
2018
|
|
|
2017
|
|
|
||||
Net loss including noncontrolling interests
|
$
|
(60
|
)
|
|
$
|
(119
|
)
|
|
|
$
|
(124
|
)
|
|
$
|
(192
|
)
|
|
Interest expense
|
|
11
|
|
|
|
12
|
|
|
|
|
24
|
|
|
|
23
|
|
|
Income tax provision
|
|
47
|
|
|
|
19
|
|
|
|
|
78
|
|
|
|
48
|
|
|
Depreciation and amortization
|
|
5
|
|
|
|
6
|
|
|
|
|
14
|
|
|
|
11
|
|
|
EBITDA
|
$
|
3
|
|
|
$
|
(82
|
)
|
|
|
$
|
(8
|
)
|
|
$
|
(110
|
)
|
|
Foreign exchange loss (gain)
|
|
1
|
|
|
|
(3
|
)
|
|
|
|
2
|
|
|
|
(3
|
)
|
|
Closure costs, impairment and other related charges
|
|
1
|
|
|
|
65
|
|
|
|
|
1
|
|
|
|
72
|
|
|
Inventory write-downs (reversal) related to closures
|
|
—
|
|
|
|
9
|
|
|
|
|
(1
|
)
|
|
|
13
|
|
|
Start-up costs
|
|
—
|
|
|
|
7
|
|
|
|
|
8
|
|
|
|
15
|
|
|
Net gain on disposition of assets
|
|
(4
|
)
|
|
|
—
|
|
|
|
|
(4
|
)
|
|
|
—
|
|
|
Non-operating pension and other postretirement benefit credits
|
|
(12
|
)
|
|
|
(1
|
)
|
|
|
|
(25
|
)
|
|
|
(4
|
)
|
|
Other expense (income), net
|
|
2
|
|
|
|
(2
|
)
|
|
|
|
8
|
|
|
|
(2
|
)
|
|
Adjusted EBITDA
|
$
|
(9
|
)
|
|
$
|
(7
|
)
|
|
|
$
|
(19
|
)
|
|
$
|
(19
|
)
|
|
•
|
write-downs of mill stores and other supplies ($9 million), primarily related to the permanent closure of a paper machine at our Catawba paper mill in the second quarter of 2017, and the permanent closure of our Mokpo paper mill in the first quarter of 2017; and
|
•
|
start-up costs ($5 million) for the Calhoun tissue manufacturing and converting facility.
|
•
|
a long-lived asset impairment charge related to our Coosa Pines pulp mill ($55 million); and
|
•
|
a long-lived asset impairment charge ($5 million), and severance and other closure-related costs ($4 million) in connection with the permanent closure of a paper machine at our Catawba paper mill.
|
•
|
write-downs of mill stores and other supplies ($13 million), primarily related to the permanent closure of a paper machine at our Catawba paper mill and the permanent closure of our Mokpo paper mill;
|
•
|
start-up costs ($12 million) for the Calhoun tissue manufacturing and converting facility; and
|
•
|
asset preservation costs ($6 million), primarily related to the indefinite idling of our Thorold paper mill in the first quarter of 2017, and our permanently closed Fort Frances (Ontario) mill.
|
•
|
a long-lived asset impairment charge related to our Coosa Pines pulp mill ($55 million);
|
•
|
a long-lived asset impairment charge ($5 million), and severance and other closure-related costs ($4 million) in connection with the permanent closure of a paper machine at our Catawba paper mill; and
|
•
|
severance and other costs related to the permanent closure of our paper mill in Mokpo ($7 million).
|
|
Six Months Ended
June 30, |
|||||||
(Unaudited, in millions)
|
2018
|
|
|
2017
|
|
|
||
Net cash provided by operating activities
|
$
|
220
|
|
|
$
|
60
|
|
|
Net cash used in investing activities
|
|
(109
|
)
|
|
|
(132
|
)
|
|
Net cash (used in) provided by financing activities
|
|
(115
|
)
|
|
|
77
|
|
|
Effect of exchange rate changes on cash and cash equivalents, and restricted cash
|
|
(2
|
)
|
|
|
3
|
|
|
Net (decrease) increase in cash and cash equivalents, and restricted cash
|
$
|
(6
|
)
|
|
$
|
8
|
|
|
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
|
|
|
|
|
|
†10.2
|
|
|
|
|
|
31.1
|
|
|
|
|
|
31.2
|
|
|
|
|
|
32.1
|
|
|
|
|
|
32.2
|
|
|
|
|
|
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.
|
†
|
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 Income (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/ Hugues Dorban
|
|
|
Hugues Dorban
|
|
|
Vice President and Chief Accounting Officer
|
|
EXHIBIT 10.1
|
2018 Short-Term Incentive Plan
Canada/International
|
Purpose
|
As a means of rewarding employees for their contribution towards the success of the Company, a 2018 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 as well as to recognize and reward individual performance.
|
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, 2018 to December 31, 2018.
|
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 employees are eligible to receive is expressed as a certain percentage of their base salary as determined by their grade level. Base salary is the rate in effect at December 31, 2018. The Company determines the threshold, target and maximum incentive payouts for participants, which 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
|
4
Incentive payouts are within the complete and sole discretion of the Company.
4
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”.
|
|
4
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.
|
|
4
The Company may modify, suspend, amend or terminate the STIP at any time.
4
Any payment made under this plan is subject to the Company's recoupment policy.
|
|
4
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.
|
|
4
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.
|
|
4
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.
|
|
4
Any adjustment to the performance metrics has to be formally approved before implementation.
|
|
4
Awards under the STIP are to be paid in a lump sum no later than March 15, 2019.
|
|
|
2018 Short-Term Incentive Plan
Canada/International |
Company Performance Metrics & Weighting
|
Incentive payout depends on the Company performance as well as on employees’ individual performance. Below are performance metrics derived from corporate and divisional objectives.
Company Performance Metrics
1
|
|
Criteria
|
Threshold
|
Target
|
Exceeding Target
|
|
|
Income from operations – Resolute
|
$264M (80% of budget)
|
$330M (budget)
|
$396M (120% of budget)
|
|
|
Manufacturing costs – division
2
|
2% > budget
|
budget
|
2% < budget
|
|
|
SG&A costs
3
|
$144.9M (3.5% > budget)
|
$140M (budget)
|
$135.1M (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
|
0.90
|
0.75
|
≤ 0.50
|
|
|
Safety – Severity rate
7
|
22
|
19
|
≤ 16
|
|
|
Number of Class 1 & 2 environmental incidents
8
|
No payout if more than 32 incidents
|
≤ 32
|
20
|
|
|
1
Expressed in U.S. dollars.
2
For the Hydro-Saguenay division, threshold is set at budget, target is set at 2% below budget and maximum payout is set at 5% below budget.
3
Excluding incentive and equity compensation costs.
4
Performance metrics differ for the Wood Products sales force.
5
Improvement of the days sales outstanding.
6
The frequency of safety incidents is the OSHA incident rate measured by the number of recordable incidents, multiplied by 200,000 and divided by the total number of hours worked. The calculation methodology for the mills/divisions varies from the calculation methodology for corporate.
7
The severity of safety incidents is measured by the number of days lost due to lost time incidents and incidents resulting in temporary assignments or restricted work, multiplied by 200,000 and divided by the total number of hours worked.
8
Performance is based on the results of the Company,
provided that i) pulp and paper mill employees will not be entitled to a payout for the environmental metric if the number of Class 1 & 2 incidents recorded at their respective mill is 4 or greater and ii) employees of other facilities and divisions will not be entitled to a payout for the environmental metric if the number of Class 1 & 2 incidents recorded at their respective facility or division is 2 or greater.
|
|
|
2018 Short-Term Incentive Plan
Canada/International |
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%
|
|
|
2018 Short-Term Incentive Plan
Canada/International |
Determination of Award and Creation of an Individual Performance Pool
|
The Short-Term Incentive Plan payout will be calculated at the end of the calendar year, based on Company performance to derive a potential incentive award for each plan participant.
Eighty-five percent (85%) of the calculated potential incentive payout, based on the company results, will be reserved for payment to all eligible employees with an adequate level of performance. The remaining fifteen percent (15%) of the calculated potential incentive payout will constitute an Individual Performance Pool (or reserve) dedicated for distribution to eligible employees based on their individual performance, as illustrated below.
|
|
|
|
|
2018 Short-Term Incentive Plan
Canada/International |
Individual Performance Component
|
An Individual Performance Component has been created to better align short-term incentive awards with each eligible employee’s performance. The Individual Performance Component payout can fall in the range of 0% to 30% of each employee’s short-term incentive target, based on the company results.
The individual performance payout for each employee will be determined based on each employee’s individual contribution during the performance period, as assessed by management, exercising managerial judgment and subject to the availability of funds in the pool.
Factors to be considered by management in making determination of individual performance payout include the following:
|
|
|
|
As outlined under “Discretionary Plan and Plan Administration,” the Company reserves the right to reduce awards or even to cancel the awards for all employees whose performance is inadequate, whether or not the applicable performance metrics have been met.
The creation of the Individual Performance Pool and the allocation of such pool to eligible employees cannot result in increasing the total amount of awards payable under the plan, such amount being determined based on performance metrics and subject to the maximum available envelope as set out in the following paragraph.
|
|
|
2018 Short-Term Incentive Plan
Canada/International |
Maximum and Minimum Payout
|
The overall maximum incentive payout under the STIP cannot exceed 7% of the free cash flow (FCF) generated by the Company in 2018 (maximum available envelope). If the total amount determined based on actual achievement of performance metrics exceeds the maximum available envelope, all incentive awards are reduced on a prorata basis. If the total payout determined based on actual achievement of performance metrics is lower than the maximum available envelope, the excess envelope is not distributed to participants.
There is no minimum payout under the STIP.
|
|
Cash Flow Measure
|
For purpose of the STIP, free cash flow is defined as net cash provided by operating activities, less maintenance, safety and environmental capital expenditures, adjusted for:
|
|
|
4
Cash reorganization and restructuring costs
|
|
|
4
Optional pension contributions towards past service
4
Other special items
|
|
Final Payout Calculation
|
|
|
Vacation
|
Any payment made pursuant to the STIP is deemed to include any and all vacation pay that may be owed pursuant to applicable minimum employment standards.
|
|
|
|
2018 Short-Term Incentive Plan
Canada/International |
Administrative Guidelines
|
New Hires
Employees hired into a regular position on or before September 30, 2018 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, 2018 are not eligible for participation in the STIP.
|
|
Promotion or Status Changes
|
|
4
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, 2018.
|
|
4
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, 2018.
|
|
4
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, 2018.
|
|
|
|
Termination
4
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.
|
|
4
Employees who are involuntarily terminated and whose last day of active work is on or before June 30, 2018 will not be entitled to receive an incentive payout, unless they are deemed to retire pursuant to the previous paragraph.
|
|
4
An employee who is involuntarily terminated and whose last day of active work is on or after July 1, 2018 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.
|
|
4
Employees who hand in their resignation before payment is made will not be eligible to receive an award.
|
|
|
2018 Short-Term Incentive Plan
Canada/International |
Administrative Guidelines
|
4
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
|
|
4
Maternity/parental/adoption leave: The length of the leave is not included in the calculation of any incentive payout.
|
|
4
Leave without pay: The length of the leave is not included in the calculation of any incentive payout.
|
|
4
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.
|
|
4
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
|
2018 Short-Term Incentive Plan
United States
|
Purpose
|
As a means of rewarding employees for their contribution towards the success of the Company, a 2018 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 as well as to recognize and reward individual performance.
|
Eligibility
|
The Plan applies to non-unionized, regular, salaried employees of the Pulp and Paper Group and Wood Products Group working in 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, 2018 to December 31, 2018.
|
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 employees are eligible to receive is expressed as a certain percentage of their 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, 2018. The Company determines the threshold, target and maximum incentive payouts for participants, which 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
|
4
Incentive payouts are within the complete and sole discretion of the Company.
4
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”.
|
|
4
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.
|
|
4
The Company may modify, suspend, amend or terminate the STIP at any time.
4
Any payment made under this plan is subject to the Company's recoupment policy.
|
|
4
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.
|
|
4
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.
|
|
4
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.
|
|
4
Any adjustment to the performance metrics has to be formally approved before implementation.
|
|
4
Awards under the STIP are to be paid in a lump sum no later than March 15, 2019.
|
|
|
2018 Short-Term Incentive Plan
United States |
Company Performance Metrics & Weighting
|
Incentive payout depends on the Company performance as well as on employees’ individual performance. Below are performance metrics derived from corporate and divisional objectives.
Company Performance Metrics
1
|
|
Criteria
|
Threshold
|
Target
|
Exceeding Target
|
|
|
Income from operations – Resolute
|
$264M (80% of budget)
|
$330M (budget)
|
$396M (120% of budget)
|
|
|
Manufacturing costs – division
2
|
2% > budget
|
budget
|
2% < budget
|
|
|
SG&A costs
3
|
$144.9M (3.5% > budget)
|
$140M (budget)
|
$135.1M (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
|
0.90
|
0.75
|
≤ 0.50
|
|
|
Safety – Severity rate
7
|
22
|
19
|
≤ 16
|
|
|
Number of Class 1 & 2 environmental incidents
8
|
No payout if more than 32 incidents
|
≤ 32
|
20
|
|
|
1
Expressed in U.S. dollars.
2
For the Hydro-Saguenay division, threshold is set at budget, target is set at 2% below budget and maximum payout is set at 5% below budget. For US Wood Product divisions, premiums are determined in accordance with the manufacturing costs of the respective paper mills they supply.
3
Excluding incentive and equity compensation costs.
4
Performance metrics differ for the Wood Products sales force.
5
Improvement of the days sales outstanding.
6
The frequency of safety incidents is the OSHA incident rate measured by the number of recordable incidents, multiplied by 200,000 and divided by the total number of hours worked. The calculation methodology for the mills/divisions varies from the calculation methodology for corporate.
7
The severity of safety incidents is measured by the number of days lost due to lost time incidents and incidents resulting in temporary assignments or restricted work, multiplied by 200,000 and divided by the total number of hours worked.
8
Performance is based on the results of the Company,
provided that i) pulp and paper mill employees will not be entitled to a payout for the environmental metric if the number of Class 1 & 2 incidents recorded at their respective mill is 4 or greater and ii) employees of other facilities and divisions will not be entitled to a payout for the environmental metric if the number of Class 1 & 2 incidents recorded at their respective facility or division is 2 or greater.
|
|
|
2018 Short-Term Incentive Plan
United States |
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%
|
|
|
2018 Short-Term Incentive Plan
United States |
Determination of Award and Creation of an Individual Performance Pool
|
The Short-Term Incentive Plan payout will be calculated at the end of the calendar year, based on Company performance to derive a potential incentive award for each plan participant.
Eighty-five percent (85%) of the calculated potential incentive payout, based on the company results, will be reserved for payment to all eligible employees with an adequate level of performance. The remaining fifteen percent (15%) of the calculated potential incentive payout will constitute an Individual Performance Pool (or reserve) dedicated for distribution to eligible employees based on their individual performance, as illustrated below.
|
|
|
|
|
2018 Short-Term Incentive Plan
United States |
Individual Performance Component
|
An Individual Performance Component has been created to better align short-term incentive awards with each eligible employee’s performance. The Individual Performance Component payout can fall in the range of 0% to 30% of each employee’s short-term incentive target, based on the company results.
The individual performance payout for each employee will be determined based on each employee’s individual contribution during the performance period, as assessed by management, exercising managerial judgment and subject to the availability of funds in the pool.
Factors to be considered by management in making determination of individual performance payout include the following:
|
|
|
|
As outlined under “Discretionary Plan and Plan Administration,” the Company reserves the right to reduce awards or even to cancel the awards for all employees whose performance is inadequate, whether or not the applicable performance metrics have been met.
The creation of the Individual Performance Pool and the allocation of such pool to eligible employees cannot result in increasing the total amount of awards payable under the plan, such amount being determined based on performance metrics and subject to the maximum available envelope as set out in the following paragraph.
|
|
|
2018 Short-Term Incentive Plan
United States |
Maximum and Minimum Payout
|
The overall maximum incentive payout under the STIP cannot exceed 7% of the free cash flow (FCF) generated by the Company in 2018 (maximum available envelope). If the total amount determined based on actual achievement of performance metrics exceeds the maximum available envelope, all incentive awards are reduced on a prorata basis. If the total payout determined based on actual achievement of performance metrics is lower than the maximum available envelope, the excess envelope is not distributed to participants.
There is no minimum payout under the STIP.
|
|
Cash Flow Measure
|
For purpose of the STIP, free cash flow is defined as net cash provided by operating activities, less maintenance, safety and environmental capital expenditures, adjusted for:
|
|
|
4
Cash reorganization and restructuring costs
|
|
|
4
Optional pension contributions towards past service
4
Other special items
|
|
Final Payout Calculation
|
|
|
|
|
2018 Short-Term Incentive Plan
United States |
Administrative Guidelines
|
New Hires
Employees hired into a regular position on or before September 30, 2018 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, 2018 are not eligible for participation in the STIP.
|
|
Promotion or Status Changes
|
|
4
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, 2018.
|
|
4
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, 2018.
|
|
4
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, 2018.
4
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, 2018 for time spent as an exempt employee.
|
|
|
|
Termination
4
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.
|
|
4
Employees who are involuntarily terminated and whose last day of active work is on or before June 30, 2018 will not be entitled to receive an incentive payout, unless they are deemed to retire pursuant to the previous paragraph.
|
|
4
An employee who is involuntarily terminated and whose last day of active work is on or after July 1, 2018 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.
|
|
4
Employees who hand in their resignation before payment is made will not be eligible to receive an award.
|
|
|
2018 Short-Term Incentive Plan
United States |
Administrative Guidelines
|
4
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
|
|
4
Leave without pay: The length of the leave is not included in the calculation of any incentive payout.
|
|
4
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.
|
|
4
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
June 30, 2018
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: August 9, 2018
|
|
/s/ Yves Laflamme
|
Yves Laflamme
|
President and Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q for the quarterly period ended
June 30, 2018
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: August 9, 2018
|
|
/s/ Jo-Ann Longworth
|
Jo-Ann Longworth
|
Senior Vice President and Chief Financial Officer
|
Date: August 9, 2018
|
/s/ Yves Laflamme
|
|
Name: Yves Laflamme
|
|
Title: President and Chief Executive Officer
|
Date: August 9, 2018
|
/s/ Jo-Ann Longworth
|
|
Name: Jo-Ann Longworth
|
|
Title: Senior Vice President and Chief Financial Officer
|