Condensed Consolidating Financial Information | Note 13. Condensed Consolidating Financial Information The following information is presented in accordance with Rule 3-10 of Regulation S-X and the public information requirements of Rule 144 promulgated pursuant to the Securities Act of 1933, as amended, in connection with Resolute Forest Products Inc.’s 2023 Notes that are fully and unconditionally guaranteed, on a joint and several basis, by all of our 100% owned material U.S. subsidiaries (or the “ Guarantor Subsidiaries ”). The 2023 Notes are not guaranteed by our foreign subsidiaries (or the “ Non-guarantor Subsidiaries ”). The following condensed consolidating financial information sets forth the Statements of Operations and Comprehensive Income (Loss) for the three and six months ended June 30, 2019 and 2018 , the Balance Sheets as of June 30, 2019 and December 31, 2018 , and the Statements of Cash Flows for the six months ended June 30, 2019 and 2018 for the Parent, the Guarantor Subsidiaries on a combined basis, and the Non-guarantor Subsidiaries also on a combined basis. The condensed consolidating financial information reflects the investments of the Parent in the Guarantor Subsidiaries and Non-guarantor Subsidiaries, as well as the investments of the Guarantor Subsidiaries in the Non-guarantor Subsidiaries, using the equity method of accounting. The principal consolidating adjustments are entries to eliminate the investments in subsidiaries and intercompany balances and transactions. CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) For the Three Months Ended June 30, 2019 (Unaudited, in millions) Parent Guarantor Subsidiaries Non-guarantor Subsidiaries Consolidating Adjustments Consolidated Sales $ — $ 613 $ 569 $ (427 ) $ 755 Costs and expenses: Cost of sales, excluding depreciation, amortization and distribution costs — 599 371 (434 ) 536 Depreciation and amortization — 9 33 — 42 Distribution costs — 23 76 2 101 Selling, general and administrative expenses 4 15 17 — 36 Operating (loss) income (4 ) (33 ) 72 5 40 Interest expense (17 ) — (2 ) 12 (7 ) Non-operating pension and other postretirement benefit credits — 2 10 — 12 Other income (expense), net — 15 (4 ) (12 ) (1 ) Equity in income of subsidiaries 46 7 — (53 ) — Income (loss) before income taxes 25 (9 ) 76 (48 ) 44 Income tax provision — — (18 ) (1 ) (19 ) Net income (loss) including noncontrolling interests 25 (9 ) 58 (49 ) 25 Net income attributable to noncontrolling interests — — — — — Net income (loss) attributable to Resolute Forest Products Inc. $ 25 $ (9 ) $ 58 $ (49 ) $ 25 Comprehensive income (loss) attributable to Resolute Forest Products Inc. $ 24 $ (12 ) $ 60 $ (48 ) $ 24 CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) For the Six Months Ended June 30, 2019 (Unaudited, in millions) Parent Guarantor Subsidiaries Non-guarantor Subsidiaries Consolidating Adjustments Consolidated Sales $ — $ 1,285 $ 1,166 $ (901 ) $ 1,550 Costs and expenses: Cost of sales, excluding depreciation, amortization and distribution costs — 1,247 742 (899 ) 1,090 Depreciation and amortization — 19 63 — 82 Distribution costs — 49 155 (3 ) 201 Selling, general and administrative expenses 10 24 39 — 73 Operating (loss) income (10 ) (54 ) 167 1 104 Interest expense (34 ) (2 ) (6 ) 26 (16 ) Non-operating pension and other postretirement benefit credits — 5 19 — 24 Other (expense) income, net (3 ) 32 (8 ) (26 ) (5 ) Equity in income of subsidiaries 114 18 — (132 ) — Income (loss) before income taxes 67 (1 ) 172 (131 ) 107 Income tax provision — — (40 ) — (40 ) Net income (loss) including noncontrolling interests 67 (1 ) 132 (131 ) 67 Net income attributable to noncontrolling interests — — — — — Net income (loss) attributable to Resolute Forest Products Inc. $ 67 $ (1 ) $ 132 $ (131 ) $ 67 Comprehensive income (loss) attributable to Resolute Forest Products Inc. $ 69 $ (6 ) $ 139 $ (133 ) $ 69 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 BALANCE SHEET As of June 30, 2019 (Unaudited, in millions) Parent Guarantor Subsidiaries Non-guarantor Subsidiaries Consolidating Adjustments Consolidated Assets Current assets: Cash and cash equivalents $ — $ 91 $ 7 $ — $ 98 Accounts receivable, net — 270 130 — 400 Accounts receivable from affiliates — 248 748 (996 ) — Inventories, net — 214 328 (12 ) 530 Advance and interest receivable from parent — 66 — (66 ) — Interest receivable from affiliate — 4 — (4 ) — Other current assets — 16 26 — 42 Total current assets — 909 1,239 (1,078 ) 1,070 Fixed assets, net — 525 954 — 1,479 Amortizable intangible assets, net — 3 47 — 50 Deferred income tax assets — 1 865 3 869 Operating lease right-of-use assets — 29 34 — 63 Notes receivable from parent — 1,264 — (1,264 ) — Note receivable from affiliate — 111 — (111 ) — Investments in consolidated subsidiaries and affiliates 3,875 2,083 — (5,958 ) — Other assets — 158 63 — 221 Total assets $ 3,875 $ 5,083 $ 3,202 $ (8,408 ) $ 3,752 Liabilities and equity Current liabilities: Accounts payable and accrued liabilities $ 10 $ 122 $ 244 $ — $ 376 Current portion of long-term debt — 1 — — 1 Current portion of operating lease liabilities — 4 4 — 8 Accounts payable to affiliates 257 784 — (1,041 ) — Advance and interest payable to subsidiaries 66 — — (66 ) — Interest payable to affiliate — — 4 (4 ) — Total current liabilities 333 911 252 (1,111 ) 385 Long-term debt, net of current portion 370 52 — — 422 Notes payable to subsidiaries 1,264 — — (1,264 ) — Note payable to affiliate — — 111 (111 ) — Pension and other postretirement benefit obligations — 330 901 — 1,231 Operating lease liabilities, net of current portion — 26 33 — 59 Other liabilities — 22 33 — 55 Total liabilities 1,967 1,341 1,330 (2,486 ) 2,152 Total equity 1,908 3,742 1,872 (5,922 ) 1,600 Total liabilities and equity $ 3,875 $ 5,083 $ 3,202 $ (8,408 ) $ 3,752 CONDENSED CONSOLIDATING BALANCE SHEET As of December 31, 2018 (Unaudited, in millions) Parent Guarantor Subsidiaries Non-guarantor Subsidiaries Consolidating Adjustments Consolidated Assets Current assets: Cash and cash equivalents $ — $ 301 $ 3 $ — $ 304 Accounts receivable, net — 301 148 — 449 Accounts receivable from affiliates — 588 1,071 (1,659 ) — Inventories, net — 194 327 (13 ) 508 Note, advance and interest receivable from parent — 422 — (422 ) — Interest receivable from affiliate — 4 — (4 ) — Other current assets — 15 28 — 43 Total current assets — 1,825 1,577 (2,098 ) 1,304 Fixed assets, net — 523 992 — 1,515 Amortizable intangible assets, net — 2 48 — 50 Deferred income tax assets — 1 872 3 876 Notes receivable from parent — 657 — (657 ) — Note receivable from affiliate — 107 — (107 ) — Investments in consolidated subsidiaries and affiliates 4,119 2,205 — (6,324 ) — Other assets — 126 64 — 190 Total assets $ 4,119 $ 5,446 $ 3,553 $ (9,183 ) $ 3,935 Liabilities and equity Current liabilities: Accounts payable and accrued liabilities $ 7 $ 170 $ 250 $ — $ 427 Current portion of long-term debt 222 1 — — 223 Accounts payable to affiliates 592 1,112 — (1,704 ) — Note, advance and interest payable to subsidiaries 422 — — (422 ) — Interest payable to affiliate — — 4 (4 ) — Total current liabilities 1,243 1,283 254 (2,130 ) 650 Long-term debt, net of current portion 370 52 — — 422 Notes payable to subsidiaries 657 — — (657 ) — Note payable to affiliate — — 107 (107 ) — Pension and other postretirement benefit obligations — 342 915 — 1,257 Other liabilities 6 21 44 — 71 Total liabilities 2,276 1,698 1,320 (2,894 ) 2,400 Total equity 1,843 3,748 2,233 (6,289 ) 1,535 Total liabilities and equity $ 4,119 $ 5,446 $ 3,553 $ (9,183 ) $ 3,935 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS For the Six Months Ended June 30, 2019 (Unaudited, in millions) Parent Guarantor Subsidiaries Non-guarantor Subsidiaries Consolidating Adjustments Consolidated Net cash provided by operating activities $ — $ 64 $ 31 $ — $ 95 Cash flows from investing activities: Cash invested in fixed assets — (19 ) (26 ) — (45 ) Disposition of assets — 2 — — 2 Decrease in countervailing duty cash deposits on supercalendered paper — 1 — — 1 Increase in countervailing and anti-dumping duty cash deposits on softwood lumber — (33 ) — — (33 ) Decrease in countervailing duty cash deposits on uncoated groundwood paper — 6 — — 6 Increase in notes receivable from and advance to parent — (230 ) — 230 — Net cash used in investing activities — (273 ) (26 ) 230 (69 ) Cash flows from financing activities: Payments of debt (225 ) — — — (225 ) Purchases of treasury stock (5 ) — — — (5 ) Payments of financing and credit facility fees — (1 ) (1 ) — (2 ) Increase in notes payable to and advance from subsidiaries 230 — — (230 ) — Net cash used in financing activities — (1 ) (1 ) (230 ) (232 ) Effect of exchange rate changes on cash and cash equivalents, and restricted cash — — 1 — 1 Net (decrease) increase in cash and cash equivalents, and restricted cash — (210 ) 5 — (205 ) Cash and cash equivalents, and restricted cash: Beginning of period — 306 39 — 345 End of period $ — $ 96 $ 44 $ — $ 140 Cash and cash equivalents, and restricted cash at period end: Cash and cash equivalents $ — $ 91 $ 7 $ — $ 98 Restricted cash — 5 37 — 42 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 |