Media Contact:
Gordon R. Manuel
864-282-9448
Analyst contact:
William G. Harvey
864-282-9413
FOR IMMEDIATE RELEASE
TUESDAY APRIL 29, 2003
BOWATER ANNOUNCES FIRST QUARTER
2003 FINANCIAL RESULTS
GREENVILLE, SC - Bowater Incorporated (NYSE: BOW) today released financial
results for the first quarter of 2003. Bowater reported a net loss of $71.7
million, or $1.26 per diluted share on sales of $630.5 million for the first
quarter of 2003. These results compare with net income of $10.2 million, or
$0.18 per diluted share, on sales of $624.2 million in the first quarter of
2002.
Before special items, the net loss for the first quarter of 2003 was $51.3
million, or $0.90 per diluted share, compared with the 2002 first quarter net
loss before special items of $33.6 million, or $0.58 per diluted share.
First quarter 2003 special items, net of tax, consisted of a $6.9 million
gain related to asset sales, a severance charge of $4.1 million, a $21.1 million
charge resulting from foreign currency changes and a non-cash charge of $2.1
million for a cumulative effect adjustment for the adoption of Statement of
Financial Accounting Standards (SFAS) No. 143, Accounting for Asset Retirement
Obligations. Special items, net of tax, in the first quarter of 2002 consisted
of a $42.5 million gain related to asset sales and a $1.3 million gain resulting
from foreign currency changes.
"Weak pricing, higher energy and wood costs, a stronger Canadian dollar,
and the one-time expenses associated with our machine conversion to coated
papers at Catawba, South Carolina all contributed to very poor first quarter
results", said Arnold M. Nemirow, Chairman, President and Chief Executive
Officer. "This conversion and improving market conditions will contribute to
better results throughout the year."
(more)
FINANCIAL HIGHLIGHTS
($ in millions, except per-share amounts)
Three months ended
March 31,
2003 2002
---- ----
SALES $ 630.5 $ 624.2
----- -----
NET INCOME (LOSS) $ (71.7) $ 10.2
------ -----
EARNINGS (LOSS) PER DILUTED SHARE (IN ACCORDANCE WITH GAAP) $ (1.26) $ 0.18
Special Items, net of tax, (per diluted share)
Sale of assets (gain) loss $ (0.12) $ (0.74)
Foreign exchange (gain) loss $ 0.37 $ (0.02)
Severance charge $ 0.07 --
Adoption of SFAS 143 $ 0.04 --
---- ------
Earnings (loss) per share excluding special items $ (0.90) $ (0.58)*
------ ------
* Includes a one-time tax benefit of $2.8 million ($0.05 per share)
Higher energy prices and increased usage due to a severe winter resulted in
energy costs that were $7 million higher in the quarter compared to the fourth
quarter of 2002. The strengthening of the Canadian dollar during the first
quarter impacted costs by $6 million. Wood costs increased by $6 million during
the quarter as a result of Canadian sawmill production curtailments, which
reduced available chip supply, and unusually wet weather in the U.S. South.
The company's average newsprint price was slightly lower in the first
quarter compared to the fourth quarter of 2002, primarily the result of lower
export prices. Bowater's average domestic newsprint price was flat in the first
quarter as compared to the fourth quarter of 2002. Bowater is presently
implementing a $50 per metric ton newsprint price increase for domestic
customers. Bowater's average operating costs per metric ton for newsprint
increased by 4.5% in the first quarter compared to the fourth quarter of 2002
due to higher energy costs and a stronger Canadian dollar. The company curtailed
49,000 metric tons of newsprint production in the first quarter, matching
production to orders.
As previously announced, Bowater permanently closed a paper machine at its
Donnacona, Quebec mill this month. Specialty grades manufactured on this machine
were transferred primarily to the Calhoun, Tennessee mill thereby eliminating
approximately 100,000 metric tons of newsprint production. Since 2000, Bowater
has permanently removed approximately 600,000 annual metric tons of newsprint
capacity through machine closures, conversions and the integration of newsprint
machines with off-site coaters.
Demand for coated groundwood and specialty grades continued to rebound
sharply in the first quarter. The conversion of a 240,000 metric ton newsprint
machine at Catawba to lightweight coated groundwood papers was completed in
March. Pricing remained unchanged from fourth quarter 2002 levels. However, due
to improved fundamentals, prices are expected to rise in the second quarter.
Bowater's average operating costs per short ton for coated groundwood and
specialty grades increased by 10.7% in the first quarter compared to the fourth
quarter of 2002. First quarter results were negatively impacted by $12 million
as a result of lost newsprint production and startup costs for the machine
conversion at Catawba.
(more)
In the first three months of 2003, Norscan market pulp demand increased by
8% over 2002. The improvement in demand combined with wood supply disruptions
resulted in a 164,000 ton reduction in Norscan inventories in the first quarter.
Bowater announced two price increases on market pulp for the quarter, totaling
$60 dollars per ton. Due to the timing of the increases, the company's average
market pulp price increased by only $16 per ton in the first quarter. In
addition, Bowater implemented a $40 per ton price increase effective April 1.
The increases have been fully implemented. Bowater's average operating costs per
ton for market pulp increased by 8.3% in the first quarter, compared to the
fourth quarter of 2002, as a result of higher energy and wood costs.
Additionally, Bowater has signed an agreement to sell approximately 82,000
acres of southeastern timberland to investors of Evergreen Timberland Investment
Management, a business unit of Wachovia Bank, National Association, for proceeds
of approximately $123 million. The transaction is expected to close in May.
Bowater will hold a management conference call to discuss these financial
results at 10:00 a.m. EDT, April 29, 2003. The conference call number is
888-423-3273 or 612-332-0820 (international). The call will also be broadcast
via the Internet. Interested parties may connect to the Bowater web site at
www.bowater.com, then follow the on-screen instructions for access to the call
and related information. A replay of the call will be available from 1:30 p.m.
EDT on Tuesday, April 29, through Tuesday, May 6, on the web site or by dialing
800-475-6701 or 320-365-3844 (international) and using the access code 681600.
Bowater Incorporated, headquartered in Greenville, SC, is a leading
producer of newsprint and coated groundwood papers. In addition, the company
makes uncoated groundwood papers, bleached kraft pulp and lumber products. The
company has 12 pulp and paper mills in the United States, Canada and South Korea
and 12 North American sawmills that produce softwood and hardwood lumber.
Bowater also operates two facilities that convert a groundwood base sheet to
coated products. Bowater's operations are supported by approximately 1.5 million
acres of timberlands owned or leased in the United States and Canada and 32
million acres of timber cutting rights in Canada. Bowater is one of the world's
largest consumers of recycled newspapers and magazines. Bowater common stock is
listed on the New York Stock Exchange, the Pacific Exchange and the London Stock
Exchange. A special class of stock exchangeable into Bowater common stock is
listed on the Toronto Stock Exchange (TSE:BWX).
All amounts are in U.S. dollars.
Statements in this news release that are not reported financial results or
other historical information are "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. They include, for
example, statements about our business outlook, assessment of market conditions,
strategies, future plans, future sales, prices for our major products, inventory
levels, capital spending and tax rates. These forward-looking statements are not
guarantees of future performance. They are based on management's expectations
that involve a number of business risks and uncertainties, any of which could
cause actual results to differ materially from those expressed in or implied by
the forward-looking statements. The risks and uncertainties relating to the
forward-looking statements in this news release include those described under
the caption "Cautionary Statement Regarding Forward-Looking Information" in
Bowater's annual report on Form 10-K for the year ended December 31, 2002, and
from time to time, in Bowater's other filings with the Securities and Exchange
Commission.
# # #
BOWATER INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited, in millions except per share amounts)
Three Months Ended
March 31
----------------------------------
2003 2002
---------------- ---------------
Sales $ 630.5 $624.2
Cost of sales, excluding depreciation, amortization
and cost of timber harvested 516.5 470.6
Depreciation, amortization and cost of timber harvested 82.5 86.3
Distribution costs 62.1 56.5
Selling and administrative expense 36.8 35.5
Net gain on sale of assets (1) 11.1 71.5
---------------- ---------------
Operating income (loss) (56.3) 46.8
Other expense (income):
Interest income (1.0) (1.0)
Interest expense, net of capitalized interest 39.9 41.8
Foreign exchange loss (gain) 8.2 (1.1)
Other, net 0.1 1.0
---------------- ---------------
47.2 40.7
---------------- ---------------
Income (loss) before income taxes, minority interest
and cumulative effect of accounting change (103.5) 6.1
Provision for income tax expense (benefit) (30.3) (2.5)
Minority interests in the net income (loss) of subsidiaries (3.6) (1.6)
---------------- ---------------
Income (loss) before cumulative effect of accounting change (69.6) 10.2
Cumulative effect of accounting change (2) (2.1) -
---------------- ---------------
Net income (loss) $ (71.7) $ 10.2
================ ===============
Basic earnings (loss) per common share: (3)
Income (loss) before cumulative effect of accounting change $ (1.22) $ 0.18
Cumulative effect of accounting change (0.04) -
---------------- ---------------
Net income (loss) $ (1.26) $ 0.18
================ ===============
Average common shares outstanding (3) 56.9 56.8
================ ===============
Diluted earnings (loss) per common share: (3)
Income (loss) before cumulative effect of accounting change $ (1.22) $ 0.18
Cumulative effect of accounting change (0.04) -
---------------- ---------------
Net income (loss) $ (1.26) $ 0.18
================ ===============
Average common and common equivalent shares outstanding (3) 56.9 57.2
================ ===============
BOWATER INCORPORATED AND SUBSIDIARIES
(Unaudited, in millions of US dollars)
CONSOLIDATED BALANCE SHEET March 31, December 31,
2003 2002
-------------------- -----------------
Current assets:
Cash and cash equivalents $ 87.7 $ 35.9
Accounts receivable, net 336.3 330.6
Inventories 281.7 257.2
Income tax receivable - 75.6
Other current assets 61.9 35.9
-------------------- --------------------
Total current assets 767.6 735.2
-------------------- --------------------
Timber and Timberlands 212.3 212.0
Fixed assets, net 3,647.2 3,645.6
Goodwill 831.1 839.9
Other assets 180.1 157.6
-------------------- --------------------
$ 5,638.3 $ 5,590.3
==================== ====================
Current liabilities:
Current installments of long-term debt $ 77.1 $ 84.3
Short-term bank debt 358.0 249.0
Accounts payable and accrued liabilities 422.0 411.9
Dividends payable 11.2 11.2
-------------------- --------------------
Total current liabilities 868.3 756.4
-------------------- --------------------
Long-term debt, net of current installments 2,039.9 2,037.4
Other long-term liabilities 458.4 450.7
Deferred income taxes 485.0 518.2
Minority interests in subsidiaries 71.3 72.1
Shareholders' equity 1,715.4 1,755.5
-------------------- --------------------
$ 5,638.3 $ 5,590.3
==================== ====================
Three Months Ended
CONSOLIDATED CASH FLOW March 31,
-----------------------------------------------
2003 2002
-------------------- --------------------
Cash flows from (used for) operating activities $ 49.5 $ (61.5)
-------------------- --------------------
Cash flows from (used for) investng activities:
Cash invested in fixed assets, timber and timberlands (96.3) (70.4)
Disposition of fixed assets, timber and timberlands 10.5 16.1
Proceeds from monetization of note receivable (1) - 88.1
Cash invested (maturity) of marketable securities, net - 0.3
-------------------- --------------------
(85.8) 34.1
-------------------- --------------------
Cash flows from (used for) financing activities:
Cash dividends, including minority interests (11.5) (14.8)
Financing activities, net 99.3 23.9
Stock options exercised 0.2 4.7
Other 0.1 -
-------------------- --------------------
88.1 13.8
-------------------- --------------------
Net increase (decrease) in cash and cash equivalents $ 51.8 $ (13.6)
==================== ====================
BOWATER INCORPORATED AND SUBSIDIARIES
NOTES TO THE PRESS RELEASE AND UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) During the first three months of 2003, Bowater sold fixed assets and land
resulting in a net pre-tax gain of $11.1 million, or $0.12 per diluted share,
after tax. In January 2002, Bowater completed the sale of approximately 116,000
acres of timberland for aggregate consideration of $104.2 million, comprised of
approximately $5.1 million in cash and $99.1 million in a note receivable. In
March 2002, we monetized the $99.1 million note receivable for net cash proceeds
of $88.1 million. These transactions resulted in a pre-tax gain of approximately
$70.4 million.
(2) Effective January 1, 2003, Bowater adopted Statement of Financial
Accounting Standards (SFAS) No. 143, "Accounting for Asset Retirement
Obligations." SFAS No. 143 requires entities to record the fair value of a
liability for an asset retirement obligation in the period in which it is
incurred. The adoption of SFAS No. 143 resulted in a non-cash, after tax
cumulative effect charge of $ 2.1 million, or $ 0.04 per diluted share in the
first quarter of 2003.
(3) For the calculation of basic and diluted earnings per share for the three
months ended March 31, 2003 and 2002, no adjustments to net income are
necessary. The effect of dilutive securities is not included in the computation
for the three months ended March 31, 2003 to prevent antidilution.
(4) A reconciliation of certain financial statement line items reported under
generally accepted accounting principles ("GAAP") to earnings reported before
special items is presented below. We believe that this measure allows investors
to more easily compare our on-going operations and financial performance from
period to period.
Three Months Ended March 31, 2003
(unaudited, in millions except per share amounts)
Adjustment for Special Items
GAAP as
GAAP as Land & asset Foreign Adoption of adjusted for
reported sales exchange Severance SFAS No.143 Special Items
----------------------------------------------------------------------
Operating income (loss) $ (56.3) $ (11.1) $ - $ 6.7 $ -- $ (60.7)
Foreign exchange loss (gain) 8.2 (8.2) --
Provision for income tax expense
benefit (30.3) (4.2) (12.3) 2.6 (44.2)
Minority interests in the net income
(loss) of subsidiaries (3.6) (0.6) (4.2)
Cumulative effect of accounting change (2.1) 2.1
Net income (loss) $ (71.7) $ (6.9) $ 21.1 $ 4.1 $ 2.1 $ (51.3)
======== ======== ======== ======== ======== ==========
Shares 56.9 56.9 56.9 56.9 56.9 56.9
==== ==== ==== ==== ==== ====
EPS $ (1.26) $ (0.12) $ 0.37 $ 0.07 $ 0.04 $ (0.90)
========= ======== ======== ========= ======== =========
Effective tax rate 29.3% 38.0% -150.0% 38.0% 38.0% 44.3%
==== ==== ===== ==== ==== ====
Three Months Ended March 31, 2002
(unaudited, in millions except per share amounts)
Adjustment for Special Items
GAAP as
GAAP as Land & asset Foreign adjusted for
reported sales exchange Special Items
----------------------------------------------------------------------
Operating income (loss) $ 46.8 $ (71.5) $ (24.7)
Foreign exchange loss (gain) (1.1) 1.1
Provision for income tax expense
(benefit) (2.5) (29.0) 0.2 (31.3)
Net income (loss) $ 10.2 $ (42.5) $ (1.3) $ (33.6)
======== ========= ======== ========
Shares 57.2 57.2 57.2 57.2
==== ==== ==== ====
EPS $ 0.18 $ (0.74) $ (0.02) $ (0.58)
========= ========= ========= =========
Effective tax rate -41.5% 40.6% -13.5% 47.2%
==== ==== ==== ====
A schedule of historical financial and operating statistics is available
upon request and on Bowater's web site (www.bowater.com)