Exhibit 99.1
Media contact:
Gordon R. Manuel
864-282-9448
Analyst contact:
William G. Harvey
864-282-9413
FOR IMMEDIATE RELEASE
THURSDAY, JULY 24, 2003
BOWATER ANNOUNCES SECOND QUARTER
2003 FINANCIAL RESULTS
GREENVILLE, SC - Bowater Incorporated (NYSE: BOW) reported a net loss of $25.7
million or $0.45 per diluted share on sales of $664.1 million for the second
quarter of 2003. These results compare with a net loss of $53.7 million, or
$0.95 per diluted share, on sales of $646.8 million in the second quarter of
2002. Before special items, the net loss for the second quarter of 2003 was
$49.1 million, or $0.86 per diluted share, compared with the 2002 second quarter
net loss before special items of $43.3 million or $0.77 per diluted share.
Second quarter 2003 special items, net of tax, consisted of a $64.5
million gain related to asset sales, a severance charge of $13.5 million and a
$27.6 million charge resulting from foreign currency changes. Special items, net
of tax, in the second quarter of 2002 consisted of a $2.2 million gain related
to asset sales and a $12.6 million charge resulting from foreign currency
changes.
"Improvements in pricing were offset by cost increases as well as
lower pulp shipments," said Arnold M. Nemirow, Chairman, President and Chief
Executive Officer, "As a result, the recovery in our financial results has been
slower than anticipated, but we do expect continued improvements for the balance
of the year."
The strengthening of the Canadian dollar during the second quarter
impacted operating income by $12 million as compared to the first quarter. Fiber
costs increased by $4 million during the quarter. The company previously
announced a nine-day shut at its Thunder Bay, Ontario mill commencing June 28,
2003, due to a wood fiber shortage. Production at the Thunder Bay mill resumed
on July 7, 2003, and wood fiber flows to the mill have returned to normal
levels.
(more)
FINANCIAL HIGHLIGHTS
($ in millions, except per-share amounts)
Three months ended Six months ended
June 30, June 30,
2003 2002 2003 2002
---- ---- ---- ----
Sales $664.1 $646.8 $1,294.6 $1,271.0
------ ------ -------- --------
Net loss $(25.7) $(53.7) $(97.4) $(43.5)
------ ------ ------ ------
Loss per diluted share (In accordance with GAAP) $(0.45) $(0.95) $(1.71) $(0.77)
Special Items, net of tax, (per diluted share)
Sale of assets (gain) loss $(1.13) $(0.04) $(1.25) $(0.79)
Foreign exchange (gain) loss 0.48 0.22 0.85 0.20
Severance charge 0.24 - 0.31 -
Adoption of SFAS 143 - - 0.04 -
-------------------------------------------------
Loss per share excluding special items $(0.86) $(0.77) $(1.76) $(1.36)*
-------------------------------------------------
* Includes a one-time tax benefit of $2.8 million ($0.05 per share)
The company's average newsprint price was $18 per metric ton higher in
the second quarter than the first quarter of 2003. Bowater's average operating
costs per metric ton for newsprint in the second quarter were flat compared to
the first quarter of 2003. The company curtailed approximately 53,000 metric
tons of newsprint production in the second quarter, of which 35,000 were market
related. The Company has informed its North American customers of a $50 per
metric ton newsprint price increase effective August 1, 2003.
Bowater's average transaction price in coated and specialty papers
increased $17 per short ton compared to the first quarter, while average
operating costs per ton for coated groundwood and specialty papers decreased by
4%. Shipments increased by 16% with the start-up of the recently converted
Catawba, South Carolina newsprint machine to lightweight coated groundwood. The
company expects its operating costs per ton in these grades to decline for the
balance of the year due to the start-up of the Catawba machine and reduced labor
costs.
The company's average transaction price for market pulp increased $47
per metric ton compared to the first quarter. During the second quarter, the
company curtailed production by 25,000 metric tons primarily related to wood
fiber and weather related issues. The lower production combined with the strong
Canadian dollar significantly raised the operating costs per ton of production.
Market pulp shipments declined 22% from first quarter levels due to the
production difficulties and weaker demand. As planned, the company expects that
market pulp production will be temporarily curtailed by 31,000 metric tons in
the third quarter primarily due to the replacement of the fiber line at the
Catawba mill and the temporary shut of the Thunder Bay mill.
The operating loss in lumber increased by $4.4 million as compared to
the first quarter as the modest improvement in transaction costs was offset by
an increase in manufacturing costs primarily due to the stronger Canadian
dollar.
(more)
Bowater will hold a management conference call to discuss these
financial results at 9:00 a.m. EDT, July 24, 2003. The conference call number is
800-230-1085 or 612-332-0345 (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 Thursday, July 24, through Tuesday, August 5, on the web site or by
dialing 800-475-6701 or 320-365-3844 (international) and using the access code
690340.
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 13 North American sawmills that produce softwood lumber. Bowater also
operates two facilities that convert a groundwood base sheet to coated products.
Bowater's operations are supported by approximately 1.4 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 Six Months Ended
June 30 June 30
--------------------- ------------------
2003 2002 2003 2002
--------------------- -------------------
Sales $ 664.1 $ 646.8 $ 1,294.6 $ 1,271.0
Cost of sales, excluding depreciation, amortization
and cost of timber harvested 554.1 508.5 1,070.6 979.1
Depreciation, amortization and cost of timber harvested 86.0 86.1 168.5 172.4
Distribution costs 62.4 50.7 124.5 107.2
Selling and administrative expense 34.0 40.4 70.8 75.9
Net gain on sale of assets (1) 104.0 3.5 115.1 75.0
----- --- ----- ----
Operating income (loss) 31.6 (35.4) (24.7) 11.4
Other expense (income):
Interest income (1.4) (1.2) (2.4) (2.2)
Interest expense, net of capitalized interest 42.2 41.3 82.1 83.1
Foreign exchange loss (gain) 5.6 4.6 13.8 3.5
Other, net (3.1) 0.6 (3.0) 1.6
---- --- ---- ---
43.3 45.3 90.5 86.0
---- ---- ---- ----
Loss before income taxes, minority interests
and cumulative effect of accounting change (11.7) (80.7) (115.2) (74.6)
Provision for income tax expense (benefit) 17.6 (22.8) (12.7) (25.3)
Minority interests in the net income (loss) of subsidiaries (3.6) (4.2) (7.2) (5.8)
----- ----- ----- -----
Loss before cumulative effect of accounting change (25.7) (53.7) (95.3) (43.5)
Cumulative effect of accounting change (2) - - (2.1) -
------ ------ ------ ------
Net loss $ (25.7) $ (53.7) $ (97.4) $ (43.5)
======= ======= ======= =======
Basic loss per common share: (3)
Loss before cumulative effect of accounting change $ (0.45) $ (0.95) $ (1.67) $ (0.77)
Cumulative effect of accounting change - - (0.04) -
------- ------- -------- --------
Net loss $ (0.45) $ (0.95) $ (1.71) $ (0.77)
======= ======= ======= =======
Average common shares outstanding (3) 56.9 56.9 56.9 56.8
==== ==== ==== ====
Diluted loss per common share: (3)
Loss before cumulative effect of accounting change $ (0.45) $ (0.95) $ (1.67) $ (0.77)
Cumulative effect of accounting change - - (0.04) -
-------- ------- -------- --------
Net loss $ (0.45) $ (0.95) $ (1.71) $ (0.77)
======= ======= ======= =======
Average common and common equivalent shares outstanding (3) 56.9 56.9 56.9 56.8
==== ==== ==== ====
BOWATER INCORPORATED AND SUBSIDIARIES
(Unaudited, in millions of US dollars)
Consolidated Balance Sheet June 30 December 31
2003 2002
---- ----
Current assets:
Cash and cash equivalents $ 82.7 $ 35.9
Accounts receivable, net 338.4 330.6
Inventories 290.6 257.2
Income tax receivable - 75.6
Other current assets 120.4 35.9
----- ----
Total current assets 832.1 735.2
----- -----
Timber and timberlands 188.2 212.0
Fixed assets, net 3,603.1 3,645.6
Goodwill 828.2 839.9
Other assets 218.9 157.6
----- -----
$ 5,670.5 $ 5,590.3
============= =============
Current liabilities:
Current installments of long-term debt $ 17.6 $ 84.3
Short-term bank debt 111.8 249.0
Accounts payable and accrued liabilities 389.4 411.9
Dividends payable 11.3 11.2
---- ----
Total current liabilities 530.1 756.4
----- -----
Long-term debt, net of current installments 2,293.1 2,037.4
Other long-term liabilities 470.2 450.7
Deferred income taxes 567.0 518.2
Minority interests in subsidiaries 71.3 72.1
Shareholders' equity 1,738.8 1,755.5
------- -------
$ 5,670.5 $ 5,590.3
============= =============
Six Months Ended
June 30
Consolidated Cash Flow --------------------------------------
2003 2002
------------- -------------
Cash flows from (used for) operating activities $ 41.1 $ (23.8)
------------ -------------
Cash flows from (used for) operating activities
Cash invested in fixed assets, timber and timberlands (150.0) (125.0)
Disposition of fixed assets, timber and timberlands 140.3 19.9
Proceeds from monetization of note receivable (1) - 88.1
Cash invested (maturity) of marketable securities, net
- 1.7
------------ -------------
(9.7) (15.3)
---- -----
Cash flows from (used for) financing activities:
Cash dividends, including minority interests (22.4) (26.6)
Financing activities, net 37.6 61.1
Stock options exercised 0.2 6.0
------------- -------------
Other -
------------- -----------
15.4 40.5
---- ----
Net increase in cash and cash equivalents $ 46.8 $ 1.4
============ ============
BOWATER INCORPORATED AND SUBSIDIARIES
Notes to the Press Release and Unaudited Consolidated Financial Statements
(1) During the three and six months ended June 30, 2003, Bowater sold fixed
assets and land resulting in a net pre-tax gain of $104.0 million, or $1.13 per
diluted share after tax, and $115.1 million, or $1.25 per diluted share after
tax, respectively. In the second quarter of 2003, Bowater completed the sale of
81,768 acres of owned and leased timberlands for aggregrate consideration of
$121.8 million. This transaction resulted in a pre-tax gain of approximately
$97.5 million. 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 charges 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 and six months ended June 30, 2003 and 2002, no adjustments to net income
are necessary. The effect of dilutive securities is not included in the
computation for the three and six months ended June 30, 2003 and 2002 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. This measure is not as complete as GAAP
earnings; consequently, investors should rely on GAAP earnings. In addition to
GAAP earnings, we use the other measures that we disclose in order to provide
perspective on our financial performance.
Three Months Ended June 30, 2003
(unaudited, in millions except per share amounts)
Adjustment for Special Items
GAAP as Land & Foreign Severance Adoption GAAP as
reported asset sales exchange of SFAS adjusted for
No.143 Special items
--------------------------------------------------------------------------------
Operating income (loss) $ 31.6 $ (104.0) $ - $ 20.8 $ - $ (51.6)
Foreign exchange loss (gain)
5.6 (5.6) -
Provision for income tax
expense (benefit) 17.6 (39.5) (21.3) 7.3 - (35.9)
Minority interests in the net
income (loss) of subsidiaries (3.6) (0.7) (4.3)
Net income (loss) $ (25.7) $ (64.5) $ 27.6 $ 13.5 $ - $ (49.1)
================================================================================
Shares
56.9 56.9 56.9 56.9 - 56.9
================================================================================
EPS $ (0.45) $ (1.13) $ 0.48 $ 0.24 $ - $ (0.86)
================================================================================
Effective tax rate -149.4% 38.0% -376.6% 35.0% - 40.3%
================================================================================
Three Months Ended June 30, 2002
(unaudited, in millions except per share amounts)
Adjustment for Special Items
GAAP as Land & Foreign Severance Adoption GAAP as
reported asset sales exchange of SFAS adjusted for
No.143 Special items
--------------------------------------------------------------------------------
Operating income (loss) $ (35.4) $ (3.5) $ - $ - $ - $ (38.9)
Foreign exchange loss (gain) 4.6 (4.6) -
Provision for income tax
expense (benefit) (22.8) (1.3) (8.0) (32.1)
Minority interests in the net
income (loss) of subsidiaries (4.2) - (4.2)
Net income (loss) $ (53.7) $ (2.2) $ 12.6 $ - $ - $ (43.3)
================================================================================
Shares 56.9 56.9 56.9 - - 56.9
================================================================================
EPS $ (0.95) $ (0.04) $ 0.22 $ - $ - $ (0.77)
================================================================================
Effective tax rate 28.1% 38.0% -171.7% - - 40.2%
================================================================================
Six Months Ended June 30, 2003
(unaudited, in millions except per share amounts)
Adjustment for Special Items
GAAP as Land & Foreign Severance Adoption GAAP as
reported asset sales exchange of SFAS adjusted for
No.143 Special items
-----------------------------------------------------------------------------
Operating income (loss) $ (24.7) $ (115.1) $ - $ 27.5 $ - $ (112.3)
Foreign exchange loss (gain) 13.8 (13.8) -
Provision for income tax
expense (benefit) (12.7) (43.7) (33.6) 9.9 (80.1)
Minority interests in the net
income (loss) of subsidiaries (7.2) (1.3) (8.5)
Cumulative effect of
accounting change (2.1) 2.1 -
Net income (loss) $ (97.4) $ (71.4) $ 48.7 $ 17.6 $ 2.1 $ (100.4)
================================================================================
Shares 56.9 56.9 56.9 56.9 56.9 56.9
================================================================================
EPS $ (1.71) $ (1.25) $ 0.85 $ 0.31 $ 0.04 $ (1.76)
================================================================================
Effective tax rate 29.3% 38.0% -150.0% 36.0% 38.0% 42.4%
================================================================================
Six Months Ended June 30, 2002
(unaudited, in millions except per share amounts)
Adjustment for Special Items
GAAP as Land & Foreign Severance Adoption GAAP as
reported asset sales exchange of SFAS adjusted for
No.143 Special items
--------------------------------------------------------------------------------
Operating income (loss) $ 11.4 $ (75.0) $ - $ - $ - $ (63.6)
Foreign exchange loss (gain) 3.5 (3.5) -
Provision for income tax
expense (benefit) (25.3) (30.3) (7.8) (63.4)
Minority interests in the net
income (loss) of subsidiaries (5.8) - (5.8)
Net income (loss) $ (43.5) $ (44.7) $ 11.3 $ - $ - $ (76.9)
================================================================================
Shares 56.8 56.8 56.8 - - 56.8
================================================================================
EPS $ (0.77) $ (0.79) $ 0.20 $ - $ - $ (1.36)
================================================================================
Effective tax rate 29.3% 38.0% -150.0% - - 43.4%
================================================================================
A schedule of historical financial and operating statistics is available
upon request and on Bowater's web site (www.bowater.com).