Exhibit 99.1
Media Contact:
Gordon R. Manuel
864-282-9448
Analyst contact:
William G. Harvey
864-282-9413
FOR IMMEDIATE RELEASE
THURSDAY, OCTOBER 30, 2003
BOWATER ANNOUNCES THIRD QUARTER 2003
FINANCIAL RESULTS
GREENVILLE, SC - Bowater Incorporated (NYSE: BOW) reported a net loss of
$56.7 million or $1.00 per diluted share, on sales of $690.9 million for the
third quarter of 2003. These results compare with a net loss of $32.3 million,
or $0.57 per diluted share, on sales of $643.8 million in the third quarter of
2002. Before special items, the net loss for the third quarter of 2003 was $51.7
million, or $0.91 per diluted share, compared with the 2002 third quarter net
loss before special items of $45.4 million, or $0.80 per diluted share.
Third quarter 2003 special items, net of tax, consisted of a $2.6 million
gain related to asset sales, a severance charge of $3.1 million, a $2.1 million
charge resulting from foreign currency changes and a non-cash charge of $2.4
million for a cumulative effect adjustment for the partial adoption of Financial
Accounting Standards Board, Financial Interpretation No. 46, Consolidation of
Variable Interest Entities. Special items, net of tax, in the third quarter of
2002 consisted of a $3.0 million gain related to asset sales and a $10.1 million
gain resulting from foreign currency changes.
"Improvements in newsprint, coated paper and lumber prices were offset by
lower market pulp pricing and the one-time impact of shutting high-cost machines
and starting up new production facilities at the Catawba, South Carolina mill,"
said Arnold M. Nemirow, Chairman, President and Chief Executive Officer. "These
costs have abated and we expect pricing improvements to continue in our major
product lines."
(more)
FINANCIAL HIGHLIGHTS
($ in millions, except per-share amounts)
Three months ended Nine months ended
September 30, September 30,
2003 2002 2003 2002
---- ----- ---- ----
Sales $690.9 $643.8 $1,985.5 $1,914.8
Net loss $(56.7) $(32.3) $(154.1) $(75.8)
Loss per diluted share (In accordance with GAAP) $(1.00) $(0.57) $(2.71) $(1.33)
Special Items, net of tax, (per diluted share):
Sale of assets (gain) loss $(0.04) $(0.05) $(1.30) $(0.84)
Foreign exchange (gain) loss $ 0.04 $(0.18) $ 0.89 $(0.02)
Severance charge $ 0.05 - $ 0.36 -
Adoption of new accounting standards $ 0.04 - $ 0.08 -
----------------------------------------------------
Loss per share excluding special items $(0.91) $(0.80) $(2.68) $(2.19)
----------------------------------------------------
General economic indicators continue to improve across many sectors of the
economy but have yet to translate into meaningful improvements in newsprint
consumption. However, the company's average newsprint price did rise $7 per
metric ton while shipments decreased 3% compared to the second quarter of 2003.
Compared to the second quarter, operating costs per ton increased due to
one-time charges associated with the shift of newsprint downtime to the Thunder
Bay, Ontario mill from the Calhoun, Tennessee mill. The company curtailed
approximately 60,000 metric tons of newsprint production in the third quarter.
Bowater's average transaction price in coated and specialty papers was
unchanged compared to the second quarter of 2003 while shipments rose slightly.
Costs per ton for coated and specialty papers rose by 2% in the third quarter
compared to the second quarter of 2003. We expect modest coated and specialty
price improvements as we enter the seasonally stronger fourth quarter.
The company's average transaction price for market pulp decreased $30 per
metric ton compared to the second quarter of 2003. Market pulp shipments
improved 15% from unusually low levels in the second quarter. The company
implemented a $15 per metric ton price increase for North American customers on
October 1 and expects an additional $15 per metric ton increase effective
November 1. During the third quarter, the company's production was reduced by
approximately 20,000 metric tons due to the start-up of the fiber line at the
Catawba mill and the previously announced shut of the Thunder Bay mill due to a
temporary wood fiber shortage. Bowater's average operating costs per metric ton
for market pulp in the third quarter decreased 5% compared to the to the second
quarter of 2003. Scheduled recovery boiler maintenance outages at the Coosa
Pines and Thunder Bay mills in the fourth quarter are expected to reduce pulp
production by 14,000 metric tons and increase maintenance expense by
approximately $8 million.
(more)
Bowater will hold a management conference call to discuss these financial
results at 10:00 a.m. EST, October 30, 2003. The conference call number is
888-428-4474 or 651-291-0618 (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.
EST on Thursday, October 30, through Thursday, November 6, on the web site or by
dialing 800-475-6701 or 320-365-3844 (international) and using the access code
700148.
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 quarterly report on Form 10-Q for the quarter ended June 30, 2003, and
from time to time, in Bowater's other filings with the Securities and Exchange
Commission. Information about industry or general economic conditions contained
in this press release is derived from third party sources that the company
believes are widely accepted and accurate; however, the company has not
independently verified this information and cannot assure its accuracy.
# # #
BOWATER INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited, in millions except per share amounts)
Three Months Ended Nine Months Ended
September 30 September 30
----------------------- -------------------------
2003 2002 2003 2002
---- ---- ---- ----
Sales $ 690.9 $ 643.8 $ 1,985.5 $ 1,914.8
Cost of sales, excluding depreciation, amortization
and cost of timber harvested 556.3 516.4 1,626.9 1,495.5
Depreciation, amortization and cost of timber harvested 84.5 84.4 253.0 256.8
Distribution costs 69.2 61.2 193.7 168.4
Selling and administrative expense 36.9 23.3 107.7 99.2
Net gain on sale of assets (1) 4.1 4.8 119.2 79.8
--- --- ----- ----
Operating loss (51.9) (36.7) (76.6) (25.3)
Other expense (income):
Interest income (1.1) (1.0) (3.5) (3.2)
Interest expense, net of capitalized interest 45.8 39.7 127.9 122.8
Foreign exchange loss (gain) 2.1 (8.9) 15.9 (5.4)
Other, net (2.4) 0.4 (5.4) 2.0
----- --- ----- ---
44.4 30.2 134.9 116.2
---- ---- ----- -----
Loss before income taxes, minority interests
and cumulative effect of accounting changes (96.3) (66.9) (211.5) (141.5)
Provision for income tax benefit (39.7) (34.8) (52.4) (60.1)
Minority interests in the net income (loss) of subsidiaries (2.3) 0.2 (9.5) (5.6)
---- --- ---- ----
Loss before cumulative effect of accounting changes (54.3) (32.3) (149.6) (75.8)
Cumulative effect of accounting changes (2) (2.4) - (4.5) -
------ ------ ------- ------
Net loss $ (56.7) $ (32.3) $ (154.1) $ (75.8)
======= ======= ======== =======
Basic loss per common share: (3)
Loss before cumulative effect of accounting changes $ (0.96) $ (0.57) $ (2.63) $ (1.33)
Cumulative effect of accounting changes (0.04) - (0.08) -
-------- -------- ---------- --------
Net loss $ (1.00) $ (0.57) $ (2.71) $ (1.33)
========= ======== ========== =========
Average common shares outstanding (3) 56.9 56.9 56.9 56.9
========= ========= ========== ==========
Diluted loss per common share: (3)
Loss before cumulative effect of accounting changes $ (0.96) $ (0.57) $ (2.63) $ (1.33)
Cumulative effect of accounting changes (0.04) - (0.08) -
--------- --------- ----------- ----------
Net loss $ (1.00) $ (0.57) $ (2.71) $ (1.33)
========= ========= =========== ==========
Average common and common equivalent shares outstanding (3) 56.9 56.9 56.9 56.9
========= ========= =========== ==========
BOWATER INCORPORATED AND SUBSIDIARIES
(Unaudited, in millions of US dollars)
Consolidated Balance Sheet September 30 December 31
2003 2002
---- ----
Current Assets:
Cash and cash equivalents $ 18.1 $ 35.9
Accounts receivable, net 359.6 330.6
Inventories 288.4 257.2
Income tax receivable - 75.6
Other current assets 129.2 35.9
--------- -------------
Total current assets 795.3 735.2
--------- -------------
Timber and timberlands 184.4 212.0
Fixed assets, net 3,603.9 3,645.6
Goodwill 828.2 839.9
Other assets 212.1 157.6
--------- -------------
$ 5,623.9 $ 5,590.3
========= =============
Current liabilities:
Current installments of long-term debt $ 17.5 $ 84.3
Short-term bank debt 158.0 249.0
Accounts payable and accrued liabilities 413.5 411.9
Dividends payable 11.6 11.2
--------- -------------
Total current liabilities 600.6 756.4
--------- ------------
Long-term debt, net of current installments 2,290.6 2,037.4
Other long-term liabilities 472.3 450.7
Deferred income taxes 524.7 518.2
Minority interests in subsidiaries 68.8 72.1
Shareholders' equity 1,666.9 1,755.5
--------- ------------
$ 5,623.9 $ 5,590.3
========= =============
Nine Months Ended
Consolidated Cash Flow September 30
-------------------------------------
2003 2002
---- ----
Cash flows from operating activities $ 24.5 $ 41.7
-------- ----------
Cash flows from (used for) investing activities:
Cash invested in fixed assets, timber and timberlands (186.5) (190.2)
Disposition of fixed assets, timber and timberlands 146.1 24.7
Proceeds from monetization of note receivable (1) - 88.1
Cash invested (maturity) of marketable securities, net - 1.7
--------- ---------
(40.4) (75.7)
--------- ---------
Cash flows from (used for) financing activities:
Cash dividends, including minority interests (33.8) (38.4)
Financing activities, net 31.2 64.0
Stock options exercised 0.7 6.8
--------- ---------
(1.9) 32.4
--------- ---------
Net decrease in cash and cash equivalents $ (17.8) $ (1.6)
========== =========
BOWATER INCORPORATED AND SUBSIDIARIES
Notes to the Press Release and Unaudited Consolidated Financial Statements
(1)During the three and nine months ended September 30, 2003, Bowater sold
fixed assets and land resulting in a net pre-tax gain of $4.1 million, or $0.04
per diluted share after tax, and $119.2 million, or $1.30 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 aggregate 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 July 1, 2003, Bowater early adopted, on a partial basis,
Financial Accounting Standards Board's Financial Interpretation (FIN) No. 46,
Consolidation of Variable Interest Entities. In general, a variable interest
entity is a corporation, partnership, trust, or any other legal structure used
for business purposes that either (a) does not have equity investors with voting
rights or (b) has equity investors that do not provide sufficient financial
resources for the entity to support its activities. Fin. No. 46 requires a
variable interest entity to be consolidated by a company if that company is
subject to a majority of the risk of loss from the variable interest entity's
activities or entitled to receive a majority of the entity's residual returns or
both. Many variable interest entities have commonly been referred to as
special-purpose entities (SPE) or off-balance sheet structures. Bowater operated
the Covington coating facility under an operating lease with a special purpose
entity. This special purpose entity was determined to be a VIE and required to
be consolidated by Bowater in accordance with FIN 46. Bowater early adopted FIN
No. 46 for the Covington SPE effective July 1, 2003 and consolidated assets and
debt of approximately $51.8 million and recorded a non-cash, after tax
cumulative effect charge of $2.4 million, or $0.04 per diluted share in the
third quarter of 2003. On August 11, 2003, Bowater terminated the lease
agreement with the SPE and paid approximately $51.8 million to pay off the debt.
Bowater will finalize its adoption of FIN No. 46 in the fourth quarter of 2003
and is currently evaluating other potential VIEs in accordance with FIN No. 46.
We do not expect the finalization of adoption of FIN No. 46 to have a material
impact on our consolidated financial statements.
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 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 nine months ended September 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 nine months ended September 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 September 30, 2003
(unaudited, in millions except per share amounts)
Adjustment for Special Items
Adoption of
new GAAP as
GAAP as Land & asset Foreign accounting adjusted for
reported sales exchange Severance standards Special Items
----------------------------------------------------------------------------
Operating income (loss) $ (51.9) $ (4.1) $ - $ 4.7 $ - $ (51.3)
Other expense (income)
Interest income (1.1) (1.1)
Interest expense, net of capitalized interest 45.8 45.8
Foreign exchange loss (gain) 2.1 (2.1) -
Other, net (2.4) (2.4)
------------------------------------------------------------------------
44.4 - (2.1) - - 42.3
------------------------------------------------------------------------
Loss before income taxes, minority interests and
cumulative effect of accounting changes (96.3) (4.1) 2.1 4.7 - (93.6)
Provision for income tax expense (benefit) (39.7) (1.5) 0.1 1.6 - (39.5)
Minority interests in the net income(loss)of subsidiaries (2.3) (0.1) (2.4)
------------------------------------------------------------------------
Income (loss) before cumulative effect of accounting
changes (54.3) (2.6) 2.1 3.1 - (51.7)
Cumulative effect of accounting changes (2.4) 2.4 -
-------------------------------------------------------------------------
Net income (loss) $ (56.7) $ (2.6) $ 2.1 $ 3.1 $ 2.4 $ (51.7)
-------------------------------------------------------------------------
Shares 56.9 56.9 56.9 56.9 56.9 56.9
--------------------------------------------------------------------------
EPS $ (1.00) $ (0.04) $ 0.04 $ 0.05 $ 0.04 $ (0.91)
--------------------------------------------------------------------------
Effective tax rate 41.2% 38.0% 4.8% 34.0% - 42.2%
--------------------------------------------------------------------------
Three Months Ended September 30, 2002
(unaudited, in millions except per share amounts)
Adjustment for Special Items
Adoption of
new GAAP as
GAAP as Land & asset Foreign accounting adjusted for
reported sales exchange Severance standards Special Items
----------------------------------------------------------------------------
Operating income (loss) $ (36.7) $ (4.8) $ - $ - $ - $ (41.5)
Other expense (income)
Interest income (1.0) (1.0)
Interest expense, net of capitalized interest 39.7 39.7
Foreign exchange loss (gain) (8.9) 8.9 -
Other, net 0.4 0.4
----------------------------------------------------------------------------
30.2 - 8.9 - - 39.1
---------------------------------------------------------------------------
Loss before income taxes, minority interests
and cumulative effect of accounting changes (66.9) (4.8) (8.9) - - (80.6)
Provision for income tax expense (benefit) (34.8) (1.8) 2.7 (33.9)
Minority interests in the net income(loss)of subsidiaries 0.2 (1.5) (1.3)
--------------------------------------------------------------------------
Income(loss)before cumulative effect of accounting changes (32.3) (3.0) (10.1) - - (45.4)
Cumulative effect of accounting changes -
---------------------------------------------------------------------------
Net income (loss) $ (32.3) $ (3.0) $(10.1) $ - $ - $ (45.4)
---------------------------------------------------------------------------
Shares 56.9 56.9 56.9 - - 56.9
---------------------------------------------------------------------------
EPS $ (0.57) $ (0.05) $(0.18) $ - $ - $ (0.80)
----------------------------------------------------------------------------
Effective tax rate 52.0% 38.0% -30.3% - - 42.1%
---------------------------------------------------------------------------
Nine Months Ended September 30, 2003
(unaudited, in millions except per share amounts)
Adjustment for Special Items
Adoption of
new GAAP as
GAAP as Land & asset Foreign accounting adjusted for
reported sales exchange Severance standards Special Items
---------------------------------------------------------------------------
Operating income (loss) $ (76.6) $ (119.2) $ - $ 32.2 $- $ (163.6)
Other expense (income)
Interest income (3.5) (3.5)
Interest expense, net of capitalized interest 127.9 127.9
Foreign exchange loss (gain) 15.9 (15.9) -
Other, net (5.4) (5.4)
-------------------------------------------------------------------------
134.9 - (15.9) - - 119.0
-------------------------------------------------------------------------
Loss before income taxes, minority interests and
cumulative effect of accounting changes (211.5) (119.2) 15.9 32.2 - (282.6)
Provision for income tax expense (benefit) (52.4) (45.3) (33.4) 11.5 (119.6)
Minority interests in the net income(loss)of subsidaries (9.5) (1.4) (10.9)
-------------------------------------------------------------------------
Income(loss)before cumulative effect of accounting changes (149.6) (73.9) 50.7 20.7 - (152.1)
Cumulative effect of accounting changes (4.5) 4.5 -
--------------------------------------------------------------------------
Net income (loss) $ (154.1) $ (73.9) $ 50.7 $ 20.7 $ 4.5 $ (152.1)
--------------------------------------------------------------------------
Shares 56.9 56.9 56.9 56.9 56.9 56.9
--------------------------------------------------------------------------
EPS $ (2.71) $ (1.30) $ 0.89 $ 0.36 $ 0.08 $ (2.68)
--------------------------------------------------------------------------
Effective tax rate 24.8% 38.0% -210.1% 35.7% - 42.3%
-------------------------------------------------------------------------
Nine Months Ended September 30, 2002
(unaudited, in millions except per share amounts)
Adjustment for Special Items
Adoption of
new GAAP as
GAAP as Land & asset Foreign accounting adjusted for
reported sales exchange Severance standards Special Items
----------------------------------------------------------------------------
Operating income (loss) $ (25.3) $ (79.8) $ - $ - $ - $ (105.1)
Other expense (income)
Interest income (3.2) (3.2)
Interest expense, net of capitalized interest 122.8 122.8
Foreign exchange loss (gain) (5.4) 5.4 -
Other, net 2.0 2.0
-------------------------------------------------------------------------
116.2 - 5.4 - - 121.6
-------------------------------------------------------------------------
Loss before income taxes, minority interests and
cumulative effect of accounting changes (141.5) (79.8) (5.4) - - (226.7)
Provision for income tax expense (benefit) (60.1) (32.1) (5.1) (97.3)
Minority interests in the net income (loss) of subsidiaries (5.6) 0.6 (5.0)
------------------------------------------------------------------------
Income(loss)before cumulative effect of accounting changes (75.8) (47.7) (0.9) - - (124.4)
Cumulative effect of accounting changes - -
------------------------------------------------------------------------
Net income (loss) $ (75.8) $ (47.7) $ (0.9) $ - $ - $(124.4)
------------------------------------------------------------------------
Shares 56.9 56.9 56.9 - - 56.9
------------------------------------------------------------------------
EPS $ (1.33) $ (0.84) $(0.02) $ - $ - $ (2.19)
------------------------------------------------------------------------
Effective tax rate 42.5% 40.2% 94.4% - - 42.9%
------------------------------------------------------------------------
A schedule of historical financial and operating statistics is available
upon request and on Bowater's web site (www.bowater.com).