Exhibit 99.1
Analyst & Media Contact:
William G. Harvey
864-282-9413
FOR IMMEDIATE RELEASE
Friday, July 30, 2004
BOWATER ANNOUNCES SECOND QUARTER 2004
FINANCIAL RESULTS
GREENVILLE, SC - Bowater Incorporated (NYSE: BOW) reported a net loss of
$1.3 million or $0.02 per diluted share, on sales of $788.0 million for the
second quarter of 2004. These results compare with a net loss of $25.7 million,
or $0.45 per diluted share, on sales of $664.1 million in the second quarter of
2003. Before special items, the net loss for the second quarter of 2004 was
$14.9 million, or $0.26 per diluted share, compared with the 2003 second quarter
net loss before special items of $49.1 million, or $0.86 per diluted share.
Second quarter 2004 special items, net of tax, consisted of a $3.2 million
gain related to asset sales, and a $10.4 million gain resulting from foreign
currency changes. Special items, net of tax, in the second quarter of 2003
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.
FINANCIAL HIGHLIGHTS
(In millions, except per-share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------- --------------------------------
2004 2003 2004 2003
------------------------------- --------------------------------
Sales $ 788.0 $ 664.1 $ 1,533.3 $ 1,294.6
Net loss $ (1.3) $ (25.7) $ (33.8) $ (97.4)
Loss per diluted share (in accordance with GAAP) $ (0.02) $ (0.45) $ (0.59) $ (1.71)
Special items, net of tax (per diluted share):
Sale of assets (gain) loss $ (0.06) $ (1.13) $ (0.05) $ (1.25)
Foreign exchange (gain) loss (0.18) 0.48 (0.17) 0.85
Severance charge - 0.24 - 0.31
Adoption of SFAS 143 - - - 0.04
------------------------------- --------------------------------
Loss per share excluding special items $ (0.26) $ (0.86) $ (0.81) $ (1.76)
------------------------------- --------------------------------
(more)
"I am pleased with the improvement in our operating income and cash flow in
the second quarter," said Arnold M. Nemirow, Chairman, President and Chief
Executive Officer. "Overall, our customers' businesses are healthier, and there
is positive momentum in pricing for our products. We expect further improvement
in operating results throughout the balance of the year."
The company's average newsprint price rose $20 per metric ton while
shipments decreased 5% compared to the first quarter of 2004. Shipments were
lower primarily due to maintenance downtime and the continuing shift from
newsprint to groundwood specialties production at our facilities. During the
second quarter, the company curtailed 36,000 metric tons of newsprint production
and took 17,000 metric tons of maintenance related downtime. The company has
informed its North American customers of a $50 per metric ton price increase
effective September 1, 2004.
Bowater's average transaction price for coated and specialty papers
increased $14 per short ton compared to the first quarter of 2004 while
shipments rose 12%. Costs per ton for coated and specialty papers decreased by
3% in the second quarter compared to the first quarter of 2004. In the second
quarter, specialty paper shipments increased by 36,000 tons compared to the
first quarter. We are now informing our customers of a $60 price increase per
ton on all of our coated and SC grades, as well as our higher bright book and
select grades. These prices will become effective September 1, 2004. Uncoated
book and select grades (75 bright and below) will increase $45 per ton at the
same time.
Bowater's average market pulp transaction price rose $49 per metric ton,
compared to the first quarter, while shipments decreased 8% due to annual
maintenance outages at several facilities. As a result of the outages, market
pulp production was reduced by 19,000 metric tons. Bowater's average operating
costs per metric ton for market pulp in the second quarter increased 7% compared
to the first quarter as a result of lower production and the increased
maintenance spending.
The company's average transaction price for lumber increased $50 per
thousand board feet while shipments increased 8% compared to the first quarter
of 2004. The impact of the lumber price increase was tempered by the duties
imposed on lumber shipped from Canada into the U.S.
Bowater will hold a management conference call to discuss these financial
results at 10:00 a.m. EDT, July 30, 2004. The conference call number is
888-428-4474 or 612-332-0228 (international). The call will also be broadcast
via the Internet. Interested parties may connect to the Bowater website 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 Friday, July 30, through Friday, August 6, on the website or by dialing
800-475-6701 or 320-365-3844 (international) and using the access code 738638.
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 30 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).
(more)
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, 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 Six Months Ended
June 30, June 30,
-------------------------------- -------------------------------
2004 2003 2004 2003
------------- --------------- -------------- --------------
Sales $ 788.0 $ 664.1 $ 1,533.3 $ 1,294.6
Cost of sales, excluding depreciation, amortization
and cost of timber harvested 577.3 554.1 1,144.8 1,070.6
Depreciation, amortization and cost of timber harvested 84.9 86.0 171.1 168.5
Distribution costs 79.4 62.4 156.4 124.5
Selling and administrative expense 31.8 34.0 68.8 70.8
Net gain on fixed assets and land sales(1) 5.1 104.0 4.2 115.1
Operating income (loss) -------------- --------------- -------------- --------------
19.7 31.6 (3.6) (24.7)
Other expense (income):
Interest income (1.1) (1.4) (2.1) (2.4)
Interest expense, net of capitalized interest 49.9 42.2 98.1 82.1
Foreign exchange (gain) loss (1.7) 5.6 (1.3) 13.8
Other, net (2.2) (3.1) (3.8) (3.0)
-------------- --------------- -------------- --------------
44.9 43.3 90.9 90.5
-------------- --------------- -------------- --------------
Loss before income taxes, minority interests
and cumulative effect of accounting changes (25.2) (11.7) (94.5) (115.2)
Provision for income tax (benefit) expense (22.9) 17.6 (56.7) (12.7)
Minority interests in the net loss of subsidiaries (1.0) (3.6) (4.0) (7.2)
-------------- --------------- -------------- --------------
Loss before cumulative effect of accounting changes (1.3) (25.7) (33.8) (95.3)
Cumulative effect of accounting changes (2) - - - (2.1)
-------------- --------------- -------------- --------------
Net loss $ (1.3) $ (25.7) $ (33.8) $ (97.4)
============== =============== ============== ==============
Basic loss per common share: (3)
Loss before cumulative effect of accounting changes $ (0.02) $ (0.45) $ (0.59) $ (1.67)
Cumulative effect of accounting changes - - - (0.04)
-------------- --------------- -------------- --------------
Net loss $ (0.02) $ (0.45) $ (0.59) $ (1.71)
============== =============== ============== ==============
Average common shares outstanding (3) 57.2 56.9 57.1 56.9
============== =============== ============== ==============
Diluted loss per common share: (3)
Loss before cumulative effect of accounting changes $ (0.02) $ (0.45) $ (0.59) $ (1.67)
Cumulative effect of accounting changes - - - (0.04)
-------------- --------------- -------------- --------------
Net loss $ (0.02) $ (0.45) $ (0.59) $ (1.71)
============== =============== ============== ==============
Average common and common equivalent shares outstanding (3) 57.2 56.9 57.1 56.9
============== =============== ============== ==============
BOWATER INCORPORATED AND SUBSIDIARIES
(Unaudited, in millions of US dollars)
Consolidated Balance Sheet June 30, December 31,
2004 2003
------------------ --------------------
Current assets:
Cash and cash equivalents $ 34.2 $ 19.4
Accounts receivable, net 397.0 360.9
Inventories 286.9 293.1
Other current assets 129.5 169.6
-------------------- ------------------
Total current assets 847.6 843.0
-------------------- ------------------
Timber and timberlands 183.0 184.1
Fixed assets, net 3,412.4 3,557.3
Goodwill 828.2 828.2
Other assets 181.5 203.2
-------------------- -----------------
$ 5,452.7 $ 5,615.8
==================== ==================
Current liabilities:
Current installments of long-term debt $ 13.1 $ 13.4
Short-term bank debt 115.8 200.5
Accounts payable and accrued liabilities 420.1 434.1
Dividends payable 11.4 11.7
-------------------- -----------------
Total current liabilities 560.4 659.7
-------------------- -----------------
Long-term debt, net of current installments 2,421.6 2,292.4
Pension, other postretirement benefits and other long-term liabilities 494.3 481.4
Deferred income taxes 402.3 500.3
Minority interests in subsidiaries 64.4 69.3
Shareholders' equity 1,509.7 1,612.7
-------------------- ------------------
$ 5,452.7 $ 5,615.8
==================== ==================
Six Months Ended
Consolidated Cash Flow June 30,
---------------------------------------------
2004 2003
-------------------- -----------------
Cash flows (used for) from operating activities $ 21.7 $ 41.1
-------------------- -----------------
Cash flows from (used for) investing activities:
Cash invested in fixed assets, timber and timberlands (38.9) (150.0)
Disposition of fixed assets, timber and timberlands 7.3 140.3
------------------- ------------------
(31.6) (9.7)
------------------- ------------------
Cash flows from (used for) financing activities:
Cash dividends, including minority interests (23.2) (22.8)
Financing activities, net 47.4 37.6
Stock options exercised 5.2 0.2
Other (4.7) 0.4
-------------------- -----------------
24.7 15.4
-------------------- --------------------
Net increase in cash and cash equivalents $ 14.8 $ 46.8
==================== ====================
BOWATER INCORPORATED AND SUBSIDIARIES
Notes to the Press Release and Unaudited Consolidated Financial Statements
(1)During the three and six months ended June 30, 2004, Bowater recorded a net
pre-tax gain of $5.1 million, or $0.06 per diluted share after tax and $
4.2 million, or $0.05 per diluted share after tax, respectively, related to
land sales and gains or losses on fixed assets. During the three and six
months ended June 30, 2003, Bowater recorded 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, related to land sales and gains
or losses on fixed assets. 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.
(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 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 month periods ended June 30, 2004 and 2003, no adjustments to net
income (loss) are necessary. The effect of dilutive securities is not
included in the computation for the three and six month periods ended June
30, 2004 and 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. 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, 2004
(unaudited, in millions except per share amounts)
Adjustment for Special Items
Adoption of
Land sales new GAAP as
GAAP as & fixed Foreign accounting adjusted for
reported assets exchange Severance standard Special items
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Operating income (loss) $ 19.7 $ (5.1) $ - $ - $ - $ 14.6
Other expense (income)
Interest income (1.1) - - - - (1.1)
Interest expense, net of capitalized interest 49.9 - - - - 49.9
Foreign exchange loss (gain) (1.7) - 1.7 - - -
Other, net (2.2) - - - - (2.2)
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44.9 - 1.7 - - 46.6
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Loss before income taxes, minority interests
and cumulative effect of accounting changes (25.2) (5.1) (1.7) - - (32.0)
Provision for income tax expense (benefit) (22.9) (1.9) 8.5 - - (16.3)
Minority interests in the net income (loss)
of subsidiaries (1.0) - 0.2 - - (0.8)
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Income (loss) before cumulative effect of
accounting changes (1.3) (3.2) (10.4) - - (14.9)
Cumulative effect of accounting changes - - - - - -
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Net income (loss) $ (1.3) $ (3.2) $ (10.4) $ - $ - $ (14.9)
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Shares 57.2 57.2 57.2 - - 57.2
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EPS $ (0.02) $ (0.06) $ (0.18) $ - $ - $ (0.26)
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Effective tax rate 90.9% 37.3% -500.0% - - 50.9%
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Three Months Ended June 30, 2003
(unaudited, in millions except per share amounts)
Adjustment for Special Items
Adoption of
Land sales new
GAAP as & Fixed Foreign accounting GAAP as adjusted
reported assets exchange Severance standards for Special items
----------------------------------------------------------------------
Operating income (loss) $ 31.6 $ (104.0) $ - $ 20.8 $ - $ (51.6)
Other expense (income)
Interest income (1.4) - - - - (1.4)
Interest expense, net of capitalized interest 42.2 - - - - 42.2
Foreign exchange loss (gain) 5.6 - (5.6) - - -
Other, net (3.1) - - - - (3.1)
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43.3 - (5.6) - - 37.7
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Loss before income taxes, minority interests
and cumulative effect of accounting changes (11.7) (104.0) 5.6 20.8 - (89.3)
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)
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Income (loss) before cumulative effect
of accounting changes (25.7) (64.5) 27.6 13.5 - (49.1)
Cumulative effect of accounting changes - - - - - -
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Net income (loss) $ (25.7) $ (64.5) $ 27.6 $ 13.5 $ - $ (49.1)
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Shares 56.9 56.9 56.9 56.9 - 56.9
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EPS $ (0.45) $ (1.13) $ 0.48 $ 0.24 $ - $ (0.86)
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Effective tax rate -150.4% 38.0% -380.4% 35.1% - 40.2%
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Six Months Ended June 30, 2004
(unaudited, in millions except per share amounts)
Adjustment for Special Items
Adoption of
Land sales new
GAAP as & Fixed Foreign accounting GAAP as adjusted
reported assets exchange Severance standards for Special items
----------------------------------------------------------------------
Operating income (loss) $ (3.6) $ (4.2) $ - $ - $ - $ (7.8)
Other expense (income)
Interest income (2.1) - - - - (2.1)
Interest expense, net of capitalized interest 98.1 - - - - 98.1
Foreign exchange loss (gain) (1.3) - 1.3 - - -
Other, net (3.8) - - - - (3.8)
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90.9 - 1.3 - - 92.2
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Loss before income taxes, minority interests
and cumulative effect of accounting changes (94.5) (4.2) (1.3) - - (100.0)
Provision for income tax expense (benefit) (56.7) (1.6) 8.4 (49.9)
Minority interests in the net income (loss)
of subsidiaries (4.0) - 0.2 - - (3.8)
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Income (loss) before cumulative effect of
accounting changes (33.8) (2.6) (9.9) - - (46.3)
Cumulative effect of accounting changes - - - - - -
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Net income (loss) $ (33.8) $ (2.6) $ (9.9) $ - $ - $ (46.3)
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Shares 57.1 57.1 57.1 - - 57.1
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EPS $ (0.59) $ (0.05) $ (0.17) $ - $ - $ (0.81)
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Effective tax rate 60.0% 38.1% -646.2% - - 49.9%
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Six Months Ended June 30, 2003
(unaudited, in millions except per share amounts)
Adjustment for Special Items
Adoption of
Land sales new
GAAP as & Fixed Foreign accounting GAAP as adjusted
reported assets exchange Severance standards for Special items
----------------------------------------------------------------------
Operating income (loss) $ (24.7) $ (115.1) $ - $ 27.5 $ - $ (112.3)
Other expense (income)
Interest income (2.4) - - - - (2.4)
Interest expense, net of capitalized interest 82.1 - - - - 82.1
Foreign exchange loss (gain) 13.8 - (13.8) - - -
Other, net (3.0) - - - - (3.0)
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90.5 - (13.8) - - 76.7
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Loss before income taxes, minority interests
and cumulative effect of accounting changes (115.2) (115.1) 13.8 27.5 - (189.0)
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)
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Income (loss) before cumulative effect of
accounting changes (95.3) (71.4) 48.7 17.6 - (100.4)
Cumulative effect of accounting changes (2.1) - - - 2.1 -
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Net income (loss) $ (97.4) $ (71.4) $ 48.7 $ 17.6 $ 2.1 $ (100.4)
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Shares 56.9 56.9 56.9 56.9 56.9 56.9
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EPS $ (1.71) $ (1.25) $ 0.85 $ 0.31 $ 0.04 $ (1.76)
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Effective tax rate 11.0% 38.0% -243.5% 36.0% - 42.4%
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A schedule of historical financial and operating statistics is available
upon request and on Bowater's web site (www.bowater.com)