EXHIBIT 99.1
Media Contact:
Gordon R. Manuel
864-282-9448
Analyst Contact:
Duane A. Owens
864-282-9488
FOR IMMEDIATE RELEASE
Thursday, January 27, 2005
BOWATER ANNOUNCES FOURTH QUARTER AND FULL YEAR 2004
FINANCIAL RESULTS
GREENVILLE, SC - Bowater Incorporated (NYSE: BOW) reported a net loss of
$33.3 million, or $0.58 per diluted share, on sales of $823.0 million for the
fourth quarter of 2004. These results compare with a net loss of $50.9 million,
or $0.89 per diluted share, on sales of $735.6 million in the fourth quarter of
2003. Before special items, the net loss for the fourth quarter of 2004 was
$24.7 million, or $0.43 per diluted share, compared with the 2003 fourth quarter
net loss before special items of $39.5 million, or $0.69 per diluted share.
Fourth quarter 2004 special items, net of tax, consisted of a $0.6 million gain
related to asset sales, a $6.3 million loss related to severance, and a $2.9
million loss resulting from foreign currency changes.
For the full year of 2004, Bowater had a net loss of $85.2 million, or
$1.49 per diluted share. This compares with a net loss of $205.0 million, or
$3.60 per diluted share, in 2003. Sales in 2004 totaled $3.2 billion compared
with $2.7 billion in 2003.
"Although 2004 financial results were better than 2003, they were still
unsatisfactory," said Arnold M. Nemirow, Chairman, President and Chief Executive
Officer. "Pricing in our major product lines increased approximately 10% during
the year; however, these improvements were significantly offset by a stronger
Canadian dollar and increases in manufacturing costs, particularly energy and
fiber. In 2005, we expect additional price increases and a strong rebound in
earnings."
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FINANCIAL HIGHLIGHTS
(In millions, except per-share amounts)
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------------------- --------------------------------
2004 2003 2004 2003
------------------------------- --------------------------------
Sales $ 823.0 $ 735.6 $ 3,190.3 $ 2,721.1
Net loss $ (33.3) $ (50.9) $ (85.2) $ (205.0)
Loss per diluted share (in accordance with GAAP) $ (0.58) $ (0.89) $ (1.49) $ (3.60)
Special items, net of tax (per diluted share):
Sale of assets (gain) loss $ (0.01) $ (0.05) $ (0.08) $ (1.35)
Foreign exchange (gain) loss 0.05 0.19 0.18 1.09
Severance charge 0.11 0.06 0.11 0.42
Adoption of new accounting standards - - - 0.08
------------------------------- --------------------------------
Loss per share excluding special items $ (0.43) $ (0.69) $ (1.28) $ (3.36)
------------------------------- --------------------------------
During the fourth quarter, the company's average transaction price for
newsprint rose $19 per metric ton while operating costs increased by $24 per
metric ton primarily due to a stronger Canadian dollar and higher energy costs
compared to the third quarter of 2004. In the fourth quarter, Bowater curtailed
approximately 57,000 metric tons of newsprint production for capital projects
and market related reasons. The company has informed its North American
customers of a $35 per metric ton price increase effective March 1, 2005.
Bowater's average transaction price for coated and specialty papers
increased $32 per short ton compared to the third quarter of 2004 while
shipments declined 7%. During the fourth quarter, the company's average
operating cost increased $11 per short ton primarily due to a stronger Canadian
dollar and higher energy costs.
Bowater's average transaction price for market pulp decreased $19 per
metric ton, compared to the third quarter of 2004. The company incurred
approximately 31,000 metric tons of market pulp production downtime due to
maintenance outages and capital projects. Average operating costs per metric ton
increased 14% compared to the third quarter primarily due to a stronger Canadian
dollar, repair costs, higher energy and wood fiber costs.
The company's average transaction price for lumber decreased $55 per
thousand board feet and shipments decreased 3% compared to the third quarter of
2004. During the quarter, the company paid countervailing and antidumping duties
of $10 million.
Bowater will hold a management conference call to discuss these financial
results at 10:00 a.m. EDT, today, January 27, 2005. The conference call number
is 800-553-5275 or 612-332-1025 (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 today through February 3, on the website or by dialing 800-475-6701 or
320-365-3844 (international) and using the access code 765238.
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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 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).
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 Twelve Months Ended
December 31, December 31,
------------------------------------ --------------------------------
2004 2003 2004 2003
---------------- ---------------- -------------- --------------
Sales $ 823.0 $ 735.6 $ 3,190.3 $ 2,721.1
Cost of sales, excluding depreciation, amortization
and cost of timber harvested 614.7 567.1 2,346.4 2,194.0
Depreciation, amortization and cost of timber harvested 81.1 86.0 335.2 339.0
Distribution costs 83.3 70.7 324.9 264.4
Selling and administrative expense 52.5 40.9 161.2 148.6
Net gain on fixed assets and land sales(1) 1.0 4.8 6.9 124.0
---------------- --------------- -------------- -------------
Operating income (loss) (7.6) (24.3) 29.5 (100.9)
Other expense (income):
Interest income (1.0) (1.1) (4.2) (4.6)
Interest expense, net of capitalized interest 48.8 46.6 195.3 174.5
Foreign exchange loss (gain) (4.8) 1.1 (4.9) 17.0
Other, net (3.9) (1.5) (10.2) (6.9)
---------------- --------------- -------------- -------------
39.1 45.1 176.0 180.0
---------------- --------------- -------------- -------------
Loss before income taxes, minority interests
and cumulative effect of accounting changes (46.7) (69.4) (146.5) (280.9)
Provision for income tax expense (benefit) (10.1) (17.7) (54.8) (70.1)
Minority interests in the net income (loss) of subsidiaries (3.3) (0.8) (6.5) (10.3)
---------------- -------------- ------------- -------------
Loss before cumulative effect of accounting changes (33.3) (50.9) (85.2) (200.5)
Cumulative effect of accounting changes (2) - - - (4.5)
---------------- --------------- ------------- -------------
Net loss $ (33.3) $ (50.9) $ (85.2) $ (205.0)
================ =============== ============= =============
Basic loss per common share: (3)
Loss before cumulative effect of accounting changes $ (0.58) $ (0.89) $ (1.49) $ (3.52)
Cumulative effect of accounting changes - - - (0.08)
---------------- --------------- ------------ ------------
Net loss $ (0.58) $ (0.89) $ (1.49) $ (3.60)
================ =============== ============ ============
Average common shares outstanding (3) 57.3 57.0 57.2 57.0
================ =============== ============ ============
Diluted loss per common share: (3)
Loss before cumulative effect of accounting changes $ (0.58) $ (0.89) $ (1.49) $ (3.52)
Cumulative effect of accounting changes - - - (0.08)
---------------- --------------- ------------ ------------
Net loss $ (0.58) $ (0.89) $ (1.49) $ (3.60)
================ =============== ============ ============
Average common and common equivalent shares outstanding (3) 57.3 57.0 57.2 57.0
================ ================ ============ ============
BOWATER INCORPORATED AND SUBSIDIARIES
(Unaudited, in millions of US dollars)
Consolidated Balance Sheet December 31, December 31,
2004 2003
----------------------- -----------------------
Current assets:
Cash and cash equivalents $ 29.7 $ 19.4
Accounts receivable, net 377.0 360.9
Inventories 328.0 293.1
Other current assets 160.4 169.6
----------------------- -----------------------
Total current assets 895.1 843.0
----------------------- -----------------------
Timber and timberlands 186.2 184.1
Fixed assets, net 3,310.3 3,557.3
Goodwill 828.2 828.2
Other assets 245.1 203.2
----------------------- -----------------------
$ 5,464.9 $ 5,615.8
======================= =======================
Current liabilities:
Current installments of long-term debt $ 12.9 $ 13.4
Short-term bank debt 73.0 200.5
Accounts payable and accrued liabilities 465.9 434.1
Dividends payable 11.2 11.7
----------------------- -----------------------
Total current liabilities 563.0 659.7
----------------------- -----------------------
Long-term debt, net of current installments 2,429.0 2,292.4
Pension, other postretirement benefits and other long-term liabilities 442.6 481.4
Deferred income taxes 450.4 500.3
Minority interests in subsidiaries 68.5 69.3
Shareholders' equity 1,511.4 1,612.7
----------------------- -----------------------
$ 5,464.9 $ 5,615.8
======================= =======================
Twelve Months Ended
Consolidated Cash Flow December 31,
--------------------------------------------------
2004 2003
----------------------- -----------------------
Cash flows from operating activities $ 122.5 $ 20.3
----------------------- -----------------------
Cash flows from (used for) investing activities:
Cash invested in fixed assets, timber and timberlands (84.1) (216.3)
Disposition of fixed assets, including timber and timberlands 12.0 154.3
----------------------- -----------------------
(72.1) (62.0)
----------------------- -----------------------
Cash flows from (used for) financing activities:
Cash dividends, including minority interests (46.0) (45.3)
Financing activities, net (0.7) 68.8
Stock options exercised 6.6 1.7
----------------------- -----------------------
(40.1) 25.2
----------------------- -----------------------
Net increase (decrease) in cash and cash equivalents $ 10.3 $ (16.5)
======================= =======================
BOWATER INCORPORATED AND SUBSIDIARIES
Notes to the Press Release and Unaudited Consolidated Financial Statements
(1) During the three months and year ended December 31, 2004, Bowater
recorded a net pre-tax gain of $1.0 million, or $0.01 per diluted share
after tax and $6.9 million, or $0.08 per diluted share after tax,
respectively, related to land sales and gains or losses on fixed
assets. During the three months and year ended December 31, 2003,
Bowater sold fixed assets and land resulting in a net pre-tax gain of
$4.8 million, or $0.05 per diluted share after tax, and $124.0 million,
or $1.35 per diluted share after tax, respectively. The 2003 pre-tax
gain is primarily attributable to the second quarter of 2003 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.
(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." 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 of approximately $49.4 million 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 finalized its adoption of FIN No. 46R in the
first quarter of 2004. The finalization of adoption of FIN No. 46R did
not impact 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 loss per share for the three
months and year ended December 31, 2004 and 2003, no adjustments to net
loss are necessary. The effect of dilutive securities is not included
in the computation for the three months and year ended December 31,
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 December 31, 2004
(unaudited, in millions except per share amounts)
Adjustment for Special Items
Land
sales & Adoption of GAAP as
GAAP as fixed Foreign new accounting adjusted for
reported assets exchange Severance standards Special items
------------ ---------- ---------- ----------- ---------------- --------------
Operating income (loss) $ (7.6) $ (1.0) $ - $ 9.7 $ - $ 1.1
Other expense (income)
Interest income (1.0) - - - - (1.0)
Interest expense, net of capitalized interest 48.8 - - - - 48.8
Foreign exchange loss (gain) (4.8) - 4.8 - - -
Other, net (3.9) - - - - (3.9)
------------- --------- ----------- ----------- ---------------- ------------
39.1 - 4.8 - - 43.9
------------- --------- ----------- ----------- ---------------- ------------
Loss before income taxes, minority interests and
cumulative effect of accounting changes (46.7) (1.0) (4.8) 9.7 - (42.8)
Provision for income tax expense (benefit) (10.1) (0.4) (9.1) 3.4 - (16.2)
Minority interests in the net income (loss) of
subsidiaries (3.3) - 1.4 - - (1.9)
------------- --------- ----------- ----------- ---------------- ------------
Income (loss) before cumulative effect of
accounting changes (33.3) (0.6) 2.9 6.3 - (24.7)
Cumulative effect of accounting changes - - - - - -
------------- --------- ----------- ----------- ---------------- ------------
Net income (loss) $ (33.3) $ (0.6) $ 2.9 $ 6.3 $ - $ (24.7)
------------- --------- ----------- ----------- ---------------- ------------
Shares 57.3 57.3 57.3 57.3 - 57.3
------------- -------- ----------- ----------- ---------------- ------------
EPS $ (0.58) $ (0.01) $ 0.05 $ 0.11 $ - $ (0.43)
------------- --------- ----------- ----------- ---------------- ------------
Effective tax rate 21.6% 40.0% 189.6% 35.1% - 37.9%
------------- --------- ----------- ----------- ---------------- ------------
Three Months Ended December 31, 2003
(unaudited, in millions except per share amounts)
Adjustment for Special Items
Land
sales & Adoption of GAAP as
GAAP as fixed Foreign new accounting adjusted for
reported assets exchange Severance standards Special items
----------- ----------- ----------- ----------- --------------- -------------
Operating income (loss) $ (24.3) $ (4.8) $ - $ 5.0 $ - $ (24.1)
Other expense (income)
Interest income (1.1) - - - - (1.1)
Interest expense, net of capitalized interest 46.6 - - - - 46.6
Foreign exchange loss (gain) 1.1 - (1.1) - - -
Other, net (1.5) - - - - (1.5)
------------ ---------- ------------ ---------- --------------- -------------
45.1 - (1.1) - - 44.0
------------ ---------- ------------ ---------- --------------- -------------
Loss before income taxes, minority interests and
cumulative effect of accounting changes (69.4) (4.8) 1.1 5.0 - (68.1)
Provision for income tax expense (benefit) (17.7) (1.8) (9.8) 1.7 - (27.6)
Minority interests in the net income (loss) of
subsidiaries (0.8) (0.2) - - (1.0)
------------ ---------- ------------ ----------- --------------- ------------
Income (loss) before cumulative effect of
accounting changes (50.9) (3.0) 11.1 3.3 - (39.5)
Cumulative effect of accounting changes - - - - - -
------------ ---------- ------------ ----------- --------------- ------------
Net income (loss) $ (50.9) $ (3.0) $ 11.1 $ 3.3 $ - $ (39.5)
------------ ---------- ------------ ----------- --------------- ------------
Shares 57.0 57.0 57.0 57.0 - 57.0
------------ ---------- ------------ ----------- --------------- ------------
EPS $ (0.89) $ ( 0.05) $ 0.19 $ 0.06 $ (0.69)
------------ ---------- ------------ ----------- --------------- ------------
Effective tax rate 25.5% 38.0% -890.9% 34.0% - 40.5%
------------ ---------- ------------ ----------- --------------- ------------
Twelve Months Ended December 31, 2004
(unaudited, in millions except per share amounts)
Adjustment for Special Items
Land
sales & Adoption of GAAP as
GAAP as fixed Foreign new accounting adjusted for
reported assets exchange Severance standards Special items
------------ ---------- ---------- ----------- ---------------- -------------
Operating income (loss) $ 29.5 $ (6.9) $ - $ 9.7 $ - $ 32.3
Other expense (income)
Interest income (4.2) - - - - (4.2)
Interest expense, net of capitalized interest 195.3 - - - - 195.3
Foreign exchange loss (gain) (4.9) - 4.9 - - -
Other, net (10.2) - - - - (10.2)
------------ ---------- ------------ ---------- ---------------- ------------
176.0 - 4.9 - - 180.9
------------ ---------- ------------ ---------- ---------------- ------------
Loss before income taxes, minority interests and
cumulative effect of accounting changes (146.5) (6.9) (4.9) 9.7 - (148.6)
Provision for income tax expense (benefit) (54.8) (2.5) (16.5) 3.4 (70.4)
Minority interests in the net income (loss) of
subsidiaries (6.5) - 1.5 - - (5.0)
------------ ---------- ------------ ---------- ---------------- ------------
Income (loss) before cumulative effect of
accounting changes (85.2) (4.4) 10.1 6.3 - (73.2)
Cumulative effect of accounting changes - - - - - -
------------ ---------- ------------ ---------- ---------------- ------------
Net income (loss) $(85.2) $ (4.4) $ 10.1 $ 6.3 $ - $ (73.2)
------------ ---------- ------------ ---------- ---------------- ------------
Shares 57.2 57.2 57.2 57.2 - 57.2
------------ ---------- ------------ ---------- ---------------- ------------
EPS $(1.49) $ (0.08) $ 0.18 $ 0.11 $ - $ (1.28)
------------ ---------- ------------ ---------- ---------------- ------------
Effective tax rate 37.4% 36.2% 336.7% 35.1% - 47.4%
------------ ---------- ------------ ---------- ---------------- ------------
Twelve Months Ended December 31, 2003
(unaudited, in millions except per share amounts)
Adjustment for Special Items
Land
sales & Adoption of GAAP as
GAAP as fixed Foreign new accounting adjusted for
reported assets exchange Severance standards Special items
----------- --------- ----------- ----------- --------------- --------------
Operating income (loss) $(100.9) $(124.0) $ - $ 37.2 $ - $ (187.7)
Other expense (income)
Interest income (4.6) - - - - (4.6)
Interest expense, net of capitalized interest 174.5 - - - - 174.5
Foreign exchange loss (gain) 17.0 - (17.0) - - -
Other, net (6.9) - - - - (6.9)
----------- --------- ------------ ----------- --------------- -------------
180.0 - (17.0) - - 163.0
----------- --------- ------------ ----------- --------------- -------------
Loss before income taxes, minority interests and
cumulative effect of accounting changes (280.9) (124.0) 17.0 37.2 - (350.7)
Provision for income tax expense (benefit) (70.1) (47.1) (43.4) 13.2 - (147.4)
Minority interests in the net income (loss) of
subsidiaries (10.3) (1.6) - - (11.9)
----------- ---------- ------------ ----------- --------------- -------------
Income (loss) before cumulative effect of
accounting changes (200.5) (76.9) 62.0 24.0 - (191.4)
Cumulative effect of accounting changes (4.5) - - - 4.5 -
----------- ---------- ------------ ----------- --------------- -------------
Net income (loss) $(205.0) $ (76.9) $ 62.0 $ 24.0 $ 4.5 $ (191.4)
------------ --------- ------------ ----------- --------------- -------------
Shares 57.0 57.0 57.0 57.0 57.0 57.0
------------ --------- ------------ ----------- --------------- -------------
EPS $ (3.60) $ (1.35) $ 1.09 $ 0.42 $ 0.08 $ (3.36)
------------ --------- ------------ ----------- --------------- -------------
Effective tax rate 25.0% 38.0% -255.3% 35.5% - 42.0%
------------ ---------------------- ----------- --------------- -------------
A schedule of historical financial and operating statistics is available upon
request and on Bowater's web site(www.bowater.com).