Catalyst Paper Q4 results impacted by lower sales volumes, higher maintenance and stronger Canadian dollar

Tue Mar 5, 2013 9:55pm EST

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RICHMOND, BC,  March 5, 2013  /PRNewswire/ - Catalyst Paper (TSX:CYT) results in
 the fourth quarter were negatively impacted by lower sales volumes,
 higher maintenance spending and a stronger Canadian dollar.



Catalyst posted a net loss of  $35.2 million  for the quarter, in contrast
 to net earnings of  $655.7 million  in the third quarter, when the
 one-time gains realized on emergence from creditor protection were
 booked. Before specific items, net losses were  $15.7 million  and  $7.5
 million  in Q4 and Q3 respectively. Adjusted EBITDA was  $7.2 million  in
 Q4, with no impact from restructuring costs, and  $13.8 million  in Q3
 ($14.0 million  before restructuring costs).



Market conditions were mixed during the fourth quarter, with North
 American paper demand down from the third quarter for directory and
 newsprint, and up for coated and uncoated grades. Benchmark prices were
 up for newsprint and coated and otherwise stable for paper, while there
 was moderate benchmark price recovery for pulp. A market curtailment at
  Powell River  was necessary over the holidays to balance production with
 orders, and Catalyst incurred a loss from discontinued operations
 largely due to an increased estimated pension withdrawal liability
 associated with the Snowflake closure.



"We saw lower prices for coated and newsprint and weaker demand across
 our paper product lines in 2012. However, capacity reductions helped
 mitigate the demand impacts," said Catalyst President and CEO  Kevin J.
 Clarke. "Pulp prices took a hit as markets weakened in  China  due to
 overstocked inventories. These sorts of challenges aren't going away,
 but with a better cost structure across all product segments, and
 continued market share momentum, we're better positioned to take them
 on."


Results for the Year


Net earnings of  $583.2 million  for 2012 were heavily impacted by
 one-time non-cash restructuring credits and fair value accounting
 adjustments. This compared with a  $974.0 million  net loss in 2011 which
 was driven largely by asset impairment charges.



Catalyst entered creditor protection on  January 31, 2012, and exited on
  September 13, having achieved a  US$390.4 million  or 60 per cent
 reduction in its debt, savings in annual interest expense of  US$33.9
 million, and a range of other cost reductions. The restructuring
 included the permanent closure of its Snowflake mill at the end of the
 third quarter. Results from this discontinued operation are excluded
 from those being reported, with comparative periods having been
 restated accordingly.



Before specific items - which also included restructuring-related fees,
 closure costs at Snowflake, and a foreign exchange gain on translation
 of US dollar-denominated debt - Catalyst posted a net loss of  $37.8
 million  ($2.62  per common share), in contrast to a net loss of  $126.3
 million  in 2011 ($0.33  per common share). Total sales were  $1,058.2
 million, slightly below  $1,079.7 million  in 2011.



Adjusted earnings before interest, taxes, depreciation and amortization
 (EBITDA) were  $55.4 million  for 2012 ($60.7 million  before specific
 items), down from  $62.8 million  for 2011 ($68.7 million  before specific
 items). A significant drop in pulp transaction prices and lower average
 paper transaction prices were only partially offset by cost reductions,
 higher sales volumes and favourable currency impacts.


Liquidity  


Total liquidity stood at  $97.9 million  at the end of 2012, compared to
  $96.7 million  a year earlier. The borrowing base on the new Asset
 Backed Loan (ABL) facility put in place upon the conclusion of the
 restructuring was down mainly due to lower accounts receivable and
 inventories as a result of the Snowflake shutdown. Letters of credit,
 amounts drawn and cash on hand were also down. Free cash flow was
 negative  $47.2 million  largely due to reorganization costs of  $37.5
 million  and salaried defined benefit pension solvency funding of  $11.8
 million, in comparison with negative  $58.8 million  in 2011.



Internally generated cash flows from operations, in combination with
 advances under the ABL facility, are expected to be sufficient to meet
 future operating cash requirements.


Restructuring


Catalyst issued 14,400,000 new common shares to holders of its
 now-cancelled 2016 Notes upon its exit from creditor protection in
 September. A further 127,571 common shares were issued in December to
 unsecured creditors who elected this option in lieu of participating in
 the proceeds pool from specified asset sales. On  January 7, 2013,
 Catalyst's new common shares were listed on the Toronto Stock Exchange
 under the symbol "CYT".



In addition to savings associated with the cancellation of its previous
 notes, additional annual cost reductions include new competitive
 five-year labour agreements ($18-$20 million), lower municipal taxes
 ($6.1 million), and pension funding relief ($7 million). The closure of
 the Snowflake recycled paper mill will also eliminate financial losses
 due to intense input-cost and market-related pressures, and
 significantly reduce working capital requirements.



The US court-approved sale of the assets of the Snowflake mill and the
 shares of the Apache Railway closed on  January 30, 2013, for  US$13.5
 million  and other non-monetary consideration. Closure costs were  $18.6
 million. Agreements were also reached in 2012 to sell smaller non-core
 assets in both  Port Alberni  and  Powell River, and efforts continue to
 market the site of the former Elk Falls operation and Catalyst's
 remaining poplar plantation lands.



On  February 13, 2013, Catalyst agreed to sell its interest in Powell
 River Energy for  $33 million. Catalyst will continue to purchase
 electricity under the existing power purchase agreement which expires
 in 2016, with possible extension to 2021 in one-year terms at
 Catalyst's option.



Under the terms of the Plan of Arrangement, unsecured creditors who did
 not elect to receive shares in settlement of their claims will receive
 their pro rata share of the net sale proceeds. Given that many
 creditors elected to receive shares, this will result in a distribution
 of approximately 40% of the net proceeds of the sale. Catalyst will
 offer to purchase a portion of the notes issued as part of its exit
 financing arrangements with the balance of the sale proceeds. The sale
 is expected to close in the first quarter of 2013.


Pension Portability Option


Catalyst offered members of the defined benefit pension plan for
 salaried employees a one-time reduced lump-sum payment option as full
 settlement of their entitlements under the plan. Members were required
 to make their elections by  December 15, 2012  and have until  June 30,
 2013  to revoke such elections in favour of continuing to receive
 monthly pension payments.

                                                                                                                                                  
 Selected Highlights                                                                                                                              
 (In millions of dollars, except where otherwise stated)                          Three months             Nine months         Year ended        
                                                                                  ended                    ended               
December,        
                                                                                  December                 September           
2011             
                                                                                  2012                     2012                                  
 Sales  2                                                                                $    260.5             $    797.7         $  1,079.7 
 Operating earnings (loss)  2                                                                 (5.7)                   24.8            (704.5) 
 Depreciation and amortization  2                                                              12.9                   23.4              105.5 
 Adjusted EBITDA  1 2                                                                           7.2                   48.2               62.8 
                               - before restructuring costs  1 2                               7.2                   53.5               68.7 
 Net earnings (loss) attributable to the company                                             (35.2)                  618.4            (974.0) 
                               - before specific items  1                                   (15.7)                 (22.1)            (126.3) 
 Total assets                                                                                 978.8                1,040.1              737.6 
 Total long-term liabilities                                                                  720.6                  768.3              713.6 
 Adjusted EBITDA margin  1 2                                                                   2.8%                   6.0%               5.8% 
                               - before restructuring costs  1 2                              2.8%                   6.7%               6.4% 
 Net earnings (loss) per share attributable to the                                                                                            
 
     company's common shareholders (in dollars)                                                                                             
                               - basic and diluted from continuing operations           $   (1.55)                                           
                               - basic and diluted from discontinued operations             (0.89)                                           
                               - before specific items                                      (1.09)                                           
                                                                                                                                             
 (In thousands of tonnes)                                                                                                                     
 Sales  2                                                                                     347.6                1,053.8            1,351.2 
 Production  2                                                                                333.3                1,055.3            1,365.1 
 Common shares (millions)                                                                                                                     
                               At period-end                                                  14.5                   14.4              381.9 
                               Weighted average                                               14.4                  381.9              381.9 


 1  Refer to section 13, Non-GAAP measures,  of our Q4 2012 management's discussion and analysis.  
 2  Numbers exclude the Snowflake mill's results from operations which have                        
     been reclassified as discontinued operations; losses from discontinued                        
     operations, net of tax, are shown separately from continuing operations                       
     in the consolidated statements of earnings (loss) in our annual                               
     consolidated financial statements for the year ended December 31, 2012.                       
                                                                                                   


Outlook


Global economies were buffeted by various factors in 2012 including the
 sovereign debt crisis in  Europe, fiscal health issues in  North America
 and slowing growth in  China. The U.S. economy is expected to improve in
 2013 with emerging economies in  Asia  and  Latin America  being a bright
 spot for most sectors. The volatility of the Canadian dollar continues
 to have significant impact on our business and its recent move to
 sub-par levels is welcome.



Nonetheless, capacity restarts are adding considerable uncertainty to
 demand forecasts with weaker prices expected across most mechanical
 printing papers. The market for our products continues to be fiercely
 competitive as capacity restarts and a seasonally slower first half
 puts more pressure on pricing in both coated and uncoated specialty
 mechanical papers. Sales and volume renewals are expected to be hard
 won as are gains in market share. Pulp prices are recovering at a
 slower pace than anticipated, however improved demand for tissue along
 with a stronger economy in  China  is expected to keep pulp markets
 stronger in 2013.



Planned maintenance - with total mill outages at two facilities - will
 put pressure on operating results in the first half of 2013. Input cost
 pressures are expected to be marginal with the exception of BC Hydro
 rate increases, compounded by the return to provincial sales tax (PST),
 adding approximately  $8 million  annually to electricity costs. Capital
 spending is expected to be in the range of  $25 million  for the year.



Completion of outstanding restructuring requirements is progressing,
 including sale of the permanently closed Elk Falls facility and
 finalization, by June, of the pension portability election process.
 Proceeds from the sale of Powell River Energy, which is expected to
 complete within the first quarter, will be applied to unsecured
 creditor claims and partial payment of exit notes.


Further Quarterly Results Materials


This release, along with the full annual Management Discussion
 &Analysis, Financial Statements and accompanying notes are available on
 our web site at  www.catalystpaper.com/Investors. This material is also filed
with SEDAR in  Canada  and EDGAR in  the
 United States.



Catalyst Paper manufactures diverse specialty mechanical printing
 papers, newsprint and pulp. Its customers include retailers, publishers
 and commercial printers in  North America,  Latin America, the  Pacific
 Rim  and  Europe. With three mills, located in  British Columbia, Catalyst
 has a combined annual production capacity of 1.5 million tonnes. The
 company is headquartered in  Richmond, British Columbia, Canada and is
 ranked by Corporate Knights magazine as one of the 50 Best Corporate
 Citizens in Canada.


Forward-Looking Statement

Certain matters in this news release, including statements with respect
 to general economic and market conditions, demand for products, pricing
 expectations, anticipated cost savings and capital expenditures, are
 forward looking.  These forward-looking statements reflect management's
 current views and are based on certain assumptions including
 assumptions as to future economic conditions, demand for products,
 levels of advertising, product pricing, ability to achieve operating
 and labour cost reductions, currency fluctuations, production
 flexibility and related courses of action, as well as other factors
 management believes are appropriate.  Such forward looking statements
 are subject to risks and uncertainties that may cause actual results to
 differ materially from those contained in these statements, including
 those risks and uncertainties identified under the heading "Risks and
 Uncertainties" in Catalyst's management's discussion and analysis
 contained in Catalyst's annual report for the year ended  December 31,
 2012  available on the company's website at  www.catalystpaper.com/investors 
and at  www.sedar.com. 



 


SOURCE  Catalyst Paper Corporation

Investors:

Brian Baarda

Vice-President, Finance & CFO

604-247-4710

Alistair MacCallum

Vice-President, Treasurer & Corporate Controller

604-247-4037

Media:

Lyn Brown

Vice-President, Marketing & Corporate Responsibility

604-247-4713

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