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Domtar 2016 Annual Report

DOMTAR 2016 ANNUAL REPORT (Continued) 2014 2015 2016 “Net debt-to-total capitalization” computation Bank indebtedness ($) 10 – 12 (+) Long-term debt due within one year ($) 169 41 63 (+) Long-term debt ($) 1,171 1,210 1,218 (=) Debt ($) 1,350 1,251 1,293 (-) Cash and cash equivalents ($) (174) (126) (125) (=) Net debt ($) 1,176 1,125 1,168 (+) Shareholders’ equity ($) 2,890 2,652 2,676 (=) Total capitalization ($) 4,066 3,777 3,844 Net debt ($) 1,176 1,125 1,168 (/) Total capitalization ($) 4,066 3,777 3,844 (=) Net debt-to-total capitalization (%) 29% 30% 30% “Earnings before items”, “Earnings before items per diluted share”, “EBITDA”, “EBITDA margin”, “EBITDA before items”, “EBITDA margin before items”, “Free cash flow”, “Net debt” and “Net debt-to-total capitalization” have no standardized meaning prescribed by GAAP and are not necessarily comparable to similar measures presented by other companies and therefore should not be considered in isolation or as a substitute for Net earnings, Operating income or any other earnings statement, cash flow statement or balance sheet financial information prepared in accordance with GAAP. It is important for readers to understand that certain items may be presented in different lines by different companies on their financial statements thereby leading to different measures for different companies. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES BY SEGMENT (In millions of dollars, unless otherwise noted) The following table sets forth certain non-U.S. generally accepted accounting principles (“GAAP”), financial metrics identified in bold as “Operating income (loss) before items”, “EBITDA before items” and “EBITDA margin before items” by reportable segment. Management believes that the financial metrics are useful to understand our operating performance and benchmark with peers within the industry. The Company calculates the segmented “Operating income (loss) before items” by excluding the pre-tax effect of specified items. These metrics are presented as a complement to enhance the understanding of operating results but not in substitution for GAAP results. Pulp and Paper Personal Care1 Corporate 2014 2015 2016 2014 2015 2016 2014 2015 2016 Reconciliation of Operating income (loss) to “Operating income (loss) before items” Operating income (loss) ($) 352 270 217 49 61 57 (37) (43) (51) (+) Impairment of property, plant and equipment ($) 4 77 29 – – – – – – (-) Net gains on disposal of property, plant and equipment ($) – (14) – – – – – (1) – (-) Alternative fuel tax credits ($) – – – – – – (18) – – (+) Litigation settlement ($) – – – – – – -- – 2 (+) Closure and restructuring costs ($) 27 3 31 1 1 1 -- – – (+) Impact of purchase accounting ($) – – – 3 – 1 – – – (=) Operating income (loss) before items ($) 383 336 277 53 62 59 (55) (44) (49) Reconciliation of “Operating income (loss) before items” to “EBITDA before items” Operating income (loss) before items ($) 383 336 277 53 62 59 (55) (44) (49) (+) Depreciation and amortization ($) 319 297 284 65 62 64 – – – (=) EBITDA before items ($) 702 633 561 118 124 123 (55) (44) (49) (/) Sales ($) 4,674 4,458 4,239 928 869 917 – – – (=) EBITDA margin before items (%) 15% 14% 13% 13% 14% 13% – – – “Operating income (loss) before items”, “EBITDA before items” and “EBITDA margin before items” have no standardized meaning prescribed by GAAP and are not necessarily comparable to similar measures presented by other companies and therefore should not be considered in isolation or as a substitute for Operating income (loss) or any other earnings statement, cash flow statement or balance sheet financial information prepared in accordance with GAAP. It is important for readers to understand that certain items may be presented in different lines by different companies on their financial statements thereby leading to different measures for different companies. (1) On January 2, 2014, the Company acquired 100% of the shares of Laboratorios Indas, S.A.U. in Spain. On October 1, 2016, the Company acquired 100% of the shares of Home Delivery Incontinent Supplies Co. in the United States.


Domtar 2016 Annual Report
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