Bowater Announces Financial Results for the Second Quarter of 1999, Status of the Sale of Its Operations in Maine and the Acquisition of a New Coating Operation.GREENVILLE Greenville. 1 City (1990 pop. 45,226), seat of Washington co., W Miss., on Lake Ferguson, a deepwater harbor adjoining the Mississippi River; inc. 1886. , S.C.--(BUSINESS WIRE)--July 27, 1999-- Bowater Bowater NYSE: BOW is an American pulp and paper company based in Greenville, South Carolina. Bowater has 12 pulp and paper mills in the United States, Canada and South Korea and 13 North American sawmills. It has approximately 10,000 employees. Incorporated (NYSE NYSE See: New York Stock Exchange : BOW) reported financial results today for the second quarter of 1999. The company also reported on the status of the sale of its wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. in Maine Maine, ship Maine, U.S. battleship destroyed (Feb. 15, 1898) in Havana harbor by an explosion that killed 260 men. The incident helped precipitate the Spanish-American War (Apr., 1898). Commanded by Capt. Charles Sigsbee, the ship had been sent (Jan. , Great Northern Paper, Inc. Because the sale is now imminent, the company is required to write down the book value of the operations by $92.0 million pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta ($1.02 per share) during the second quarter, as further described below. The company also announced the acquisition of a small coating facility in Benton Harbor, Michigan Benton Harbor is a city in Berrien County in the U.S. State of Michigan. The population was 11,182 at time of the 2000 census. It is the lesser populated of the two principal cities included in the Niles-Benton Harbor, Michigan Metropolitan Statistical Area. . Financial Results for the Second Quarter of 1999 Net income for the second quarter of 1999 was $5.2 million, or $.10 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, including the asset write-down Write-Down Reducing the book value of an asset because it is overvalued compared to the market value. Notes: This is usually reflected in the company's income statement as an expense, thereby reducing net income. mentioned above, a $108.3 million pre-tax gain ($1.20 per share) on the sale of timberlands and $16.6 million pre-tax ($.22 per diluted share) for foreign exchange gains. Excluding the three preceding items, the company had a net loss for the second quarter of $16.5 million, or $.30 per diluted share. This compares with net income of $18.9 million, or $.44 per diluted share, for the second quarter of 1998, after a $9.6 million after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. charge ($.24 per diluted share) related to currency hedges Currency hedge Applies mainly to international equities. Hedging technique to guard against foreign exchange fluctuations (i.e., short Euro l00 mm when holding a long position of Euro l00 mm in stocks). for acquisitions pending at that time. Net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight for the quarter were $527.4 million, compared with $395.7 million for the second quarter of 1998. Net income for the first six months of 1999 was $111.7 million, or $2.00 per diluted share, including the second quarter non-operating items mentioned above and a first quarter gain on the sale of timberlands of $143.1 million pre-tax ($1.57 per diluted share) and other first quarter non-operating charges totaling $1.0 million pre-tax, or $.02 per diluted share. This compares with net income of $43.7 million, or $1.03 per diluted share, for the first half of 1998, which includes a net after-tax currency hedging charge of $12.3 million, or $.30 per diluted share, and a $6.7 million after-tax gain ($.16 per diluted share) on the sale of timberlands. Net sales for the first half of 1999 totaled $1.1 billion, compared with $778.9 million for the first half of 1998. The increase in sales in 1999 compared with 1998 is primarily due to the 1998 acquisitions of Avenor Av´e`nor n. 1. See Avener. Inc. and a mill in Korea, offset by lower prices for the company's paper products. During the second quarter, prices for the company's major paper products declined, but stabilized sta·bi·lize v. sta·bi·lized, sta·bi·liz·ing, sta·bi·liz·es v.tr. 1. To make stable or steadfast. 2. near the end of the quarter. Bowater has announced a price increase for newsprint newsprint low grade paper used for newspapers. Old newspapers are fed to cattle as an alternative roughage and may occasionally be ingested by dogs. Significant amounts of lead are accumulated in tissues; no cases of poisoning have been recorded in cattle, though it has been of $50 per metric ton effective October 1, 1999. The company is also implementing price increases for coated paper Coated paper is paper which has been coated by an inorganic compound to impart certain qualities to the paper, including weight and surface gloss, smoothness or ink absorbency. Kaolinite is the compound most often used for coating papers used in commercial printing. products. Pulp pulp: see paper. prices increased throughout the second quarter, with the upward momentum continuing into the third quarter. Acquisition of Nuway Paper On July 12, 1999, Bowater purchased the assets of Nuway Paper LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control , located in Benton Harbor, Michigan, for $15 million. Nuway has developed a unique process for coating various grades of paper, including newsprint, which will provide the company with a broader coated product offering as well as create value-added opportunities for a portion of its newsprint production. Unlike Bowater's traditional coated groundwood market, the end use for this new product will be various inserts, coupons and supplements distributed by direct mail and retail outlets retail outlet n → punto de venta retail outlet n → point m de vente retail outlet retail n → . The existing coating capacity of this facility is approximately 60,000 short tons per year. The company's strategy is to grow production to 200,000 short tons using mostly newsprint as its base stock. Sale of Great Northern Paper, Inc. (GNP GNP See: Gross National Product ) in Maine On May 19, 1999, Bowater announced that it had signed an agreement with Inexcon Maine, Inc., a Quebec-based investment group, for the purchase of GNP, subject to the completion of financing and other conditions. Inexcon is purchasing GNP for $250 million, consisting of cash, a note, and the assumption of certain liabilities. The company expects to complete the sale shortly, as the financing contingency contingency n. an event that might not occur. has now been met and the company and Inexcon have reached an agreement with the unions representing 700 hourly production employees, subject to a ratification The confirmation or adoption of an act that has already been performed. A principal can, for example, ratify something that has been done on his or her behalf by another individual who assumed the authority to act in the capacity of an agent. vote later this week. Negotiations with GNP's 400 trade union employees are expected to conclude this week. Inexcon will continue to serve GNP's current directory, coated paper and specialty customers. Inexcon has stated its intention to convert all of GNP's newsprint production capacity, which is approximately 150,000 metric tons annually, to specialty grades by the end of next year. The company has taken a $92.0 million pre-tax charge to reflect the sale price of GNP. Earlier this year, in two separate transactions, Bowater completed the sale of 1.6 million acres of GNP timberlands for $366.5 million and a pre-tax gain of $253.7 million. Upon the sale to Inexcon, the company will have sold all of its assets in the state of Maine for total consideration of approximately $600 million. The net effect of these transactions results in a net pre-tax gain of $42.1 million, subject to contingent liabilities Contingent Liability 1. The possibility of an obligation to pay certain sums dependent on future events. 2. Defined obligations by a company that must be met, but the probability of payment is minimal. Notes: 1. of approximately $60 million. Bowater Incorporated, headquartered in Greenville, SC, is a global leader in newsprint. In addition, the company makes coated and uncoated groundwood papers, bleached kraft pulp and lumber lumber, term for timber that has been cut into boards for use as a building material. The major steps in producing lumber involve logging (the felling and preparation of timber for shipment to sawmills), sawing the logs into boards, grading the boards according to products. It has 10 pulp and paper mills in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , Canada and South Korea. These operations are supported by 2.4 million acres of timberlands owned or leased in the United States and Canada and over 14 million acres of timber cutting rights in Canada. The company is one of the world's largest users of recycled newspapers and magazines. Bowater common stock is listed on the New York Stock Exchange New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. , U.S. regional exchanges and the London Stock Exchange London Stock Exchange London marketplace for securities. It was formed in 1773 by a group of stockbrokers who had been doing business informally in local coffeehouses. . A special class of stock exchangeable into Bowater common stock is listed on the Toronto and Montreal exchanges Montreal Exchange A Canadian derivatives exchange that facilitates the trading of stock options, interest rate futures and options, as well as index options and futures. Located in Montreal, Quebec, it is the country's main financial derivative market, while the Winnipeg (TSE See Tokyo Stock Exchange. TSE 1. See Tokyo Stock Exchange (TSE). 2. See Toronto Stock Exchange (TSE). and ME: BWX). All amounts are in U.S. dollars. -0-
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, June 30, June 30,
1999 1998 1999 1998
---------- ---------- --------- --------
Net sales $ 527.4 $ 395.7 $ 1,098.7 $ 778.9
Cost of sales 417.4 280.3 840.8 554.7
Depreciation, amortization,
and cost of timber
harvested 76.0 43.1 151.8 88.3
Impairment of asset (1) 92.0 - 92.0 -
---------- ---------- --------- --------
Gross profit / (loss) (58.0) 72.3 14.1 135.9
Selling and administrative
expense 21.3 13.7 42.6 31.0
---------- ---------- --------- --------
Operating income / (loss) (79.3) 58.6 (28.5) 104.9
Other expense (income):
Interest income (1.3) (6.2) (1.8) (12.7)
Interest expense, net 30.6 16.7 63.0 33.3
Sale of timberlands (2) (108.3) (0.1) (253.7) (21.1)
Foreign exchange
(gain)/loss (16.6) 1.4 (29.2) 1.1
Other, net 0.7 15.4 1.0 20.0
---------- ---------- --------- --------
(94.9) 27.2 (220.7) 20.6
---------- ---------- --------- --------
Income before income taxes
and minority interests 15.6 31.4 192.2 84.3
Provision for
income taxes 7.8 11.9 77.5 32.0
Minority interests 2.6 0.6 3.0 8.6
---------- ---------- --------- --------
Net income $ 5.2 $ 18.9 $ 111.7 $ 43.7
========== ========== ========= ========
Basic earnings per
common share: (3) $ 0.10 $ 0.45 $ 2.03 $ 1.05
========== ========== ========= =========
Average common
shares outstanding 54.3 40.6 54.4 40.5
========== ========== ========= ========
Diluted earnings per
common share: (3) $ 0.10 $ 0.44 $ 2.00 $ 1.03
========== ========== ========= ========
Average common and
common equivalent
shares outstanding 55.0 41.3 55.3 41.2
========== ========== ========= ========
BOWATER INCORPORATED AND SUBSIDIARIES
(Unaudited, in millions of US dollars)
Consolidated Balance Sheet June 30, December 31,
1999 1998
----------- -----------
Current assets:
Cash and cash equivalents $ 36.5 $ 58.3
Marketable securities 2.1 1.2
Accounts receivable, net 301.0 372.4
Inventories 187.4 186.3
Other current assets 71.3 77.2
----------- -----------
----------- -----------
Total current assets 598.3 695.4
----------- -----------
Timber and timberlands 371.2 472.8
Fixed assets, net 2,765.1 2,885.2
Goodwill 877.6 921.7
Other assets 120.2 116.3
----------- -----------
=========== ===========
$4,732.4 $ 5,091.4
=========== ===========
Current liabilities:
Current installments of
long-term debt $ 20.0 $ 86.2
Revolver credit 70.5 210.0
Accounts payable and
accrued liabilities 321.3 464.4
Income taxes payable 57.2 -
Dividends payable 10.9 11.9
----------- -----------
----------- -----------
Total current liabilities 479.9 772.5
----------- -----------
Long-term debt, net of
current installments (4) 1,463.5 1,534.6
Other long-term liabilities 340.2 356.3
Deferred income taxes 462.0 522.2
Minority interests in
subsidiaries 134.2 128.8
Shareholders' equity 1,852.6 1,777.0
=========== ===========
$4,732.4 $ 5,091.4
=========== ===========
Six Months Ended
--------------------------------------
Consolidated Cash Flow June 30, June 30,
1999 1998
----------- -----------
Cash flow from operating
activities $ 47.4 $ 132.2
----------- -----------
Cash flow from investing activities:
Cash invested in fixed
assets and timberlands (93.7) (73.2)
Disposition of fixed assets
and timberlands 360.8 31.7
Cash from maturities of
marketable securities, net (0.8) 151.4
Cash invested in option
contracts - (22.7)
Cash paid on maturity of
hedging contracts (19.9) -
----------- -----------
246.4 87.2
----------- -----------
Cash flow from financing
activities:
Proceeds from short-term
borrowings 254.7 -
Payments of short-term
borrowings (394.2) -
Cash dividends, including
minority interests (28.0) (34.1)
Payments of long-term
borrowings (4) (68.9) (0.9)
Redemption of Series C
Preferred (26.4) -
Purchase of common stock (57.4) -
Stock options exercised 3.6 6.5
Other 1.0 0.9
----------- -----------
(315.6) (27.6)
----------- -----------
Increase/(decrease) in cash
and cash equivalents $ (21.8) $ 191.8
=========== ===========
BOWATER INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) In the second quarter of 1999, the Company recorded an
impairment charge of $92.0 million pre-tax, or $1.02 per diluted
share, after tax, per Statement of Financial Accounting Standards No.
121 "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of", on the assets of the Company's
Great Northern Paper (GNP) facility. The assets were written down to
fair value, based on the proposed sale to Inexcon, Inc.
Below is a summary of all GNP related activities since the third
quarter of 1998:
Pre-Tax Per Diluted
Gain (Loss) Share
Period Item (Millions ) After-Tax
Quarter 3, 1998 Impairment - GNP West $ (119.6) $ (1.39)
Quarter 1, 1999 Land Sale - Irving 145.4 1.59
Quarter 2, 1999 Land Sale - McDonald 108.3 1.20
Quarter 2, 1999 Impairment - GNP Assets (92.0) (1.02)
------------ ------------
============ ============
$ 42.1 $ 0.38
============ ============
In addition, a charge of approximately $60.0 million of employee related liabilities, is anticipated to be recorded when the sale to Inexcon, Inc. is completed. (2) During the second quarter of 1999, the Company sold approximately 650,000 acres of timberlands resulting in a pre-tax gain of $108.3 million, or $1.20 per diluted share after tax. For the six months ended June 30, 1999, the Company sold 1,630,000 acres of timberlands resulting in a pre-tax gain of $253.7 million or $2.80 per diluted share after tax. Related to the timberland sales, the Company recognized severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when charges of $2.3 million. (3) The calculations of basic and diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of for the six months ended June 30, 1999, include a deduction deduction, in logic, form of inference such that the conclusion must be true if the premises are true. For example, if we know that all men have two legs and that John is a man, it is then logical to deduce that John has two legs. of $.1 million for Series C preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. dividends and a deduction of $1.0 million for deferred issuance costs associated with the redemption of the remaining outstanding Series C Preferred Stock. For the three and six months ended June 30, 1998, the calculations include a deduction of $.6 million and $1.1 million respectively for Series C preferred stock dividends. (4) During the first quarter of 1999, the Company redeemed re·deem tr.v. re·deemed, re·deem·ing, re·deems 1. To recover ownership of by paying a specified sum. 2. To pay off (a promissory note, for example). 3. all of its 7.50% Convertible Unsecured Unsecured A loan or equity interest that is given without any guarantee of payment, performance, satisfaction or opportunity for return from the recipient. No property, interest or security is used as collateral in either a guarantee or a pledge. Subordinated Debentures subordinated debenture An unsecured bond with a claim to assets that is subordinate to all existing and future debt. Thus, in the event that the issuer encounters financial difficulties and must be liquidated, all other claims must be satisfied before due 2004. The Company paid cash of approximately $65.9 million, and Bowater Canada Inc. issued 1,359,620 Exchangeable shares. A schedule of historical financial and operating statistics is available upon request. |
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