Bowater Announces Fourth Quarter and 1998 Results.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)--Feb. 4, 1999--Bowater Incorporated (NYSE NYSE See: New York Stock Exchange :BOW) today reported net income for the 1998 fourth quarter of $25.9 million, or $.45 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, on 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 of $639.2 million. The fourth quarter represented the first full period with combined results for the newly acquired Avenor Av´e`nor n. 1. See Avener. and Korean Korean, language of uncertain ancestry. It is thought by some scholars to be akin to Japanese, by others to be a member of the Altaic subfamily of the Ural-Altaic family of languages (see Uralic and Altaic languages), and by still others to be unrelated to any known operations. The results compare to net income in the fourth quarter of 1997 (prior to the acquisitions) of $30.1 million, or $.72 per diluted share, on net sales of $401.0 million. Pricing for the company's primary products was lower in the fourth quarter of 1998 compared with the third quarter of 1998 and the fourth quarter of 1997. The company's order books remained full, at profitable levels, throughout the fourth quarter, while mill inventories at year end were reduced significantly from the third quarter level. In the fourth quarter, the company repurchased 2.4 million shares of common stock for $98.1 million, representing approximately 4.3% of outstanding shares. Full Year 1998 Results Net income before charges for the full year of 1998 was $69.5 million, or $1.41 per diluted share, before non-operating charges of $88.0 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. ), or $1.85 per diluted share, to write down the Millinocket, Maine Millinocket is a town with a mill in Penobscot County, Maine, USA. The population was 5,203 at the 2000 census. It is home to a hospital. History It began with the selection of a site for the Great Northern Paper Company in 1899. Charles W. , mill and a long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. note receivable note receivable A debt due from borrowers and evidenced by a written promise of payment. Note receivable, an entry on the asset side of many corporate balance sheets, indicates the dollar amount of loans due to be repaid by borrowers. to net realizable value Net realizable value (NRV) is a commonly used method of evaluating an asset's worth in the field of inventory accounting. NRV is part of GAAP rules that apply to valuing inventory, so as to not overstate or understate the value of inventory goods. . Including these charges, the company had a net loss of $18.5 million, or $.44 per diluted share for the full year of 1998. For 1997, the company had net income of $53.7 million, or $1.25 per diluted share. Net sales for the full year of 1998 were $2.0 billion, compared to $1.48 billion for the full year of 1997. The increase in sales over the prior year is primarily due to the inclusion of newly acquired operations for a portion of the year. The company acquired Avenor Inc. on July July: see month. 24, 1998, and a 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 mill in South Korea Korea (kôrē`ə, kə–), Korean Hanguk or Choson, region and historic country (85,049 sq mi/220,277 sq km), E Asia. on July 15, 1998. Arnold M. Nemirow, Bowater's Chairman, President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. , said, "1998 was a pivotal year for 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. . Earnings per share were up significantly before special charges, despite the impact of the Asian crisis on pulp and paper markets. Our accretive acquisition Accretive Acquisition An acquisition that will increase the acquiring company's EPS. Notes: As they are expected to increase the acquiring company's future earnings, these acquisitions tend to be favorable for the company's market price. of Avenor was a significant contributor to this performance. Integration efforts and the realization of synergies for our Avenor and Korean acquisitions are ahead of schedule. In addition, we sold the Dryden, Ontario Dryden (2006 population 8,195) is the second largest city in the Kenora District of Northwestern Ontario, Canada located on Wabigoon Lake. It is currently the smallest community in the province of Ontario designated as a city. , white paper mill in September September: see month. , and have entered into agreements to sell 1.6 million acres of surplus timberland and a sawmill sawmill, installation or facility in which cut logs are sawed into standard-sized boards and timbers. The saws used in such an installation are generally of three types: the circular saw, which consists of a disk with teeth around its edge; the band saw, which 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. . We also announced our intention to permanently close the Gold River, British Columbia Gold River is a village located close to the centre of Vancouver Island in British Columbia, Canada. Taking advantage of its deep water and abundant forests, Gold River developed in 1967 as a prototypical logging and pulp & paper industry community. , market pulp mill A pulp mill is a manufacturing facility that converts wood chips or other plant fiber source into a thick fiber board which can be shipped to a paper mill for further processing. acquired as part of the Avenor transaction, and we are proceeding with the previously announced strategy at Great Northern Paper in Maine to sell the Millinocket mill and invest significant capital in the East Millinocket mill. Our stock repurchases Stock repurchase A firm's repurchase of outstanding shares of its common stock. and redemptions and recent debt tenders will also serve to enhance the value of our enterprise. These actions, all taken in 1998, have positioned Bowater to compete more effectively on a global basis in our chosen markets." 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 11 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 Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of and Korea. These operations are supported by more than 4 million acres of timberlands owned in the United States and Canada (before the timberland sales mentioned above) 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 Toronto (tərŏn`tō), city (1998 est pop. 2,400,000), provincial capital, S Ont., Canada, on Lake Ontario. Toronto is the largest city in Canada and since the 1970s has been one of the fastest-changing cities in North America, experiencing 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 stated in U.S. dollars. -0-
BOWATER INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited, in millions except per share amounts)
Three Months Ended Twelve Months Ended
-----------------------------------------
Dec. 31 Dec. 31,
1998 1997 1998 1997
---------- ---------- ---------- ---------
Net sales $ 639.2 $ 401.0 $ 1,995.0 $ 1,484.5
Cost of sales 456.4 277.1 1,422.2 1,106.8
Depreciation, amortization,
and cost of timber
harvested 75.6 43.6 229.6 169.8
Impairment of asset (1) - - 119.6 -
---------- ---------- ---------- ----------
Gross profit 107.2 80.3 223.6 207.9
Selling and administrative
expense 30.9 18.4 81.4 72.2
---------- ---------- ---------- ----------
Operating income 76.3 61.9 142.2 135.7
Other expense (income):
Interest income (2.6) (5.9) (17.5) (21.6)
Interest expense, net 37.3 16.8 98.4 67.5
Sale of timberlands (2) - (0.7) (21.1) (0.8)
Foreign exchange
(gain)/loss (6.1) 1.3 29.7 2.1
Other, net (3) 0.3 (0.1) 35.9 (1.0)
---------- ---------- ---------- ----------
28.9 11.4 125.4 46.2
---------- ---------- ---------- ----------
Income before income taxes
and minority interests 47.4 50.5 16.8 89.5
Provision for
income taxes (4) 23.9 18.7 27.1 33.1
Minority interests (2.4) 1.7 8.2 2.7
---------- ---------- ---------- ----------
Net income/(loss) $ 25.9 $ 30.1 $ (18.5) $ 53.7
========== ========== ========== ==========
Basic earnings/(loss)
per common share(5) $ 0.46 $ 0.73 $ (0.44) $ 1.26
========== ========== ========== ==========
Average common shares
outstanding 55.7 40.5 47.6 40.3
========== ========== ========== ==========
Diluted earnings/(loss)
per common share(5) $ 0.45 $ 0.72 $ (0.44) $ 1.25
========== ========== ========== ==========
Average common and common
equivalent shares
outstanding 58.7 41.1 47.6 40.8
========== ========== ========== ==========
BOWATER INCORPORATED AND SUBSIDIARIES
(Unaudited, in millions)
Consolidated Balance Sheet December 31, December 31,
1998 1997
---------------- ----------------
Current assets:
Cash and cash equivalents $ 58.3 $ 228.7
Marketable securities 1.2 176.8
Accounts receivable, net 372.4 190.6
Inventories 186.3 105.5
Other current assets 25.2 16.8
---------------- ----------------
Total current assets 643.4 718.4
---------------- ----------------
Timber and timberlands 472.8 394.0
Fixed assets, net 2,885.2 1,554.5
Goodwill 921.7 -
Other assets 116.3 78.9
---------------- ----------------
$ 5,039.4 $ 2,745.8
================ ================
Current liabilities:
Current installments
of long-term debt $ 296.2 $ 1.8
Accounts payable and
accrued liabilities 410.1 168.3
Income taxes payable - 15.9
Dividends payable 11.9 8.7
---------------- ----------------
Total current liabilities 718.2 194.7
---------------- ----------------
Long-term debt, net of
current installments 1,534.6 757.1
Other long-term liabilities 410.5 169.5
Deferred income taxes 470.3 345.1
Minority interests in subsidiaries 128.8 125.2
Shareholders' equity 1,777.0 1,154.2
---------------- ---------------
$ 5,039.4 $ 2,745.8
================ ================
Twelve Months Ended
-------------------------------
Consolidated Cash Flow December 31, December 31,
1998 1997
---------------- ----------------
Cash flow from operating
activities $ 274.1 $ (195.6)
---------------- ----------------
Cash flow from investing
activities:
Acquisition of Avenor Inc. (675.0) -
Acquisition of Halla
newsprint mill (201.0) -
Cash invested in fixed
assets and timberlands (223.2) (99.6)
Disposition of fixed assets
and timberlands 33.8 3.7
Disposition of Dryden
pulp & paper mill (6) 532.5 -
Cash invested in option contracts (22.7) -
Cash paid on maturity of hedging
contracts (27.9) -
Cash from maturities of
marketable securities, net 175.5 168.6
---------------- ----------------
(408.0) 72.7
---------------- ----------------
Cash flow from financing
activities:
Proceeds from short-term
borrowings 766.3 -
Payments of short-term
borrowings (560.0) -
Cash dividends, including
minority interests (62.1) (57.6)
Payments of long-term borrowings (91.1) (1.8)
Purchase of common stock (98.1) (66.8)
Redemption of LIBOR preferred stock - (25.0)
Stock options exercised 6.8 24.5
Other 1.7 1.8
---------------- ----------------
(36.5) (124.9)
---------------- ----------------
Increase/(decrease) in cash
and cash equivalents $ (170.4) $ (247.8)
================ ================
BOWATER INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) During 1998, the Company reduced the book value of assets at
its Millinocket, Maine, paper mill in accordance with SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets", resulting in a
pre-tax charge of $120 million or $1.53 per diluted share.
(2) During 1998, the Company sold approximately 26,000 acres of
non-strategic timberlands resulting in a pre-tax gain of $21 million.
(3) During 1998, the Company recorded a reserve of $15 million
against a long-term note receivable.
During 1998, the Company adjusted the cost of its purchased
options on the Canadian dollar and closed out Korean won foreign
exchange contracts resulting in a total pre-tax charge of $20 million.
(4) The provision for income taxes in 1998 has been increased to
reflect the non-deductibility of certain book charges and allowances
for tax benefits not currently expected to be realized.
(5) The calculations of basic and diluted earnings per share for
the three and twelve months ended December 31, 1998, include the
following net income adjustments: (a) deductions of $.6 million and
$2.2 million, respectively, for Series C preferred stock dividends,
and (b) addition of $1.0 million for the quarter for interest expense
on convertible debentures (common stock equivalents). Due to the net
loss incurred for the year-to-date period, all common stock
equivalents were excluded to prevent antidilution. For the three and
twelve months ended December 31, 1997, the calculations included
deductions of $.6 million and $2.9 million, respectively, for any
dividend requirements of the Company's LIBOR and Series C preferred
stock and the amortization of the difference between the net proceeds
from the LIBOR preferred stock and its mandatory redemption value.
(6) In the third quarter of 1998, the Company sold its Dryden
white paper mill for approximately $532 million, which was acquired
upon the acquisition of Avenor Inc. The Dryden assets were accounted
for as assets held for sale. Therefore, no gain or loss was recorded
upon the sale of such assets.
A schedule of historical financial and operating statistics is
available upon request.
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