Bowater Announces Second Quarter 2002 Financial Results.Business Editors 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 30, 2002 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) today reported financial results for the second quarter of 2002. Bowater reported a net loss of $53.7 million, or $0.95 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 sales of $652.1 million. These results compare with a net income of $18.6 million, or $0.36 per diluted share, on sales of $585.2 million in the second quarter of 2001. Included in the 2002 net loss is a $2.2 million, or $0.04 per diluted share, gain related to asset sales and a $12.6 million, or $0.22 per diluted share, loss resulting from foreign currency changes. Before these two items, the net loss for the second quarter of 2002 was $43.3 million, or $0.77 per diluted share. Earnings for fiscal year 2001 included goodwill amortization of $24.0 million. The company adopted Statement of Financial Accounting Standards No. 142, which eliminated goodwill amortization, effective January January: see month. 1, 2002. Bowater's results for the second quarter of 2001 do not include the impact of its acquisition of Alliance Forest Products Inc., which closed in September September: see month. 2001. Bowater reported a net loss of $43.5 million, or $0.77 per diluted share, on sales of $1.3 billion for the first six months of 2002. This compares with net income of $56.3 million, or $1.08 per diluted share, on sales of $1.2 billion for the first six months of 2001.
FINANCIAL HIGHLIGHTS
($ in millions, except per-share amounts)
Three months Six months
ended June 30, ended June 30,
2002 2001 2002 2001
---- ---- ---- ----
Sales $ 652.1 $ 585.2 $1,274.1 $1,190.1
Net income (loss) $ (53.7) $ 18.6 $ (43.5) $ 56.3
Earnings (loss) per
diluted share $( 0.95) $ 0.36 $ (0.77) $ 1.08
INCLUDED IN RESULTS
(per diluted share)
Sale of assets (gain) loss $ (0.04) $ (0.37) $ (0.79) $ (0.30)
Foreign exchange (gain) loss $ 0.22 $ 0.21 $ 0.20 $ 0.06
Goodwill amortization $ - $ 0.12 $ - $ 0.23
Earnings (loss) per share
excluding these items $ (0.77) $ 0.32 $ (1.36) $ 1.07
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 markets weakened weak·en tr. & intr.v. weak·ened, weak·en·ing, weak·ens To make or become weak or weaker. weak  en·er n. further in the second quarter of 2002
and Bowater experienced a decline in the average price of newsprint of
3% compared to the first quarter of 2002. The company curtailed
newsprint production by 119,000 metric tons, of which 23,000 metric tons
related to scheduled maintenance, and 27,000 metric tons related to the
previously announced labor union labor union: see union, labor. dispute at the Mokpo Mok·po A city of southwest South Korea on an inlet of the Yellow Sea. Its port was opened to foreign trade in 1897. Population: 231,000. , South Korea Korea (kôrē`ə, kə–), Korean Hanguk or Choson, region and historic country (85,049 sq mi/220,277 sq km), E Asia. newsprint mill. Production at the mill resumed on July July: see month. 29, 2002 following settlement of the strike. Newsprint market fundamentals are improving and the company has informed its North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. newsprint customers that it will raise prices $50 per metric ton effective August 1, 2002. Although trends in consumption are improving, the company expects to curtail cur·tail tr.v. cur·tailed, cur·tail·ing, cur·tails To cut short or reduce. See Synonyms at shorten. [Middle English curtailen, to restrict newsprint production by approximately 110,000 metric tons in the third quarter of 2002. Pulp pulp: see paper. markets strengthened in the second quarter of 2002 due to increased consumption, low inventories and a weaker U.S. dollar. Bowater implemented two market pulp increases in the second quarter and implemented a third increase on July 1, 2002. Bowater's average selling price The average sales price of goods or commodities. Especially used in the retail sector and technology distribution. in the second quarter improved slightly compared to the first quarter. However, Bowater's pulp prices are more than $30 per metric ton higher than March levels. Bowater's market pulp production was curtailed by approximately 21,000 metric tons in the second quarter. The selling price of Bowater's coated and specialty paper declined by 3% in the quarter. 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 sales during the second quarter of 2002 benefited by a reversal in previously accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. countervailing and anti-dumping duties of $7.3 million. In the second quarter, Bowater's cost per ton, net of downtime The time during which a computer is not functioning due to hardware, operating system or application program failure. , was significantly lower than the first quarter. Bowater has achieved its previously increased $80 million Alliance synergy The enhanced result of two or more people, groups or organizations working together. In other words, one and one equals three! It comes from the Greek "synergia," which means joint work and cooperative action. target six months ahead of schedule. The company expects business conditions to improve steadily in the second half of 2002. Bowater will hold a management conference call to discuss these financial results at 10:00 AM EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT , July 30, 2002. The conference call number is 800-230-1085 or 612-332-0923 (international). The call will also be broadcast via the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the . Interested parties may connect to the Bowater website at www.bowater.com, then follow the on-screen on·screen or on-screen adj. & adv. 1. As shown on a movie, television, or display screen. 2. Within public view; in public. instructions for access to the call. A replay of the call will be available from 1:30 PM EDT on Tuesday Tuesday: see week. , July 30, through Tuesday, August 6, on the website or by dialing 800-475-6701 or 320-365-3844 (international) and using the access code 644267. 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 products. The company has 12 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 South Korea and 13 North American sawmills that produce softwood softwood Timber obtained from coniferous trees (mainly of the pine and fir families). With the exception of bald cypress, tamarack, and larch, softwood trees are evergreens. and hardwood hardwood: see wood. hardwood Timber obtained from broad-leaved, flower-bearing trees. Hardwood trees are deciduous trees, except in the warmest regions. lumber. Bowater also operates two facilities that convert a groundwood base sheet to coated products. Bowater's operations are supported by approximately 1.5 million acres of timberlands owned or leased in the United States and Canada and 33 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 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. , the Pacific Exchange 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 Stock Exchange Toronto Stock Exchange (TSE) Canada's largest stock exchange, trading approximately 1,200 company stocks and 33 options. (TSE See Tokyo Stock Exchange. TSE 1. See Tokyo Stock Exchange (TSE). 2. See 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 forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and 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 capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. 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 relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc 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 Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December 31, 2001, and from time to time, in Bowater's other filings with the Securities and Exchange Commission.
BOWATER INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited, in millions except per share amounts)
Three Months Ended Six Months Ended
June 30 (1) June 30 (1)
------------ ---------------
2002 2001 2002 2001
--------------- ----------------
Sales $ 652.1 $ 585.2 $ 1,274.1 $ 1,190.1
Cost of sales, excluding
depreciation, amortization
and cost of timber
harvested 508.5 385.2 979.1 761.2
Depreciation, amortization
and cost of timber
harvested (2) 86.1 74.8 172.4 151.6
Distribution costs 56.0 41.3 110.3 81.2
Selling and administrative
expense 40.4 29.2 75.9 46.0
Net gain on sale of assets (3) 3.5 85.0 75.0 79.2
-------- ------- ------- ------
Operating income (loss) (35.4) 139.7 11.4 229.3
Other expense (income):
Interest income (1.2) (3.0) (2.2) (6.6)
Interest expense, net of
capitalized interest 41.3 33.8 83.1 69.0
Foreign exchange loss 4.6 11.4 3.5 6.6
Other, net 0.6 (0.9) 1.6 (0.7)
-------- ------- ------- ------
45.3 41.3 86.0 68.3
-------- ------- ------- ------
Income (loss) before income
taxes and minority
interests (80.7) 98.4 (74.6) 161.0
Provision (benefit) for
income tax expense (22.8) 50.0 (25.3) 70.4
Minority interests in the
net income (loss) of
subsidiaries (4.2) 29.8 (5.8) 34.3
-------- ------- ------- ------
Net income (loss) $ (53.7) $ 18.6 $ (43.5) $ 56.3
======== ======== ======= ======
Basic earnings (loss)
per common share: (4) $ (0.95) $ 0.36 $ (0.77) $ 1.09
======== ======== ======= ======
Average common shares
outstanding (4) 56.9 51.6 56.8 51.6
======== ======== ======= ======
Diluted earnings (loss)
per common share: (4) $ (0.95) $ 0.36 $ (0.77) $ 1.08
======== ======== ======= ======
Average common and common
equivalent shares
outstanding (4) 56.9 51.9 56.8 52.0
======== ======== ======= ======
BOWATER INCORPORATED AND SUBSIDIARIES
(Unaudited, in millions of US dollars)
Consolidated Balance Sheet June 30, December 31,
2002 2001
---------- ------------
Current assets:
Cash and cash equivalents $ 29.7 $ 28.3
Marketable securities 0.5 2.1
Accounts receivable, net 357.5 367.0
Inventories 257.4 250.5
Other current assets 54.6 41.7
--------- ---------
Total current assets 699.7 689.6
--------- ---------
Timber and timberlands 198.7 227.7
Fixed assets, net 3,738.2 3,818.4
Goodwill 843.0 843.0
Other assets 197.5 182.3
--------- ---------
$ 5,677.1 $ 5,761.0
========== ==========
Current liabilities:
Current installments of long-term
debt $ 20.8 $ 73.0
Short-term bank debt 478.0 341.7
Accounts payable and accrued liabilities 337.1 437.9
Income taxes payable 6.8 -
Dividends payable 11.1 10.9
--------- ---------
Total current liabilities 853.8 863.5
--------- ---------
Long-term debt, net of current
installments 1,809.1 1,828.0
Other long-term liabilities 362.0 362.3
Deferred income taxes 583.4 600.0
Minority interests in subsidiaries 77.8 85.2
Commitments and contingencies - -
Shareholders' equity 1,991.0 2,022.0
--------- ---------
$ 5,677.1 $ 5,761.0
========= =========
Six Months Ended
Consolidated Cash Flow June 30,
---------------------
2002 2001
--------- ---------
Cash flows from (used for)
operating activities $ (23.8) $ 180.3
--------- ---------
Cash flows from (used for) investing activities:
Cash invested in fixed assets, timber
and timberlands (125.0) (115.0)
Disposition of assets 19.9 -
Proceeds from sale of note receivable (3) 88.1 122.6
Maturity of marketable securities, net 1.7 -
--------- ---------
(15.3) 7.6
--------- ---------
Cash flows from (used for) financing activities:
Cash dividends, including minority
interests (26.6) (85.6)
Financing activities, net 61.1 (102.8)
Stock options exercised 6.0 0.2
--------- ---------
40.5 (188.2)
--------- ---------
Net increase (decrease) in cash and
cash equivalents $ 1.4 $ (0.3)
========== =========
BOWATER INCORPORATED AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(1) The Alliance Forest Products Inc. (Alliance) acquisition was
completed on September 24, 2001. The results of Alliance's operations
have been included in the consolidated financial statements since
September 24, 2001.
(2) In accordance with Statement of Financial Accounting Standards
No. 142, "Goodwill and Other Intangible Assets," Bowater is no longer
amortizing goodwill to earnings. During the three months and six
months ended June 30, 2001, Bowater recorded goodwill amortization of
approximately $6.2 million, or $0.12 per diluted share and $11.9
million, or $0.23 per diluted share, respectively.
(3) In January 2002, Bowater completed the sale of approximately
116,000 acres of timberland for aggregate consideration of $104.2
million, comprised of approximately $5.1 million in cash and $99.1
million in a note receivable. In March 2002, we monetized the $99.1
million note receivable for net cash proceeds of $88.1 million. These
transactions resulted in a pre-tax gain of approximately $70.4
million.
In the second quarter of 2001, Bowater recognized a net pre-tax
gain on the sale of assets of $85.0 million. This gain is primarily
the result of the monetization of a note receivable and recognition of
deferred income (previously in Other Long-term Liabilities) related to
a 1999 sale of timberlands. The pre-tax gain was $84.5 million ($19.2
million after tax and minority interest). A portion of the proceeds
was dividended to the minority shareholder ($60.1 million). In April
2001, Bowater reached a final settlement in connection with a 1999
asset sale. Bowater recognized a $5.8 million pre-tax charge ($3.6
million after tax), or $0.07 per diluted share, in the first quarter
of 2001.
(4) For the calculation of basic and diluted earnings per share
for the three months and six months ended June 30, 2002 and 2001, no
adjustments to net income are necessary. The effect of dilutive
securities is not included in the computation for the three months and
six months ended June 30, 2002 to prevent antidilution.
A schedule of historical financial and operating statistics is
available upon request and on Bowater's web site (www.bowater.com).
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