Asset Impairment Overshadows Catalyst Paper’s Improved Financial Results
RICHMOND, CANADA—Nov. 14, 2011—Catalyst Paper posted a net loss of $205.7 million on sales of $340.3 million during the third quarter of 2011. The net loss was largely due to a $151.0 million impairment charge on the company’s Snowflake facility.
The third-quarter net loss compared with a second-quarter net loss of $47.4 million on sales of $297.8 million. Operating results for the third quarter improved over the prior quarter, driven by higher sales volumes and paper prices, productivity gains and a lower Canadian dollar.
“We regained momentum this quarter in productivity and operating rates,” said President and CEO Kevin J. Clarke. “And our strong safety focus helped reduce lost time injuries. Unfortunately, these improvements were overshadowed by the magnitude of the impairment charge at Snowflake, which makes very clear the relentless pressures on our industry.”
The Snowflake impairment charge consists of a full write-down of the net book value of building, machinery and equipment, as well as the cost of materials and parts inventory. The profitability of recycled newsprint production at Snowflake is being severely impacted by demand declines and by supply and price pressures relating to recovered old newsprint (ONP) which is the mill’s sole fibre feedstock. The impairment charge is therefore being taken in accordance with U.S. generally accepted accounting principles.
Before the impairment charge and other specific items, Catalyst had a net loss for the third quarter of $14.1 million, in contrast to a net loss before specific items of $46.9 million in the second quarter. The other significant specific item during the third quarter was a foreign exchange loss on the translation of U.S.-dollar denominated debt.
Earnings before interest, taxes, depreciation and amortization (EBITDA) were $26.8 million in the third quarter. This was an improvement from negative EBITDA of $3.9 million in the second quarter. There were no re-structuring costs in either quarter. The benefits of higher EBITDA were however more than offset by the Snowflake-related impairment charge, and resulted in a third-quarter operating loss of $151.6 million, compared to an operating loss of $30.6 million in the second quarter.