AbitibiBowater Inc., doing business as Resolute Forest Products, has reported net income of $23 million for the first quarter, or $0.23 per share, on sales of $1.1 billion. This compares with net income of $30 million, or $0.31 per share, on sales of $1.2 billion in the first quarter of 2011.

Excluding $16 million of special items described below, net income for the quarter was $7 million, or $0.07 per share.  Net income excluding special items for the first quarter of 2011 was $10 million, or $0.10 per share.

"Our balance sheet continued to strengthen despite seasonal softness and market headwinds," said Richard Garneau, president and chief executive officer.  "We demonstrated the discipline that sets us apart by taking market-related downtime to control finished goods inventory and by advancing annual pulp mill major maintenance to the first quarter from the second."

DESCRIPTION OF SPECIAL ITEMS

Special items incurred in the first quarter of 2012, net of tax, included:

• $15 million non-cash gain on translation of Canadian dollar net monetary assets
• $12 million gain on disposition of assets
• $4 million charge related to closure costs, impairment and other related charges
• $4 million of transaction costs related to the acquisition of Fibrek
• $3 million non-cash charge related to reorganization tax adjustments
• Income from other items, offset by a severance charge and post-emergence costs

Special items incurred in the first quarter of 2011, net of tax, included:

• $29 million non-cash gain on translation of Canadian dollar net monetary assets
• $10 million non-cash income related to reorganization tax adjustments
• $9 million charge related to closure costs, impairment and other related charges
• $8 million charge for post-emergence costs
• $3 million severance charge
• $1 million income, net, from a gain on disposition of assets, a charge for inventory write-downs and other income

Non-GAAP financial measures, such as adjustments for special items, are reconciled below.

SEGMENT DETAILS

Newsprint

The newsprint segment generated operating income of $21 million, a $5 million decrease from the fourth quarter of 2011.  The decrease reflects a 9% seasonal reduction in shipments and the stronger Canadian dollar, largely offset by lower input costs, mainly recovered paper and power.  The average transaction price remained unchanged and inventories were stable as the Company took 85,000 metric tons of production downtime.

Coated Papers 

Operating income in the coated papers segment was $14 million lower in the first quarter than in the previous quarter, resulting in an operating loss of $1 million. Shipments were stable but the average transaction price declined approximately $30 per short ton on weaker market conditions.  Costs increased by $56 per short ton, primarily as a result of the annual maintenance outage in Catawba, South Carolina.

Specialty Papers

The specialty papers segment generated operating income of $15 million, down from $24 million in the previous quarter.  Shipments were down 13% from the seasonally stronger fourth quarter and operating costs were higher due to a stronger Canadian dollar, offset in part by lower maintenance costs.  The average transaction price remained stable, notwithstanding a decline in market demand to which the Company responded with approximately 36,000 metric tons of production downtime.

Market Pulp

Operating loss in the market pulp segment was $21 million, compared to operating income of $12 million in the previous quarter. The average transaction price continued its downward trend, falling another $38 per metric ton in the first quarter.  Results also included an $11 million charge for annual maintenance outages at two mills, including one advanced from a later quarter in light of softer demand.  Shipments were essentially unchanged from the fourth quarter as the Company took production downtime of over 77,000 metric tons.

Wood Products

The wood products segment reported an operating loss of $6 million in the first quarter, compared to a loss of $5 million in the fourth quarter. Shipments decreased by 8% over the same period, offsetting the $24 increase in average transaction price.

Corporate

Operating income in the corporate segment included a $9 million refund of certain group benefit premiums paid in prior years.

OUTLOOK

"Our outlook for newsprint remains the same: despite modest secular decline in North America, we expect stable pricing, with continued weakness in Asian and European markets as long as the combination of lower ONP prices, a strong U.S. dollar and weaker euro continues," said Mr. Garneau.  "We remain somewhat cautious in our outlook for pulp over the balance of the year, and we plan to complete the bulk of annual pulp mill maintenance in the second quarter.  Pricing pressure in the specialty grades is building as a result of weak demand, especially in high gloss grades, but we expect the coated segment to recover as a result of recent price increase announcements by us and a number of our competitors.  For their part, lumber markets are starting to reflect the gradual improvement in U.S. housing starts."