Annual Report on Form 10-K 2020
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RESOLUTE FOREST PRODUCTS – ANNUAL REPORT ON FORM 10-K RESOLUTE FOREST PRODUCTS – ANNUAL REPORT FORM 10-K ANNUAL REPORT ON FORM 10-K 2020 2020 ABOUT RESOLUTE FOREST PRODUCTS Resolute Forest Products is a global leader in the forest products industry with a diverse range of products, including market pulp, tissue, wood products and papers, which are marketed in over 50 countries. The company owns or operates some 40 facilities, as well as power generation assets, in the United States and Canada. Resolute has third-party certified 100% of its managed woodlands to internationally recognized sustainable forest management standards. The shares of Resolute Forest Products trade under the stock symbol RFP on both the New York Stock Exchange and the Toronto Stock Exchange. Resolute has received regional, North American and global recognition for its leadership in corporate social responsibility and sustainable development, as well as for its business practices. Visit www.resolutefp.com for more information. EQUAL OFFSET HEADQUARTERS The inside pages of this report are printed on Equal Offset® 42.5 lb (63 g/m2) paper, Resolute Forest Products manufactured at Resolute Forest Products’ Alma (Quebec) mill. 111 Robert-Bourassa Blvd., Suite 5000 Montreal, Quebec H3C 2M1, Canada Certi cations at Alma include: 514-875-2160 or 1-800-361-2888 • Sustainable Forestry Initiative® (SFI®), Programme for the Endorsement of Forest Certi cation (PEFC) and Forest Stewardship Council® (FSC®) chain of custody For a full list of contacts, visit • SFI ber sourcing www.resolutefp.com/contact. • ISO 14001 environmental management system LETTER FROM THE CHAIRMAN AND THE PRESIDENT AND CHIEF EXECUTIVE OFFICER Resolute Forest Products is accelerating Financial performance1 the evolution of our business to generate Our fi nancial performance strengthened in 2020, despite the challenges. This refl ects mostly the bottom-line impact of our long-term value for shareholders and to wood products segment, which benefi ted from the rebound drive sustainable economic activity in the in U.S. housing starts and robust demand for repair and communities where we operate. These remodeling activity, and helped to make up for challenging conditions in our pulp and paper2 segments, which are goals are vital to building the Resolute of still recovering from the economic effects of the pandemic. the future, and to fueling our collective Sales were $2.8 billion, down by 4% from the previous economic recovery from the coronavirus year. Operating income was $99 million, an $82 million pandemic. improvement over 2019, and adjusted EBITDA was $338 million compared to $213 million in 2019. Our fi nancial performance was favorably impacted by higher market While 2020 was a year of unprecedented challenges, from prices for wood products and tissue, followed by: the added the outset of the pandemic, our focus was clear: protecting contribution from the U.S. sawmills acquired in early 2020; ABOUT RESOLUTE FOREST PRODUCTS the health and well-being of our people and supporting an overall reduction in manufacturing costs; and the favorable Resolute Forest Products is a global leader in the forest our business through the uncertainty. We strictly adhered impact of the weaker Canadian dollar. These gains were products industry with a diverse range of products, including to guidelines and measures put in place by government partially offset by items directly affected by the pandemic, market pulp, tissue, wood products and papers, which are authorities, and adapted safety protocols as the situation namely: the unfavorable effect of lower pulp and paper marketed in over 50 countries. The company owns or operates evolved. Despite the diffi cult business environment, Resolute pricing, lower paper shipments, and the impact of charges some 40 facilities, as well as power generation assets, in the has weathered the COVID-19 storm with remarkable related to newsprint capacity-reduction initiatives. United States and Canada. Resolute has third-party certified strength, thanks to the tremendous effort and vigilance of 100% of its managed woodlands to internationally recognized our employees and the steadfast support of our business Our wood products segment generated EBITDA of sustainable forest management standards. partners and the communities in which we work and live. $319 million in 2020, up signifi cantly from $28 million in 2019, We continue operating in all of our business segments – while our tissue business posted EBITDA of $17 million, The shares of Resolute Forest Products trade under the stock pulp, tissue, wood products and paper – as forest products a $15 million improvement over 2019. The other business symbol RFP on both the New York Stock Exchange and the have been designated as essential by governments, all segments generated less EBITDA in 2020: $23 million Toronto Stock Exchange. while maintaining world-class safety performance. for market pulp compared to $62 million, and $23 million for paper, down from $154 million in 2019. Resolute has received regional, North American and global In May, Resolute marked its 200th anniversary. For two recognition for its leadership in corporate social responsibility centuries, the company has been transforming a renewable We generated $334 million of cash from operating activities and sustainable development, as well as for its business resource into products we depend on in our daily lives. in 2020, compared to $85 million in the previous year. practices. Visit www.resolutefp.com for more information. Never was the importance of our role on clearer display The increase is mostly attributable to the higher selling prices than in the past year with the tissue products to fi ll empty and volumes for wood products, including the additional shelves, pulp to produce medical and personal care volume from the U.S. sawmills. supplies, wood products critical to our infrastructure now and in the economic recovery to come, and paper to keep In 2020, the company repurchased 6.9 million shares people informed the world over. Our 7,100 employees from of common stock – or 8% of the total outstanding – for across some 40 facilities in the United States and Canada $30 million, as part of our initiatives to increase value have worked fl at-out to meet the critical demand for forest for shareholders. To continue improving the balance sheet, products. we recently refi nanced $375 million of our outstanding 5.875% notes due 2023 with $300 million in new 4.875% We would like to pay tribute to Yves Lafl amme for his steady notes due 2026 on very favorable terms and conditions. leadership during three eventful years as president and chief This refi nancing allows us to deleverage the business, reduce executive offi cer, as well as for helping to build Resolute’s our interest burden, gain more fl exible terms and covenants, lumberEQUAL business OFFSET to where it is today during his nearly 40-year and add three years of maturityHEAD runwayQUARTERS in our capital careerThe with inside the pages company of this reportand itsare predecessors.printed on Equal Offset ® 42.5 lb (63 g/m2) structure.paper, As of the end of theResolute year, ourForest net Products debt was down manufactured at Resolute Forest Products’ Alma (Quebec) mill. 111 Robert-Bourassa Blvd., Suite 5000 Montreal, Quebec H3C 2M1, Canada Certi cations at Alma include: 514-875-2160 or 1-800-361-2888 • Sustainable Forestry Initiative® (SFI®), Programme for the Endorsement of Forward-lookingForest Certiinformation: cation (PEFC) See section and Forest on “Cautionary Stewardship Statements Council® (FSC Regarding®) chain ofForward-Looking custody Information and UseFor ofa full Third-Party list of contacts, Data” visit on page• 1 SFIof the ber 2020 sourcing Form 10-K. www.resolutefp.com/contact. • ISO 14001 environmental management system 1. EBITDA is not a nancial measure recognized under GAAP; see note 1 on page 37 of the 2020 Form 10-K. 2. As of the second quarter 2020, the company’s results from the newsprint and specialty papers segments have been combined into one paper segment. to $448 million, with a healthy leverage ratio of 1.3 times We recently resumed the construction of a commercial 2020 adjusted EBITDA. Concurrent with the refi nancing cellulose fi lament plant at our Kénogami (Quebec) mill, activities, both Moody’s and S&P revised Resolute’s credit with production start-up planned for 2022. This is an exciting rating outlook from negative to stable. Total liquidity improved opportunity to break into non-traditional growth markets for by $110 million, to $693 million, year over year, in part due fi ber and other forest products. Cellulose fi laments are a new, to a new 10-year secured delayed term loan facility for up sustainable biomaterial made from wood fi ber manufactured to $173 million, which remains undrawn, with $130 million entirely from renewable sources. Integrating these fi bers into available as at December 31. commercial and everyday products results in lighter-weight, more fuel-effi cient vehicles, more resilient coatings and higher We made $78 million in capital expenditures for the year performance concrete. and $81 million in softwood lumber duty deposits, for cumulative deposits of $243 million as of year-end. Human resources highlights The long-term pension and other post-retirement benefi t liability on the balance sheet as of December 31, 2020, Like many other companies, our top priority in 2020 was increased by $102 million from 2019, to $1,562 million, to protect the health and safety of our employees and due almost entirely to a reduction in the applicable discount to minimize the spread of the virus at all our locations. rates in the prevailing lower interest rate environment. We established a cross-functional vigilance committee led by human resources and health and safety team members to create workplace guidelines and protocols, monitor Operational and corporate highlights government advisories and consult with medical authorities.