DEFA14A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the
Registrant x Filed by a
Party other than the Registrant ¨
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appropriate box:
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
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DOMTAR CORPORATION |
(Name of Registrant as Specified In Its Charter) |
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant) |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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MESSAGE
TO SHAREHOLDERS
Partners
every day
At Domtar, we are taking action every day to shape our future and deliver
meaningful value for our shareholders. Guided by clear strategic priorities and a well-defined plan that positions Domtar for sustainable growth, our business transformation is well underway, and our results demonstrate the progress we are making.
Our goal over the longer term is to generate annual EBITDA of $300 million to $500 million from growing fiber-based businesses, while delivering solid value for shareholders along the way.
Our Personal Care division is gaining traction in North America and Europe, both in the adult incontinence and infant care
categories, and growth is accelerating. Our Pulp and Paper division is proving resilient year after year. We remain the North American leader in uncoated freesheet, with industry-leading margins over the past several years. We are repurposing assets
and leveraging the flexibility of this divisions integrated value chain to capture opportunities that deliver higher value, more sustainably.
Thanks to our strong and steady performance in our Pulp and Paper division, which generated
approximately $4.5 billion in sales in 2015, we have been able to invest in growth markets and reward our shareholders. From January 2011 to December 2015, we returned approximately $1.3 billion to shareholdersfully 72% of our free cash flow,
through share buybacks and dividendswhile maintaining a strong financial position.
DRIVING VALUE IN OUR CORE BUSINESS
Our 2015 shipments of communication paperswhich account for about 80% of Domtars total paper mixbenefited from
higher white-collar employment and an increase in direct mail marketing. Shipments were also up for specialty and packaging grades, a category that represents 16% of our mix and tracks GDP growth.
DOMTAR 2015 ANNUAL REPORT 1
FROM JANUARY 2011 TO
DECEMBER 2015, DOMTAR RETURNED APPROXIMATELY $1.3 BILLION TO SHAREHOLDERS THROUGH SHARE BUYBACKS AND DIVIDENDS.
OVER $900 MILLION IN CUMULATIVE BUYBACKS
In 2016, Domtar will remain a supplier of choice for a broad range of paper customers and channel partners by
staying focused on innovation, product quality, technical support and excellent service. The recent favorable decisions by the U.S. International Trade Commission and the U.S. Department of Commerce to address unfairly-priced imports of certain
uncoated paper into the United States will support higher shipments from U.S. manufacturers in 2016.
Our customers
and partners continue to appreciate our initiatives to reinforce the practical and enduring qualities of paper and encourage its responsible use. This includes our Print Works! publications and our edgy, award-winning PAPERbecause
campaign, which advocates for paper through innovative promotions.
Market pulp represents 19% of our consolidated
sales, and we continue to diversify and expand in growth markets. Pulp volumes remained strong in 2015, and we expect higher sales following the completion of our paper machine conversion into a fluff pulp line in Ashdown, Arkansas, in the second
half of 2016. We are adding over 500,000 air dry metric tons (ADMT) in annual pulp capacity on a machine that will also be able to produce softwood bales. The repurposing of this asset will further shift our pulp customer base toward growth markets.
Our goal is for 50% of the production capacity on this machine to be used for fluff pulp by 2017.
The Pulp and
Paper division achieved solid productivity last year, driven by full capacity operation and the introduction of continuous improvement and reliability programs across our mill network that is extracting costs from the system and is reducing
maintenance spending, an ongoing objective. We expect these programs to generate further productivity improvements in 2016 and beyond as we pursue our goal to be the lowest cost producer in the industry.
2 DOMTAR
2015 ANNUAL REPORT
MESSAGAE
TO SHAREHOLDERS
EXPANDING DOMTARS FOOTPRINT IN PERSONAL CARE
Over the past few years, we have established a meaningful position in the global personal care market through strategic
acquisitions, investments in expanded and improved manufacturing, product innovation and organic growth. Today, we have a growing position in institutional channels for adult incontinence products in North America and Europe. We are one of the
largest suppliers of private-label baby diapers in the North American retail channel and a leader in the branded adult incontinence segment in Spain. The personal care market has attractive fundamentals, and we are investing to build efficiency and
scale, and to expand our product offering.
In 2015, we achieved cost savings from our new manufacturing platform
and secured significant new business in key retail channels that will be reflected in our 2016 sales. These wins reflect the strength of our partner brand model, a unique go-to-market approach that offers close alignment with the needs of our
customers. We are bringing more choice, innovation and flexibility to the private-label market, as well as technical expertise, category management and customer service.
Whether developing products with our clients or marketing our own, we are at the forefront of innovation for absorbent
materials and product design. We incorporated new innovation in the re-launch of our line of branded light incontinence products in Spain, which was well received by consumers, and we conducted consumer testing for innovations that will be launched
in 2016 within our infant line and adult incontinence brief design. This is the R&D engine of our personal care business.
Overall, our broadening product assortment across the absorbent hygiene spectrum will further position us as a partner of choice, with the offering, insight and scale to provide required service levels in both products and
distribution capabilities. As we continue to win new business and strengthen customer relationships, we are confident that this growth segment will contribute significantly to achieving Domtars long-term objectives.
CREATING VALUE FOR SHAREHOLDERS
We increased our quarterly dividend by 7% to $0.40 per share and our stock buyback program from $1 billion to $1.3 billion in 2015. For the year,
we returned over 90% of our free cash flow directly to shareholders. We will continue to pursue a balanced approach to the deployment of our capital, while maintaining the flexibility to execute our growth strategy.
Maximizing value in our pulp and paper business and positioning Domtar in growth markets remain our strategic priorities. We are also committed
to operating responsibly, an ethic that is engrained in our culture and drives everything we do. From the environmental compliance of our operations and making responsibly-sourced and manufactured products, to giving back to our communities, we are
committed to setting an example of sustainable business.
We are pleased with our progress in 2015 and look forward to achieving new
milestones in the years ahead as our investments and our efforts bear fruit. We are confident in our strategy. In 2016, a significant portion of our capital expenditures will be allocated to investments in pulp and personal care, further advancing
our long-term financial objectives. We will remain squarely focused on execution and on ensuring that we deliver value for our shareholders, employees, customers and communities by shaping our future, every day.
John D. Williams
President and Chief Executive Officer
The terms
EBITDA and free cash flow referred to in this message are non-GAAP financial measures. Please see Reconciliation of non-GAAP financial measures at domtar.com.
DOMTAR 2015 ANNUAL REPORT 3
4 DOMTAR
2015 ANNUAL REPORT
DOMTAR 2015 ANNUAL REPORT 5
6 DOMTAR
2015 ANNUAL REPORT
DOMTAR 2015 ANNUAL REPORT 7
PULP
In addition to
paper products, we also sell papergrade, fluff and specialty pulp that we manufacture in excess of our internal needs. Our papergrade softwood and hardwood pulp is mainly used to make tissue, towel, packaging and specialty products. Fluff pulp,
derived from softwood fibers, is used in a broad range of absorbent productsbaby diapers, feminine hygiene and adult incontinence products.
1.7 MILLION
AIR DRY
METRIC TONS
OF MARKET
PULP
The location of our mills positions us well for serving the growing export markets, where over half our market pulp is sold,
and for the North American tissue, hygiene and specialty customers we currently serve. The global pulp market is experiencing modest growth, and we plan on growing our position in the softwood and fluff pulp market by the end of 2016 with the
announced capacity conversion at Ashdown, Arkansas.
Together, our pulp and paper products are sold in over 40 countries around the
world.
Recyclable, re-usable and sourced from renewable forests, Domtar pulp and paper products bring value to the businesses and
consumers who use them every day.
8 DOMTAR
2015 ANNUAL REPORT
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PULP AND PAPER KEY FIGURES
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Years ended December 31 |
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2013 |
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2014 |
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2015 |
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(In millions of dollars unless otherwise noted) |
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Sales (including sales to Personal Care) |
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4,843 |
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4,674 |
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4,458 |
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Operating
income |
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244 |
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352 |
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270 |
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Depreciation and
amortization |
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345 |
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319 |
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297 |
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EBITDA before items1 |
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629 |
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702 |
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633 |
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Capital
expenditures |
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147 |
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161 |
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221 |
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Total
assets |
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4,180 |
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3,915 |
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3,667 |
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Paper
shipmentsmanufactured (000 ST) |
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3,260 |
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3,148 |
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3,163 |
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Pulp shipments
(000 ADMT) |
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1,445 |
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1,391 |
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1,414 |
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1 |
Non-GAAP financial measure. Please see Reconciliation of non-GAAP Financial Measures at domtar.com. |
BUSINESS
SEGMENTS
Beginning in 2014 and reaching full implementation in 2015, Domtar embarked on a Life-altering Injury, Fatality
Elimination (LIFE) journey to provide additional focus on the elimination of serious injury. The importance of this program was heightened by an employee fatality in late 2015. For the year, nine pulp and paper sites were free of recordable
incidents.
DOMTAR 2015 ANNUAL REPORT 9
10 DOMTAR
2015 ANNUAL REPORT
DOMTAR 2015 ANNUAL REPORT 11
BUSINESS SEGMENTS
In 2015, the Personal Care division reduced incident frequency by 29%, with two sites remaining injury-free for
the year. To further improve its safety performance, the recently implemented, division-wide Environmental Health and Safety Steering Council developed comprehensive safety plans for each facility.
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PERSONAL CARE KEY FIGURES
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Years ended December 31 |
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2013 |
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2014 |
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2015 |
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(In millions of dollars unless otherwise noted) |
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Sales |
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566 |
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928 |
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869 |
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Operating
income |
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40 |
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49 |
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61 |
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Depreciation and
amortization |
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31 |
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65 |
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62 |
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EBITDA before items1 |
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77 |
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118 |
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124 |
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Capital
expenditures |
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91 |
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86 |
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57 |
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Total
assets |
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1,272 |
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1,963 |
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1,822 |
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1 |
Non-GAAP financial measure. Please see Reconciliation of non-GAAP Financial at domtar.com. |
12 DOMTAR
2015 ANNUAL REPORT
MANAGEMENT COMMITTEE AND
BOARD OF DIRECTORS
Responsible
every day
Domtar upholds the highest standards of ethical and socially responsible behavior. Our commitment
is supported and enforced by Domtars Code of Business Conduct and Ethicswhich is applicable to all our directors and employeesstrict Corporate Governance Guidelines and a robust compliance program. As a responsible corporate
citizen, Domtar has adopted policies and best practices that often go beyond what the law requires. Promoting strong governance and diversity, as well as ensuring the compliance with policies and procedures, is a responsibility we take seriously
every day.
For more information on our governance practices, or to consult our proxy statement, please visit domtar.com.
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John D. Williams President and Chief Executive Officer |
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Daniel Buron Senior Vice President and Chief Financial
Officer |
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Michael D. Garcia President Pulp and Paper Division |
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Michael Fagan President Personal Care Division |
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Zygmunt Jablonski Senior Vice President and Chief Legal
and Administrative
Officer |
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Patrick Loulou Senior Vice President Corporate Development |
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Robert J. Steacy Chairman of the Board Domtar Corporation
Toronto, Ontario |
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Louis P. Gignac Chairman G Mining Services Inc.
Montreal, Quebec |
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David G. Maffucci Corporate Director Isle of Palms,
South Carolina |
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Denis Turcotte President and CEO North Channel Management and
North Channel Capital Partners Sault
Ste. Marie, Ontario |
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Giannella Alvarez Chief Executive Officer Harmless Harvest, Inc.
San Francisco, California |
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David J. Illingworth Corporate Director Orchid, Florida |
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Domenic Pilla Corporate Director Toronto, Ontario |
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John D. Williams President and Chief Executive Officer
Domtar Corporation Charlotte, North
Carolina |
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Robert E. Apple Chief Operating Officer MasTec, Inc.
Miami, Florida |
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Brian M. Levitt Chairman of the Board The Toronto-Dominion Bank
Vice-Chair, Osler Hoskin &
Harcourt LLP Montreal,
Quebec |
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Pamela B. Strobel Corporate Director Chicago, Illinois |
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Mary A. Winston Corporate Director Charlotte, North Carolina |
DOMTAR 2015 ANNUAL REPORT 13
14 DOMTAR
2015 ANNUAL REPORT
DOMTAR 2015 ANNUAL REPORT 15
Selected financial
figures
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Years ended December 31 |
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2013
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2014
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2015
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(In millions of dollars unless otherwise noted)
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Consolidated sales per segment |
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Pulp and Paper |
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4,843 |
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4,674 |
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4,458 |
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Intersegment salesPulp and Paper |
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(18 |
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(39 |
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(63 |
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Personal Care |
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566 |
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928 |
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869 |
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Consolidated sales |
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5,391 |
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5,563 |
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5,264 |
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Operating income (loss) per segment |
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Pulp and Paper |
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244 |
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352 |
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270 |
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Personal Care |
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40 |
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49 |
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61 |
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Corporate |
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(123 |
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(37 |
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(43 |
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Operating income |
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161 |
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364 |
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288 |
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Net earnings |
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91 |
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431 |
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142 |
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Cash flow provided from operating activities |
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411 |
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634 |
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453 |
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Capital expenditures |
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242 |
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236 |
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289 |
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Free cash flow1 |
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169 |
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398 |
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164 |
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Total assets |
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6,278 |
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6,185 |
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5,663 |
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Long-term debt, including current portion |
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1,514 |
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1,350 |
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1,260 |
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Net debt-to-total capitalization ratio1 |
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24% |
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29% |
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30% |
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Total shareholders equity |
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2,782 |
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2,890 |
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2,652 |
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Weighted averge number of common and exchangeable shares outstanding in millions (diluted) |
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66.7 |
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64.9 |
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63.4 |
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1 |
Non-GAAP financial measure. Please see Reconciliation of non-GAAP Financial Measures at domtar.com. |
16 DOMTAR
2015 ANNUAL REPORT
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Shareholder information |
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Production notes |
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DIVIDENDS DECLARED IN 2015 |
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PAPER |
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Declared |
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Record Date
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Payable Date
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Amount |
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Cover printed on 80 lb. Cougar® Cover,
Smooth Finish.
Insert printed on 60 lb. Cougar® Text,
Smooth Finish. Form 10-K printed on
40 lb. Lynx® Opaque Ultra Text, Smooth Finish |
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November 4, 2015 |
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January 4, 2016 |
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January 15, 2016 |
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$0.40 |
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August 5, 2015 |
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October 2, 2015 |
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October 15, 2015 |
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$0.40 |
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May 5, 2015 |
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July 2, 2015 |
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July 15, 2015 |
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$0.40 |
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February 23, 2015 |
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April 2, 2015 |
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April 15, 2015 |
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$0.40 |
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EXCHANGE LISTINGS
NYSE: UFS TSX: UFS
DIVIDEND POLICY
Subject to approval by our Board of
Directors, Domtar pays a quarterly
dividend on its common stock.
TRANSFER AGENT AND
REGISTRAR Computershare P.O. BOX 30170 College Station, TX 77845-3170
North American Toll Free Number:
1-877-282-1168 Tel.:
1-781-575-2879 computershare.com/investor |
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INVESTOR RELATIONS
Investor Relations Department Domtar Corporation 395 de Maisonneuve Blvd. West
Montreal, QC Canada H3A 1L6 Tel.:
514-848-5555 Voice Recognition: Investor Relations
Email: ir@domtar.com
Electronic versions of this report, SEC
filings and other publications are
available at domtar.com
ANNUAL MEETING Tuesday, May
3, 2016, 5 p.m. ET Domtar Corporate Office 234 Kingsley Park Drive Fort Mill, SC 29715 |
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PRINTING Cover and insert printed with UV inks on a Heidelberg Speedmaster CD 102 press 6-color units with in-line coater and
full |
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inter-deck and end-of- press extended delivery
UV drying systems. |
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WE THANK THE DOMTAR EMPLOYEES |
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WHO PARTICIPATED IN THE COVER |
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PHOTO |
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Cindy Chee, Internal Auditor |
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Vincent Déry, Advisor |
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Pension Plans |
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Dominique Buslot, Manager |
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IT Service Providers |
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TENTATIVE EARNINGS SCHEDULE |
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First Quarter 2016: Thursday, April 28, 2016 |
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Second Quarter 2016: Thursday, July 28, 2016 |
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Third Quarter 2016: Thursday, October 27, 2016 |
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Fourth Quarter 2016: Thursday, February 9, 2017 |
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Domtar is pleased to make an annual contribution of $425,000 to WWF from the sale of FSC® Certified EarthChoice® |
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® WWF Registered Trademark. Panda Symbol
© 1986 WWF. © 1986 Panda symbol WWF-World Wide Fund for Nature (also known as World Wildlife Fund).
® WWF is a WWF Registered Trademark
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Learn the environmental, social and economic impacts of Domtar products at domtarpapertrail.com. |
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