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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM    TO
COMMISSION FILE NUMBER: 001-33776
RESOLUTE FOREST PRODUCTS INC.
(Exact name of registrant as specified in its charter)
Delaware98-0526415
(State or other jurisdiction of incorporation or organization)(I.R.S. employer identification number)
1010 De La Gauchetière Street West
Suite 400
Montreal
Quebec
Canada
H3B 2N2
(Address of principal executive offices) (Zip Code)

(514) 875-2160
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of classTrading SymbolName of exchange on which registered
Common Stock, par value $0.001 per shareRFPNew York Stock Exchange
Toronto Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
    Yes ☒    No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
    Yes ☒    No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer☐Accelerated Filer
☒
Non-accelerated Filer☐Smaller Reporting Company☐Emerging Growth Company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
    Yes ☐    No ☒
As of October 31, 2022, there were 76,811,811 shares of Resolute Forest Products Inc. common stock, $0.001 par value, outstanding.

RESOLUTE FOREST PRODUCTS INC.
TABLE OF CONTENTS
 
 Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
PART II. OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

PART I.    FINANCIAL INFORMATION
ITEM 1.    FINANCIAL STATEMENTS
RESOLUTE FOREST PRODUCTS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in millions of U.S. dollars, except per share amounts)
Three Months Ended
September 30,		Nine Months Ended
September 30,
2022202120222021
Sales$974 $817 $2,977 $2,830 
Costs and expenses:
Cost of sales, excluding depreciation, amortization and distribution costs
653 554 1,847 1,642 
Depreciation and amortization34 42 101 123 
Distribution costs107 87 310 264 
Selling, general and administrative expenses57 32 133 114 
Closure costs, impairment and other related charges (Note 3)
(1)— 8 2 
Net loss on disposition of assets
— — 2 — 
Operating income
124 102 576 685 
Interest expense(5)(5)(16)(16)
Non-operating pension and other postretirement benefit (costs) credits
(3)3 (13)8 
Other income (expense), net (Note 4)
37 20 95 (74)
Income before income taxes
153 120 642 603 
Income tax provision (Note 12)
(66)(40)(89)(167)
Net income including noncontrolling interest
87 80 553 436 
Net income attributable to noncontrolling interest— — — (1)
Net income attributable to Resolute Forest Products Inc.
$87 $80 $553 $435 
Net income per share attributable to Resolute Forest Products Inc. common shareholders (Note 6):
Basic$1.12 $1.00 $7.14 $5.44 
Diluted$1.11 $0.99 $7.07 $5.39 
Weighted-average number of Resolute Forest Products Inc. common shares outstanding:
Basic77.5 79.4 77.4 80.0 
Diluted78.4 80.1 78.2 80.8 
See accompanying notes to unaudited interim Consolidated Financial Statements.
1
RESOLUTE FOREST PRODUCTS INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited, in millions of U.S. dollars)
Three Months Ended
September 30,		Nine Months Ended
September 30,
2022202120222021
Net income including noncontrolling interest
$87 $80 $553 $436 
Other comprehensive income:
Unamortized prior service costs
Change in unamortized prior service costs (Note 5)
— — — (3)
Income tax provision
— — — — 
Change in unamortized prior service costs, net of tax
— — — (3)
Unamortized actuarial losses
Change in unamortized actuarial losses (Note 5)
16 16 61 84 
Income tax provision
(3)(4)(11)(20)
Change in unamortized actuarial losses, net of tax
13 12 50 64 
Foreign currency translation(3)— (3)— 
Other comprehensive income, net of tax
10 12 47 61 
Comprehensive income including noncontrolling interest
97 92 600 497 
Comprehensive income attributable to noncontrolling interest
— — — (1)
Comprehensive income attributable to Resolute Forest Products Inc.
$
97 $92 $600 $496 
See accompanying notes to unaudited interim Consolidated Financial Statements.
2
RESOLUTE FOREST PRODUCTS INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, in millions of U.S. dollars, except per share amount)
September 30,
2022		December 31,
2021
Assets
Current assets:
Cash and cash equivalents$446 $112 
Accounts receivable, net:
Trade297 257 
Other60 56 
Inventories, net (Note 7)
609 510 
Other current assets49 54 
Total current assets1,461 989 
Fixed assets, less accumulated depreciation of $1,840 and $1,752 as of September 30, 2022 and December 31, 2021, respectively
1,275 1,270 
Amortizable intangible assets, less accumulated amortization of $41 and $37 as of September 30, 2022 and December 31, 2021, respectively
57 57 
Goodwill (Note 2)
85 31 
Deferred income tax assets515 653 
Operating lease right-of-use assets54 54 
Other assets (Note 8)
606 484 
Total assets$4,053 $3,538 
Liabilities and equity
Current liabilities:
Accounts payable and other (Note 9)
$493 $421 
Current portion of long-term debt (Note 10)
1 2 
Current portion of operating lease liabilities8 8 
Total current liabilities502 431 
Long-term debt, net of current portion (Note 10)
300 300 
Pension and other postretirement benefit obligations991 1,151 
Deferred income tax liabilities2 — 
Operating lease liabilities, net of current portion48 51 
Other liabilities91 88 
Total liabilities1,934 2,021 
Commitments and contingencies (Note 13)
Equity:
Resolute Forest Products Inc. shareholders’ equity:
Common stock, $0.001 par value. 121.3 million shares issued and 76.8 million shares outstanding as of September 30, 2022; 121.2 million shares issued and 76.8 million shares outstanding as of December 31, 2021
— — 
Additional paid-in capital3,811 3,807 
Deficit
(456)(1,009)
Accumulated other comprehensive loss (Note 5)
(1,015)(1,062)
Treasury stock at cost, 44.5 million shares and 44.4 million shares as of September 30, 2022 and December 31, 2021, respectively
(224)(222)
Total Resolute Forest Products Inc. shareholders’ equity2,116 1,514 
Noncontrolling interest3 3 
Total equity2,119 1,517 
Total liabilities and equity$4,053 $3,538 
See accompanying notes to unaudited interim Consolidated Financial Statements.
3
RESOLUTE FOREST PRODUCTS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited, in millions of U.S. dollars)
Three Months Ended September 30, 2022
 Resolute Forest Products Inc. Shareholders’ Equity  
Common
Stock		Additional
Paid-In
Capital		DeficitAccumulated Other Comprehensive LossTreasury
Stock		Non-controlling
Interest
Total Equity
Balance as of June 30, 2022$— $3,811 $(543)$(1,025)$(224)$3 $2,022 
Share-based compensation, net of withholding taxes— — — — — — — 
Net income
— — 87 — — — 87 
Other comprehensive income, net of tax
— — — 10 — — 10 
Balance as of September 30, 2022$— $3,811 $(456)$(1,015)$(224)$3 $2,119 
Nine Months Ended September 30, 2022
Resolute Forest Products Inc. Shareholders’ Equity
Common
Stock		Additional
Paid-In
Capital		DeficitAccumulated Other Comprehensive LossTreasury
Stock		Non-controlling
Interest
Total Equity
Balance as of December 31, 2021$— $3,807 $(1,009)$(1,062)$(222)$3 $1,517 
Share-based compensation, net of withholding taxes— 4 — — — — 4 
Net income
— — 553 — — — 553 
Purchases of treasury stock (0.1 million shares) (Note 14)
— — — — (2)— (2)
Stock unit awards vested and stock options exercised (0.1 million shares), net of shares forfeited for employee withholding taxes
— — — — — — — 
Other comprehensive income, net of tax
— — — 47 — — 47 
Balance as of September 30, 2022$— $3,811 $(456)$(1,015)$(224)$3 $2,119 

4
RESOLUTE FOREST PRODUCTS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited, in millions of U.S. dollars)
Three Months Ended September 30, 2021
 Resolute Forest Products Inc. Shareholders’ Equity  
Common
Stock		Additional
Paid-In
Capital		DeficitAccumulated Other Comprehensive LossTreasury
Stock		Non-
controlling
Interest
Total Equity
Balance as of June 30, 2021$— $3,805 $(961)$(1,265)$(194)$2 $1,387 
Share-based compensation, net of withholding taxes
— — — — — — — 
Net income
— — 80 — — — 80 
Purchases of treasury stock (1.2 million shares) (Note 14)
— — — — (14)— (14)
Other comprehensive income, net of tax
— — — 12 — — 12 
Balance as of September 30, 2021$— $3,805 $(881)$(1,253)$(208)$2 $1,465 
Nine Months Ended September 30, 2021
Resolute Forest Products Inc. Shareholders’ Equity
Common
Stock		Additional
Paid-In
Capital		DeficitAccumulated Other Comprehensive LossTreasury
Stock		Non-
controlling
Interest
Total Equity
Balance as of December 31, 2020$— $3,804 $(1,235)$(1,314)$(174)$1 $1,082 
Share-based compensation, net of withholding taxes— (1)— — — — (1)
Net income
— — 435 — — 1 436 
Purchases of treasury stock (3.3 million shares) (Note 14)
— — — — (34)— (34)
Special dividend (Note 14)
— 2 (81)— — — (79)
Stock unit awards vested (0.4 million shares), net of shares forfeited for employee withholding taxes
— — — — — — — 
Other comprehensive income, net of tax
— — — 61 — — 61 
Balance as of September 30, 2021$— $3,805 $(881)$(1,253)$(208)$2 $1,465 
See accompanying notes to unaudited interim Consolidated Financial Statements.
5
RESOLUTE FOREST PRODUCTS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in millions of U.S. dollars)
Nine Months Ended
September 30,
20222021
Cash flows from operating activities:
Net income including noncontrolling interest
$553 $436 
Adjustments to reconcile net income including noncontrolling interest to net cash provided by operating activities:
Share-based compensation6 3 
Depreciation and amortization101 123 
Deferred income taxes85 167 
Net pension contributions and other postretirement benefit payments(34)(71)
Gain on previously-held equity investments (Note 2)
(42)— 
Net loss on disposition of assets
2 — 
Loss (gain) on translation of foreign currency denominated deferred income taxes
42 (7)
(Gain) loss on translation of foreign currency denominated pension and other postretirement benefit obligations
(70)6 
Net planned major maintenance amortization (payments)
19 (15)
Changes in working capital:
Accounts receivable(39)(45)
Inventories(81)(48)
Other current assets(19)(11)
Accounts payable and other48 34 
Other, net20 8 
Net cash provided by operating activities
591 580 
Cash flows from investing activities:
Cash invested in fixed assets(68)(79)
Cash invested in intangible assets(3)— 
Acquisitions of businesses, net of cash acquired (Note 2)
(49)— 
Disposition of assets5 — 
Increase in countervailing and anti-dumping duty cash deposits on softwood lumber (Note 8)
(138)(128)
Other investing activities, net— 3 
Net cash used in investing activities
(253)(204)
Cash flows from financing activities:
Issuance of long-term debt (Note 10)
— 300 
Payment of special dividend— (79)
Repayments of debt (Note 10)
(2)(557)
Purchases of treasury stock (Note 14)
(2)(34)
Payments of financing fees— (7)
Other financing activities, net— 2 
Net cash used in financing activities
(4)(375)
Effect of exchange rate changes on cash and cash equivalents, and restricted cash(7)(1)
Net increase in cash and cash equivalents, and restricted cash
$327 $— 
Cash and cash equivalents, and restricted cash:
Beginning of period$152 $159 
End of period$479 $159 
Cash and cash equivalents, and restricted cash at end of period:
Cash and cash equivalents$446 $119 
Restricted cash (included in “Other assets”)$33 $40 
See accompanying notes to unaudited interim Consolidated Financial Statements.
6

RESOLUTE FOREST PRODUCTS INC.
Notes to Unaudited Interim Consolidated Financial Statements
Note 1. Organization and Basis of Presentation
Nature of operations
Resolute Forest Products Inc. (with its subsidiaries, either individually or collectively, unless otherwise indicated, referred to as “Resolute Forest Products,” “we,” “our,” “us,” “Parent,” or the “Company”) is incorporated in Delaware. We are a global leader in the forest products industry with a diverse range of products, including market pulp, tissue, wood products and paper, which are marketed in over 60 countries. We own or operate some 40 facilities, as well as power generation assets, in the U.S. and Canada.
Financial statements
Our unaudited interim consolidated financial statements and accompanying notes (or, the “Consolidated Financial Statements”) have been prepared in accordance with the requirements of the U.S. Securities and Exchange Commission (or, the “SEC”) for interim reporting. Under those rules, certain footnotes and other financial information that are normally required by U.S. generally accepted accounting principles (or, “GAAP”) may be condensed or omitted. In our opinion, all adjustments (consisting of normal recurring adjustments) necessary for the fair statement of the Consolidated Financial Statements have been made. All amounts are expressed in U.S. dollars, unless otherwise indicated. The results for the interim period ended September 30, 2022, are not necessarily indicative of the results to be expected for the full year. These Consolidated Financial Statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 1, 2022. Certain prior period amounts in the notes to our Consolidated Financial Statements have been reclassified to conform to the 2022 presentation.
New accounting pronouncement adopted in 2022
ASU 2021-08 “Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”
Effective January 1, 2022, we adopted ASU 2021-08, “Accounting for Contract Assets and Contract Liabilities from Contracts with Customers,” issued by the Financial Accounting Standards Board in 2021, which revises the accounting for acquired revenue contracts with customers in a business combination. The adoption of this accounting guidance, which was applied prospectively, did not impact our Consolidated Financial Statements and disclosures.
Note 2. Business Combinations
Potential acquisition by Paper Excellence
On July 5, 2022, Resolute and Paper Excellence Group, through its wholly-owned subsidiary Domtar Corporation (or, “Domtar”), entered into a business combination agreement (or, the “Transaction”) under which Domtar will acquire all of the issued and outstanding common shares of Resolute for $20.50 per share, in cash, without interest, and one contractual contingent value right per share (or, the “CVR”).
Under the CVR, stockholders will receive any refunds on approximately $500 million of deposits on softwood lumber duties paid by Resolute through June 30, 2022, including any interest thereon, net of certain expenses and of applicable taxes. Any proceeds attributable to the CVR will be distributed proportionally to the CVR holders, and the value will ultimately be determined by the terms and timing of the resolution of the softwood lumber dispute between Canada and the United States. The terms and timing of such resolution is uncertain.
On October 31, 2022, Resolute's stockholders approved the Transaction. The Transaction, which is subject to applicable regulatory approvals and the satisfaction of certain other customary closing conditions, is expected to close in the first half of 2023. See Note 16, “Subsequent Events.”
Acquisition of Larouche and St-Prime
On March 4, 2022 (or, the “Acquisition Date”), we acquired control of Resolute-LP Engineered Wood Larouche Inc. and Resolute-LP Engineered Wood St-Prime Limited Partnership (or, “Larouche and St-Prime”), that were previously held as 50% owned joint ventures, by acquiring the remaining 50% equity interests from Louisiana-Pacific Canada Ltd., a wholly-owned subsidiary of Louisiana-Pacific Corporation, for a cash consideration of $51 million (including $1 million of working capital adjustment, and net of cash acquired of $8 million). Larouche and St-Prime, which are engineered wood product facilities
7

RESOLUTE FOREST PRODUCTS INC.
Notes to Unaudited Interim Consolidated Financial Statements
located in Quebec, produce I-joists for the construction industry. This acquisition solidifies our presence in the engineered wood product segment.
We accounted for our previously held equity investments in Larouche and St-Prime using the equity method of accounting since we had joint control prior to acquiring a controlling interest on the Acquisition Date.
We accounted for the acquisition of Larouche and St-Prime as a business combination in accordance with the acquisition method of accounting, which requires us to record the identifiable assets acquired and liabilities assumed at fair value. The amount by which the purchase price exceeds the fair value of the net assets acquired is recorded as goodwill.
The following table summarizes our preliminary allocation of the purchase price to the fair values of assets acquired and liabilities assumed at the Acquisition Date:
(Unaudited, in millions)
Cash and cash equivalents$16 
Accounts receivable10 
Inventories16 
Current assets acquired$42 
Fixed assets$28 
Goodwill (1)
54 
Total assets acquired and goodwill$124 
Accounts payable and other$3 
Current liabilities assumed3 
Pension and other postretirement benefit obligations1 
Deferred income tax liabilities2 
Total liabilities assumed$6 
Net assets acquired$118 
Cash consideration transferred59 
Fair value of the previously held interests in Larouche and St-Prime59 
Total fair value of consideration$118 
(1)The goodwill represents the future economic benefit arising from other assets acquired that could not be individually identified and separately recognized and is mostly attributable to securing downstream integration and the Larouche and St-Prime assembled workforce. Goodwill has been assigned to the wood products segment, and is included in such segment for goodwill impairment testing purposes. The total amount of goodwill is not deductible for tax purposes.
The allocation of the purchase price to assets acquired and liabilities assumed was based upon a preliminary valuation for all items and may be subject to adjustment during the 12-month measurement period following the Acquisition Date since we are finalizing the assumptions in regards to the fair values of these assets and liabilities.
The allocation of the purchase price was based on management’s estimate of the fair values of the acquired identifiable assets and assumed liabilities using valuation techniques including income, cost and market approaches. We utilized both the cost and market approaches to value fixed assets (Level 3).
At the Acquisition Date, our previously-held equity investments of $17 million were remeasured at a fair value of $59 million, which resulted in a gain of $42 million. The gain was recorded in “Other income (expense), net” in our Consolidated Statements of Operations for the nine months ended September 30, 2022.
We applied an income approach, specifically the discounted cash flow (or, the “DCF”) method, to measure the fair value of our equity interest in Larouche and St-Prime, as of immediately prior to the business acquisition. Determining fair value requires the exercise of significant judgments, including the amount and timing of expected future cash flows, discount rate and tax rate. The cash flows employed in the DCF analysis are based on our best estimate of future sales, earnings and cash flows after considering factors such as general market conditions, existing firm orders, long-term business plans and recent operating performance. The discount rate utilized in the DCF analysis is based on the respective company’s weighted average cost of
8

RESOLUTE FOREST PRODUCTS INC.
Notes to Unaudited Interim Consolidated Financial Statements
capital, which takes into account the relative weights of each component of capital structure (equity and debt) and represents the expected cost of new capital, adjusted as appropriate to consider the risk inherent in future cash flows of the Company.
We ceased applying the equity method for our investments in Larouche and St-Prime and the net assets acquired and results of operations are consolidated from the Acquisition Date and are included in the wood products segment.
From the Acquisition Date to September 30, 2022, our consolidated financial results included sales of $127 million and net income of $36 million attributable to Larouche and St-Prime.
The following unaudited pro forma information for the three and nine months ended September 30, 2022, represents our results of operations as if the acquisition of Larouche and St-Prime had occurred on January 1, 2021. This pro forma information does not purport to be indicative of the results that would have occurred for the periods presented or that may be expected in the future.
Three Months Ended
September 30,		Nine Months Ended
September 30,
(Unaudited, in millions)2022202120222021
Sales$974 $853 $2,997 $2,903 
Net income attributable to Resolute Forest Products Inc. (1)
$87 $86 $521 $476 
(1)For the pro forma information, the gain on previously-held equity investments of $42 million was considered realized in the nine months ended September 30, 2021, and deducted from the nine months ended September 30, 2022.
Acquisition of a power generation facility
On April 1, 2022, we acquired a 34.5 megawatt power generation facility in Senneterre (Quebec) for $8 million, including a contingent consideration. With this acquisition, we will maximize the use of biomass from our regional operations.
Note 3. Closure Costs, Impairment and Other Related Charges
In December 2021, the Company announced the indefinite idling of pulp and paper operations at our Calhoun (Tennessee) mill. We have revised our expected 2022 additional cash closure costs, disclosed in our December 31, 2021 Consolidated Financial Statements, from $32 million to $12 million, due to lower than expected chemical disposal costs. During the three and nine months ended September 30, 2022, we recognized nil and $7 million, respectively, of these costs.
In March 2021, the Company announced the indefinite idling of the Amos and Baie-Comeau (Quebec) paper mills. During the three and nine months ended September 30, 2022, we recognized additional other costs of nil and $4 million, respectively, for the Baie-Comeau paper mill.
Note 4. Other Income (Expense), Net
Other income (expense), net for the three and nine months ended September 30, 2022 and 2021, was comprised of the following:
Three Months Ended
September 30,		Nine Months Ended
September 30,
(Unaudited, in millions)2022202120222021
Foreign exchange gain
$37 $12 $45 $1 
Gain (loss) on commodity contracts (1)
— 1 1 (85)
Income from equity method investments— 8 7 12 
Gain on previously-held equity investments (Note 2)
— — 42 — 
Miscellaneous expense
— (1)— (2)
 $37 $20 $95 $(74)
(1)The loss for the nine months ended September 30, 2021, was principally related to lumber futures contracts; none of these contracts were outstanding as of September 30, 2022 and 2021.
9

RESOLUTE FOREST PRODUCTS INC.
Notes to Unaudited Interim Consolidated Financial Statements
Note 5. Accumulated Other Comprehensive Loss
The change in our accumulated other comprehensive loss by component (net of tax) for the three and nine months ended September 30, 2022 and 2021, was as follows:
(Unaudited, in millions)Unamortized Prior Service CostsUnamortized Actuarial LossesForeign
Currency
Translation		Total
Balance as of June 30, 2022
$(5)$(1,014)$(6)$(1,025)
Other comprehensive loss before reclassifications
— — (3)(3)
Amounts reclassified from accumulated other comprehensive loss— 13 — 13 
Net current period other comprehensive income (loss)— 13 (3)10 
Balance as of September 30, 2022$(5)$(1,001)$(9)$(1,015)
(Unaudited, in millions)
Unamortized Prior Service Costs
Unamortized Actuarial
Losses
Foreign
Currency
Translation		Total
Balance as of December 31, 2021$(5)$(1,051)$(6)$(1,062)
Other comprehensive income (loss) before reclassifications (1)
— 10 (3)7 
Amounts reclassified from accumulated other comprehensive loss— 40 — 40 
Net current period other comprehensive income (loss)— 50 (3)47 
Balance as of September 30, 2022$(5)$(1,001)$(9)$(1,015)
(1)    The indefinite idling of pulp and paper operations at our Calhoun mill triggered pension special termination benefit costs and remeasurement of the pension and other postretirement benefit (or, “OPEB”) obligations related to its plans as of January 31, 2022, resulting in a loss of $4 million and an actuarial gain of $14 million, totaling a net gain of $10 million ($10 million net of tax).
(Unaudited, in millions)Unamortized Prior Service Costs
Unamortized Actuarial Losses
Foreign
Currency
Translation		Total
Balance as of June 30, 2021$(4)$(1,255)$(6)$(1,265)
Amounts reclassified from accumulated other comprehensive loss— 12 — 12 
Net current period other comprehensive income— 12 — 12 
Balance as of September 30, 2021$(4)$(1,243)$(6)$(1,253)
(Unaudited, in millions)Unamortized Prior Service CostsUnamortized Actuarial LossesForeign
Currency
Translation		Total
Balance as of December 31, 2020$(1)$(1,307)$(6)$(1,314)
Other comprehensive income before reclassifications (1)
— 22 — 22 
Amounts reclassified from accumulated other comprehensive loss(3)42 — 39 
Net current period other comprehensive (loss) income(3)64 — 61 
Balance as of September 30, 2021$(4)$(1,243)$(6)$(1,253)
(1)    The indefinite idling of the Amos and Baie-Comeau mills triggered curtailment and remeasurement of the pension and OPEB obligations related to their plans as of March 31, 2021, resulting in a curtailment gain of $8 million and an actuarial gain of $22 million, totaling $30 million ($22 million net of tax).
10

RESOLUTE FOREST PRODUCTS INC.
Notes to Unaudited Interim Consolidated Financial Statements
The reclassifications out of accumulated other comprehensive loss for the three and nine months ended September 30, 2022 and 2021, were comprised of the following:
Three Months Ended
September 30,		Nine Months Ended
September 30,
(Unaudited, in millions)2022202120222021Affected Line in the Consolidated Statements of Operations
Unamortized Prior Service Costs
Amortization of prior service costs or credits$— $— $— $(2)
Non-operating pension and other postretirement benefit (costs) credits (1)
Curtailment gain— — — (1)
Non-operating pension and other postretirement benefit (costs) credits (1)
Income tax effect of the above— — — — 
Income tax provision
Net of tax— — — (3)
Unamortized Actuarial Losses
Amortization of actuarial losses
16 16 48 54 
Non-operating pension and other postretirement benefit (costs) credits (1)
Other items— — 3 — 
Non-operating pension and other postretirement benefit (costs) credits (1)
Income tax effect of the above(3)(4)(11)(12)
Income tax provision
Net of tax13 12 40 42 
Total Reclassifications$13 $12 $40 $39 
(1)These items are included in the computation of net periodic benefit costs (credits) related to our pension and OPEB plans summarized in Note 11, “Employee Benefit Plans.”
Note 6. Net Income Per Share
The reconciliation of the basic and diluted net income per share for the three and nine months ended September 30, 2022 and 2021, was as follows:
Three Months Ended
September 30,		Nine Months Ended
September 30,
(Unaudited, in millions, except per share amounts)2022202120222021
Numerator:
Net income attributable to Resolute Forest Products Inc.
$87 $80 $553 $435 
Denominator:
Weighted-average number of Resolute Forest Products Inc. common shares outstanding77.5 79.4 77.4 80.0 
Dilutive impact of nonvested stock unit awards and stock options0.9 0.7 0.8 0.8 
Diluted weighted-average number of Resolute Forest Products Inc. common shares outstanding78.4 80.1 78.2 80.8 
Net income per share attributable to Resolute Forest Products Inc. common shareholders:
Basic
$1.12 $1.00 $7.14 $5.44 
Diluted$1.11 $0.99 $7.07 $5.39 
11

RESOLUTE FOREST PRODUCTS INC.
Notes to Unaudited Interim Consolidated Financial Statements
The weighted-average number of outstanding stock options and nonvested equity-classified restricted stock units, deferred stock units and performance stock units (collectively, “stock unit awards”) that were excluded from the calculation of diluted net income per share, as their impact would have been antidilutive, for the three and nine months ended September 30, 2022 and 2021, was as follows:
Three Months Ended
September 30,		Nine Months Ended
September 30,
(Unaudited, in millions)2022202120222021
Stock options— 0.4 — 0.5 
Stock unit awards— — — — 
Note 7. Inventories, Net
Inventories, net as of September 30, 2022 and December 31, 2021, were comprised of the following:
(Unaudited, in millions)September 30,
2022		December 31,
2021
Raw materials$186 $159 
Work in process80 57 
Finished goods183 148 
Mill stores and other supplies160 146 
 $609 $510 
Note 8. Other Assets
Other assets as of September 30, 2022 and December 31, 2021, were comprised of the following:
(Unaudited, in millions)September 30,
2022		December 31,
2021
Countervailing duty cash deposits on softwood lumber (Note 13)
$424 $339 
Anti-dumping duty cash deposits on softwood lumber (Note 13)
111 58 
Equity method investments11 22 
Restricted cash33 40 
Other27 25 
$606 $484 
Note 9. Accounts Payable and Other
Accounts payable and other as of September 30, 2022 and December 31, 2021, were comprised of the following:
(Unaudited, in millions)September 30,
2022		December 31,
2021
Trade accounts payable$338 $262 
Accrued compensation86 89 
Accrued interest2 6 
Pension and other postretirement benefit obligations13 14 
Accrued provision related to Fibrek Inc. litigation (Note 13)
20 21 
Income and other taxes payable7 4 
Other27 25 
$493 $421 
12

RESOLUTE FOREST PRODUCTS INC.
Notes to Unaudited Interim Consolidated Financial Statements
Note 10. Long-Term Debt
Overview
Long-term debt, including current portion, as of September 30, 2022 and December 31, 2021, was comprised of the following:
(Unaudited, in millions)September 30,
2022		December 31,
2021
4.875% senior unsecured notes due 2026:
Principal amount$300 $300 
Deferred financing costs(4)(5)
Total 4.875% senior unsecured notes due 2026
296 295 
Finance lease obligations4 6 
Other debt1 1 
Total debt301 302 
Less: Current portion of finance lease obligations and other debt(1)(2)
Long-term debt, net of current portion$300 $300 
Debt availabilities
(Unaudited, in millions)September 30,
2022		December 31,
2021
Term Loan Facility
$180 $180 
Revolving Credit Facility
180 180 
ABL Credit Facility (1)
355 307 
Secured delayed draw term loan facility (C$220 million as of September 30, 2022 and December 31, 2021)
159 174 
Total availability$874 $841 
(1)The availability as of September 30, 2022, was $355 million, net of $82 million of ordinary course letters of credit outstanding, of which $62 million were to guarantee surety bonds of $101 million related to the U.S. softwood lumber cash deposits. The availability as of December 31, 2021, was $307 million, net of $73 million of ordinary course letters of credit outstanding, of which $53 million were to guarantee surety bonds of $83 million related to the U.S. softwood lumber cash deposits.
Senior Unsecured Notes
2026 Notes
On February 2, 2021, we issued $300 million aggregate principal amount of 4.875% senior unsecured notes due 2026 (or, the “2026 Notes”) at an issue price of 100%, pursuant to an indenture as of that date. Upon their issuance, the 2026 Notes were recorded at their fair value of $300 million. Interest on the 2026 Notes is payable semi-annually on March 1 and September 1 of each year, beginning on September 1, 2021, until their maturity date of March 1, 2026. In connection with the issuance of the 2026 Notes, we incurred financing costs of $6 million, which were deferred and recorded as a reduction of the principal. Deferred financing costs are amortized to “Interest expense” in our Consolidated Statements of Operations using the interest method over the term of the notes.
The fair value of the 2026 Notes (Level 1) was $291 million as of September 30, 2022.
2023 Notes
On February 2, 2021, we placed the net proceeds from the issuance of the 2026 Notes together with additional cash, into trust for the benefit of the holders of the 5.875% senior unsecured notes due 2023 (or, the “2023 Notes”) to redeem all of the $375 million outstanding aggregate principal amount of the 2023 Notes (or, the “Redemption”) at a price of 100% of the aggregate principal amount thereof, plus accrued and unpaid interest to, but not including, the redemption date. The Redemption occurred on February 18, 2021. As a result of the repurchase, we recorded a net loss on extinguishment of debt of
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Notes to Unaudited Interim Consolidated Financial Statements
$3 million in “Other income (expense), net” in our Consolidated Statement of Operations for the nine months ended September 30, 2021.
Senior Secured Credit Facility
On April 19, 2021 (or, the “Effective Date”), we entered into a first amendment to the amended and restated senior secured credit facility (or, the “Senior Secured Credit Facility”). The amount available under the Senior Secured Credit Facility remains unchanged for up to $360 million and is comprised of a term loan facility of up to $180 million with a delayed draw period of up to three years and the choice of maturities of six to ten years from the date of drawing (or, the “Term Loan Facility”); and a six-year revolving credit facility of up to $180 million (or, the “Revolving Credit Facility”). On the Effective Date, we repaid our $180 million term loans under the amended and restated senior secured credit facility with a combination of proceeds of borrowings under the Revolving Credit Facility and cash on hand. The amendment then reinstated the full amount of the Term Loan Facility. There is also an uncommitted option to increase the Senior Secured Credit Facility by up to an additional $360 million, subject to certain terms and conditions.
The obligations under the Senior Secured Credit Facility are guaranteed by certain material U.S. subsidiaries of the Company and are secured by a first priority mortgage on the real property of the Company’s facility in Calhoun and a first priority security interest on the fixtures and equipment located therein. On March 2, 2022, the Company entered into agreements to provide the following additional security under the Senior Secured Credit Facility: (i) a first priority mortgage on the real property of the Company’s sawmill facilities in Glenwood and El Dorado (Arkansas) and a first priority security interest on the fixtures and equipment located therein, and (ii) a first priority security interest on the fixtures and equipment at the Company’s sawmill facility in Cross City (Florida).
ABL Credit Facility
On May 14, 2019, we entered into an amended senior secured asset-based revolving credit facility (or, the “ABL Credit Facility”) with an aggregate lender commitment of up to $500 million at any time outstanding, subject to borrowing base availability based on specified advance rates, eligibility criteria and customary reserves.
Effective January 21, 2021, we reduced the commitment under the Canadian tranche of our senior secured asset-based revolving credit facility by $50 million, to $250 million, resulting in an aggregate commitment of $450 million, subject to borrowing base limitations. The obligations under the ABL Credit Facility are guaranteed by certain of our material subsidiaries.
On December 15, 2021, we entered into an amendment to the credit agreement, which reset the facility and extended the maturity date to December 15, 2026. The agreement also contains hardwired benchmark replacement provisions for future transition of the London Interbank Offered Rate and may be amended based on agreed upon Environmental, Social and Governance key performance indicators as described in the credit agreement.
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RESOLUTE FOREST PRODUCTS INC.
Notes to Unaudited Interim Consolidated Financial Statements
Note 11. Employee Benefit Plans
Pension and other postretirement benefit plans
The components of net periodic benefit costs (credits) relating to our pension and OPEB plans for the three and nine months ended September 30, 2022 and 2021, were as follows:
Pension Plans:
Three Months Ended
September 30,		Nine Months Ended
September 30,
(Unaudited, in millions)2022202120222021
Interest cost$35 $33 $106 $100 
Expected return on plan assets(49)(53)(147)(162)
Amortization of actuarial losses17 18 52 59 
Amortization of prior service costs
— 1 — 1 
Non-operating pension costs (credits)
3 (1)11 (2)
Service cost5 4 12 12 
Net periodic benefit costs before special events
8 3 23 10 
Other loss (gain)
— — 3 (1)
 $8 $3 $26 $9 
OPEB Plans:
Three Months Ended
September 30,		Nine Months Ended
September 30,
(Unaudited, in millions)2022202120222021
Interest cost$1 $1 $3 $3 
Amortization of actuarial gains(1)(2)(4)(5)
Amortization of prior service credits— (1)— (3)
Non-operating other postretirement benefit credits
— (2)(1)(5)
Service cost— 1 — 1 
Net periodic benefit credits before special events
— (1)(1)(4)
Other— — — — 
$— $(1)$(1)$(4)
Defined contribution plans
Our expense for the defined contribution plans totaled $4 million and $5 million for the three months ended September 30, 2022 and 2021, and $13 million and $14 million for the nine months ended September 30, 2022 and 2021.
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RESOLUTE FOREST PRODUCTS INC.
Notes to Unaudited Interim Consolidated Financial Statements
Note 12. Income Taxes
The income tax provision attributable to income before income taxes differs from the amounts computed by applying the U.S. federal statutory income tax rate of 21% for the three and nine months ended September 30, 2022 and 2021, as a result of the following:
Three Months Ended
September 30,		Nine Months Ended
September 30,
(Unaudited, in millions)2022202120222021
Income before income taxes
$153 $120 $642 $603 
Income tax provision:
Expected income tax provision
(32)(26)(135)(127)
Changes resulting from:
Valuation allowance33 11 219 89 
Foreign exchange(27)(5)(34)(2)
U.S. tax on non-U.S. earnings(34)(13)(106)(96)
State income taxes, net of federal income tax benefit— (1)(3)1 
Foreign tax rate differences(9)(6)(33)(33)
Other, net3 — 3 1 
 $(66)$(40)$(89)$(167)
During the three and nine months ended September 30, 2022, we released $33 million and $219 million, respectively, of the $673 million valuation allowance on our U.S. deferred income tax assets that existed at January 1, 2022. Of the released amount for the nine months ended September 30, 2022, $105 million was to offset future projected tax implications of the global intangible low-taxed income (or, “GILTI”) inclusion, which impacted the overall effective tax rate. The remaining amount released for the nine months ended September 30, 2022, and the amount released for the three months ended September 30, 2022, were mainly to offset tax implications relating to the GILTI inclusion.
During the three and nine months ended September 30, 2021, we used $11 million and $89 million, respectively, of deferred income tax assets that were fully reserved to offset the tax implications relating to the GILTI.
At each reporting period, we assess whether it is more likely than not that the deferred income tax assets will be realized, based on the review of all available positive and negative evidence, including future reversals of existing taxable temporary differences, estimates of future taxable income, past operating results, and prudent and feasible tax planning strategies.
In our evaluation process, we give the most weight to historical income or losses. During the second quarter of 2022, after evaluating all available positive and negative evidence, although realization is not assured, we determined that it is more likely than not that the $105 million of the U.S. deferred income tax assets released during the second quarter, will be realized in the future prior to expiration. The key factor contributing to the conclusion that the positive evidence ultimately outweighed existing negative evidence is the continuous GILTI inclusion. The rapidly changing dynamics in the wood products, pulp and paper segments resulted or are expected to result in significant GILTI inclusions for 2021, 2022 and some future years. These significant GILTI inclusions have created or are expected to create U.S. taxable income, which has been, or is expected to be entirely offset by existing U.S. tax attributes included in deferred income tax assets that have been fully reserved.
Note 13. Commitments and Contingencies
Legal matters
We become involved in various legal proceedings, claims and governmental inquiries, investigations, and other disputes in the normal course of business, including matters related to contracts, commercial and trade disputes, taxes, environmental issues, activist damages, employment and workers’ compensation claims, grievances, human rights complaints, pension and benefit plans and obligations, health and safety, product safety and liability, asbestos exposure, financial reporting and disclosure obligations, corporate governance, Indigenous peoples’ claims, antitrust, governmental regulations, and other matters. Although the final outcome is subject to many variables and cannot be predicted with any degree of certainty, we regularly assess the status of the matters and establish provisions (including legal costs expected to be incurred) when we believe an adverse outcome is probable, and the amount can be reasonably estimated. Any recovery from litigation or settlement of claims that is a
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Notes to Unaudited Interim Consolidated Financial Statements
gain contingency is recognized if, and when, realized or realizable. Except as described below and for claims that cannot be assessed due to their preliminary nature, we believe that the ultimate disposition of these matters outstanding or pending as of September 30, 2022, will not have a material adverse effect on our Consolidated Financial Statements.
Asbestos-related lawsuits
We are involved in a number of asbestos-related lawsuits filed primarily in U.S. state courts, including certain cases involving multiple defendants. These lawsuits principally allege direct or indirect personal injury or death resulting from exposure to asbestos-containing premises. While we dispute the plaintiffs’ allegations and intend to vigorously defend these claims, the ultimate resolution of these matters cannot be determined at this time. These lawsuits frequently involve claims for unspecified compensatory and punitive damages, and we are unable to reasonably estimate a range of possible losses, which may not be covered in whole or in part by our insurance coverage. However, unfavorable rulings, judgments or settlement terms could materially impact our Consolidated Financial Statements. Hearings for certain of these matters are scheduled to occur in the next twelve months.
Countervailing duty and anti-dumping investigations on softwood lumber
On November 25, 2016, countervailing duty and anti-dumping petitions were filed with the U.S. Department of Commerce (or, “Commerce”) and the U.S. International Trade Commission (or, “ITC”) by certain U.S. softwood lumber products producers and forest landowners, requesting that the U.S. government impose countervailing and anti-dumping duties on Canadian-origin softwood lumber products exported to the U.S. One of our subsidiaries was identified in the petitions as being a Canadian exporting producer of softwood lumber products to the U.S. and was selected as a mandatory respondent to be investigated by Commerce in both the countervailing duty and anti-dumping investigations.
Countervailing Duties – On April 24, 2017, Commerce announced its preliminary determination in the countervailing duty investigation; as a result, from April 28, 2017 to August 25, 2017, we were required to pay cash deposits to the U.S. Customs and Border Protection agency (or, “U.S. Customs”) at a rate of 12.82% for countervailing duties on the vast majority of our U.S. imports of Canadian-produced softwood lumber. On November 2, 2017, Commerce issued its final determination in the countervailing investigation; as a result, from December 28, 2017 to November 30, 2020, we were required to pay cash deposits to U.S. Customs at a new rate of 14.70%. On November 23, 2020, Commerce issued its final determination in the first administrative review of the countervailing investigation; as a result, from December 1, 2020 to December 1, 2021, we were required to pay cash deposits to U.S. Customs at a rate of 19.10%. On November 24, 2021, Commerce issued its final determination in the second administrative review of the countervailing investigation; as a result, from December 2, 2021, to August 8, 2022, we were required to pay cash deposits to U.S. Customs at a rate of 18.07%. Commerce issued its final determination dated August 3, 2022, in the third administrative review of the countervailing investigation; as a result, since August 9, 2022, we have been required to pay cash deposits to U.S. Customs at a new rate of 10.10%. Through September 30, 2022, our cash deposits totaled $424 million.
Anti-dumping Duties – On June 26, 2017, Commerce announced its preliminary determination in the anti-dumping investigation; as a result, from June 30, 2017 to November 7, 2017, we were required to pay cash deposits to U.S. Customs at a rate of 4.59% for anti-dumping duties on the vast majority of our U.S. imports of Canadian-produced softwood lumber. On November 2, 2017, Commerce issued its final determination in the anti-dumping investigation; as a result, from November 8, 2017 to November 29, 2020, we were required to pay cash deposits to U.S. Customs at a new rate of 3.20%. On November 23, 2020, Commerce issued its final determination in the first administrative review of the anti-dumping investigation; as a result, from November 30, 2020 to December 1, 2021, we were required to pay cash deposits to U.S. Customs at a rate of 1.15%. On November 24, 2021, Commerce issued its final determination in the second administrative review of the anti-dumping investigation; as a result, from December 2, 2021, to August 8, 2022, we were required to pay cash deposits to U.S. Customs at a rate of 11.59%. Commerce issued its final determination dated August 3, 2022, in the third administrative review of the anti-dumping investigation; as a result, since August 9, 2022, we have been required to pay cash deposits to U.S. Customs at a new rate of 4.76%. Through September 30, 2022, our cash deposits totaled $111 million.
Ongoing Administrative Reviews – Following Commerce’s completion of the Canadian softwood lumber investigation and the first, second, and third administrative reviews, the fourth administrative review remains pending. On March 9, 2022, Commerce published a notice initiating the fourth administrative review of the countervailing duty and anti-dumping orders on softwood lumber products from Canada. According to a decision published by Commerce on April 27 and 29, 2022, we were not selected as a mandatory respondent for the fourth administrative reviews of the countervailing duty order and anti-dumping order, respectively.
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Notes to Unaudited Interim Consolidated Financial Statements
Ongoing Appellate Reviews – On December 14, 2017 and January 4, 2018, we filed complaints supporting appellate reviews of the final results of Commerce’s countervailing and anti-dumping investigations on softwood lumber from Canada, respectively, before a binational panel formed pursuant to the North American Free Trade Agreement or United States-Mexico-Canada Agreement, as the case may be (or, “Panel”). Briefing for these appeals has been completed, and scheduling of the hearings remains pending. The full formation of the anti-dumping Panel was announced on October 17, 2022, and that of the countervailing Panel was announced on November 1, 2022. Further, on January 6, 2021 and January 19, 2021, we filed our complaints supporting appellate Panel reviews of the final results in the countervailing and anti-dumping first administrative reviews. We filed similar complaints with respect to the second administrative reviews on January 12, 2022, and with respect to the third administrative reviews on September 16, 2022.
ITC Injury Determination – In parallel, on December 28, 2017, the ITC published its affirmative final injury determinations in the anti-dumping and countervailing investigations on softwood lumber from Canada. On September 4, 2019, a Panel issued an interim decision upholding the affirmative final injury determinations of the ITC in both investigations of softwood lumber products from Canada. The Panel remanded the ITC to reconsider several findings and ordered the ITC to submit its redetermination on remand within 90 days from the date of the Panel interim decision. On December 19, 2019, the ITC issued its redetermination on remand that maintained the affirmative final injury determinations, and on May 22, 2020, the Panel issued its final decision and affirmed in its entirety the ITC’s injury determination on remand.
WTO Appeal – In addition, on August 24, 2020, the World Trade Organization’s (or, “WTO”) dispute panel issued a report (or, the “Panel Report”) in the case brought by the government of Canada in “United States — Countervailing Measures on Softwood Lumber from Canada” (DS533), concluding, among other things, that Commerce acted inconsistently with the Agreement on Subsidies and Countervailing Measures on most of the matters. On September 28, 2020, the United States notified the WTO’s dispute settlement body of its decision to appeal the Panel Report.
Financial assurance – We are required by U.S. Customs to provide surety bonds to secure the payment of our cash deposits. As of September 30, 2022, we had unpaid deposits of $8 million related to products exported to the U.S. up to the end of the quarter since our last payment, and we had $101 million of surety bonds outstanding in favor of U.S. Customs, of which $62 million were secured by letters of credit. See Note 10, “Long-Term Debt – ABL Credit Facility” for more information.

We are not presently able to determine the ultimate resolution of these matters, but we believe it is not probable that we will ultimately be assessed with significant duties, if any, on our U.S. imports of Canadian-produced softwood lumber products. Accordingly, no contingent loss was recorded in respect of these petitions in our Consolidated Statements of Operations, and our cash deposits are recorded in “Other assets” in our Consolidated Balance Sheets.
Fibrek acquisition
Effective July 31, 2012, we completed the final step of the transaction pursuant to which we acquired the remaining 25.40% of the outstanding Fibrek Inc. shares, following the approval of Fibrek’s shareholders on July 23, 2012, and the issuance of a final order by the Quebec Superior Court in Canada (or, the “Quebec Superior Court”) approving the arrangement on July 27, 2012. Certain former shareholders of Fibrek exercised rights of dissent in respect of the transaction, asking for a judicial determination of the fair value of their claim under the Canada Business Corporations Act. On September 26, 2019, the Quebec Superior Court rendered a decision fixing the fair value of the shares of the dissenting shareholders at C$1.99 per share, or C$31 million in aggregate, plus interest and an additional indemnity, for a total estimated at C$44 million payable in cash. We had previously accrued C$14 million for the payment of the dissenting shareholders’ claims. Following the court decision, we accrued an additional C$30 million ($23 million), and as a result recorded $23 million in “Other expense, net” in our Consolidated Statement of Operations for the year ended on December 31, 2019. Of the total amount of C$44 million, C$19 million ($14 million) was payable immediately and paid on October 2, 2019. The remaining balances of C$28 million ($20 million) and C$27 million ($21 million) as of September 30, 2022 and December 31, 2021, respectively, which include accrued interest, are recorded in “Accounts payable and other” in our Consolidated Balance Sheets. We are appealing the decision, therefore the payment of any additional consideration and its timing will depend on the outcome of the appeal. On November 13, 2019, a legal hypothec in the amount of C$30 million was registered on our Saint-Félicien (Quebec) immovable and movable property to secure the payment of any additional amounts following the outcome of the appeal. The hearing in this matter is scheduled to occur in 2022.
Partial wind-ups of pension plans
On June 12, 2012, we filed a motion for directives with the Quebec Superior Court, the court with jurisdiction in the creditor protection proceedings under the Companies’ Creditors Arrangement Act (Canada) (or, the “CCAA Creditor Protection
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Notes to Unaudited Interim Consolidated Financial Statements
Proceedings”), seeking an order to prevent pension regulators in each of Quebec, New Brunswick, and Newfoundland and Labrador from declaring partial wind-ups of pension plans relating to employees of former operations in New Brunswick, and Newfoundland and Labrador, or a declaration that any claim for accelerated reimbursements of deficits arising from a partial wind-up is a barred claim under the CCAA Creditor Protection Proceedings. We contend, among other things, that any such declaration, if issued, would be inconsistent with the Quebec Superior Court’s sanction order confirming the CCAA debtors’ CCAA Plan of Reorganization and Compromise, as amended, and the terms of our emergence from the CCAA Creditor Protection Proceedings. A partial wind-up would likely shorten the period in which any deficit within those plans, which could reach up to C$150 million ($108 million), would have to be funded if we do not obtain the relief sought. The hearing in this matter has not yet been scheduled but could occur in the next 12 months.
Contingent gain
In 2016, we filed a lawsuit against Greenpeace International, Greenpeace Inc. and certain individuals related to loss of business following false allegations concerning the impact of our harvesting operations in certain regions in Quebec. The claims alleged certain damages resulting from defamation and unfair competition. The total amount for damages claimed is substantial but the amount and timing of the ultimate recovery, if any, is uncertain. As a result, any recovery from this litigation or settlement of this claim is a contingent gain and will be recognized if, and when, realized or realizable.
Environmental matters
We are subject to a number of federal or national, state, provincial, and local environmental laws, regulations, and orders in various jurisdictions. We believe our operations are in material compliance with current applicable environmental laws and regulations. Environmental regulations promulgated and orders issued in the future could require substantial additional expenditures for compliance and could have a material impact on us, in particular, and the industry in general.
We have environmental liabilities of $16 million and $13 million recorded as of September 30, 2022 and December 31, 2021, respectively, primarily related to environmental remediation related to closed sites. The amount of these liabilities represents management’s estimate of the ultimate settlement based on an assessment of relevant factors and assumptions and could be affected by changes in facts or assumptions not currently known to management for which the outcome cannot be reasonably estimated at this time.
We also have asset retirement obligations of $36 million recorded as of September 30, 2022 and December 31, 2021, primarily consisting of liabilities associated with landfills, sludge basins and the dismantling of retired assets.
These liabilities are included in “Accounts payable and other” and “Other liabilities” in our Consolidated Balance Sheets.
Note 14. Share Capital
Treasury stock
On December 7, 2021, we announced a new share repurchase program, authorized by our board of directors, of up to ten million shares of our common stock or $100 million, whichever occurs first. We repurchased no shares during the three months ended September 30, 2022, and 125,482 shares at an average price of $11.34 for a total of $2 million during the nine months ended September 30, 2022.
On March 2, 2020, our board of directors authorized a share repurchase program of up to 15% of our common stock, for an aggregate consideration of up to $100 million. During the three and nine months ended September 30, 2021, we repurchased 1,248,251 shares at an average price of $10.95 for a total of $14 million and 3,340,599 shares at an average price of $10.22 for a total of $34 million, respectively. This share repurchase program was completed in December 2021.
Dividends
We did not declare or pay any dividends on our common stock during the three and nine months ended September 30, 2022. We declared a special dividend of $1.00 per share ($79 million) on our common stock during the nine months ended September 30, 2021. The dividend was paid to shareholders on July 7, 2021.
Under some of our compensation plans, participants are credited additional units when a dividend is declared. The impact of the special dividend was as follows: for the nine months ended September 30, 2021, $3 million was recognized as a compensation
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Notes to Unaudited Interim Consolidated Financial Statements
expense, and $2 million as an increase in deficit and in additional paid-in capital; and $3 million as an increase in liabilities as of September 30, 2021.
Note 15. Segment Information
We manage our business based on the products we manufacture. Accordingly, our reportable segments correspond to our principal product lines: market pulp, tissue, wood products and paper.
None of the income or loss items following “Operating income” in our Consolidated Statements of Operations are allocated to our segments, since those items are reviewed separately by management. For the same reason, closure costs, impairment and other related charges, gains and losses on disposition of assets, as well as other discretionary charges or credits are not allocated to our segments. We allocate depreciation and amortization expense to our segments, although the related fixed assets and amortizable intangible assets are not allocated to segment assets. Additionally, all selling, general and administrative expenses are allocated to our segments, with the exception of certain discretionary charges and credits, which we present under “corporate and other.”
Information about certain segment data for the three and nine months ended September 30, 2022 and 2021, was as follows:
(Unaudited, in millions)
Market Pulp (1)
Tissue
Wood Products (2)
PaperSegment
Total		Corporate
and Other		Total
Sales
Third quarter
2022$265 $50 $379 $280 $974 $— $974 
2021$234 $38 $293 $252 $817 $— $817 
First nine months
2022$687 $150 $1,324 $816 $2,977 $— $2,977 
2021$609 $115 $1,387 $719 $2,830 $— $2,830 
Depreciation and amortization
Third quarter
2022$5 $4 $11 $10 $30 $4 $34 
2021$6 $5 $11 $15 $37 $5 $42 
First nine months
2022$16 $13 $33 $29 $91 $10 $101 
2021$18 $14 $32 $46 $110 $13 $123 
Operating income (loss)
Third quarter
2022$81 $(12)$42 $52 $163 $(39)$124 
2021$46 $(9)$64 $16 $117 $(15)$102 
First nine months
2022$144 $(30)$441 $114 $669 $(93)$576 
2021$80 $(18)$690 $(15)$737 $(52)$685 
(1)Inter-segment sales were $19 million and $7 million for the three months ended September 30, 2022 and 2021, respectively, and $47 million and $22 million for the nine months ended September 30, 2022 and 2021, respectively. These inter-segment sales, which were transacted at either the lowest market price of the previous month or cost, were excluded from market pulp sales.
(2)Wood products sales to our previously-held joint ventures, which were transacted at arm’s length negotiated prices, were $22 million for three months ended September 30, 2021, and were $12 million for the period up to the Acquisition Date and $55 million for the nine months ended September 30, 2021. See Note 2, “Business Combinations” for more information.
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RESOLUTE FOREST PRODUCTS INC.
Notes to Unaudited Interim Consolidated Financial Statements
Note 16. Subsequent Events
The following significant events occurred subsequent to September 30, 2022:
•On October 31, 2022, Resolute’s stockholders approved the Transaction. The Transaction is subject to applicable regulatory approvals and the satisfaction of certain other customary closing conditions. See Note 2, “Business Combinations” for more information.
•On October 6, 2022, a fire started at our Menominee (Michigan) recycled pulp mill, which resulted in the temporary idling of the facility. We cannot yet estimate the extent of the losses, but aim to restart the mill in the coming months. We maintain insurance coverage for the mill, which is subject to customary deductible and limits.
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ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following management’s discussion and analysis is intended to help the reader understand Resolute Forest Products, our results of operations, cash flows and financial condition. The discussion is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the accompanying notes (or, the “Consolidated Financial Statements”) contained in Item 1, “Financial Statements,” of this Quarterly Report on Form 10-Q (or, “Form 10-Q”).
When we refer to “Resolute Forest Products,” “Resolute,” “we,” “our,” “us” or the “Company,” we mean Resolute Forest Products Inc. with its subsidiaries, either individually or collectively, unless otherwise indicated.
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION AND USE OF THIRD-PARTY DATA
Statements in this Form 10-Q that are not reported financial results or other historical information of Resolute Forest Products are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. They include, for example, statements relating to the potential benefits of the proposed transaction between Resolute Forest Products and Domtar Corporation; the prospective performance and outlook of our business, performance and opportunities; the ability of the parties to complete the proposed transaction and the expected timing of completion of the proposed transaction; the impact of the coronavirus (or, “COVID-19”) pandemic and resulting economic conditions on our business, results of operations and market price of our securities; the impact on our future business results of the price volatility of our products; the logistics and transportation network constraints and the levels of inventory; and to our: efforts and initiatives to reduce costs and increase revenues and profitability; business and operating outlook; future pension obligations; assessment of market conditions; growth strategies and prospects, and the growth potential of the Company and the industry in which we operate; liquidity; future cash flows, including as a result of the changes to our pension funding obligations; estimated capital expenditures; environmental, social and governance (or, “ESG”) reporting; and strategies for achieving our goals generally. Forward-looking statements may be identified by the use of forward-looking terminology such as the words “should,” “would,” “could,” “will,” “may,” “expect,” “believe,” “continue,” “maintain,” “remain,” “estimate,” “aim” and other terms with similar meaning indicating possible future events or potential impact on our business or Resolute Forest Products’ shareholders.
The reader is cautioned not to place undue reliance on these forward-looking statements, which are not guarantees of future performance. These statements are based on management’s current assumptions, beliefs, and expectations, all of which involve a number of business risks and uncertainties that could cause actual results to differ materially. The potential risks and uncertainties that could cause our actual future financial condition, results of operations, and performance to differ materially from those expressed or implied in this Form 10-Q include, but are not limited to: uncertainties as to the timing of the proposed transaction with Domtar Corporation; the risk that the proposed transaction with Domtar Corporation may not be completed in a timely manner or at all; the possibility that competing offers or acquisition proposals will be made; the possibility that any or all of the various conditions to the consummation of the proposed transaction may not be satisfied or waived, including the failure to receive any required regulatory approvals from any applicable governmental entities (or any conditions, limitations or restrictions placed on such approvals); the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement, including in circumstances that would require us to pay a termination fee or other expenses; the inability to recover softwood lumber duty refunds in a timely manner or at all; the effect of the pendency of the proposed transaction on our ability to retain and hire key personnel, our ability to maintain relationships with our customers, suppliers and others with whom we do business and our business generally or our stock price; risks related to diverting management’s attention from our ongoing business operations; the impact of the COVID-19 pandemic on our business and resulting economic conditions; developments in non-print media, including changes in consumer habits, and the effectiveness of our responses to these developments; intense competition in the forest products industry; any inability to offer products certified to globally recognized forestry management and chain of custody standards; any inability to successfully implement our strategies to increase our earnings power; the possible failure to successfully integrate acquired businesses with ours or to realize the anticipated benefits of acquisitions or divestitures or other strategic transactions or projects, including loss of synergies following business divestitures; uncertainty or changes in political or economic conditions in the U.S., Canada or other countries in which we sell our products, including the effects of pandemics; global economic and political conditions; the highly cyclical nature of the forest products industry; any difficulties in obtaining timber or wood fiber at favorable prices, or at all; impacts of inflation on the price of goods and services, including changes in the cost of purchased energy and other raw materials; any loss of important customers and resulting accounts receivable credit risk exposure; physical, financial, regulatory, transitional and litigation risks associated with global, regional, and local weather conditions, and climate change; financial, litigation, liability and reputational risks associated with ESG reporting; any disruption in operations or increased labor costs due to labor disputes or occupational health and safety issues; difficulties in our employee relations or in employee attraction or retention, and workforce shortages; disruptions to our supply chain, operations, or the delivery of our products, including due to public health epidemics and workforce shortages; disruptions to our information technology systems including
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cybersecurity and privacy incidents; risks related to the operation and transition of legacy system applications; negative publicity, even if unjustified; currency fluctuations; any increase in the level of required contributions to our pension plans, including as a result of any increase in the amount by which they are underfunded; our ability to maintain adequate capital resources to provide for all of our substantial capital requirements; the terms of our outstanding indebtedness, which could restrict our current and future operations; increases of interest rates and changes relating to the London Interbank Offered Rate, which could impact our borrowings under our credit facilities; losses that are not covered by insurance; any additional closure costs and long-lived asset impairment or goodwill impairment or accelerated depreciation charges; any need to record additional valuation allowances against our recorded deferred income tax assets or any limitation of our use of certain tax attributes; our exports from one country to another country becoming or remaining subject to duties, cash deposit requirements, border taxes, quotas, or other trade remedies or restrictions; countervailing and anti-dumping duties on imports to the U.S. of the vast majority of our softwood lumber products produced at our Canadian sawmills; any failure to comply with laws or regulations generally; any additional environmental or health and safety liabilities; any violation of trade laws, export controls, or other laws relating to our international sales and operations; adverse outcomes of legal proceedings, claims and governmental inquiries, investigations, and other disputes in which we are involved; the actions of holders of a significant percentage of our common stock; and the potential risks and uncertainties set forth under Part II, Item 1A, “Risk Factors,” in this quarterly report on Form 10-Q and Part I, Item 1A, “Risk Factors,” of our annual report on Form 10-K for the year ended December 31, 2021, filed with the U.S. Securities and Exchange Commission (or, the “SEC”) on March 1, 2022 (or, the “2021 Annual Report”), which have been heightened by the COVID-19 pandemic, including related governmental responses and economic impacts, market disruptions and resulting changes in consumer habits.
All forward-looking statements in this Form 10-Q are expressly qualified by the cautionary statements contained or referred to in this section and in our other filings with the SEC and the Canadian securities regulatory authorities. We disclaim any obligation to publicly update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by law.
Market and industry data
The information on industry and general economic conditions in this Form 10-Q was derived from third-party sources and trade publications we believe to be widely accepted and accurate. We have not independently verified the information and cannot assure you of its accuracy.
OVERVIEW
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 paper, which are marketed in over 60 countries. The Company owns or operates some 40 facilities, as well as power generation assets, in the U.S. and Canada. We are a large and growing North American producer of wood products, the largest producer of uncoated mechanical papers in North America, a competitive pulp producer in North America, and a leading global producer of newsprint. Resolute has third-party certified 100% of its managed woodlands to internationally recognized sustainable forest management standards.
We report our activities in four business segments: market pulp, tissue, wood products and paper. We believe an integrated approach maximizes value creation for our Company and stakeholders.
We are guided by our vision and values, focusing on safety, sustainability, profitability, accountability, and teamwork. We believe we can be distinguished by the following competitive strengths:
•Competitive cost structure combined with diversified and integrated asset base
–harvesting rights for the majority of fiber needs in Canada;
–sophisticated infrastructure to manage fiber flows from harvesting through transformation into a range of end-products to maximize resource utilization and process efficiency;
–nearly 100% of our products sourced from high-quality virgin fiber; and
–large-scale and cost-effective operations, including significant internal energy production from cogeneration and hydroelectric facilities, which support our value proposition.
•Strong balance sheet
–favorable pricing and flexibility under borrowing agreements together with our liquidity levels support our ability to weather challenging market cycles and to continue to execute our transformation strategy;
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–significant tax assets to defer cash income taxes and provide synergies to execute this strategy; and
–customers benefit from a financially stable and reliable business partner in a challenging industry.
•Seasoned management team and strong culture of commitment
–deep industry expertise, with influential leaders in forestry, operations, environmental risk management and public policy;
–culture of accountability, encouraging transparency and straightforwardness; and
–core identity tied to renewable resources we harvest in a truly sustainable manner.
•Deep-seated commitment to fundamental principles of sustainability
–ambitious targets and governance to back it up;
–unwavering focus on safety; and
–transparent communications.
Our Business
For information relating to our products, strategy and highlights, sustainable development and performance, and power generation assets, refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Overview – Our Business” in our 2021 Annual Report.
Third Quarter and Year-to-Date Overview
Impact of global economic conditions
There continues to be a measure of uncertainty because of global geopolitical and economic conditions. While we benefit from strong market conditions for our pulp and paper segment and an overall improvement to logistic constraints, our operations and our financial results remain negatively affected by cost inflation. In addition, rising interest rates and reduced demand has adversely influenced our wood products segment.
Business combinations
Potential acquisition by Paper Excellence
On July 5, 2022, Resolute and Paper Excellence Group, through its wholly-owned subsidiary Domtar Corporation (or, “Domtar”), entered into a business combination agreement (or, the “Transaction”) under which Domtar will acquire all of the issued and outstanding common shares of Resolute for $20.50 per share, in cash, without interest, and one contractual contingent value right per share (or, the “CVR”).
Under the CVR, stockholders will receive any refunds on approximately $500 million of deposits on softwood lumber duties paid by Resolute through June 30, 2022, including any interest thereon, net of certain expenses and of applicable taxes. Any proceeds attributable to the CVR will be distributed proportionally to the CVR holders, and the value will ultimately be determined by the terms and timing of the resolution of the softwood lumber dispute between Canada and the United States. The terms and timing of such resolution is uncertain.
On October 31, 2022, Resolute's stockholders approved the Transaction. The Transaction, which is subject to applicable regulatory approvals and the satisfaction of certain other customary closing conditions, is expected to close in the first half of 2023. See Note 16, “Subsequent Events” to our Consolidated Financial Statements.
Acquisition of a power generation facility
On April 1, 2022, we acquired a 34.5 megawatt power generation facility in Senneterre (Quebec) for $8 million, including a contingent consideration. With this acquisition, we will maximize the use of biomass from our regional operations, generating green power and providing a platform for future growth and enhanced competitiveness in the Abitibi-Témiscamingue region.
Acquisition of Larouche and St-Prime
On March 4, 2022, we acquired control of Resolute-LP Engineered Wood Larouche Inc. and Resolute-LP Engineered Wood St-Prime Limited Partnership (or, “Larouche and St-Prime”), that were previously held as 50% owned joint ventures, by acquiring
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the remaining 50% equity interests from Louisiana-Pacific Canada Ltd., a wholly-owned subsidiary of Louisiana-Pacific Corporation, for a cash consideration of $51 million (including $1 million of working capital adjustment, and net of cash acquired of $8 million). Larouche and St-Prime, which are engineered wood product facilities located in Quebec, produce I-joists for the construction industry. This acquisition solidifies our presence in the engineered wood product segment with assets we know well, and downstream integrates over 60 million board feet of lumber capacity.
For more information, see Note 2, “Business Combinations,” to our Consolidated Financial Statements.
Indefinite idling of pulp and paper operations at Calhoun mill
In December 2021, we announced the indefinite idling of pulp and paper operations at our Calhoun (Tennessee) mill. During the first quarter of 2022, pulp and paper operations ceased. During the nine-month period ended September 30, 2022, we have revised our expected 2022 additional cash closure costs, disclosed in our December 31, 2021 Consolidated Financial Statements, from $32 million to $12 million, due to lower than expected chemical disposal costs. We already have incurred $7 million of these costs in the first nine months of 2022.
Menominee fire
On October 6, 2022, a fire started at our Menominee (Michigan) recycled pulp mill, which resulted in the temporary idling of the facility. We cannot yet estimate the extent of the losses, but aim to restart the mill in the coming months. We maintain insurance coverage for the mill, which is subject to customary deductible and limits.
Three months ended September 30, 2022 vs. September 30, 2021
Our operating income was $124 million in the quarter, compared to an operating income of $102 million in the third quarter of 2021. Excluding special items, our operating income was $123 million, compared to an operating income of $102 million in the year-ago period.
Our net income in the quarter was $87 million, or $1.11 per diluted share, compared to a net income of $80 million, or $0.99 per diluted share, in the year-ago period. Our net income in the quarter, excluding special items, was $85 million, or $1.08 per diluted share, compared to a net income of $67 million, or $0.84 per diluted share, in the year-ago period. Special items are described below.
Three Months Ended September 30, 2022Operating Income
Net Income
EPS
(Unaudited, in millions, except per share amounts)
GAAP, as reported$124 $87 $1.11 
Adjustments for special items:
Closure costs, impairment and other related charges(1)(1)(0.01)
Non-operating pension and other postretirement benefit costs
— 3 0.04 
Other income, net
— (37)(0.47)
Income tax effect of special items— 33 0.41 
Adjusted for special items (1)
$123 $85 $1.08 
Three Months Ended September 30, 2021Operating IncomeNet IncomeEPS
(Unaudited, in millions, except per share amounts)
GAAP, as reported$102 $80 $0.99 
Adjustments for special items:
Non-operating pension and other postretirement benefit credits
— (3)(0.04)
Other income, net
— (20)(0.24)
Income tax effect of special items— 10 0.13 
Adjusted for special items (1)
$102 $67 $0.84 
(1)Operating income, net income and net income per diluted share (or, “EPS”), in each case as adjusted for special items, are not financial measures recognized under U.S. generally accepted accounting principles (or, “GAAP”). We calculate operating income, as adjusted for special items, as operating income from our Consolidated Statements of Operations, adjusted for items such as closure costs, impairment, and other related charges, and gains and losses on disposition of
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assets that are excluded from our segment’s performance from GAAP operating income. We calculate net income, as adjusted for special items, as net income from our Consolidated Statements of Operations, adjusted for the same special items applied to operating income, in addition to non-operating pension and other postretirement benefit (or, “OPEB”) costs and credits, other income and expense, net, U.S. deferred income tax asset valuation allowance reversal (to offset future projected tax implications of the global intangible low-taxed income (or, “GILTI”) inclusion), and the income tax effect of the special items. EPS, as adjusted for special items, is calculated as net income, as adjusted for special items, per diluted share. We believe that using these non-GAAP measures is useful because they are consistent with the indicators management uses internally to measure the Company’s performance, and it allows the reader to compare our operations and financial performance from period to period. Operating income, net income and EPS, in each case as adjusted for special items, are internal measures, and therefore may not be comparable to those of other companies. These non-GAAP measures should not be viewed as substitutes to financial measures determined under GAAP.
Nine months ended September 30, 2022 vs. September 30, 2021
Our operating income was $576 million in the first nine months of the year, compared to operating income of $685 million in the year-ago period. Excluding special items, our operating income was $586 million, compared to operating income of $687 million in the year-ago period. Special items are described below.
Our net income in the first nine months of the year was $553 million, or $7.07 per diluted share, compared to net income of $435 million, or $5.39 per diluted share, in the year-ago period. Our net income in the period, excluding special items, was $417 million, or $5.33 per diluted share, compared to net income of $486 million, or $6.01 per diluted share, in the year-ago period.
Nine Months Ended September 30, 2022
Operating Income
Net Income
EPS
(Unaudited, in millions, except per share amounts)
GAAP, as reported$576 $553 $7.07 
Adjustments for special items:
Closure costs, impairment and other related charges8 8 0.10 
Net loss on disposition of assets
2 2 0.03 
Non-operating pension and other postretirement benefit costs
— 13 0.17 
Other income, net
— (95)(1.21)
U.S. deferred income tax asset valuation allowance reversal— (105)(1.34)
Income tax effect of special items— 41 0.51 
Adjusted for special items (1)
$586 $417 $5.33 
Nine Months Ended September 30, 2021
Operating Income
Net Income
EPS
(Unaudited, in millions, except per share amounts)
GAAP, as reported$685 $435 $5.39 
Adjustments for special items:
Closure costs, impairment and other related charges2 2 0.02 
Non-operating pension and other postretirement benefit credits
— (8)(0.10)
Other expense, net
— 74 0.92 
Income tax effect of special items— (17)(0.22)
Adjusted for special items (1)
$687 $486 $6.01 
(1)Operating income, net income and EPS, in each case as adjusted for special items, are non-GAAP financial measures. For more information on the calculation and reasons we include these measures, see note 1 under “Overview – Third Quarter and Year-to-Date Overview” above.
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RESULTS OF OPERATIONS
Consolidated Results
Selected financial information
Three Months Ended
September 30,		Nine Months Ended
September 30,
(Unaudited, in millions, except per share amounts)
2022202120222021
Sales$974 $817 $2,977 $2,830 
Operating income (loss) per segment:
Market pulp$81 $46 $144 $80 
Tissue(12)(9)(30)(18)
Wood products42 64 441 690 
Paper52 16 114 (15)
Segment total163 117 669 737 
Corporate and other(39)(15)(93)(52)
Operating income
$124 $102 $576 $685 
Net income attributable to Resolute Forest Products Inc.
$87 $80 $553 $435 
Net income per common share attributable to Resolute Forest Products Inc. common shareholders:
Basic$1.12 $1.00 $7.14 $5.44 
Diluted$1.11 $0.99 $7.07 $5.39 
Adjusted EBITDA (1)
$157 $144 $687 $810 
(Unaudited, in millions)
September 30,
2022
December 31, 2021
Cash and cash equivalents$446 $112 
Total assets$4,053 $3,538 
(1)Earnings before interest expense, income taxes, and depreciation and amortization (or, “EBITDA”) and adjusted EBITDA are not financial measures recognized under GAAP. EBITDA is calculated as net income (loss) including noncontrolling interest from the Consolidated Statements of Operations, adjusted for interest expense, income taxes, and depreciation and amortization. Adjusted EBITDA means EBITDA, excluding special items, such as closure costs, impairment and other related charges, gains and losses on disposition of assets, non-operating pension and OPEB costs and credits, and other income and expense, net. We believe that using non-GAAP measures such as EBITDA and adjusted EBITDA is useful because they are consistent with the indicators management uses internally to measure the Company’s performance and it allows the reader to compare our operations and financial performance from period to period. EBITDA and adjusted EBITDA are internal measures, and therefore may not be comparable to those of other companies. These non-GAAP measures should not be viewed as substitutes to financial measures determined under GAAP.
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Three Months Ended
September 30,		Nine Months Ended
September 30,
(Unaudited, in millions)2022202120222021
Net income including noncontrolling interest
$87 $80 $553 $436 
Interest expense5 5 16 16 
Income tax provision
66 40 89 167 
Depreciation and amortization34 42 101 123 
EBITDA$192 $167 $759 $742 
Closure costs, impairment and other related charges(1)— 8 2 
Net loss on disposition of assets
— — 2 — 
Non-operating pension and other postretirement benefit costs (credits)
3 (3)13 (8)
Other (income) expense, net
(37)(20)(95)74 
Adjusted EBITDA$157 $144 $687 $810 
Three months ended September 30, 2022 vs. September 30, 2021
Operating income variance analysis
rfp-20220930_g1.jpg
Sales
Sales increased by $157 million compared to the year-ago period, to $974 million. After removing the effects of the indefinite idling of the Calhoun pulp and paper operations during the first quarter of 2022 and the weaker Canadian dollar, pricing had a favorable impact of $119 million, as a result of an increase in the average transaction price for paper, market pulp, and tissue, up by 24%, 24% and 21% respectively, partly offset by lower prices in the wood products segment due to market conditions, down by 2%. Higher volume increased sales by $98 million, mainly reflecting higher shipments across all segments.
Cost of sales, excluding depreciation, amortization and distribution costs
Cost of sales, excluding depreciation, amortization and distribution costs (or, “COS”) increased by $99 million compared to the year-ago period. After removing the effects of the indefinite idling of the Calhoun pulp and paper operations, the higher volume and the weaker Canadian dollar, COS increased by $105 million, largely due to:
•higher fiber costs ($46 million), mainly reflecting an increase in stumpage fees (which are based on higher benchmark lumber selling prices reflecting a time lag in the stumpage system), higher harvesting costs (including fuel) and higher price for log purchases for the wood products segment; higher market pulp prices for the tissue segment; as well as higher price of recycled furnish for the market pulp segment;
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•unfavorable maintenance and other operating costs ($25 million) as a result of higher costs, scope and timing of maintenance work, and higher labor and outside services costs;
•higher energy costs ($24 million) due to higher prices of natural gas and power; and
•higher chemical costs ($9 million), mainly due to higher prices.
Distribution costs
After removing the impact of volume, including the favorable impact ($6 million) of the indefinite idling of the Calhoun pulp and paper operations, and the weaker Canadian dollar, distribution costs increased by $24 million, mainly due to higher freight rates and limited flexibility of mode of transportation.
Depreciation and amortization
Depreciation and amortization was $8 million lower compared to the year-ago period, primarily due to fully depreciated assets and the decrease in depreciation related to the indefinite idling of the Calhoun pulp and paper operations, whose assets were fully impaired in the fourth quarter of 2021.
Selling, general and administrative expenses
Selling, general and administrative (or, “SG&A”) expenses increased by $25 million in the quarter compared to the same period last year, due to higher stock-based compensation expense, mainly reflecting a mark-to-market adjustment based on the stock price changes, and to costs related to the Transaction.
Indefinite idling of the Calhoun pulp and paper operations
During the three months ended September 30, 2022, the indefinite idling of Calhoun pulp and paper operations had a favorable impact of $7 million on our operating income. This included a decrease in sales of $59 million, in COS of $52 million (net of asset preservation costs of $2 million) and in distribution costs of $6 million, all reflecting the lower volume of 66,000 metric tons compared to the year-ago period; and lower SG&A of $5 million and depreciation of $3 million.
Net income variance analysis
Non-operating pension and other postretirement benefit (costs) credits
We recorded non-operating pension and OPEB costs of $3 million in the quarter, compared to credits of $3 million in the year-ago period. The difference mainly reflects lower expected return on plan assets ($4 million) in the current period.
Other income, net
We recorded other income, net, of $37 million in the quarter, compared to other income, net, of $20 million, in the year-ago period. The difference mainly reflects a foreign exchange gain of $37 million in the current period, compared to a foreign exchange gain of $12 million and income from equity method investments of $8 million in the year-ago period.
Income taxes
We recorded an income tax provision of $66 million in the quarter on income before income taxes of $153 million, compared to an expected income tax provision of $32 million based on the U.S. federal statutory income tax rate of 21%. The difference mainly reflects: U.S. tax on non-U.S. earnings ($34 million); foreign exchange items ($27 million); and foreign tax rate differences ($9 million); partly offset by an income tax benefit for our valuation allowance related to our U.S. operations ($33 million) where we recognized a full valuation allowance against our deferred income tax assets as of January 1, 2022.
During the three months ended September 30, 2022, we released $33 million of the $673 million valuation allowance on our U.S. deferred income tax assets that existed at January 1, 2022, mainly to offset tax implications relating to the GILTI inclusion.
In the third quarter of 2021, we recorded an income tax provision of $40 million, on income before income taxes of $120 million, compared to an expected income tax provision of $26 million based on the U.S. federal statutory income tax rate of 21%. The difference mainly reflects: U.S. tax on non-U.S. earnings ($13 million); foreign tax rate differences ($6 million); and foreign exchange items ($5 million); partly offset by a decrease in our valuation allowance related to our U.S. operations ($11 million) where we recognized a full valuation allowance against our deferred income tax assets.
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The $11 million decrease in our valuation allowance for the three months ended September 30, 2021, was to offset the tax implications relating to the GILTI inclusion.
Nine months ended September 30, 2022 vs. September 30, 2021
Operating income variance analysis
rfp-20220930_g2.jpg
Sales
Sales increased by $147 million compared to the year-ago period, to $2,977 million. After removing the effects of the indefinite idling of the Calhoun pulp and paper operations and the weaker Canadian dollar, pricing had a favorable impact of $233 million, mainly as a result of an increase in the average transaction price for paper, market pulp, and tissue, up by 25%, 23% and 13% respectively, partly offset by a decrease in the average transaction price for wood products, down by 10%. Higher volume increased sales by $51 million, mainly reflecting higher shipments in tissue ($18 million), and wood products ($33 million) due to the acquisition of the remaining 50% equity interests in Larouche and St-Prime, partly offset by logistic constraints as a result of limited rail car availability.
Cost of sales, excluding depreciation, amortization and distribution costs
COS increased by $205 million in the period. After removing the effects of the indefinite idling of the Calhoun pulp and paper operations, the weaker Canadian dollar and volume, COS increased by $288 million, largely reflecting:
•higher fiber costs ($133 million), mainly reflecting an increase in stumpage fees (which are based on higher benchmark lumber selling prices reflecting a time lag in the stumpage system), higher harvesting costs (including fuel) and higher price for log purchases for the wood products segment; higher price of recycled furnish for the market pulp segment; as well as higher market pulp prices for the tissue segment;
•higher energy costs ($68 million) due to higher prices of natural gas and power, as well as lower internal power generation, mainly as a result of a seven-month turbine failure at the Saint-Félicien (Quebec) mill which was back in operation during the second quarter of 2022;
•unfavorable maintenance and other operating costs ($67 million) as a result of higher costs, scope and timing of maintenance work, and higher labor and outside services costs; and
•higher chemical costs ($23 million), mainly due to higher prices.
Distribution costs
After removing the impact of volume, including the favorable impact ($14 million) of the indefinite idling of the Calhoun pulp and paper operations, and the weaker Canadian dollar, distribution costs increased by $65 million, mainly due to higher freight rates and limited flexibility of mode of transportation.
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Depreciation and amortization
Depreciation and amortization was $22 million lower compared to the year-ago period, primarily due to fully depreciated assets and the decrease in depreciation related to the indefinite idling of the Calhoun pulp and paper operations, whose assets were fully impaired in the fourth quarter of 2021.
Selling, general and administrative expenses
SG&A expenses increased by $19 million in the first nine months of 2022, compared to the same period last year, mainly due to costs related to the Transaction.
Closure costs, impairment and other related charges
In the first nine months of 2022, we recorded additional closure costs, impairment and other related charges of $8 million, related to the indefinite idling of our Calhoun pulp and paper operations, and additional costs for the Baie-Comeau (Quebec) paper mill. This compares to $2 million of closure costs, impairment and other related charges in the year-ago period, related to the indefinite idling of our Baie-Comeau paper mill.
Indefinite idling of the Calhoun pulp and paper operations
In the first nine months of 2022, the indefinite idling of our Calhoun pulp and paper operations had a favorable impact of $22 million on our operating income. This included a decrease in sales of $135 million, in COS of $130 million (net of asset preservation costs of $15 million) and in distribution costs of $14 million, all reflecting the lower volume of 166,000 metric tons compared to the year-ago period; and lower depreciation of $7 million and SG&A of $6 million.
Net income variance analysis
Non-operating pension and other postretirement benefit (costs) credits
We recorded non-operating pension and OPEB costs of $13 million in the first nine months of 2022, compared to credits of $8 million in the year-ago period. The difference reflects: in the current period, lower expected return on plan assets ($15 million), higher interest cost ($6 million), and pension special termination benefit cost ($3 million) related to the indefinite idling of our pulp and paper operations at our Calhoun mill; partly offset by lower amortization of actuarial losses ($6 million).
Other income, net
We recorded other income, net, of $95 million in the first nine months of 2022, compared to other expense, net, of $74 million in the year-ago period. The difference mainly reflects a foreign exchange gain of $45 million, a gain on previously-held equity investments of $42 million (see Note 2, “Business Combinations” to our Consolidated Financial Statements), and income from equity method investments of $7 million in the current period, compared to a foreign exchange gain of $1 million, a loss on commodity contracts of $85 million, principally related to lumber futures contracts and income from equity method investments of $12 million in the year-ago period. There were no lumber futures contracts outstanding as of September 30, 2022 and 2021.
Income taxes
We recorded an income tax provision of $89 million in the first nine months of 2022 on income before income taxes of $642 million, compared to an expected income tax provision of $135 million based on the U.S. federal statutory income tax rate of 21%. The difference mainly reflects: an income tax benefit for our valuation allowance related to our U.S. operations ($219 million) where we recognized a full valuation allowance against our deferred income tax assets as of January 1, 2022; partly offset by U.S. tax on non-U.S. earnings ($106 million); foreign exchange items ($34 million); and foreign tax rate differences ($33 million).
During the nine months ended September 30, 2022, we released $219 million of the $673 million valuation allowance on our U.S. deferred income tax assets that existed at January 1, 2022. Of the released amount, $105 million was to offset future projected tax implications of the GILTI inclusion, which impacted the overall effective tax rate. The remaining amount released was mainly to offset tax implications relating to the GILTI inclusion for the nine months ended September 30, 2022.
At each reporting period, we assess whether it is more likely than not that the deferred income tax assets will be realized, based on the review of all available positive and negative evidence, including future reversals of existing taxable temporary differences, estimates of future taxable income, past operating results, and prudent and feasible tax planning strategies.
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In our evaluation process, we give the most weight to historical income or losses. During the second quarter of 2022, after evaluating all available positive and negative evidence, although realization is not assured, we determined that it is more likely than not that the $105 million of the U.S. deferred income tax assets released during the second quarter, will be realized in the future prior to expiration. The key factor contributing to the conclusion that the positive evidence ultimately outweighed existing negative evidence is the continuing GILTI inclusion. The rapidly changing dynamics in the wood products, pulp and paper segments resulted or are expected to result in significant GILTI inclusions for 2021, 2022 and some future years. These significant GILTI inclusions have created or are expected to create U.S. taxable income, which has been, or is expected to be entirely offset by existing U.S. tax attributes included in deferred income tax assets that have been fully reserved.
In the first nine months of 2021, we recorded an income tax provision of $167 million, on income before income taxes of $603 million, compared to an expected income tax provision of $127 million based on the U.S. federal statutory income tax rate of 21%. The difference mainly reflects: U.S. tax on non-U.S. earnings ($96 million); foreign tax rate differences ($33 million); partly offset by a net decrease in our valuation allowance related to our U.S. operations ($89 million) where we recognized a full valuation allowance against our deferred income tax assets.
The $89 million net decrease in our valuation allowance for the nine months ended September 30, 2021, was mainly to offset the tax implications relating to the GILTI inclusion.

Segment Earnings
We manage our business based on the products we manufacture. Our reportable segments correspond to our principal product lines: market pulp, tissue, wood products and paper.
We do not allocate any of the income or loss items following “operating income” in our Consolidated Statements of Operations to our segments because those items are reviewed separately by management. Similarly, we do not allocate to the segments: closure costs, impairment and other related charges; gains and losses on disposition of assets; as well as other discretionary charges or credits.
We allocate depreciation and amortization expense to our segments, although the related fixed assets and amortizable intangible assets are not allocated to segment assets. Additionally, all SG&A expenses are allocated to our segments, with the exception of certain discretionary charges and credits, which we present under “corporate and other.”
32
MARKET PULP
Highlights
Three Months Ended
September 30,		Nine Months Ended
September 30,
(Unaudited, in millions, except where otherwise stated)2022202120222021
Sales$265 $234 $687 $609 
Operating income (1)
$81 $46 $144 $80 
EBITDA (2)
$86 $52 $160 $98 
(In thousands of metric tons)
Shipments260 283 741 808 
Downtime2 28 33 76 
September 30,
(Unaudited, in thousands of metric tons)20222021
Finished goods inventory67 52 
(1)Net income including noncontrolling interest is equal to operating income in this segment.
(2)EBITDA, a non-GAAP financial measure, is reconciled below. For more information on the calculation and reasons we include this measure, see note 1 under “Results of Operations – Consolidated Results – Selected financial information” above.
Three Months Ended
September 30,		Nine Months Ended
September 30,
(Unaudited, in millions)2022202120222021
Net income including noncontrolling interest
$81 $46 $144 $80 
Depreciation and amortization5 6 16 18 
EBITDA$86 $52 $160 $98 
Industry trends
rfp-20220930_g3.jpg
World demand for chemical pulp increased by 2.8% in the first eight months of 2022 compared to the year-ago period, reflecting an increase in North America and Western Europe of 3.1% and 5.9%, respectively, while China decreased by 2.8%. In the first eight months of 2022, world capacity increased by 3.0% compared to the year-ago period.
33
World demand for softwood pulp fell by 1.9% in the first eight months of 2022, with a decrease of 14.0% in China, while North America and Western Europe increased by 4.1% and 2.2%, respectively. The shipment-to-capacity ratio was 86%.
In the same period, world demand for hardwood pulp increased by 5.3%, with shipments to Western Europe, North America, and China up by 8.1%, 2.2%, and 1.3%, respectively. The shipment-to-capacity ratio was 88%.
Three months ended September 30, 2022 vs. September 30, 2021
Operating income variance analysis
rfp-20220930_g4.jpg
Sales
Sales were $31 million higher, or 13%, in the quarter to $265 million. After removing the effects of the indefinite idling of the Calhoun pulp operations, pricing contributed to a $51 million increase due to higher realized prices in all pulp grades as the average transaction price rose by $199 per metric ton, or 24%.
Cost of sales, excluding depreciation, amortization and distribution costs
COS decreased by $3 million compared to the year-ago period. After removing the effects of the indefinite idling of the Calhoun pulp operations, higher volume, and the weaker Canadian dollar, COS increased by $17 million, largely reflecting:
•higher energy costs ($6 million) due to higher prices of natural gas and power;
•higher fiber costs ($6 million), mainly due to higher price of recycled furnish; and
•higher chemical costs ($4 million), mainly due to higher prices.
Distribution costs
After removing the effect of volume including the favorable impact of the indefinite idling of the Calhoun pulp operations, and of the weaker Canadian dollar, distribution costs increased by $4 million, mainly due to higher freight rates and limited flexibility of mode of transportation.
34
Nine months ended September 30, 2022 vs. September 30, 2021
Operating income variance analysis
rfp-20220930_g5.jpg
Sales
Sales were $78 million higher, or 13%, to $687 million in the first nine months of the year. After removing the effects of the indefinite idling of the Calhoun pulp operations, pricing increased sales by $123 million, reflecting an increase in the average transaction price of $176 per metric ton, or 23%, due to higher realized prices in all pulp grades.
Cost of sales, excluding depreciation, amortization and distribution costs
After adjusting for the effects of the indefinite idling of the Calhoun pulp operations, higher volume and the weaker Canadian dollar, manufacturing costs increased by $69 million, largely reflecting:
•higher energy costs ($29 million) due to higher prices of natural gas and power, as well as lower internal power generation, mainly as a result of a seven-month turbine failure at the Saint-Félicien mill which was back in operation during the second quarter of 2022;
•higher fiber costs ($22 million), mainly due to higher price of recycled furnish;
•higher chemical costs ($11 million), mainly due to higher prices; and
•unfavorable maintenance and labor costs ($11 million), mainly as a result of the timing of scheduled outages and the scope of work.
Distribution costs
After removing the effect of volume including the favorable impact of the indefinite idling of the Calhoun pulp operations, and the weaker Canadian dollar, distribution costs increased by $12 million, mainly due to higher freight rates and limited flexibility of mode of transportation.
35
TISSUE
Highlights
Three Months Ended
September 30,		Nine Months Ended
September 30,
(Unaudited, in millions, except where otherwise stated)2022202120222021
Sales$50 $38 $150 $115 
Operating loss (1)
$(12)$(9)$(30)$(18)
EBITDA (2)
$(8)$(4)$(17)$(4)
(In thousands of short tons)
Shipments (3)
24 23 75 65 
Downtime2 3 2 10 
September 30,
(Unaudited, in thousands of short tons)20222021
Finished goods inventory (3)
5 6 
(1)Net loss including noncontrolling interest is equal to operating loss in this segment.
(2)EBITDA, a non-GAAP financial measure, is reconciled below. For more information on the calculation and reasons we include this measure, see note 1 under “Results of Operations – Consolidated Results – Selected financial information” above.
(3)Tissue converted products, which are measured in cases, are converted to short tons.
Three Months Ended
September 30,		Nine Months Ended
September 30,
(Unaudited, in millions)2022202120222021
Net loss including noncontrolling interest
$(12)$(9)$(30)$(18)
Depreciation and amortization4 5 13 14 
EBITDA$(8)$(4)$(17)$(4)
Industry trends
rfp-20220930_g6.jpg
Total U.S. tissue consumption rose by 4.5% in the first eight months of 2022, compared to the year-ago period. Converted product shipments increased by 3.9%, where at-home shipments increased by 3.7%, and away-from-home shipments increased by 4.2%.
36
U.S. parent roll production rose by 4.0% in the first eight months of 2022, and the average industry production-to-capacity ratio increased to 94%, up from 90% in the year-ago period.
Three months ended September 30, 2022 vs. September 30, 2021
Operating loss variance analysis
rfp-20220930_g7.jpg
Sales
Sales were $12 million higher, or 32%, to $50 million in the quarter, reflecting an increase in the average transaction price of $363 per short ton, or 21%, due to a favorable product mix and a rise in tissue pricing, and an increase in shipments by 1,000 short tons, or 4%, following better conditions in the retail and away-from-home markets.
Cost of sales, excluding depreciation, amortization and distribution costs
After removing the effect of higher volume, our manufacturing costs increased by $15 million compared to the year-ago period, mainly reflecting:
•higher fiber costs ($9 million) due to higher market pulp prices, including the loss of pulp integration following the indefinite idling of the Calhoun pulp and paper operations; and
•higher energy costs ($4 million) due to higher prices.
37
Nine months ended September 30, 2022 vs. September 30, 2021
Operating loss variance analysis
rfp-20220930_g8.jpg
Sales
Sales were $35 million higher, or 30%, to $150 million in the first nine months of the year, due to an increase in shipments by 10,000 short tons, or 15%, following better conditions in the retail and away-from-home markets, and an increase in pricing of $228 per short ton, or 13%, due to favorable product mix and a rise in tissue pricing.
Cost of sales, excluding depreciation, amortization and distribution costs
After removing the effect of higher volume, our manufacturing costs increased by $32 million compared to the year-ago period, mainly reflecting:
•higher fiber costs ($21 million) due to higher market pulp prices, including the loss of pulp integration following the indefinite idling of the Calhoun pulp and paper operations;
•higher energy costs ($6 million) due to higher prices; and
•unfavorable maintenance and labor costs ($4 million).
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WOOD PRODUCTS
Highlights
Three Months Ended
September 30,		Nine Months Ended
September 30,
(Unaudited, in millions, except where otherwise stated)2022202120222021
Sales$379 $293 $1,324 $1,387 
Operating income (1)
$42 $64 $441 $690 
EBITDA (2)
$53 $75 $474 $722 
(In millions board feet)    
Shipments (3)
606 511 1,577 1,578 
Downtime22 47 72 112 
September 30,
(Unaudited, in millions board feet)20222021
Finished goods inventory (3)
168 129 
(1)Net income including noncontrolling interest is equal to operating income in this segment.
(2)EBITDA, a non-GAAP financial measure, is reconciled below. For more information on the calculation and reasons we include this measure, see note 1 under “Results of Operations – Consolidated Results – Selected financial information” above.
(3)Includes wood pellets measured by mass, converted to board feet using a density-based conversion ratio, as well as engineered wood products measured by linear feet, converted to board feet.
Three Months Ended
September 30,		Nine Months Ended
September 30,
(Unaudited, in millions)2022202120222021
Net income including noncontrolling interest
$42 $64 $441 $690 
Depreciation and amortization11 11 33 32 
EBITDA$53 $75 $474 $722 
Industry trends
rfp-20220930_g9.jpg
U.S. housing starts were 1.6 million on a seasonally adjusted basis in the first nine months of 2022, up by 1.8% from the same period last year, which reflects a 5.1% decrease in single-family starts and an increase of 17.9% in multi-family starts.
39
2x4 – Random Length (or “RL”) #1-2 Kiln Dried Great Lakes (or “KD GL”) price fell by 1.5% in the first nine months of 2022 compared to the year ago period, and the 2x4x8 Stud KD GL price rose by 2.4%. The 2x4 – RL #2 KD Southern Pine (Eastside) price decreased by 0.1%, and the 2x4 – RL #2 KD Southern Pine (Westside) price was down by 0.2%.
Three months ended September 30, 2022 vs. September 30, 2021
Operating income variance analysis
rfp-20220930_g10.jpg
Sales
Sales were $86 million higher, or 29%, to $379 million in the quarter. Volume increased sales by $92 million reflecting an increase in shipments of 95 million board feet, or 19%, due to softer lumber market conditions in the prior period. Pricing resulted in a $6 million decrease in sales.
Cost of sales, excluding depreciation, amortization and distribution costs
After removing the effects of the weaker Canadian dollar, and of the higher volume, which included higher manufacturing costs related to the Larouche and St-Prime acquisition, COS increased by $43 million, mainly reflecting:
•higher log costs ($26 million), primarily due to an increase in stumpage fees (which are based on higher benchmark lumber selling prices reflecting a time lag in the stumpage system), as well as fuel and higher external log cost; and
•unfavorable sawmill operating costs ($14 million), mainly due to maintenance, labor, outside services and fuel.
Distribution costs
After removing the effect of higher volume, and of the weaker Canadian dollar, distribution costs increased by $8 million, mainly due to higher freight rates and limited flexibility of mode of transportation.
40
Nine months ended September 30, 2022 vs. September 30, 2021
Operating income variance analysis
rfp-20220930_g11.jpg
Sales
Sales were $63 million lower, or 5%, to $1,324 million in the first nine months of the year mainly reflecting lower prices due to market conditions, partly offset by the acquisition of the remaining 50% equity interests in Larouche and St-Prime. Pricing decreased sales by $96 million, reflecting a lower average transaction price of $90 per thousand board feet, or 10%. Sales volume was $33 million higher, due to the acquisition of the remaining 50% equity interests in Larouche and St-Prime, partly offset by logistic constraints as a result of limited rail car availability.
Cost of sales, excluding depreciation, amortization and distribution costs
After removing the effects of the weaker Canadian dollar, and of the higher volume, which included higher manufacturing cost related to the Larouche and St-Prime acquisition, COS increased by $120 million, mainly reflecting:
•higher log costs ($79 million), primarily due to an increase in stumpage fees (which are based on higher benchmark lumber selling prices reflecting a time lag in the stumpage system), harvesting costs, fuel and higher external log cost; and
•unfavorable sawmill operating costs ($39 million), mainly due to maintenance, labor, outside services and fuel.
Distribution costs
After removing the effect of volume, and the weaker Canadian dollar, distribution costs increased by $17 million, mainly due to higher freight rates and limited flexibility of mode of transportation.
41
PAPER
Highlights
Three Months Ended
September 30,		Nine Months Ended
September 30,
(Unaudited, in millions, except where otherwise stated)2022202120222021
Sales$280 $252 $816 $719 
Operating income (loss) (1)
$52 $16 $114 $(15)
EBITDA (2)
$62 $31 $143 $31 
(In thousands of metric tons)
Shipments327 364 1,020 1,124 
Downtime32 36 96 229 
September 30,
(Unaudited, in thousands of metric tons)20222021
Finished goods inventory74 72 
(1)Net income (loss) including noncontrolling interest is equal to operating income (loss) in this segment.
(2)EBITDA, a non-GAAP financial measure, is reconciled below. For more information on the calculation and reasons we include this measure, see note 1 under “Results of Operations – Consolidated Results – Selected financial information” above.
Three Months Ended
September 30,		Nine Months Ended
September 30,
(Unaudited, in millions)2022202120222021
Net income (loss) including noncontrolling interest
$52 $16 $114 $(15)
Depreciation and amortization10 15 29 46 
EBITDA$62 $31 $143 $31 
Industry trends
rfp-20220930_g12.jpg
North American newsprint demand fell by 8.4% in the first eight months of the year compared to the same period last year. Demand from newspaper publishers fell by 6.4% and demand from commercial printers fell by 11.4%. The North American shipment-to-capacity ratio was 90%, compared to 95% in the year-ago-period.
42
Global demand for newsprint fell by 2.6% in the first eight months of 2022, with North America, Western Europe, and Asia down by 8.4%, 0.7%, and 1.7%, respectively. The shipment-to-capacity ratio increased to 89%, up from 86% in the year-ago period.
North American demand for uncoated mechanical papers rose by 8.4% in the first eight months of 2022, compared to the year-ago period, reflecting a 6.7% increase in supercalendered grades, and a 9.8% increase in standard grades. The shipment-to-capacity ratio for all uncoated mechanical papers was 92%, compared to 91% in the year-ago period.
Three months ended September 30, 2022 vs. September 30, 2021
Operating income variance analysis
rfp-20220930_g13.jpg
Sales
Sales increased by $28 million, or 11%, to $280 million in the quarter. After adjusting for the effects of the indefinite idling of the Calhoun paper operations, volume, and the Canadian dollar fluctuation, pricing contributed to a $65 million increase in sales, due to higher prices across all paper grades reflecting a rise in the average transaction price of $167 per metric ton, or 24%.
Cost of sales, excluding depreciation, amortization and distribution costs
After adjusting for the effects of the indefinite idling of the Calhoun paper operations, and the weaker Canadian dollar, manufacturing costs increased by $30 million, largely reflecting:
•higher energy costs ($13 million) due to higher prices of power and natural gas;
•higher fiber costs ($5 million);
•higher chemical costs ($5 million) due to price increase; and
•unfavorable maintenance costs ($3 million) as a result of the scope of work.
Distribution costs
After removing the effect of volume, distribution costs increased by $11 million, mainly due to higher freight rates and limited flexibility of mode of transportation.
43
Depreciation and amortization
Depreciation and amortization was $5 million lower compared to the year-ago period, primarily due to fully depreciated assets and the decrease in depreciation related to the indefinite idling of the Calhoun pulp and paper operations, whose assets were fully impaired in the fourth quarter of 2021.
Nine months ended September 30, 2022 vs. September 30, 2021
Operating income (loss) variance analysis
rfp-20220930_g14.jpg
Sales
Sales rose by $97 million, or 13%, to $816 million in the first nine months of the year. After adjusting for the effects of the indefinite idling of the Calhoun paper operations and the Canadian dollar fluctuation, pricing contributed to a $189 million increase in sales, due to an increase in the average transaction price of $160 per metric ton, or 25%, due to higher prices across all paper grades and lower volume decreased sales by $4 million due to logistic constraints.
Cost of sales, excluding depreciation, amortization and distribution costs
Manufacturing costs increased by $66 million after adjusting for the effects of volume, the indefinite idling of the Calhoun paper operations, and the weaker Canadian dollar, largely reflecting:
•higher energy costs ($32 million) due to higher prices of power and natural gas, as well as lower internal power generation;
•higher chemical costs ($11 million), mainly due to higher prices;
•higher fiber costs ($11 million); and
•unfavorable maintenance costs ($10 million) as a result of the scope of work.
Distribution costs
After removing the impact of volume, including the favorable impact of the indefinite idling of the Calhoun paper operations, and the weaker Canadian dollar, distribution costs increased by $33 million, mainly due to higher freight rates and limited flexibility of mode of transportation.
44
Depreciation and amortization
Depreciation and amortization was $17 million lower compared to the year-ago period, primarily due to fully depreciated assets and the decrease in depreciation related to the indefinite idling of the Calhoun paper operations, whose assets were fully impaired in the fourth quarter of 2021.
45
Corporate and Other
Highlights
Three Months Ended
September 30,		Nine Months Ended
September 30,
(Unaudited, in millions)2022202120222021
Cost of sales, excluding depreciation, amortization and distribution costs
$(5)$(3)$(21)$(5)
Depreciation and amortization(4)(5)(10)(13)
Selling, general and administrative expenses(31)(7)(52)(32)
Closure costs, impairment and other related charges1 — (8)(2)
Net loss on disposition of assets— — (2)— 
Operating loss(39)(15)(93)(52)
Interest expense(5)(5)(16)(16)
Non-operating pension and other postretirement benefit (costs) credits
(3)3 (13)8 
Other income (expense), net
37 20 95 (74)
Income tax provision
(66)(40)(89)(167)
Net loss including noncontrolling interest
$(76)$(37)$(116)$(301)
The table below shows the reconciliation of net loss including noncontrolling interest to EBITDA and adjusted EBITDA, which are non-GAAP financial measures. For more information on the calculation and reasons we include these measures, see note 1 under “Results of Operations – Consolidated Results – Selected financial information” above.
Three Months Ended
September 30,		Nine Months Ended
September 30,
(Unaudited, in millions)2022202120222021
Net loss including noncontrolling interest
$(76)$(37)$(116)$(301)
Interest expense5 5 16 16 
Income tax provision66 40 89 167 
Depreciation and amortization4 5 10 13 
EBITDA(1)13 (1)(105)
Closure costs, impairment and other related charges(1)— 8 2 
Net loss on disposition of assets
— — 2 — 
Non-operating pension and other postretirement benefit costs (credits)
3 (3)13 (8)
Other (income) expense, net
(37)(20)(95)74 
Adjusted EBITDA$(36)$(10)$(73)$(37)
Three and nine months ended September 30, 2022 vs. September 30, 2021
Cost of sales, excluding depreciation, amortization and distribution costs
COS increased compared to the year-ago period principally due to asset preservation costs, mainly related to our indefinitely idled Calhoun pulp and paper operations.
46
LIQUIDITY AND CAPITAL RESOURCES
Capital Resources
We rely on cash and cash equivalents, cash flows provided by operations, and our credit facilities to: fund our operations; make pension contributions; and to finance our working capital, capital expenditures, duty cash deposits and opportunities in support of our growth and transformation strategy. In addition, from time to time we may use available cash to reduce debt and to return capital to stockholders, including through share repurchases or special dividends. As of September 30, 2022, we had cash and cash equivalents of $446 million and availability of $874 million under our credit facilities.
Based on our current projections, we expect to have sufficient financial resources available to finance our business plan, make pension contributions, meet working capital and duty cash deposit requirements, and maintain an appropriate level of capital spending.
Third Quarter and Year-to-Date Overview
Credit rating risk
CurrentDecember 31,
2021
Standard & Poor’s
Senior unsecured debt (1)
BB
Long-term corporate credit rating (1)
B+B+
Outlook (1)
CreditWatchStable
Moody’s Investors Service
Senior unsecured debt (1) (2)
B1B2
Corporate family rating (1) (2)
Ba3B1
Outlook (1)
Under ReviewStable
Liquidity ratingSGL-1SGL-1
(1)On July 7, 2022, following the announcement of the Transaction, Standard & Poor’s changed the Positive Outlook to CreditWatch with positive implications. Additionally, Moody’s changed the Stable Outlook to Under Review for downgrade.
(2)On April 6, 2022, Moody’s upgraded the senior unsecured debt to B1, and the corporate family rating was upgraded to Ba3.
Although our debt agreements do not include any provision that would require material changes in payment schedules or terminations as a result of a credit rating downgrade, we believe our access to capital markets at a reasonable cost is determined in part by credit quality. A credit rating downgrade could impact our ability to access capital markets at a reasonable cost. These ratings reflect the views of the rating agencies only. An explanation of the significance of these ratings can be obtained from each rating agency. The ratings are not a recommendation to buy, sell or hold securities. Any rating can be revised upward or downward or withdrawn at any time by a rating agency.
Senior Secured Credit Facility
The obligations under the Senior Secured Credit Facility (as defined in Note 10, “Long-Term Debt” to our Consolidated Financial Statements) are guaranteed by certain material U.S. subsidiaries of the Company and are secured by a first priority mortgage on the real property of the Company’s facility in Calhoun and a first priority security interest on the fixtures and equipment located therein. Following the indefinite idling of the Calhoun pulp and paper operations, the Company entered into agreements, on March 2, 2022, to provide the following additional security under the Senior Secured Credit Facility: (i) a first priority mortgage on the real property of the Company’s sawmill facilities in Glenwood and El Dorado (Arkansas) and a first priority security interest on the fixtures and equipment located therein, and (ii) a first priority security interest on the fixtures and equipment at the Company’s sawmill facility in Cross City (Florida).
47
Flow of Funds
Summary of cash flows
A summary of cash flows for the nine months ended September 30, 2022 and 2021, was as follows:
Nine Months Ended
September 30,
(Unaudited, in millions)20222021
Net cash provided by operating activities
$591 $580 
Net cash used in investing activities
(253)(204)
Net cash used in financing activities
(4)(375)
Effect of exchange rate changes on cash and cash equivalents, and restricted cash(7)(1)
Net increase in cash and cash equivalents, and restricted cash
$327 $— 
Nine months ended September 30, 2022 vs. September 30, 2021
Net cash provided by operating activities
We generated $591 million of cash from operating activities in the first nine months of 2022, compared to $580 million in the year-ago period. The increase is primarily driven by a decrease in planned major maintenance payments, as well as pension contributions, partly offset by lower profitability and an unfavorable working capital variance in the current period.
Net cash used in investing activities
We used $253 million of cash in investing activities in the current period, compared to $204 million in the year-ago period. The difference mostly reflects the acquisitions, net of cash acquired, of Larouche and St-Prime and of a power generation facility in Senneterre ($49 million).
Net cash used in financing activities
Net cash used in financing activities was $4 million in the first nine months of 2022, compared to $375 million in the year-ago period. The difference mostly reflects the repayment of the 5.875% senior unsecured notes due 2023 of $375 million partly offset by the issuance of the 4.875% senior unsecured notes due 2026 of $300 million, as well as the repayment of $180 million in term loans in the year-ago period. In addition, in the current year, we repurchased $2 million of shares, compared to the year-ago period when we repurchased $34 million, and paid a special dividend of $1 per share, or $79 million.
Outlook
While headwinds from inflationary pressure and rising interest rates influenced building materials demand and prices in the third quarter, we expect lumber prices to stabilize as the market finds supply-demand balance. The paper segment should continue to benefit from favorable prices. We expect market conditions to soften marginally in market pulp, while the temporary idling of the Menominee recycled pulp mill will result in lower shipments. With transportation challenges easing, we expect to continue to normalize inventory in wood products and paper segments.
Share Repurchase Program
On December 7, 2021, we announced a new share repurchase program, authorized by our board of directors, of up to ten million shares of our common stock or $100 million, whichever occurs first. We repurchased no shares during the three months ended September 30, 2022, and 125,482 shares at an average price of $11.34 for a total of $2 million during the nine months ended September 30, 2022.
On March 2, 2020, our board of directors authorized a share repurchase program of up to 15% of our common stock, for an aggregate consideration of up to $100 million. During the three and nine months ended September 30, 2021, we repurchased 1,248,251 shares at an average price of $10.95 for a total of $14 million and 3,340,599 shares at an average price of $10.22 for a total of $34 million, respectively. This share repurchase program was completed in December 2021.
48
Dividends
We did not declare or pay any dividends on our common stock during the three and nine months ended September 30, 2022. We declared a special dividend of $1.00 per share ($79 million) on our common stock during the nine months ended September 30, 2021. The dividend was paid to shareholders on July 7, 2021.
49

RESOLUTE FOREST PRODUCTS INC.
ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information relating to quantitative and qualitative disclosures about market risk is disclosed in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” in our 2021 Annual Report. There have been no material changes in our exposure to market risk as previously disclosed in our 2021 Annual Report.
ITEM 4.    CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures:
We have evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a–15(e) and 15d–15(e) of the Securities Exchange Act of 1934, as of September 30, 2022. Based on that evaluation, the President and Chief Executive Officer and the Senior Vice President and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of such date in recording, processing, summarizing and timely reporting information required to be disclosed in our reports to the SEC.
(b) Changes in Internal Control over Financial Reporting:
In connection with the evaluation of internal control over financial reporting, there were no changes during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
50

RESOLUTE FOREST PRODUCTS INC.
PART II.    OTHER INFORMATION
ITEM 1.    LEGAL PROCEEDINGS
In addition to the legal proceedings presented under Part I, Item 3, “Legal Proceedings,” in our 2021 Annual Report, see the description of our material pending legal proceedings in Note 13, “Commitments and Contingencies – Legal matters,” to our Consolidated Financial Statements, which is incorporated in this “Item 1 – Legal Proceedings” by reference.
ITEM 1A.    RISK FACTORS
In addition to the other information set forth in this Form 10-Q, you should carefully consider the risk factors set forth under Part I, Item 1A, “Risk Factors” in our 2021 Annual Report, which could materially affect our business, financial condition or future results. Except as stated below, there have been no material changes to the risk factors previously disclosed in our 2021 Annual Report.
The proposed business combination transaction of the Company with Paper Excellence Group, through its wholly-owned subsidiary Domtar Corporation (or, the “Transaction”), is subject to certain closing conditions that, if not satisfied or waived, will result in the Transaction not being completed, which may cause the market price of the Company’s common stock to decline.
The Transaction is subject to customary conditions to closing, including the receipt of required regulatory approvals and other customary closing conditions. If any condition to the Transaction is not satisfied or, if permissible, waived, the Transaction will not be completed. In addition, Domtar Corporation (or, “Domtar”) and the Company may terminate the Transaction in certain circumstances. If Domtar and the Company do not complete the Transaction, the market price of the Company’s common stock may fluctuate to the extent that the current market prices of those shares reflect a market assumption that the Transaction will be completed. The Company will also be obligated to pay certain fees and expenses in connection with the Transaction, whether or not the Transaction is completed. In addition, the Company has diverted significant management resources in an effort to complete the Transaction and is subject to restrictions contained in the merger agreement between the Company and Domtar on the conduct of its business. If the Transaction is not completed, the Company will have incurred significant costs, including the diversion of management resources, for which it will have received little or no benefit. Further, in specified circumstances, the Company may be required to pay Domtar a company termination fee of up to $40 million if the Transaction is terminated.
The announcement and pendency of the proposed Transaction may adversely affect our business, results of operations and financial condition.
Uncertainty about the effect of the proposed Transaction on our agents, customers, employees, and other parties may have an adverse effect on our business, results of operations and financial condition. These risks to our business include the following, among other factors, all of which could be exacerbated by a delay in the completion of the proposed Transaction:
•the impairment of our ability to attract, retain and motivate employees, including key personnel;
•the diversion of significant management time and resources toward the completion of the proposed Transaction that could otherwise have been devoted to pursuing other beneficial opportunities for the Company;
•difficulties maintaining relationships with agents, customers and other business partners;
•delays or deferments of certain business decisions by agents, customers and other business partners;
•the inability to pursue alternative business opportunities or make appropriate changes to our business because the merger agreement between the Company and Domtar requires us to, subject to certain exceptions, conduct our business in the ordinary course of business consistent with past practice and not engage in certain kinds of transactions prior to the completion of the proposed Transaction;
•any legal proceedings related to the proposed Transaction and the costs related thereto; and
•the incurrence of significant costs, expenses, and fees of professional services and other transaction costs in connection with the proposed Transaction.
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RESOLUTE FOREST PRODUCTS INC.
ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table sets forth information about our stock repurchases for the three months ended September 30, 2022:
PeriodTotal Number of Shares PurchasedAverage Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (1)
July 1 to July 31— $— — $98,576,675 
August 1 to August 31— — — 98,576,675 
September 1 to September 30— — — 98,576,675 
Total— $— — $98,576,675 
(1)2021 share repurchase program of up to ten million shares of our common stock or $100 million, whichever occurs first. For more information, see Note 14, “Share Capital,” to our Consolidated Financial Statements.
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RESOLUTE FOREST PRODUCTS INC.
ITEM 6.    EXHIBITS
Exhibit No. Description
Form of Resolute Forest Products 2019 Equity Incentive Plan Director Cash-Settled Deferred Stock Unit Agreement.
Form of Resolute Forest Products 2019 Equity Incentive Plan Director Cash-Settled Restricted Stock Unit Agreement.
Form of Resolute Forest Products 2019 Equity Incentive Plan Cash Settled Performance Stock Unit Agreement.
Form of Resolute Forest Products 2019 Equity Incentive Plan Director Cash-Settled Restricted Stock Unit Agreement.
Retention Agreement between Sylvain Girard and Resolute Forest Products Inc., dated September 20, 2022.
 Certification of President and Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 Certification of Senior Vice President and Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 Certification of President and Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 Certification of Senior Vice President and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS* XBRL Instance Document.
101.SCH* XBRL Taxonomy Extension Schema Document.
101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB* XBRL Taxonomy Extension Label Linkbase Document.
101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF* XBRL Taxonomy Extension Definition Linkbase Document.
†This is a management contract or compensatory plan or arrangement.
*Interactive data files furnished with this Form 10-Q, which represent the following materials from this Form 10-Q formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Operations, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Changes in Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to Unaudited Interim Consolidated Financial Statements. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document.
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RESOLUTE FOREST PRODUCTS INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
RESOLUTE FOREST PRODUCTS INC.
By /s/ Sylvain A. Girard
 Sylvain A. Girard
 Senior Vice President and Chief Financial Officer
By  /s/ Daniel Viboux
 Daniel Viboux
 Vice President and Chief Accounting Officer
Date: November 3, 2022
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