Resolute Forest Products 10Q 2021 Q3 Quarterly report

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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, 2021


			☐			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)


Delaware			98-0526415
(State or other jurisdiction of incorporation or organization)			(I.R.S. employer identification number)

111 Robert-Bourassa Boulevard

Suite 5000

Montreal

Quebec

Canada

H3C 2M1

(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 class	Trading Symbol	Name of exchange on which registered
Common Stock, par value $0.001 per share	RFP	New 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 29, 2021, there were 77,662,976 shares of Resolute Forest Products Inc. common stock, $0.001 par value, outstanding.

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RESOLUTE FOREST PRODUCTS INC.

TABLE OF CONTENTS


			Page Number
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements:

Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2021 and 2020			1

Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2021 and 2020			2

Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020			3

Consolidated Statements of Changes in Equity for the Three and Nine Months Ended September 30, 2021 and 2020			4

Consolidated Statements of Cash Flows for the Nine Months Ended Septemb er 30, 2021 and 2020			6

Notes to Unaudited Interim Consolidated Financial Statements			7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			20

Item 3. Quantitative and Qualitative Disclosures About Market Risk			46

Item 4. Controls and Procedures			46

PART II. OTHER INFORMATION

Item 1. Legal Proceedings			47

Item 1A. Risk Factors			47

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			47



Item 6. Exhibits			48

SIGNATURES			49

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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,
	2021		2020		2021		2020
Sales	$	817	$	730	$	2,830	$	2,031
Costs and expenses:
Cost of sales, excluding depreciation, amortization and distribution costs		554		475		1,642		1,463
Depreciation and amortization		42		43		123		125
Distribution costs		87		80		264		258
Selling, general and administrative expenses		32		35		114		101
Closure costs, impairment and other related charges		—		—		2		(2)
Net gain on disposition of assets		—		—		—		(9)
Operating income		102		97		685		95
Interest expense		(5)		(8)		(16)		(26)
Non-operating pension and other postretirement benefit credits		3		5		8		24
Other income (expense), net		20		(14)		(74)		24
Income before income taxes		120		80		603		117
Income tax provision		(40)		(23)		(167)		(55)
Net income including noncontrolling interest		80		57		436		62
Net income attributable to noncontrolling interest		—		—		(1)		—
Net income attributable to Resolute Forest Products Inc.	$	80	$	57	$	435	$	62
Net income per share attributable to Resolute Forest Products Inc. common shareholders:
Basic	$	1.00	$	0.66	$	5.44	$	0.71
Diluted	$	0.99	$	0.66	$	5.39	$	0.71
Weighted-average number of Resolute Forest Products Inc. common shares outstanding:
Basic		79.4		86.0		80.0		87.4
Diluted		80.1		86.2		80.8		87.6

See accompanying notes to unaudited interim Consolidated Financial Statements.

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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,
	2021		2020		2021		2020
Net income including noncontrolling interest	$	80	$	57	$	436	$	62
Other comprehensive income:
Unamortized prior service costs or credits
Change in unamortized prior service costs or credits		—		(1)		(3)		(17)
Income tax provision		—		—		—		—
Change in unamortized prior service costs or credits, net of tax		—		(1)		(3)		(17)
Unamortized actuarial losses
Change in unamortized actuarial losses		16		14		84		46
Income tax provision		(4)		(3)		(20)		(10)
Change in unamortized actuarial losses, net of tax		12		11		64		36
Foreign currency translation		—		1		—		—
Other comprehensive income, net of tax		12		11		61		19
Comprehensive income including noncontrolling interest		92		68		497		81




Comprehensive income attributable to noncontrolling interest		—		—		(1)		—
Comprehensive income attributable to Resolute Forest Products Inc.	$	92	$	68	$	496	$	81

See accompanying notes to unaudited interim Consolidated Financial Statements.

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RESOLUTE FOREST PRODUCTS INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited, in millions of U.S. dollars, except per share amount)


	September 30, 2021		December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	119	$	113
Accounts receivable, net:
Trade		279		230
Other		48		48
Inventories, net		509		462

Other current assets		68		47
Total current assets		1,023		900
Fixed assets, less accumulated depreciation of $1,720 and $1,604 as of September 30, 2021 and December 31, 2020, respectively		1,406		1,441
Amortizable intangible assets, less accumulated amortization of $37 and $33 as of September 30, 2021 and December 31, 2020, respectively		59		63
Goodwill		31		31
Deferred income tax assets		735		915
Operating lease right-of-use assets		58		60
Other assets		455		320
Total assets	$	3,767	$	3,730
Liabilities and equity
Current liabilities:
Accounts payable and other	$	437	$	369
Current portion of long-term debt		3		2
Current portion of operating lease liabilities		7		9

Total current liabilities		447		380
Long-term debt, net of current portion		300		559
Pension and other postretirement benefit obligations		1,415		1,562

Operating lease liabilities, net of current portion		55		55
Other liabilities		85		92
Total liabilities		2,302		2,648
Commitments and contingencies		0		0
Equity:
Resolute Forest Products Inc. shareholders’ equity:
Common stock, $0.001 par value. 121.0 million shares issued and 77.9 million shares outstanding as of September 30, 2021; 120.6 million shares issued and 80.8 million shares outstanding as of December 31, 2020		—		—
Additional paid-in capital		3,805		3,804
Deficit		(881)		(1,235)
Accumulated other comprehensive loss		(1,253)		(1,314)
Treasury stock at cost, 43.1 million shares and 39.8 million shares as of September 30, 2021 and December 31, 2020, respectively		(208)		(174)
Total Resolute Forest Products Inc. shareholders’ equity		1,463		1,081
Noncontrolling interest		2		1
Total equity		1,465		1,082
Total liabilities and equity	$	3,767	$	3,730

See accompanying notes to unaudited interim Consolidated Financial Statements.

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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		Deficit		Accumulated Other Comprehensive Loss		Treasury 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 12)		—		—		—		—		(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		Deficit		Accumulated Other Comprehensive Loss		Treasury 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 12)		—		—		—		—		(34)		—		(34)
Special dividend		—		2		(81)		—		—		—		(79)
Stock unit awards vested and stock options exercised (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

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RESOLUTE FOREST PRODUCTS INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited, in millions of U.S. dollars)


	Three Months Ended September 30, 2020
	Resolute Forest Products Inc. Shareholders’ Equity
	Common Stock		Additional Paid-In Capital		Deficit		Accumulated Other Comprehensive Loss		Treasury Stock		Non- controlling Interest		Total Equity
Balance as of June 30, 2020	$	—	$	3,805	$	(1,240)	$	(1,171)	$	(145)	$	1	$	1,250
Share-based compensation, net of withholding taxes		—		—		—		—		—		—		—
Net income		—		—		57		—		—		—		57
Purchases of treasury stock (4.5 million shares) (Note 12)		—		—		—		—		(18)		—		(18)

Other comprehensive income, net of tax		—		—		—		11		—		—		11
Balance as of September 30, 2020	$	—	$	3,805	$	(1,183)	$	(1,160)	$	(163)	$	1	$	1,300

	Nine Months Ended September 30, 2020
	Resolute Forest Products Inc. Shareholders’ Equity
	Common Stock		Additional Paid-In Capital		Deficit		Accumulated Other Comprehensive Loss		Treasury Stock		Non- controlling Interest		Total Equity
Balance as of December 31, 2019	$	—	$	3,802	$	(1,245)	$	(1,179)	$	(144)	$	1	$	1,235
Share-based compensation, net of withholding taxes		—		3		—		—		—		—		3
Net income		—		—		62		—		—		—		62
Purchases of treasury stock (4.8 million shares) (Note 12)		—		—		—		—		(19)		—		(19)
Stock unit awards vested (0.7 million shares), net of shares forfeited for employee withholding taxes		—		—		—		—		—		—		—
Other comprehensive income, net of tax		—		—		—		19		—		—		19
Balance as of September 30, 2020	$	—	$	3,805	$	(1,183)	$	(1,160)	$	(163)	$	1	$	1,300

See accompanying notes to unaudited interim Consolidated Financial Statements.

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RESOLUTE FOREST PRODUCTS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in millions of U.S. dollars)


	Nine Months Ended September 30,
	2021		2020
Cash flows from operating activities:
Net income including noncontrolling interest	$	436	$	62
Adjustments to reconcile net income including noncontrolling interest to net cash provided by operating activities:
Share-based compensation		3		4
Depreciation and amortization		123		125


Deferred income taxes		167		55
Net pension contributions and other postretirement benefit payments		(71)		(66)
Net gain on disposition of assets		—		(9)
(Gain) loss on translation of foreign currency denominated deferred income taxes		(7)		23
Loss (gain) on translation of foreign currency denominated pension and other postretirement benefit obligations		6		(28)


Net planned major maintenance payments		(15)		(2)

Changes in working capital:
Accounts receivable		(45)		20
Inventories		(48)		21
Other current assets		(11)		(21)
Accounts payable and other		34		(14)
Other, net		8		6
Net cash provided by operating activities		580		176
Cash flows from investing activities:
Cash invested in fixed assets		(79)		(53)
Acquisition of business, net of cash acquired		—		(172)
Disposition of assets		—		9

Increase in countervailing and anti-dumping duty cash deposits on softwood lumber		(128)		(52)



Proceeds from insurance settlement		—		15
Other investing activities, net		3		5
Net cash used in investing activities		(204)		(248)
Cash flows from financing activities:
Net repayments under revolving credit facilities		—		(71)
Issuance of long-term debt		300		—

Payment of special dividend		(79)		—
Proceeds from long-term debt		—		180
Repayments of debt		(557)		(1)
Purchases of treasury stock		(34)		(19)
Payments of financing fees		(7)		—
Other financing activities, net		2		—
Net cash (used in) provided by financing activities		(375)		89
Effect of exchange rate changes on cash and cash equivalents, and restricted cash		(1)		—
Net increase in cash and cash equivalents, and restricted cash	$	—	$	17
Cash and cash equivalents, and restricted cash:
Beginning of period	$	159	$	42
End of period	$	159	$	59
Cash and cash equivalents, and restricted cash at end of period:
Cash and cash equivalents	$	119	$	20

Restricted cash (included in “Other assets”)	$	40	$	39

See accompanying notes to unaudited interim Consolidated Financial Statements.

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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 50 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, 2021, 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, 2020, filed with the SEC on March 1, 2021. Certain prior period amounts in the notes to our Consolidated Financial Statements have been reclassified to conform to the 2021 presentation.

New accounting pronouncement adopted in 2021

ASU 2019-12 “Simplifying the Accounting for Income Taxes”

Effective January 1, 2021, we adopted ASU 2019-12, “Simplifying the Accounting for Income Taxes,” issued by the Financial Accounting Standards Board (or, “FASB”) in 2019, which removes the specific exceptions to the general principles in ASC 740, “Income Taxes,” and clarifies certain aspects of the existing guidance. The adoption of this accounting guidance did not impact our Consolidated Financial Statements and disclosures.

Accounting pronouncement not yet adopted as of September 30, 2021

ASU 2020-04 “Reference Rate Reform”

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform,” amended in January by ASU 2021-01, “Reference Rate Reform - Scope,” which provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. This update provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (or, the “LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. This update is effective as of March 12, 2020, through December 31, 2022. We are currently evaluating this accounting guidance and have not elected an adoption date. We do not expect this accounting guidance to materially impact our results of operations or financial position.

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RESOLUTE FOREST PRODUCTS INC.

Notes to Unaudited Interim Consolidated Financial Statements

Note 2. Other Income (Expense), Net

Other income (expense), net for the three and nine months ended September 30, 2021 and 2020, was comprised of the following:


	Three Months Ended September 30,				Nine Months Ended September 30,
(Unaudited, in millions)	2021		2020		2021		2020
Foreign exchange gain (loss)	$	12	$	(5)	$	1	$	9

Gain (loss) on commodity contracts (1)		1		(11)		(85)		(7)
Insurance recovery (2)		—		—		—		15
Miscellaneous income		7		2		10		7
	$	20	$	(14)	$	(74)	$	24

(1) Principally related to lumber futures contracts; none of these contracts were outstanding as of September 30, 2021.

(2) We recorded $15 million as other income for the nine months ended September 30, 2020, from the settlement of an insurance claim in connection with our acquisition of Atlas Paper Holdings, Inc. (or, “Atlas”) in 2015.

Note 3. 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, 2021 and 2020, was as follows:


(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 Costs		Unamortized Actuarial Losses		Foreign 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 (Quebec) mills triggered curtailment and remeasurement of the pension and other postretirement benefit (or, “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).

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RESOLUTE FOREST PRODUCTS INC.

Notes to Unaudited Interim Consolidated Financial Statements


(Unaudited, in millions)	Unamortized Prior Service Costs		Unamortized Actuarial Losses		Foreign Currency Translation		Total
Balance as of June 30, 2020	$	—	$	(1,164)	$	(7)	$	(1,171)
Other comprehensive income before reclassifications		—		—		1		1
Amounts reclassified from accumulated other comprehensive loss		(1)		11		—		10
Net current period other comprehensive (loss) income		(1)		11		1		11
Balance as of September 30, 2020	$	(1)	$	(1,153)	$	(6)	$	(1,160)

(Unaudited, in millions)	Unamortized Prior Service Credits (Costs)		Unamortized Actuarial Losses		Foreign Currency Translation		Total
Balance as of December 31, 2019	$	16	$	(1,189)	$	(6)	$	(1,179)

Amounts reclassified from accumulated other comprehensive loss		(17)		36		—		19
Net current period other comprehensive (loss) income		(17)		36		—		19
Balance as of September 30, 2020	$	(1)	$	(1,153)	$	(6)	$	(1,160)

The reclassifications out of accumulated other comprehensive loss for the three and nine months ended September 30, 2021 and 2020, were comprised of the following:


	Three Months Ended September 30,				Nine Months Ended September 30,
(Unaudited, in millions)	2021		2020		2021		2020		Affected Line in the Consolidated Statements of Operations
Unamortized Prior Service Costs or Credits
Amortization of prior service costs or credits	$	—	$	(1)	$	(2)	$	(3)	Non-operating pension and other postretirement benefit credits (1)
Curtailment gain		—		—		(1)		(14)	Non-operating pension and other postretirement benefit credits (1)
Income tax effect of the above		—		—		—		—	Income tax provision
Net of tax		—		(1)		(3)		(17)
Unamortized Actuarial Losses
Amortization of actuarial losses		16		14		54		43	Non-operating pension and other postretirement benefit credits (1)
Other items		—		—		—		3	Non-operating pension and other postretirement benefit credits (1)
Income tax effect of the above		(4)		(3)		(12)		(10)	Income tax provision
Net of tax		12		11		42		36
Total Reclassifications	$	12	$	10	$	39	$	19

(1)These items are included in the computation of net periodic benefit cost (credit) related to our pension and OPEB plans summarized in Note 9, “Employee Benefit Plans.”

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RESOLUTE FOREST PRODUCTS INC.

Notes to Unaudited Interim Consolidated Financial Statements

Note 4. Net Income Per Share

The reconciliation of the basic and diluted net income per share for the three and nine months ended September 30, 2021 and 2020, was as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
(Unaudited, in millions, except per share amounts)	2021		2020		2021		2020
Numerator:
Net income attributable to Resolute Forest Products Inc.	$	80	$	57	$	435	$	62
Denominator:
Weighted-average number of Resolute Forest Products Inc. common shares outstanding		79.4		86.0		80.0		87.4
Dilutive impact of nonvested stock unit awards and stock options		0.7		0.2		0.8		0.2
Diluted weighted-average number of Resolute Forest Products Inc. common shares outstanding		80.1		86.2		80.8		87.6
Net income per share attributable to Resolute Forest Products Inc. common shareholders:
Basic	$	1.00	$	0.66	$	5.44	$	0.71
Diluted	$	0.99	$	0.66	$	5.39	$	0.71

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, 2021 and 2020, was as follows:


	Three Months Ended September 30,		Nine Months Ended September 30,
(Unaudited, in millions)	2021	2020	2021	2020
Stock options	0.4	0.9	0.5	0.9
Stock unit awards	—	0.6	—	0.7

Note 5. Inventories, Net

Inventories, net as of September 30, 2021 and December 31, 2020, were comprised of the following:


(Unaudited, in millions)	September 30, 2021		December 31, 2020
Raw materials	$	145	$	132
Work in process		60		46
Finished goods		133		120
Mill stores and other supplies		171		164
	$	509	$	462

Note 6. Other Assets

Other assets include countervailing and anti-dumping duty cash deposits on softwood lumber of $315 million and $56 million, respectively, as of September 30, 2021, and of $194 million and $49 million, respectively, as of December 31, 2020. See Note 11, “Commitments and Contingencies” for more information.

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Notes to Unaudited Interim Consolidated Financial Statements

Note 7. Accounts Payable and Other

Accounts payable and other as of September 30, 2021 and December 31, 2020, were comprised of the following:


(Unaudited, in millions)	September 30, 2021		December 31, 2020
Trade accounts payable	$	296	$	251
Accrued compensation		73		76
Accrued interest		2		4
Pension and other postretirement benefit obligations		15		14

Accrued provision related to Fibrek Inc. litigation (Note 11)		21		—
Income and other taxes payable		4		5




Other		26		19
	$	437	$	369

Note 8. Long-Term Debt

Overview

Long-term debt, including current portion, as of September 30, 2021 and December 31, 2020, was comprised of the following:


(Unaudited, in millions)	September 30, 2021		December 31, 2020
4.875% senior unsecured notes due 2026:
Principal amount	$	300	$	—
Deferred financing costs		(6)		—
Total 4.875% senior unsecured notes due 2026		294		—
5.875% senior unsecured notes due 2023:
Principal amount		—		375
Deferred financing costs		—		(2)
Unamortized discount		—		(1)
Total 5.875% senior unsecured notes due 2023		—		372
Senior secured credit facility - Term loans due 2030		—		180


Finance lease obligations		7		9
Other debt		2		—
Total debt		303		561

Less: Current portion of finance lease obligations and other debt		(3)		(2)
Long-term debt, net of current portion	$	300	$	559

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 (or, the “Indenture”). 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 2026 Notes are guaranteed by current and future wholly-owned U.S. subsidiaries that guarantee the ABL Credit Facility and the Senior Secured Credit Facility (each, as defined and discussed below). The notes are unsecured and effectively junior to indebtedness under each of the ABL Credit Facility, the Senior Secured Credit Facility, the Loan Facility and future secured

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Notes to Unaudited Interim Consolidated Financial Statements

indebtedness to the extent of the value of the collateral that secures such indebtedness. In addition, the notes are structurally subordinated to all existing and future indebtedness (including the Loan Facility) and other liabilities of our subsidiaries that do not guarantee the notes, including all our non-U.S. subsidiaries.

The terms of the Indenture impose certain restrictions, subject to a number of exceptions and qualifications, including limits on our ability to: incur additional indebtedness or issue certain preferred shares; make dividend payments on or make other distributions in respect of our capital stock or make other restricted payments; make certain investments; sell certain assets; create liens on assets; consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; and enter into certain transactions with our affiliates.

In the event of specified change of control triggering events, we shall be required to offer to repurchase the 2026 Notes at 101% of the principal amount, plus accrued and unpaid interest.

On or after March 1, 2023, we may redeem the notes at our option, in whole at any time or in part from time to time, at redemption prices equal to a percentage of the principal amount plus accrued and unpaid interest, as follows:


Year (beginning March 1)	Redemption Price
2023	102.438	%
2024	101.219	%
2025 and thereafter	100.000	%

The fair value of the 2026 Notes (Level 1) was $308 million as of September 30, 2021.

2023 Notes

We issued $600 million in aggregate principal amount of 5.875% senior unsecured notes due 2023 (or, the “2023 Notes”) on May 8, 2013. Upon their issuance, the 2023 Notes were recorded at their fair value of $594 million, which reflected a discount of $6 million that was being amortized to “Interest expense” in our Consolidated Statements of Operations using the interest method over the term of the 2023 Notes, resulting in an effective interest rate of 6%. Interest on the 2023 Notes was payable semi-annually beginning November 15, 2013. In connection with the issuance of the 2023 Notes, we incurred financing costs of $9 million, which were deferred and recorded as a reduction of the 2023 Notes. Deferred financing costs were amortized to “Interest expense” in our Consolidated Statements of Operations using the interest method over the term of the 2023 Notes.

On January 3, 2019, we repurchased $225 million in aggregate principal amount of the 2023 Notes, pursuant to a notes purchase agreement entered into on December 21, 2018, with certain noteholders, at a purchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest.

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 2023 Notes to redeem all of the $375 million 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 $3 million in “Other income (expense), net” in our Consolidated Statement of Operations for the nine months ended September 30, 2021.

The fair value of the 2023 Notes (Level 1) was $375 million as of December 31, 2020.

Senior Secured Credit Facility

On October 28, 2019, we entered into an amended and restated senior secured credit facility for up to $360 million, which provided a term loan facility of up to $180 million and a revolving credit facility of up to $180 million with a maturity date of October 28, 2025, for the latter. In March 2020, we borrowed $180 million in term loans for ten years, maturing in March 2030.

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

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Notes to Unaudited Interim Consolidated Financial Statements

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 continue to be guaranteed by certain material U.S. subsidiaries of the Company and remain secured by first priority liens on assets of our Calhoun (Tennessee) facility. Interest rates under the Senior Secured Credit Facility are based, at the Company’s election, on either a floating rate based on the LIBOR, or a base rate, in each case plus a spread over the index. In addition, loans under the Term Loan Facility can bear interest at a fixed rate plus a spread. For loans under the Term Loan Facility, the applicable spread ranges from 0.5% to 1.4% for base rate loans, from 1.5% to 2.4% for LIBOR rate loans, and from 1.7% to 2.1% for fixed rate loans. For the Revolving Credit Facility, the applicable spread ranges from 0.5% to 1.0% for base rate loans, and from 1.5% to 2.0% for LIBOR rate loans. The amended credit agreement contains customary covenants, representations and warranties, and events of default.

As of September 30, 2021, we had $180 million of availability under the Term Loan Facility and $180 million of availability under the Revolving Credit Facility, which were undrawn. The fair values of the term loans (Level 2) approximated their carrying values and were bearing interest at LIBOR plus a spread of 2.13% as of December 31, 2020.

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. The amended credit agreement provides for an extension of the maturity date to May 14, 2024.

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.

As of September 30, 2021, we had $278 million of borrowing base availability under the ABL Credit Facility, which was undrawn except for $74 million of ordinary course letters of credit outstanding.

Loan Facility

On November 4, 2020, our Canadian subsidiary, Resolute FP Canada Inc., entered into a secured delayed draw term loan facility (or, the “Loan Facility”) with Investissement Québec as lender for up to C$220 million ($173 million as of September 30, 2021), subject to borrowing base availability based on 75% of the countervailing and anti-dumping duty deposits imposed by the U.S. Department of Commerce and collected by Customs and Border Protection Agency on U.S. imports of applicable softwood lumber products produced at sawmills of the Borrower and its affiliates located in the province of Quebec, Canada from April 28, 2017 to December 31, 2022. The Loan Facility will bear interest at a floating rate equal to 1.45% above the one month Canadian banker’s acceptance rate. The principal shall be repayable in monthly installments over a period of eight years after an interest only period of two years from the date of the first draw. The Loan Facility is subject to prepayment requirements under certain conditions and may be repaid earlier without premium or penalty, but subject to prepayment of accrued and unpaid interest. The Loan Facility provides for a maximum of 10 draws and the fulfillment of certain conditions upon each draw. Borrowings are subject to certain restrictions.

As of September 30, 2021, we had C$220 million ($173 million) of borrowing base availability under the Loan Facility, which was undrawn.

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Notes to Unaudited Interim Consolidated Financial Statements

Note 9. 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, 2021 and 2020, were as follows:

Pension Plans:


	Three Months Ended September 30,				Nine Months Ended September 30,
(Unaudited, in millions)	2021		2020		2021		2020
Interest cost	$	33	$	38	$	100	$	112
Expected return on plan assets		(53)		(57)		(162)		(168)
Amortization of actuarial losses		18		15		59		47
Amortization of prior service costs		1		—		1		—
Non-operating pension credits		(1)		(4)		(2)		(9)
Service cost		4		4		12		11
Net periodic benefit costs before special events		3		—		10		2
Other (gain) loss		—		—		(1)		3
	$	3	$	—	$	9	$	5

OPEB Plans:


	Three Months Ended September 30,				Nine Months Ended September 30,
(Unaudited, in millions)	2021		2020		2021		2020
Interest cost	$	1	$	1	$	3	$	3
Amortization of actuarial gains		(2)		(1)		(5)		(4)
Amortization of prior service credits		(1)		(1)		(3)		(3)
Non-operating other postretirement benefit credits		(2)		(1)		(5)		(4)
Service cost		1		(1)		1		—
Net periodic benefit credits before special events		(1)		(2)		(4)		(4)
Curtailment gain		—		—		—		(14)
	$	(1)	$	(2)	$	(4)	$	(18)

Defined contribution plans

Our expense for the defined contribution plans totaled $5 million and $4 million for the three months ended September 30, 2021 and 2020, respectively, and $14 million and $12 million for the nine months ended September 30, 2021 and 2020, respectively.

U.S. pension funding

The American Rescue Plan Act of 2021 includes provisions that allow for interest rate smoothing of pension funding deficits to minimize the impact of lower interest rates on liabilities. It also extends the amortization period for funding shortfalls from seven years to 15 years. We continue to estimate that the impact of the Act on our previously disclosed estimated contributions for 2021 will be a reduction of $13 million.

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Notes to Unaudited Interim Consolidated Financial Statements

Note 10. 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, 2021 and 2020, as a result of the following:


	Three Months Ended September 30,				Nine Months Ended September 30,
(Unaudited, in millions)	2021		2020		2021		2020
Income before income taxes	$	120	$	80	$	603	$	117
Income tax provision:
Expected income tax provision		(26)		(17)		(127)		(25)
Changes resulting from:

Valuation allowance on our U.S. operations		11		(5)		89		(21)


Foreign exchange		(5)		2		(2)		(8)
U.S. tax on non-U.S. earnings		(13)		(1)		(96)		(1)
State income taxes, net of federal income tax benefit		(1)		1		1		3
Foreign tax rate differences		(6)		(5)		(33)		(10)
Other, net (1)		—		2		1		7
	$	(40)	$	(23)	$	(167)	$	(55)

(1) Includes $4 million for the nine months ended September 30, 2020, related to the settlement of an insurance claim in connection with our acquisition of Atlas.

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 global intangible low-taxed income inclusion, which is based on the U.S. system of taxation for non-U.S. earnings, whereby foreign earnings less a qualified deduction for foreign assets are included in U.S. taxable income.

Note 11. 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 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, 2021, 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. 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 12 months.

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Notes to Unaudited Interim Consolidated Financial Statements

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 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, since December 1, 2020, we have been required to pay cash deposits to U.S. Customs at new rate of 19.10%. Commerce is expected to issue its final determination in the second administrative review of the countervailing investigation in November 2021, following which a new rate will take effect for Resolute; this new rate was estimated at 18.17% in a non-binding, preliminary determination issued on May 21, 2021, but is subject to modification in the upcoming final determination. During the nine months ended September 30, 2021, we made additional cash deposits of $121 million, bringing our total to $315 million.

Antidumping 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, since November 30, 2020, we have been required to pay cash deposits to U.S. Customs at a new rate of 1.15%. Commerce is expected to issue its final determination in the second administrative review of the anti-dumping investigation in November 2021, following which a new rate will take effect for Resolute; this new rate was estimated at 12.05% in a non-binding, preliminary determination issued on May 21, 2021, but is subject to modification in the upcoming final determination. During the nine months ended September 30, 2021, we made additional cash deposits of $7 million, bringing our total to $56 million.

Ongoing Administrative Reviews – Following Commerce’s completion of the Canadian softwood lumber investigation and first administrative review, two further administrative reviews remain pending. On March 10, 2020, Commerce published a notice initiating the second administrative review of the countervailing duty and anti-dumping orders on softwood lumber products from Canada. We were selected as a mandatory respondent for the second administrative review of the countervailing duty order and we have completed our answers to Commerce with the information requested. On March 4, 2021, Commerce published a notice initiating the third administrative review of the countervailing duty and anti-dumping orders on softwood lumber products from Canada. We were selected as a mandatory respondent for the third administrative review of the countervailing duty order and we have responded to Commerce with the information requested to date.

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 antidumping 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 the constitution of the Panel reviewing countervailing duties was announced on August 24, 2021; the hearing in this matter is scheduled to occur in March 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 antidumping first administrative reviews. Briefing for these appeals has also been completed; we are awaiting the constitution of the Panel in both instances.

ITC Injury Determination – In parallel, on December 28, 2017, the ITC published its affirmative final injury determinations in the antidumping 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

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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.

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 then 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). Of the total amount of C$44 million, C$19 million ($14 million) was payable immediately and paid on October 2, 2019. The remaining balance of C$27 million ($21 million) as of September 30, 2021 and C$26 million ($20 million) as of December 31, 2020, which includes accrued interest, is recorded in “Accounts payable and other” as of September 30, 2021, and in “Other liabilities” as of December 31, 2020, 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 expected to occur in the next 12 months.

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 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 ($118 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.

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 $13 million and $15 million recorded as of September 30, 2021 and December 31, 2020, respectively, primarily related to environmental remediation, assessment, monitoring and management related to closed or idled sites. The amount of these liabilities represents management’s estimate of the ultimate settlement based on an assessment of

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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 and $25 million recorded as of September 30, 2021 and December 31, 2020, respectively, 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 12. Share Capital

Treasury stock

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 1.2 million shares at an average price of $10.95 for a total of $14 million and 3.3 million shares at an average price of $10.22 for a total of $34 million, respectively. During the three and nine months ended September 30, 2020, we repurchased 4.5 million shares at an average price of $4.12 for a total of $18 million and 4.8 million shares at an average price of $4.01 for a total of $19 million, respectively.

Dividends

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 special dividend was paid to shareholders on July 7, 2021. We did not declare or pay any dividends on our common stock during the nine months ended September 30, 2020.

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 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 13. 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.”

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Information about certain segment data for the three and nine months ended September 30, 2021 and 2020, was as follows:


(Unaudited, in millions)	Market Pulp (1)		Tissue		Wood Products (2)		Paper		Segment Total		Corporate and Other		Total
Sales
Third quarter
2021	$	234	$	38	$	293	$	252	$	817	$	—	$	817
2020	$	161	$	39	$	322	$	208	$	730	$	—	$	730
First nine months
2021	$	609	$	115	$	1,387	$	719	$	2,830	$	—	$	2,830
2020	$	499	$	132	$	695	$	705	$	2,031	$	—	$	2,031
Depreciation and amortization
Third quarter
2021	$	6	$	5	$	11	$	15	$	37	$	5	$	42
2020	$	6	$	4	$	11	$	18	$	39	$	4	$	43
First nine months
2021	$	18	$	14	$	32	$	46	$	110	$	13	$	123
2020	$	18	$	13	$	32	$	51	$	114	$	11	$	125
Operating income (loss)
Third quarter
2021	$	46	$	(9)	$	64	$	16	$	117	$	(15)	$	102
2020	$	(4)	$	2	$	128	$	(12)	$	114	$	(17)	$	97
First nine months
2021	$	80	$	(18)	$	690	$	(15)	$	737	$	(52)	$	685
2020	$	3	$	2	$	148	$	(27)	$	126	$	(31)	$	95

(1)Inter-segment sales were $7 million and $8 million for the three months ended September 30, 2021 and 2020, respectively, and $22 million for the nine months ended September 30, 2021 and 2020. 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 joint ventures, which are transacted at arm’s length negotiated prices, were $22 million and $7 million for the three months ended September 30, 2021 and 2020, respectively, and $55 million and $17 million for the nine months ended September 30, 2021 and 2020, respectively.

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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 impact of the novel coronavirus (or, “COVID-19”) pandemic and resulting economic conditions on our business, results of operations and market price of our securities, and to our: efforts and initiatives to reduce costs, increase revenues, and improve 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; 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,” “see,” “anticipate,” “continue,” “attempt,” “project,” “progress,” “build,” “pursue,” “plan,” “grow,” “allow,” “look,” “enhance” 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, 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, such as our entry into wood manufacturing in the U.S., and tissue production and sales, 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 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; physical, financial and regulatory risks associated with global, regional, and local weather conditions, and climate change; 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; disruptions to our supply chain, operations, or the delivery of our products, including due to public health epidemics; disruptions to our information technology systems including 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; changes relating to the London Interbank Offered Rate (or, the “LIBOR”), which could impact our borrowings under our credit facilities; losses that are not covered by insurance; any shutdown of machines or facilities, restructuring of operations or sale of assets resulting in any additional closure costs and long-lived asset or goodwill impairment or accelerated depreciation charges; any need to record additional valuation allowances against our recorded deferred income tax assets; 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

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potential risks and uncertainties set forth under Part I, Item 1A, “Risk Factors,” of our annual report on Form 10-K for the year ended December 31, 2020, filed with the U.S. Securities and Exchange Commission (or, the “SEC”) on March 1, 2021 (or, the “2020 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 50 countries. The Company owns or operates some 40 facilities, as well as power generation assets, in the U.S. and Canada. We produce lumber in the U.S. and Canada, and we are the largest producer of wood products east of the Canadian Rockies, the largest producer of uncoated mechanical papers in North America, and a competitive pulp producer in North America. We are also a leading global producer of newsprint and an emerging tissue producer. 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 across these segments 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

–large-scale and cost-effective operations, including significant internal energy production from cogeneration and hydroelectric facilities, which support our value proposition;

–control over fiber transformation chain from standing timber to end-product for the majority of our offering;

–nearly 100% of our products sourced from high-quality virgin fiber;

–harvesting rights for the majority of fiber needs in Canada; and

–sophisticated logistics capabilities to meet demanding customer expectations.

•Solid balance sheet

–favorable pricing and flexibility under borrowing agreements together with our liquidity levels support our ability to weather challenging market cycles and to execute our transformation strategy;

–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

–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.

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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 2020 Annual Report.

Third Quarter Overview

Impact of the COVID-19 pandemic

We have sustained operations across all of our business segments through the COVID-19 pandemic, but we had to take certain measures in the face of the dramatic reduction in economic activity, particularly for marketing-dependent products like newspapers, inserts, flyers and commercial paper. In March 2021, the Company announced the indefinite idling of its Amos and Baie-Comeau (Quebec) paper mills, which had been temporarily idled since spring 2020, as a result of market conditions and the impacts of the pandemic, reducing the run-rate newsprint capacity by 25% (equivalent to 43,000 metric tons per month).

In addition, our operations were negatively affected by workforce availability and logistic constraints related to the pandemic, as well as by energy cost inflation related to the economic recovery.

Dividends

We declared a special dividend of $1.00 per share ($79 million) on our common stock in the previous quarter, which was recorded in “Accounts payable and other” in our Consolidated Balance Sheet as of June 30, 2021. The special dividend was paid to shareholders on July 7, 2021.

Three months ended September 30, 2021 vs. September 30, 2020

Our operating income was $102 million in the quarter, compared to an operating income of $97 million in the third quarter of 2020. Excluding special items, our operating income was $102 million, compared to an operating income of $97 million in the year-ago period.

Our net income in the quarter was $80 million, or $0.99 per diluted share, compared to a net income of $57 million, or $0.66 per diluted share, in the year-ago period. Our net income in the quarter, excluding special items, was $67 million, or $0.84 per diluted share, compared to a net income of $62 million, or $0.72 per share, in the year-ago period. Special items are described below.


Three Months Ended September 30, 2021	Operating Income		Net Income		EPS
(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


Three Months Ended September 30, 2020	Operating Income		Net Income		EPS
(Unaudited, in millions, except per share amounts)
GAAP, as reported	$	97	$	57	$	0.66
Adjustments for special items:





Non-operating pension and other postretirement benefit credits		—		(5)		(0.06)


Other expense, net		—		14		0.17

Income tax effect of special items		—		(4)		(0.05)
Adjusted for special items (1)	$	97	$	62	$	0.72

(1)Operating income (loss), net income (loss) and net income (loss) per 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 (loss), as adjusted for special items, as operating income (loss) from our

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Consolidated Statements of Operations, adjusted for items such as closure costs, impairment, and other related charges, and gains and losses on disposition of assets that are excluded from our segment’s performance from GAAP operating income (loss). We calculate net income (loss), as adjusted for special items, as net income (loss) from our Consolidated Statements of Operations, adjusted for the same special items applied to operating income (loss), in addition to non-operating pension and other postretirement benefit (or, “OPEB”) costs and credits, other income and expense, net, and the income tax effect of the special items. EPS, as adjusted for special items, is calculated as net income (loss), 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 (loss), net income (loss) 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, 2021 vs. September 30, 2020

Our operating income was $685 million in the first nine months of the year, compared to operating income of $95 million in the year-ago period. Excluding special items, our operating income was $687 million, compared to operating income of $84 million in the year-ago period. Special items are described below.

Our net income in the first nine months of the year was $435 million, or $5.39 per diluted share, compared to net income of $62 million, or $0.71 per diluted share, in the year-ago period. Our net income in the period, excluding special items, was $486 million, or $6.01 per diluted share, compared to net income of $11 million, or $0.13 per share, in the year-ago period.


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 charges		2		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


Nine Months Ended September 30, 2020	Operating Income		Net Income		EPS
(Unaudited, in millions, except per share amounts)
GAAP, as reported	$	95	$	62	$	0.71
Adjustments for special items:

Closure costs, impairment and other related charges		(2)		(2)		(0.02)


Net gain on disposition of assets		(9)		(9)		(0.10)
Non-operating pension and other postretirement benefit credits		—		(24)		(0.27)


Other income, net		—		(24)		(0.27)

Income tax effect of special items		—		8		0.08
Adjusted for special items (1)	$	84	$	11	$	0.13

(1) Operating income (loss), net income (loss) 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 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)	2021		2020		2021		2020
Sales	$	817	$	730	$	2,830	$	2,031
Operating income (loss) per segment:
Market pulp	$	46	$	(4)	$	80	$	3
Tissue		(9)		2		(18)		2
Wood products		64		128		690		148
Paper		16		(12)		(15)		(27)
Segment total		117		114		737		126
Corporate and other		(15)		(17)		(52)		(31)
Operating income	$	102	$	97	$	685	$	95
Net income attributable to Resolute Forest Products Inc.	$	80	$	57	$	435	$	62
Net income per common share attributable to Resolute Forest Products Inc. common shareholders:
Basic	$	1.00	$	0.66	$	5.44	$	0.71
Diluted	$	0.99	$	0.66	$	5.39	$	0.71
Adjusted EBITDA (1)	$	144	$	140	$	810	$	209


(Unaudited, in millions)	September 30, 2021		December 31, 2020
Cash and cash equivalents	$	119	$	113
Total assets	$	3,767	$	3,730

(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)	2021		2020		2021		2020
Net income including noncontrolling interest	$	80	$	57	$	436	$	62
Interest expense		5		8		16		26
Income tax provision		40		23		167		55
Depreciation and amortization		42		43		123		125
EBITDA	$	167	$	131	$	742	$	268

Closure costs, impairment and other related charges		—		—		2		(2)


Net gain on disposition of assets		—		—		—		(9)
Non-operating pension and other postretirement benefit credits		(3)		(5)		(8)		(24)


Other (income) expense, net		(20)		14		74		(24)
Adjusted EBITDA	$	144	$	140	$	810	$	209

Three months ended September 30, 2021 vs. September 30, 2020

Operating income variance analysis

Sales

Sales increased by $87 million compared to the year-ago period, to $817 million. Pricing had a favorable impact of $82 million, mainly as a result of an increase in the average transaction price for market pulp and paper, up by 39%, and 16% respectively, partly offset by lower average transaction price for tissue and wood products, down by 9% and 5%, respectively. Higher volume increased sales by $4 million, mainly reflecting higher shipments of paper, market pulp and tissue, partly offset by lower shipments of wood products.

Cost of sales, excluding depreciation, amortization and distribution costs

Cost of sales, excluding depreciation, amortization and distribution costs (or, “COS”) increased by $79 million compared to the year-ago period. After removing the effects of higher volume and the stronger Canadian dollar, COS increased by $55 million, largely reflecting:

•higher fiber costs ($27 million), mainly reflecting an increase in stumpage costs related to higher lumber sale prices, and in harvesting costs for the wood products segment;

•higher energy prices ($13 million) due to inflation; and

•unfavorable maintenance costs ($8 million) as a result of the timing of scheduled outages and the scope of maintenance work, partly offset by the indefinite idling of the Amos and Baie-Comeau paper mills.

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Distribution costs

After removing the effect of the stronger Canadian dollar, distribution costs increased by $6 million, mainly due to higher freight rates.

Selling, general and administrative expenses

Selling, general and administrative (or, “SG&A”) expenses decreased by $3 million in the quarter compared to the same period last year, mainly due to lower stock-based compensation expense.

Net gain on disposition of assets

See the corresponding variance analysis under “Corporate and Other” below.

Net income variance analysis

Non-operating pension and other postretirement benefit credits

We recorded non-operating pension and OPEB credits of $3 million in the quarter, compared to $5 million in the year-ago period. The difference reflects: lower expected return on plan asset ($4 million) in the current period and higher amortization of actuarial losses ($2 million); partly offset by lower interest cost ($5 million) in the current period.

Other income (expense), net

We recorded other income, net of $20 million in the quarter, compared to other expense, net of $14 million in the year-ago period. The difference mainly reflects a foreign exchange gain of $12 million in the current period, compared to a loss on commodity contracts of $11 million, principally related to lumber futures contracts, and a foreign exchange loss of $5 million in the year-ago period. There were no lumber futures contracts outstanding as of September 30, 2021.

Interest expense

Interest expense was $3 million lower in the quarter compared to the year-ago period, as a result of the refinancing of the 2023 Notes at a lower interest rate and debt level.

Income taxes

We recorded an income tax provision of $40 million in the quarter 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 recognize a full valuation allowance against our net deferred income tax assets.

The $11 million decrease in our valuation allowance for the three months ended September 30, 2021, is to offset the tax implications relating to the global intangible low-taxed income (or, “GILTI”) inclusion, which is based on the U.S. system of taxation for non-U.S. earnings, whereby foreign earnings less a qualified deduction for foreign assets are included in U.S. taxable income.

In the third quarter of 2020, we recorded an income tax provision of $23 million, on income before income taxes of $80 million, compared to an expected income tax provision of $17 million, based on the U.S. federal statutory income tax rate of 21%. The difference mainly reflects: an increase to our valuation allowance related to our U.S. operations ($5 million), where we recognize a full valuation allowance against our net deferred income tax assets, and foreign tax rate differences ($5 million); partly offset by foreign exchange items ($2 million).

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Nine months ended September 30, 2021 vs. September 30, 2020

Operating income variance analysis

Sales

Sales increased by $799 million compared to the year-ago period, to $2,830 million. Pricing had a favorable impact of $835 million, mainly as a result of an increase in the average transaction price for wood products, market pulp, and paper up by 90%, 26% and 7% respectively. Lower volume reduced sales by $41 million, mainly reflecting lower shipments in paper ($35 million), market pulp ($15 million) and tissue ($15 million), partly offset by higher shipments of wood products ($24 million).

Cost of sales, excluding depreciation, amortization and distribution costs

COS increased by $179 million in the period to $1,642 million. After removing the effects of lower volume and the stronger Canadian dollar, COS increased by $144 million, largely reflecting:

•higher fiber costs ($67 million), mainly reflecting an increase in stumpage costs related to higher lumber sale prices, and in harvesting costs for the wood products segment, partly offset by lower chip costs in the market pulp and paper segment;

•unfavorable maintenance costs ($23 million) as a result of the timing of scheduled outages and the scope of maintenance work, partly offset by the indefinite idling of the Amos and Baie-Comeau paper mills;

•higher energy prices ($25 million) due to inflation;

•higher expenses related to a process improvement project ($12 million); and

•higher labor expense ($7 million), mainly due to higher compensation expense, partly offset by the indefinite idling of the Amos and Baie-Comeau paper mills.

Distribution costs

After removing the effect of lower volume and the stronger Canadian dollar, distribution costs increased by $6 million, mainly due to higher freight rates.

Selling, general and administrative expenses

SG&A expenses increased by $13 million in the first nine months of 2021, compared to the same period last year, mainly due to higher incentive plan expense, which is based on company performance, and higher stock-based compensation expense, partly offset by lower corporate expenses.

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Closure costs, impairment and other related charges

In the first nine months of 2021, we recorded closure costs, impairment and other related charges of $2 million, related to the

indefinite idling of our Amos and Baie-Comeau paper mills. This compares to the reversal of $2 million of closure costs, impairment and other related charges in the year-ago period, related to the indefinite idling of our paper mill at Augusta (Georgia).

Net gain on disposition of assets

See the corresponding variance analysis under “Corporate and Other” below.

Net income variance analysis

Non-operating pension and other postretirement benefit credits

We recorded non-operating pension and OPEB credits of $8 million in the first nine months of 2021, compared to $24 million in the year-ago period. The difference mainly reflects: an OPEB curtailment credit related to the indefinite idling of our Augusta mill in the prior period ($14 million); higher amortization of actuarial losses ($11 million) and lower expected return on plan assets ($6 million) in the current period; partly offset by lower interest cost ($12 million) and a pension special termination benefit cost related to the indefinite idling of our Augusta mill in the prior period ($3 million).

Interest expense

Interest expense was $10 million lower in the first nine months compared to the year-ago period, as a result of the refinancing of the 2023 Notes at a lower interest rate and debt level.

Other income (expense), net

We recorded other expense, net of $74 million in the first nine months of 2021, compared to other income, net of $24 million in the year-ago period. The difference mainly reflects a loss on commodity contracts of $85 million principally related to lumber futures contracts, compared to a favorable insurance claim settlement of $15 million related to our acquisition of Atlas in 2015, a foreign exchange gain of $9 million, and a loss on commodity contracts of $7 million in the year-ago period. There were no lumber futures contracts outstanding as of September 30, 2021.

Income taxes

We recorded an income tax provision of $167 million in the period, 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); and 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 recognize a full valuation allowance against our net deferred income tax assets.

The $89 million net decrease in our valuation allowance for the nine months ended September 30, 2021, is to offset the tax implications relating to the GILTI inclusion, which is based on the U.S. system of taxation for non-U.S. earnings, whereby foreign earnings less a qualified deduction for foreign assets are included in U.S. taxable income.

In the first nine months of 2020, we recorded an income tax provision of $55 million, on income before income taxes of $117 million, compared to an expected income tax provision of $25 million based on the U.S. federal statutory income tax rate of 21%. The difference mainly reflects: an increase to our valuation allowance related to our U.S. operations ($21 million) where we recognize a valuation allowance against virtually all of our net deferred income tax assets; foreign exchange items ($8 million); and state and foreign tax rate differences ($7 million); partially offset by other items ($7 million), mainly related to the settlement of an insurance claim in connection with our acquisition of Atlas.

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.

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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.”

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MARKET PULP

Highlights


	Three Months Ended September 30,				Nine Months Ended September 30,
(Unaudited, in millions, except where otherwise stated)	2021		2020		2021		2020
Sales	$	234	$	161	$	609	$	499
Operating income (loss) (1)	$	46	$	(4)	$	80	$	3
EBITDA (2)	$	52	$	2	$	98	$	21
(In thousands of metric tons)
Shipments		283		273		808		834
Downtime		28		42		76		75


	September 30,
(Unaudited, in thousands of metric tons)	2021		2020
Finished goods inventory		52		71

(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)	2021		2020		2021		2020
Net income (loss) including noncontrolling interest	$	46	$	(4)	$	80	$	3
Depreciation and amortization		6		6		18		18
EBITDA	$	52	$	2	$	98	$	21

Industry trends

World demand for chemical pulp decreased by 2.8% in the first eight months of 2021 compared to the year-ago period, reflecting a decrease in China and North America of 6.5% and 0.8%, respectively, while Western Europe increased by 3.2%. World capacity decreased by 0.3% compared to the year-ago period.

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World demand for softwood pulp fell by 3.0% in the first eight months of 2021, with a decrease of 4.4% and 3.1% in North America and China, respectively, while Western Europe increased by 1.7%. The shipment-to-capacity ratio was 88%.

In the same period, world demand for hardwood pulp fell by 4.5%, with shipments to China down by 10.2%, while shipments to Western Europe and North America were up by 3.6% and 1.7%, respectively. The shipment-to-capacity ratio was 89%.

Three months ended September 30, 2021 vs. September 30, 2020

Operating income (loss) variance analysis

Sales

Sales were $73 million higher, or 45%, in the quarter to $234 million. Pricing contributed to a $66 million increase in sales, reflecting an increase in the average transaction price of $233 per metric ton, or 39%, due to a price increase across all pulp grades. Higher volume increased sales by $7 million, mainly due to an increase in shipments of 10,000 metric tons, or 4%, mainly reflecting recovery from the lower demand levels since the onset of the pandemic.

Cost of sales, excluding depreciation, amortization and distribution costs

COS increased by $19 million compared to the year-ago period. After removing the effects of higher volume and the stronger Canadian dollar, COS increased by $9 million, largely reflecting higher energy prices due to inflation ($5 million) and unfavorable maintenance costs ($2 million) as a result of the timing of scheduled outages.

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Nine months ended September 30, 2021 vs. September 30, 2020

Operating income variance analysis

Sales

Sales were $110 million higher, or 22%, to $609 million in the first nine months of the year. Pricing had a favorable impact of $125 million, reflecting an increase in the average transaction price of $155 per metric ton, or 26%, due to a price increase across all pulp grades. Lower volume reduced sales by $15 million, mainly reflecting lower shipments of 26,000 metric tons, or 3%, due to production inconsistencies.

Cost of sales, excluding depreciation, amortization and distribution costs

After adjusting for the effects of lower volume and the stronger Canadian dollar, manufacturing costs increased by $19 million, reflecting:

•higher energy prices ($13 million) due to inflation;

•unfavorable maintenance costs ($6 million) as a result of the timing of scheduled outages and the scope of maintenance work; and

•higher expenses related to a process improvement project ($5 million);

partly offset by lower chip costs ($7 million).

Distribution costs

After removing the effect of lower volume and the stronger Canadian dollar, distribution costs increased by $3 million mainly due to higher freight rates.

Selling, general and administrative expenses

SG&A expenses increased by $4 million in the first nine months of 2021, compared to the same period last year, mainly due to higher incentive plan expense, which is based on company performance, and higher stock-based compensation expense, partly offset by lower corporate expenses.

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TISSUE

Highlights


	Three Months Ended September 30,				Nine Months Ended September 30,
(Unaudited, in millions, except where otherwise stated)	2021		2020		2021		2020
Sales	$	38	$	39	$	115	$	132
Operating (loss) income (1)	$	(9)	$	2	$	(18)	$	2
EBITDA (2)	$	(4)	$	6	$	(4)	$	15
(In thousands of short tons)
Shipments (3)		23		21		65		73
Downtime		3		2		10		4


	September 30,
(Unaudited, in thousands of short tons)	2021		2020
Finished goods inventory (3)		6		6

(1)Net (loss) income including noncontrolling interest is equal to operating (loss) income in this segment.

(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)	2021		2020		2021		2020
Net (loss) income including noncontrolling interest	$	(9)	$	2	$	(18)	$	2
Depreciation and amortization		5		4		14		13
EBITDA	$	(4)	$	6	$	(4)	$	15

Industry trends

Total U.S. tissue consumption fell by 8.5% in the first nine months of 2021, compared to the year-ago period. Converted product shipments decreased by 5.7%, where at-home shipments decreased by 9.7%, and away-from-home shipments increased by 4.5%.

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U.S. parent roll production fell by 6.4% in the first nine months of 2021, and the average industry production-to-capacity ratio decreased to 91%, down from 97% in the year-ago period.

Three months ended September 30, 2021 vs. September 30, 2020

Operating (loss) income variance analysis

Sales

Sales were $1 million lower, or 3%, to $38 million in the quarter, mainly due to a decrease in pricing of $172 per short ton, or 9%, due to an unfavorable product mix, partly offset by an increase in shipments by 2,000 short tons, or 10%.

Cost of sales, excluding depreciation, amortization and distribution costs

After removing the effect of higher volume, our manufacturing costs increased by $7 million compared to the year-ago period, mainly related to:

•reduced workforce availability and logistic constraints, which challenged our ability to scale production and resulted in higher manufacturing overhead ($3 million), especially for the ramp-up of our Hagerstown (Maryland) converting facility acquired in the fourth quarter of 2020; and

•higher fiber costs ($2 million).

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Nine months ended September 30, 2021 vs. September 30, 2020

Operating (loss) income variance analysis

Sales

Sales were $17 million lower, or 13%, to $115 million in the first nine months of the year, mainly due to a decrease in shipments of 8,000 short tons, principally in away-from-home products due to the ongoing pandemic, and an unfavorable product mix.

Cost of sales, excluding depreciation, amortization and distribution costs

After removing the effect of lower volume, our manufacturing costs increased by $13 million compared to the year-ago period, mainly related to:

•reduced workforce availability and logistic constraints, which challenged our ability to scale production and resulted in higher manufacturing overhead ($7 million), especially for the ramp-up of our Hagerstown converting facility acquired in the fourth quarter of 2020; and

•higher fiber costs ($3 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)	2021		2020		2021		2020
Sales	$	293	$	322	$	1,387	$	695
Operating income (1)	$	64	$	128	$	690	$	148
EBITDA (2)	$	75	$	139	$	722	$	180
(In millions board feet)
Shipments (3)		511		537		1,578		1,501
Downtime		47		56		112		224


	September 30,
(Unaudited, in millions board feet)	2021		2020
Finished goods inventory (3)		129		121

(1)Net income including noncontrolling interest is equal to operating income in this segment.

(3)Includes wood pellets measured by mass, converted to board feet using a density-based conversion ratio.


	Three Months Ended September 30,				Nine Months Ended September 30,
(Unaudited, in millions)	2021		2020		2021		2020
Net income including noncontrolling interest	$	64	$	128	$	690	$	148
Depreciation and amortization		11		11		32		32
EBITDA	$	75	$	139	$	722	$	180

Industry trends

U.S. housing starts were 1.6 million on a seasonally adjusted basis in the first nine months of 2021, up 18.5% from the same period last year, which reflects a 19.9% increase in single-family starts and an increase of 15.6% in multi-family starts.

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2x4 – Random Length (or “RL”) #1-2 Kiln Dried Great Lakes (or “KD GL”) price rose by 75.5% in the first nine months of 2021 compared to the year ago period, and the 2x4x8 Stud KD GL price rose by 75.0%. The 2x4 – RL #2 KD Southern Pine (Eastside) price increased by 64.4%, and the 2x4 – RL #2 KD Southern Pine (Westside) price was up by 77.1%.

Three months ended September 30, 2021 vs. September 30, 2020

Operating income variance analysis

Sales

Sales were $29 million lower, or 9%, to $293 million in the quarter, reflecting softer lumber market conditions. Volume decreased sales by $15 million due to a decrease in shipments of 26 million board feet, or 5%. Pricing contributed to a $14 million decrease in sales, reflecting a decrease of the average transaction price of $27 per thousand board feet, or 5%.

Cost of sales, excluding depreciation, amortization and distribution costs

After removing the COS related to the lower volume and the effect of the Canadian dollar, manufacturing costs increased by $37 million, reflecting:

•higher log costs ($29 million) primarily due to an increase in stumpage costs related to higher lumber sale prices, and in harvesting costs; and

•unfavorable maintenance costs ($6 million) as a result of the scope of maintenance work.

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Nine months ended September 30, 2021 vs. September 30, 2020

Operating income variance analysis

Sales

Sales were $692 million higher, or 100%, to $1,387 million in the first nine months of the year, due to stronger market conditions. Pricing contributed to a $668 million increase in sales, reflecting a rise in the average transaction price of $416 per thousand board feet, or 90%, and volume increased sales by $24 million due to an increase in shipments of 77 million board feet, or 5%, reflecting new volume from the restart in the first quarter of 2021 of the El Dorado (Arkansas) and Ignace (Ontario) sawmills.

Cost of sales, excluding depreciation, amortization and distribution costs

After adjusting for the effect of higher volume and the stronger Canadian dollar, manufacturing costs increased by $103 million, reflecting:

•higher log costs ($83 million), primarily reflecting an increase in stumpage costs related to higher lumber sale prices, and in harvesting costs;

•unfavorable maintenance costs ($13 million) as a result of the scope of maintenance work; and

•higher labor expense ($5 million), mainly due to higher compensation expense.

Selling, general and administrative expenses

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PAPER

Highlights


	Three Months Ended September 30,				Nine Months Ended September 30,
(Unaudited, in millions, except where otherwise stated)	2021		2020		2021		2020
Sales	$	252	$	208	$	719	$	705
Operating income (loss) (1)	$	16	$	(12)	$	(15)	$	(27)
EBITDA (2)	$	31	$	6	$	31	$	24
(In thousands of metric tons)
Shipments		364		351		1,124		1,183
Downtime		36		171		229		371


	September 30,
(Unaudited, in thousands of metric tons)	2021		2020
Finished goods inventory		72		124

(1)Net income (loss) including noncontrolling interest is equal to operating income (loss) in this segment.


	Three Months Ended September 30,				Nine Months Ended September 30,
(Unaudited, in millions)	2021		2020		2021		2020
Net income (loss) including noncontrolling interest	$	16	$	(12)	$	(15)	$	(27)
Depreciation and amortization		15		18		46		51
EBITDA	$	31	$	6	$	31	$	24

Industry trends

North American newsprint demand fell by 5.2% in the first nine months of the year compared to the same period last year. Demand from newspaper publishers fell by 11.5%, while demand from commercial printers increased by 4.6%. The North American shipment-to-capacity ratio was 94%, compared to 82% in the year-ago-period.

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Global demand for newsprint fell by 6.5% in the first nine months of 2021, with North America down by 5.2%, Western Europe down by 2.4%, and Asia down by 10.1%. The shipment-to-capacity ratio increased to 87%, up from 76% in the year-ago period.

North American demand for uncoated mechanical papers rose by 3.6% in the first nine months of 2021, compared to the year-ago period, reflecting a 1.2% increase in supercalendered grades, and a 5.7% increase in standard grades. The shipment-to-capacity ratio for all uncoated mechanical papers increased to 88%, compared to 73% in the year-ago period.

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Three months ended September 30, 2021 vs. September 30, 2020

Operating income (loss) variance analysis

Sales

Sales increased by $44 million, or 21%, to $252 million in the quarter. Pricing contributed to a $33 million increase in sales, reflecting a rise in the average transaction price of $95 per metric ton, or 16%, due to a price increase across all paper grades. Higher volume increased sales by $10 million, mainly due to an increase in shipments of 13,000 metric tons, or 4%, principally reflecting a recovery from lower demand levels since the onset of the pandemic.

Cost of sales, excluding depreciation, amortization and distribution costs

After adjusting for the effects of higher volume and the stronger Canadian dollar, manufacturing costs increased by $2 million, reflecting higher energy prices ($8 million) due to inflation, partly offset by lower chip costs ($4 million).

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Nine months ended September 30, 2021 vs. September 30, 2020

Operating loss variance analysis

Sales

Sales increased by $14 million, or 2%, to $719 million in the first nine months of the year. Pricing contributed to a $44 million increase in sales, reflecting a rise in the average transaction price of $44 per metric ton, or 7%, and supported by a favorable product mix. Lower volume decreased sales by $35 million, due to a decrease in shipments of 59,000 metric tons, or 5%, mainly reflecting lower demand levels since the onset of the pandemic and our resulting capacity adjustments.

Cost of sales, excluding depreciation, amortization and distribution costs

Manufacturing costs increased by $11 million after adjusting for the effects of lower volume and the stronger Canadian dollar, reflecting:

•higher energy prices ($12 million) due to inflation;

•higher expenses related to a process improvement project ($5 million);

•unfavorable maintenance costs ($3 million) as a result of the timing of scheduled outages and the scope of maintenance work, partly offset by the indefinite idling of the Amos and Baie-Comeau paper mills;

partly offset by lower chip costs ($12 million).

Depreciation and amortization

Depreciation and amortization was $5 million lower in the first nine months of the year, reflecting the accelerated depreciation charges taken in the fourth quarter of 2020 due to the temporary idling of the Amos and Baie-Comeau paper mills. The mills were indefinitely idled in March 2021.

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Corporate and Other

Highlights


	Three Months Ended September 30,				Nine Months Ended September 30,
(Unaudited, in millions)	2021		2020		2021		2020
Cost of sales, excluding depreciation, amortization and distribution costs	$	(3)	$	(2)	$	(5)	$	(6)
Depreciation and amortization		(5)		(4)		(13)		(11)
Selling, general and administrative expenses		(7)		(11)		(32)		(25)
Closure costs, impairment and other related charges		—		—		(2)		2
Net gain on disposition of assets		—		—		—		9
Operating loss		(15)		(17)		(52)		(31)
Interest expense		(5)		(8)		(16)		(26)
Non-operating pension and other postretirement benefit credits		3		5		8		24
Other income (expense), net		20		(14)		(74)		24
Income tax provision		(40)		(23)		(167)		(55)
Net loss including noncontrolling interest	$	(37)	$	(57)	$	(301)	$	(64)

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)	2021		2020		2021		2020
Net loss including noncontrolling interest	$	(37)	$	(57)	$	(301)	$	(64)
Interest expense		5		8		16		26
Income tax provision		40		23		167		55
Depreciation and amortization		5		4		13		11
EBITDA		13		(22)		(105)		28

Closure costs, impairment and other related charges		—		—		2		(2)


Net gain on disposition of assets		—		—		—		(9)

Non-operating pension and other postretirement benefit credits		(3)		(5)		(8)		(24)

Other (income) expense, net		(20)		14		74		(24)
Adjusted EBITDA	$	(10)	$	(13)	$	(37)	$	(31)

Three and nine months ended September 30, 2021 vs. September 30, 2020

Net gain on disposition of assets

We recorded a net gain of $9 million on the disposition of the Augusta mill in the year-ago period.

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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 for our growth and transformation strategy. In addition, from time to time we may use available cash to reduce debt and to return capital to shareholders, including through share repurchases or special dividends. As of September 30, 2021, we had cash and cash equivalents of $119 million and availability of $811 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.

Based on market conditions, we may seek to refinance our credit facilities to optimize our capital structure and enhance our flexibility to continue our transformation.

Flow of Funds

Summary of cash flows

A summary of cash flows for the nine months ended September 30, 2021 and 2020, was as follows:


	Nine Months Ended September 30,
(Unaudited, in millions)	2021		2020
Net cash provided by operating activities	$	580	$	176
Net cash used in investing activities		(204)		(248)
Net cash (used in) provided by financing activities		(375)		89
Effect of exchange rate changes on cash and cash equivalents, and restricted cash		(1)		—
Net increase in cash and cash equivalents, and restricted cash	$	—	$	17

Nine months ended September 30, 2021 vs. September 30, 2020

Net cash provided by operating activities

We generated $580 million of cash from operating activities in the first nine months of 2021, compared to $176 million in the year-ago period. The increase is primarily driven by higher profitability, partly offset by an unfavorable working capital variance and higher major maintenance payments in the current period.

Net cash used in investing activities

We used $204 million of cash in investing activities in the current period, compared to $248 million in the year-ago period. The difference mostly reflects the acquisition of the U.S. Sawmill Business, net of cash acquired, in the year-ago period ($172 million); partly offset by higher countervailing and anti-dumping duty cash deposits ($76 million), and higher cash invested in fixed assets ($26 million) in the current period, as well as proceeds from an insurance recovery related to our acquisition of Atlas in 2015 ($15 million) in the prior period.

Net cash (used in) provided by financing activities

Net cash used in financing activities was $375 million in the first nine months of 2021, compared to cash provided by financing activities of $89 million in the year-ago period. The difference mostly reflects the repayment of the 2023 Notes of $375 million partly offset by the issuance of the 2026 Notes of $300 million, as well as the repayment of $180 million in term loans in the current period; compared to drawing of $180 million in term loans used to finance the acquisition of the U.S. Sawmill Business, partly offset by the repayment of $71 million in revolving credit facilities in the year-ago period. In the current period, we also paid a special dividend of $1 per share, or $79 million, and repurchased $34 million of shares compared to $19 million in the year-ago period.

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2021 outlook

To support the company’s continued growth, in the second quarter, we increased our expected capital expenditures for 2021 from $95 million to $125 million. Due to supply chain delays and limited contractor availability, we now expect our capex investments to reach approximately $110 million.

Employee Benefit Plans

Share Repurchase Program

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 1.2 million shares at an average price of $10.95 for a total of $14 million and 3.3 million shares at an average price of $10.22 for a total of $34 million, respectively. Since the beginning of this share repurchase program, we have repurchased 10 million shares for a total cost of $64 million, representing 12% of our common stock. During the three and nine months ended September 30, 2020, we repurchased 4.5 million shares at an average price of $4.12 for a total of $18 million and 4.8 million shares at an average price of $4.01 for a total of $19 million, respectively.

Dividends

On July 7, 2021, we paid a special dividend of $1.00 per share ($79 million) on our common stock, which was declared on June 10, 2021, for holders of record at the close of business on June 28, 2021.

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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 2020 Annual Report. We are supplementing our exposure to market risk as previously disclosed in our 2020 Annual Report with the additional information on market risk set forth below. This supplemental market risk information should be read in conjunction with the other market risks described in our 2020 Annual Report.

Prices, sales volume and margins for our products have historically been cyclical and subject to changes as a result of economic and market shifts, fluctuations in capacity, and movements in foreign currency exchange rates. In order to mitigate these risks and to protect the Company’s earnings and cash flows from adverse fluctuations of market risks, from time to time, we enter into derivative financial transactions, in compliance with our financial risk management policy, which forbids speculative purposes.

For more information on loss related to lumber futures contracts recorded during the nine month period ended September 30, 2021, please see Note 2, “Other Income (Expense), Net,” to our Consolidated Financial Statements.

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, 2021. 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.

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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 2020 Annual Report, see the description of our material pending legal proceedings in Note 11, “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 2020 Annual Report, which could materially affect our business, financial condition or future results. There have been no material changes to the risk factors previously disclosed in our 2020 Annual Report.

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, 2021:


Period	Total Number of Shares Purchased		Average Price Paid per Share		Total 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		—	$	—		—	$	50,000,192
August 1 to August 31		—		—		—		50,000,192
September 1 to September 30		1,248,251		10.95		1,248,251		36,329,747
Total		1,248,251	$	10.95		1,248,251	$	36,329,747

(1)$100 million share repurchase program launched in 2020. For more information, see Note 12, “Share Capital,” to our Consolidated Financial Statements.

As of October 29, 2021, we repurchased 197,037 additional shares at an average price per share of $11.94 for a total cost of $2 million.

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RESOLUTE FOREST PRODUCTS INC.

ITEM 6. EXHIBITS


Exhibit No.						Description



†10.1						Letter Agreement between Jacques P. Vachon and Resolute Forest Products Inc. dated November 4, 2021.













31.1						Certification of President and Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2						Certification of Senior Vice President and Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1						Certification of President and Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2						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 9, 2021

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Resolute Forest Products (RFP) 10-Q2021 Q3 Quarterly report

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