Exhibit 99.1

Index to Financial Statements

	Page
Consolidated Statements of Operations for the Years Ended December  31, 2021, 2020 and 2019		1
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2021, 2020 and 2019		2
Consolidated Balance Sheets as of December 31, 2021 and 2020		3
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2021, 2020 and 2019		4
Consolidated Statements of Cash Flows for the Years Ended December  31, 2021, 2020 and 2019		5
Notes to Consolidated Financial Statements		6
Report of Independent Auditors		44

RESOLUTE FOREST PRODUCTS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions of U.S. dollars, except per share amounts)

	Years Ended December 31,
	2021			2020			2019
Sales	$	3,664		$	2,800		$	2,923
Costs and expenses:
Cost of sales, excluding depreciation, amortization and distribution costs		2,258			2,010			2,198
Depreciation and amortization		164			169			167
Distribution costs		356			344			389
Selling, general and administrative expenses		158			136			136
Closure costs, impairment and other related charges		144			53			18
Net gain on disposition of assets		—			(11	)		(2	)
Operating income		584			99			17
Interest expense		(21	)		(34	)		(31	)
Non-operating pension and other postretirement benefit credits		11			—			47
Other expense, net		(70	)		(4	)		(22	)
Income before income taxes		504			61			11
Income tax provision		(195	)		(51	)		(58	)
Net income (loss) including noncontrolling interest		309			10			(47	)
Net income attributable to noncontrolling interest		(2	)		—			—
Net income (loss) attributable to Resolute Forest Products Inc.	$	307		$	10		$	(47	)
Net income (loss) per share attributable to Resolute Forest Products Inc. common shareholders:
Basic	$	3.87		$	0.12		$	(0.51	)
Diluted	$	3.83		$	0.12		$	(0.51	)
Weighted-average number of Resolute Forest Products Inc. common shares outstanding:
Basic		79.5			86.1			91.4
Diluted		80.3			86.4			91.4

See accompanying notes to Consolidated Financial Statements.

1

RESOLUTE FOREST PRODUCTS INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In millions of U.S. dollars)

	Years Ended December 31,
	2021			2020			2019
Net income (loss) including noncontrolling interest	$	309		$	10		$	(47	)
Other comprehensive income (loss):
Unamortized prior service costs or credits
Change in unamortized prior service costs or credits		(4	)		(17	)		(12	)
Income tax benefit		—			—			—
Change in unamortized prior service costs or credits, net of tax		(4	)		(17	)		(12	)
Unamortized actuarial losses
Change in unamortized actuarial losses		336			(156	)		(273	)
Income tax (provision) benefit		(80	)		38			55
Change in unamortized actuarial losses, net of tax		256			(118	)		(218	)
Foreign currency translation		—			—			1
Other comprehensive income (loss), net of tax		252			(135	)		(229	)
Comprehensive income (loss) including noncontrolling interest		561			(125	)		(276	)
Comprehensive income attributable to noncontrolling interest		(2	)		—			—
Comprehensive income (loss) attributable to Resolute Forest Products Inc.	$	559		$	(125	)	$	(276	)

See accompanying notes to Consolidated Financial Statements.

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RESOLUTE FOREST PRODUCTS INC.

CONSOLIDATED BALANCE SHEETS

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

	December 31, 2021			December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	112		$	113
Accounts receivable, net:
Trade		257			230
Other		56			48
Inventories, net		510			462
Other current assets		54			47
Total current assets		989			900
Fixed assets, net		1,270			1,441
Amortizable intangible assets, net		57			63
Goodwill		31			31
Deferred income tax assets		653			915
Operating lease right-of-use assets		54			60
Other assets		484			320
Total assets	$	3,538		$	3,730
Liabilities and equity
Current liabilities:
Accounts payable and other	$	421		$	369
Current portion of long-term debt		2			2
Current portion of operating lease liabilities		8			9
Total current liabilities		431			380
Long-term debt, net of current portion		300			559
Pension and other postretirement benefit obligations		1,151			1,562
Operating lease liabilities, net of current portion		51			55
Other liabilities		88			92
Total liabilities		2,021			2,648
Commitments and contingencies
Equity:
Resolute Forest Products Inc. shareholders’ equity:
Common stock, $0.001 par value. 121.2 million shares issued and 76.8 million shares outstanding as of December 31, 2021; 120.6 million shares issued and 80.8 million shares outstanding as of December 31, 2020		—			—
Additional paid-in capital		3,807			3,804
Deficit		(1,009	)		(1,235	)
Accumulated other comprehensive loss		(1,062	)		(1,314	)
Treasury stock at cost, 44.4 million shares and 39.8 million shares as of December 31, 2021 and 2020, respectively		(222	)		(174	)
Total Resolute Forest Products Inc. shareholders’ equity		1,514			1,081
Noncontrolling interest		3			1
Total equity		1,517			1,082
Total liabilities and equity	$	3,538		$	3,730

See accompanying notes to Consolidated Financial Statements.

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RESOLUTE FOREST PRODUCTS INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In millions of U.S. dollars)

	Resolute Forest Products Inc. Shareholders’ Equity
	Common Stock		Additional Paid-in Capital		Deficit			Accumulated Other Comprehensive Loss			Treasury Stock			Non-controlling Interests		Total Equity
Balance as of December 31, 2018	$	—	$	3,802	$	(1,198	)	$	(950	)	$	(120	)	$	1	$	1,535
Net loss		—		—		(47	)		—			—			—		(47	)
Purchase of treasury stock (4.8 million shares) (Note 19)		—		—		—			—			(24	)		—		(24	)
Stock unit awards vested (0.7 million shares), net of shares forfeited for employee withholding taxes (Note 20)		—		—		—			—			—			—		—
Other comprehensive loss, net of tax		—		—		—			(229	)		—			—		(229	)
Balance as of December 31, 2019		—		3,802		(1,245	)		(1,179	)		(144	)		1		1,235
Share-based compensation, net of withholding taxes		—		2		—			—			—			—		2
Net income		—		—		10			—			—			—		10
Purchase of treasury stock (6.9 million shares) (Note 19)		—		—		—			—			(30	)		—		(30	)
Stock unit awards vested (1.0 million shares), net of shares forfeited for employee withholding taxes (Note 20)		—		—		—			—			—			—		—
Other comprehensive loss, net of tax		—		—		—			(135	)		—			—		(135	)
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		—		—		307			—			—			2		309
Purchases of treasury stock (4.6 million shares) (Note 19)		—		—		—			—			(48	)		—		(48	)
Special dividend (Note 19)		—		2		(81	)		—			—			—		(79	)
Stock unit awards vested and stock options exercised (0.6 million shares), net of shares forfeited for employee withholding taxes (Note 20)		—		—		—			—			—			—		—
Other comprehensive income, net of tax		—		—		—			252			—			—		252
Balance as of December 31, 2021	$	—	$	3,807	$	(1,009	)	$	(1,062	)	$	(222	)	$	3	$	1,517

See accompanying notes to Consolidated Financial Statements.

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RESOLUTE FOREST PRODUCTS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions of U.S. dollars)

	Years Ended December 31,
	2021			2020			2019
Cash flows from operating activities:
Net income (loss) including noncontrolling interest	$	309		$	10		$	(47	)
Adjustments to reconcile net income (loss) including noncontrolling interest to net cash provided by operating activities:
Share-based compensation		8			5			4
Depreciation and amortization		164			169			167
Closure costs, impairment and other related charges		144			53			18
Inventory write-downs related to closures		29			25			13
Deferred income taxes		192			51			58
Net pension contributions and other postretirement benefit payments		(91	)		(87	)		(125	)
Net gain on disposition of assets		—			(11	)		(2	)
Gain on translation of foreign currency denominated deferred income taxes		(9	)		(15	)		(42	)
Loss on translation of foreign currency denominated pension and other postretirement benefit obligations		10			17			43
Net planned major maintenance (payments) amortization		(17	)		6			13
Changes in working capital:
Accounts receivable		(31	)		80			88
Inventories		(77	)		44			(27	)
Other current assets		—			(12	)		—
Accounts payable and other		1			2			(92	)
Other, net		16			(3	)		16
Net cash provided by operating activities		648			334			85
Cash flows from investing activities:
Cash invested in fixed assets		(112	)		(78	)		(113	)
Acquisition of business, net of cash acquired		—			(172	)		—
Disposition of assets		1			14			3
Increase in countervailing and anti-dumping duty cash deposits on softwood lumber		(154	)		(81	)		(59	)
Decrease in countervailing duty cash deposits on uncoated groundwood and supercalendered paper		—			—			7
Proceeds from insurance settlement		—			15			—
Other investing activities, net		3			5			—
Net cash used in investing activities		(262	)		(297	)		(162	)
Cash flows from financing activities:
Net (repayments) borrowings under revolving credit facilities		—			(71	)		71
Issuance of long-term debt		300			—			—
Payment of special dividend		(79	)		—			—
Proceeds from long-term debt		—			180			—
Repayments of debt		(558	)		(1	)		(271	)
Purchases of treasury stock		(48	)		(30	)		(24	)
Payments of financing fees		(8	)		—			(4	)
Other financing activities, net		1			—			—
Net cash (used in) provided by financing activities		(392	)		78			(228	)
Effect of exchange rate changes on cash and cash equivalents, and restricted cash		(1	)		2			2
Net (decrease) increase in cash and cash equivalents, and restricted cash	$	(7	)	$	117		$	(303	)
Cash and cash equivalents, and restricted cash:
Beginning of year	$	159		$	42		$	345
End of year	$	152		$	159		$	42
Cash and cash equivalents, and restricted cash at year end:
Cash and cash equivalents	$	112		$	113		$	3
Restricted cash (included in “Other current assets”)	$	—		$	4		$	—
Restricted cash (included in “Other assets”)	$	40		$	42		$	39
Supplemental disclosures of cash flow information:
Cash paid (received) during the year for:
Interest, including capitalized interest	$	20		$	32		$	26
Income taxes	$	3		$	(1	)	$	(11	)

See accompanying notes to Consolidated Financial Statements.

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RESOLUTE FOREST PRODUCTS INC.

Notes to Consolidated Financial Statements

Note 1. Organization and Basis of Presentation

Nature of operations

Resolute Forest Products Inc. (with its subsidiaries, either individually or collectively, unless otherwise indicated, referred to as “Resolute Forest Products,” “we,” “our,” “us,” “Parent,” or the “Company”) is incorporated in Delaware. We are a global leader in the forest products industry with a diverse range of products, including market pulp, tissue, wood products and paper, which are marketed in over 60 countries. We own or operate some 40 facilities, as well as power generation assets, in the U.S. and Canada.

Financial statements

We have prepared our consolidated financial statements and the accompanying notes (or, the “Consolidated Financial Statements”) in accordance with U.S. generally accepted accounting principles (or, “GAAP”). All amounts are expressed in U.S. dollars, unless otherwise indicated. Certain prior period amounts to our Consolidated Financial Statements and the accompanying notes have been reclassified to conform to the 2021 presentation.

Consolidation

Our Consolidated Financial Statements include the accounts of Resolute Forest Products Inc. and its subsidiaries. All transactions and balances between these companies have been eliminated. All consolidated subsidiaries are wholly-owned as of December 31, 2021, with the exception of the following:

Consolidated Subsidiary	Resolute Forest Products Ownership			Partner	Partner Ownership
Forest Products Mauricie L.P.		93.2	%	Coopérative Forestière du Haut Saint-Maurice		6.8	%

Equity method investments

We account for our investments in companies where we have significant influence or joint control, using the equity method of accounting.

Note 2. Summary of Significant Accounting Policies

Use of estimates

In preparing our Consolidated Financial Statements in accordance with GAAP, management is required to make accounting estimates based on assumptions, judgments, and projections of future results of operations and cash flows. These estimates and assumptions affect the reported amounts of revenues and expenses during the periods presented, the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities as of the date of the financial statements. The most critical estimates relate to the assumptions underlying the benefit obligations of our pension and other postretirement benefit (or, “OPEB”) plans, the recoverability of deferred income tax assets, the recoverability of our long-lived assets and the fair value estimates of the assets acquired and liabilities assumed in a business combination, including goodwill. Estimates, assumptions, and judgments are based on a number of factors, including historical experience, recent events, existing conditions, internal budgets and forecasts, projections obtained from industry research firms, and other data that management believes are reasonable under the circumstances. Actual results could differ materially from those estimates under different assumptions or conditions.

Business combination

We account for business combinations using the acquisition method as of the date control is transferred to us. Under this approach, identifiable assets acquired and liabilities assumed are recorded at their respective fair values at the date of acquisition. Any amount of the purchase price paid that is in excess of the estimated fair values of net identifiable assets acquired is recorded in “Goodwill” in our Consolidated Balance Sheets. In determining the estimated fair values of identifiable assets acquired and liabilities assumed in a business combination, we use various recognized valuation methods such as present value modeling and referenced market values (where available). Valuations are performed by management or independent valuation specialists under management’s supervision, where appropriate. Transaction costs are recognized in “Other expense, net” in our Consolidated Statements of Operations when incurred.

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RESOLUTE FOREST PRODUCTS INC.

Notes to Consolidated Financial Statements

Cash and cash equivalents, and restricted cash

Cash and cash equivalents generally consist of direct obligations of the U.S. and Canadian governments and their agencies, demand deposits, money market, and other short-term, highly liquid securities with a maturity of three months or less from the date of purchase. Restricted cash consists primarily of deposits held as collateral for letters of credit.

Accounts receivable

Accounts receivable are recorded at cost, net of an allowance for expected credit losses.

Accounts receivable are subject to impairment review that is based on the aging method. Impairment is calculated based on how long a receivable has been outstanding. The Company estimates expected credit losses by considering historical credit loss experience (based on days past due), current conditions, and forward-looking factors specific to the customers and the economic environment.

We also consider if we are no longer doing business with the customer, and any other factors that may affect collectability from customers with significant outstanding balances. A receivable is written off when there is no reasonable expectation of recovering the contractual cash flows.

Inventories

Inventories are stated at the lower of cost or net realizable value using the average cost method. Cost includes labor, materials and production overhead, which is based on the normal capacity of our production facilities. Unallocated overhead, including production overhead associated with abnormal production levels, is recognized in “Cost of sales, excluding depreciation, amortization and distribution costs” in our Consolidated Statements of Operations when incurred.

Assets held for sale

Assets held for sale are carried in our Consolidated Balance Sheets at the lower of carrying value or fair value less costs to sell. We cease recording depreciation and amortization when assets are classified as held for sale.

Fixed assets

Fixed assets acquired, including internal-use software, are stated at acquisition cost less accumulated depreciation and impairment. The cost of the fixed assets is reduced by any investment tax credits or government capital grants earned. Depreciation is provided on a straight-line basis over the estimated useful lives of the assets. We capitalize interest on borrowings during the construction period of major capital projects as part of the related asset and amortize the capitalized interest in “Depreciation and amortization” in our Consolidated Statements of Operations over the related asset’s remaining useful life.

Major maintenance costs

Planned major maintenance costs are recorded using the deferral method, whereby the costs of each planned major maintenance activity are capitalized to “Other current assets” or “Other assets” in our Consolidated Balance Sheets, and amortized to “Cost of sales, excluding depreciation, amortization and distribution costs” in our Consolidated Statements of Operations on a straight-line basis over the estimated period until the next planned major maintenance activity. All other routine repair and maintenance costs are expensed as incurred.

Amortizable intangible assets

Amortizable intangible assets are stated at acquisition cost less accumulated amortization and impairment. Amortization is provided on a straight-line basis over the estimated useful lives of the assets.

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RESOLUTE FOREST PRODUCTS INC.

Notes to Consolidated Financial Statements

Impairment of long-lived assets

The unit of accounting for impairment testing for fixed assets, net, amortizable intangible assets, net, and operating lease right-of-use assets (collectively, “long-lived assets”) is its group, which includes long-lived assets and liabilities directly related to those assets (herein defined as “asset group”). For asset groups that are held and used, that group represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other asset groups. For asset groups that are to be disposed of by sale or otherwise, that group represents assets to be disposed of together as a group in a single transaction and liabilities directly associated with those assets that will be transferred in the transaction.

Long-lived assets are reviewed for impairment when events or changes in circumstances indicate that the carrying value of an asset group may no longer be recoverable. The recoverability of an asset group that is held and used is tested by initially comparing the carrying value of the asset group to the sum of the estimated undiscounted future cash flows expected to be generated by that asset group. In estimating the undiscounted future cash flows, we use projections of cash flows directly associated with, and which are expected to arise as a direct result of, the use and eventual disposition of the asset group. If there are multiple plausible scenarios for the use and eventual disposition of an asset group, we assess the likelihood of each scenario occurring in order to determine a probability-weighted estimate of the undiscounted future cash flows. The principal assumptions include periods of operation, projections of product pricing, production levels and sales volumes, product costs, market supply and demand, foreign exchange rates, inflation, and projected capital spending. Changes in any of these assumptions could have a material effect on the estimated undiscounted future cash flows expected to be generated by the asset group. If it is determined that an asset group is not recoverable, an impairment loss is recognized in the amount that the asset group’s carrying value exceeds its fair value. The fair value of a long-lived asset group is determined in accordance with our accounting policy for fair value measurements, as discussed below. If it is determined that the carrying value of an asset group is recoverable, we review and adjust, as necessary, the estimated useful lives of the assets in the group.

Long-lived assets to be disposed of other than by sale are classified as held and used until the asset group is disposed of or use of the asset group has ceased.

Goodwill

Goodwill is not amortized and is tested for impairment every year at the end of November, or more frequently if events or changes in circumstances indicate a potential impairment loss. The impairment test of goodwill is performed at the reporting unit’s level.

We have the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount including goodwill. In performing the qualitative assessment, we identify the relevant drivers of fair value of a reporting unit and the relevant events and circumstances that may have an impact on those drivers of fair value. This process involves significant judgment and assumptions including the assessment of the results of the most recent fair value calculations, the identification of macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, specific events affecting us and the business, and making the assessment on whether each relevant factor will impact the impairment test positively or negatively, and the magnitude of any such impact. If the qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill, then a quantitative impairment test is performed. We can also elect to bypass the qualitative assessment and proceed directly to the quantitative impairment test.

The quantitative impairment test consists of comparing the fair value of a reporting unit to its carrying amount, including goodwill. Significant judgment is required to estimate the fair value of a reporting unit.

We determine the fair value of a reporting unit by using the income method. Under this method, we estimate the fair value of a reporting unit based on the present value of estimated future cash flows. The assumptions used in the model requires estimating future sales volumes, selling prices and costs, changes in working capital, investments in fixed assets, and the selection of the appropriate discount rate. The assumptions used are consistent with internal projections and operating plans. Unanticipated market and macroeconomic events and circumstances may occur and could affect the exactitude and validity of management assumptions and estimates. Sensitivities of these fair value estimates to changes in assumptions are also performed.

In the event that the net carrying amount of the reporting unit exceeds its fair value, an impairment charge is recognized for the amount by which the reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill in that reporting unit.

Goodwill is assigned to the wood segment for the purposes of impairment testing.

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RESOLUTE FOREST PRODUCTS INC.

Notes to Consolidated Financial Statements

We elected the optional qualitative assessment for our 2021 annual goodwill impairment test. We concluded that it is not more likely than not that the fair value of the reporting unit is less than its carrying amount. As a result, no impairment was recognized.

Leases

We engage in short and long-term leases for building, machinery, chemical equipment, rail cars and office equipment. We determine if a contract contains a lease at inception. Leases are classified as either operating leases or finance leases. Operating leases are included in “Operating lease right-of-use assets,” “Current portion of operating lease liabilities,” and “Operating lease liabilities, net of current portion,” whereas finance leases are included in “Fixed assets, net,” “Current portion of long-term debt,” and “Long-term debt, net of current portion” in our Consolidated Balance Sheets. Leases with a term of 12 months or less are not recorded in our Consolidated Balance Sheets, and are expensed over the term of the lease in our Consolidated Statements of Operations.

Operating and finance lease right-of-use assets and the related liabilities are recognized at the lease commencement date based on the present value of the future lease payments over the lease term. Renewal and termination options are included in our lease terms when it is reasonably certain that they will be exercised. In determining the present value of lease payments, we use the implicit rate when readily determinable, or our estimated incremental borrowing rate, which is based on information available at the lease commencement date. Lease payments are expensed in our Consolidated Statements of Operations on a straight-line basis over the term of the lease.

For buildings, we account for the lease and non-lease components as a single lease component. For all other contracts, we account for the lease and non-lease components separately.

Income taxes

We use the asset and liability approach in accounting for income taxes. Under this approach, deferred income tax assets and liabilities are recognized for the expected future tax consequences attributable to differences between the carrying amounts in our Consolidated Financial Statements of existing assets and liabilities and their respective tax bases. This approach also requires the recording of deferred income tax assets related to net operating loss, tax credit and other carryforwards. Deferred income tax assets and liabilities are measured using enacted tax rates applicable when temporary differences and carryforwards are expected to be recovered or settled.

We account for global intangible low-taxed income (or, “GILTI”) as a period cost, if and when incurred, and apply the tax law ordering approach to assess the impact of GILTI on the realizability of net operating loss carryforwards.

We have not provided for the additional U.S. and foreign income taxes that could become payable upon remittance of undistributed earnings of our foreign subsidiaries, as we have specific plans for the reinvestment of such earnings.

Valuation allowances are recognized to reduce deferred income tax assets to the amount that is more likely than not to be realized. In assessing the likelihood of realization, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, estimates of future taxable income, past operating results, and prudent and feasible tax planning strategies. In our evaluation process, we give the most weight to historical income or losses.

Tax benefits related to uncertain tax positions are recorded when it is more likely than not, based on technical merits, that the position will be sustained upon examination by the relevant taxing authorities. The amount of tax benefit recognized may differ from the amount taken or expected to be taken on a tax return. These differences represent unrecognized tax benefits and are reviewed at each reporting period based on facts, circumstances and available evidence. We recognize accrued interest and penalties related to unrecognized tax benefits as a component of the income tax provision.

Environmental costs

We expense environmental costs related to existing conditions resulting from past or current operations and from which no current or future benefit is discernible. These costs are included in “Cost of sales, excluding depreciation, amortization and distribution costs” in our Consolidated Statements of Operations. Expenditures that extend the life of the related property are capitalized. We determine our liability on a site-by-site basis and record a liability at the time it is probable and can be reasonably estimated. Such accruals are adjusted as further information develops or circumstances change. Costs of future expenditures for environmental remediation obligations are discounted to their present value when the amount and timing of expected cash payments are reliably determinable.

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RESOLUTE FOREST PRODUCTS INC.

Notes to Consolidated Financial Statements

Pension and OPEB plans

For each defined benefit pension and OPEB plan, a liability is recognized for a plan’s under-funded status, net of the fair value of plan assets, and an asset is recognized for a plan’s over-funded status, net of the plan’s obligations. Changes in the funding status that have not been recognized in our net periodic benefit cost are reflected as an adjustment to our “Accumulated other comprehensive loss” in our Consolidated Balance Sheets. We recognize net periodic benefit cost or credit as employees render the services necessary to earn the pension and OPEB. The service cost component of net periodic pension and OPEB cost or credit is recorded in operating expenses (together with other employee compensation costs arising during the period). The other components of the net periodic pension and OPEB cost or credit (or, “non-operating pension and OPEB credits”) are reported separately outside any subtotal of operating income. Amounts we contribute to our defined contribution plans are expensed as incurred.

Fair value measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date, and is based on any principal market for the specific asset or liability. We consider the risk of non-performance of the obligor, which in some cases reflects our own credit risk, in determining fair value. We categorize assets and liabilities measured at fair value (other than those measured at net asset value, or “NAV,” per share, or its equivalent) into one of three different levels depending on the observability of the inputs employed in the measurement. This fair value hierarchy is as follows:

Level 1 -	Valuations based on quoted prices in active markets for identical assets and liabilities.
Level 2 -	Valuations based on observable inputs, other than Level 1 prices, such as quoted interest or currency exchange rates.
Level 3 -	Valuations based on significant unobservable inputs that are supported by little or no market activity, such as discounted cash flow methodologies based on internal cash flow forecasts.

The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used in the determination of fair value of our assets and liabilities, when required, maximize the use of observable inputs and minimize the use of unobservable inputs.

Share-based compensation

We recognize the cost of our share-based compensation over the requisite service period using the straight-line attribution approach. For equity-based awards, the cost is based on the grant date fair value, or when the award has a service inception date preceding the grant date, the cost is based on the fair value at the end of each reporting period until the grant date. For liability-based awards, the cost is based on the fair value at the end of each reporting period. The requisite service period is reduced for those employees who are retirement eligible at the date of the grant or who will become retirement eligible during the vesting period and who will be entitled to continue vesting in their entire award upon retirement.

Our stock incentive awards (as defined in Note 20, “Share-Based Compensation”) may be subject to market, performance and/or service conditions. For equity-based awards, the fair value of stock options is determined using a Black-Scholes option pricing formula, and the fair value of restricted stock units (or, “RSUs”), deferred stock units (or, “DSUs”) and performance stock units (or, “PSUs”) is determined based on the market price of a share of our common stock on the grant date. Liability-based awards, consisting of RSUs, DSUs, and PSUs, are initially measured based on the market price of a share of our common stock on the grant date and remeasured at the end of each reporting period, until settlement. Certain PSUs have a market condition considered in the determination of the fair value of the award, such that the ultimate number of units that vest will be determined in part by total shareholder return relative to a group of peer companies. The fair value of those PSUs is determined using a Monte Carlo simulation model.

We estimate forfeitures of stock incentive awards and performance adjustments for our PSUs based on historical experience and forecasts, and recognize compensation cost only for those awards expected to vest. Estimated forfeitures and performance adjustments are updated to reflect new information or actual experience, as it becomes available.

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Notes to Consolidated Financial Statements

Revenue recognition

Revenue arises from contracts with customers in which the sale of goods is the main performance obligation. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when or as the performance obligation is satisfied, which is when (point in time) or as (over time) control of the promised good or service is transferred to the customer.

Revenue is measured at the amount to which we are expected to be entitled in exchange for transferring goods based on consideration specified in the contract with the customer. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that we collect from the customer, are excluded from revenue. When a contract with a customer includes variable consideration such as special pricing agreements and other volume-based incentives, revenue is recognized at the most likely amount based on sales forecasts, for which it is probable that a revenue reversal will not subsequently occur.

Revenue is recorded at a point in time when control over the goods transfers to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying contracts with customers. Pulp, tissue, paper and wood products are delivered to our customers in the U.S. and Canada directly from our mills primarily by truck or rail. Pulp and paper products are delivered to our international customers primarily by ship. For sales where control transfers to the customer at the shipping point, revenue is recorded when the product leaves the facility, whereas for sales where control transfers at the destination, revenue is recorded when the product is delivered to the customer’s delivery site.

Sales of our other products (green power produced from renewable sources and wood-related products) are recognized when the products are delivered and are included in “Cost of sales, excluding depreciation, amortization and distribution costs” in our Consolidated Statements of Operations.

Distribution costs

Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in “Distribution costs” in our Consolidated Statements of Operations.

Currency translation

The functional currency of the majority of our operations is the U.S. dollar. Non-monetary assets and liabilities denominated in foreign currencies of these operations and the related income and expense items such as depreciation and amortization are remeasured into U.S. dollars using historical exchange rates. Remaining assets and liabilities are remeasured into U.S. dollars using the exchange rate as of the balance sheet date. Remaining income and expense items are remeasured into U.S. dollars using a daily or monthly average exchange rate for the period. Gains and losses from foreign currency transactions and from remeasurement of the balance sheet items are reported in “Other expense, net” in our Consolidated Statements of Operations.

The functional currency of our other operations is their local currency. Assets and liabilities of these operations are translated into U.S. dollars at the exchange rate in effect as of the balance sheet date. Income and expense items are translated using a daily or monthly average exchange rate for the period. The resulting translation gains or losses are recognized as a component of equity in “Accumulated other comprehensive loss.”

Derivatives financial instruments

We regularly enter into derivative financial instruments to manage our commodities price risk. These derivative instruments are not designated as hedging instruments and are recorded as either other assets or other liabilities at fair value in our Consolidated Balance Sheets. Changes in fair value are recognized in “Other expense, net” in our Consolidated Statements of Operations.

Net income (loss) per share

We calculate basic net income (loss) per share attributable to Resolute Forest Products Inc. common shareholders by dividing our net income (loss) by the basic weighted-average number of outstanding common shares. We calculate diluted net income per share attributable to Resolute Forest Products Inc. common shareholders by dividing our net income by the basic weighted-average number of outstanding common shares, as adjusted for dilutive potential common shares using the treasury-stock method. To calculate diluted net income per share attributable to Resolute Forest Products Inc. common shareholders, securities that could have potentially dilutive effect on the weighted average number of outstanding common shares include all or a portion of outstanding stock options, RSUs, DSUs and PSUs.

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Notes to Consolidated Financial Statements

New accounting pronouncements 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.

ASU 2020-04 “Reference Rate Reform”

Effective December 1, 2021, we adopted ASU 2020-04, “Reference Rate Reform,” amended in January 2021 by ASU 2021-01, “Reference Rate Reform - Scope,” issued by the FASB in March 2020, 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. The adoption of this accounting guidance did not impact our Consolidated Financial Statements and disclosures.

Accounting pronouncements not yet adopted as of December 31, 2021

ASU 2021-08 “Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”

In October 2021, the FASB issued ASU 2021-08, “Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”, which improves the accounting for acquired revenue contracts with customers in a business combination. This update is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years, with early adoption being permitted. This accounting guidance will have to be applied to future acquisitions.

ASU 2021-10 “Government Assistance”

In November 2021, the FASB issued ASU 2021-10, “Government Assistance”, which requires business entities to disclose information about transactions with a government that are accounted for by applying a grant or contribution model by analogy. This update is effective for annual periods beginning after December 15, 2021. We are currently evaluating this accounting guidance, which will have disclosure impact only.

Note 3. Business Acquisition

2020 Acquisition

On February 1, 2020 (or, the “Acquisition Date”), we acquired from Conifex Timber Inc. all of the equity securities and membership interests in certain of its subsidiaries, the business of which consists mainly in the operation of three sawmills and related assets in Cross City (Florida) and in Glenwood and El Dorado (Arkansas) (or, the “U.S. Sawmill Business”). The U.S. Sawmill Business acquired produces construction-grade dimensional lumber and decking products from locally sourced southern yellow pine for distribution within the U.S. This acquisition diversified our lumber production, and increased our operating capacity in the U.S. South.

The fair value of the consideration, paid in cash, for the U.S. Sawmill Business acquired was $173 million. The acquisition was structured as an asset purchase for tax purposes, but treated as a business combination for accounting purposes.

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Notes to Consolidated Financial Statements

The following table summarizes our final allocation of the purchase price to the fair values of assets acquired and liabilities assumed at the Acquisition Date:

(In millions)
Current assets (1)	$	19
Fixed assets		114
Amortizable intangible assets (2)		21
Operating lease right-of-use assets		2
Goodwill (3)		31
Total assets acquired and goodwill	$	187
Current liabilities	$	11
Long-term debt, net of current portion		2
Operating lease liabilities, net of current portion		1
Total liabilities assumed	$	14
Net assets acquired	$	173
Fair value of consideration transferred	$	173

⁽¹⁾  Includes cash and cash equivalents of $1 million.

⁽²⁾  Amortizable intangible assets identified relate to customer relationships, which have a weighted-average useful life of 10 years. The fair value of the customer relationships was determined using the income approach through an excess earnings analysis discounted at a rate of 12.6%.

⁽³⁾  Goodwill represents the future economic benefit arising from other assets acquired that could not be individually identified and separately recognized and is mostly attributable to the U.S. Sawmill Business’s assembled workforce and synergies expected from combining our operations with the U.S. Sawmill Business. Goodwill is deductible for tax purposes.

The allocation of the purchase price was based on management’s estimate of the fair values of the acquired identifiable assets and assumed liabilities using valuation techniques including income, cost and market approaches (Level 3). We utilized both the cost and market approaches to value fixed assets, which consider external transactions and other comparable transactions, estimated replacement and reproduction costs, and estimated useful lives and consideration for physical, functional and economic obsolescence. We utilized the income approach to value intangible assets, which considers the present value of the net cash flows expected to be generated by the intangible assets, and excluding cash flows related to contributory assets.

From the Acquisition Date to the year ended December 31, 2020, our consolidated financial results included sales of $137 million and net income of $43 million attributable to the U.S. Sawmill Business. The U.S. Sawmill Business results of operations are included in the wood products segment, except for the El Dorado sawmill for the period it was idled (from the acquisition date until it was restarted in the fourth quarter of 2020). In connection with the acquisition of the U.S. Sawmill Business, we also recognized transaction costs of $3 million in “Other expense, net” in our Consolidated Statement of Operations for the year ended December 31, 2020.

The following unaudited pro forma information for the years ended December 31, 2020 and 2019, represents our results of operations as if the acquisition of the U.S. Sawmill Business had occurred on January 1, 2019, excluding the results of operations of the El Dorado sawmill that had been idled since October 2019 and restarted in the fourth quarter of 2020. This pro forma information does not purport to be indicative of the results that would have occurred for the periods presented or that may be expected in the future.

(Unaudited, in millions)	2020		2019
Sales	$	2,808	$	3,021
Net income (loss) attributable to Resolute Forest Products Inc.	$	13	$	(70	)

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Notes to Consolidated Financial Statements

Note 4. Other Expense, Net

Other expense, net for the years ended December 31, 2021, 2020 and 2019, was comprised of the following:

(In millions)	2021			2020			2019
Foreign exchange loss	$	(2	)	$	(4	)	$	(12	)
Loss on commodity contracts (1)		(85	)		(22	)		—
Income from equity method investments		19			8			10
Insurance recovery (2)		—			15			—
Provision related to a litigation (3)		(1	)		—			(23	)
Miscellaneous (expense) income		(1	)		(1	)		3
	$	(70	)	$	(4	)	$	(22	)

⁽¹⁾  Principally related to lumber futures contracts; none of these contracts were outstanding as of December 31, 2021.

⁽²⁾  We recorded $15 million as other income for the year ended December 31, 2020, from the settlement of an insurance claim in connection with our acquisition of Atlas Paper Holdings, Inc. (or, “Atlas”) in 2015.

⁽³⁾  We accrued C$30 million of legal indemnity and interest costs for the year ended December 31, 2019, in connection with the Quebec Superior Court decision of the fair value of the shares of former dissenting shareholders of Fibrek Inc. (or, “Fibrek”) upon acquisition in 2012. See Note 18, “Commitments and Contingencies - Fibrek acquisition,” for more information.

Note 5. Closure Costs, Impairment and Other Related Charges

Closure costs, impairment and other related charges for the year ended December 31, 2021, were comprised of the following:

(In millions)	Impairment of Assets		Severance and Other Costs		Total
Pulp and Paper mill at Calhoun (Tennessee)	$	124	$	18	$	142
Other		—		2		2
	$	124	$	20	$	144

On December 16, 2021, the Company announced the indefinite idling of pulp and paper operations at our Calhoun mill given the continuing accumulation of significant financial losses, even with strong market conditions for both the pulp and uncoated freesheet paper it manufactured. Tissue remains in operation. Following the announcement, new long-lived asset groups were identified at that site, which were tested for impairment as the indefinite idling of pulp and paper operations was considered an impairment indicator for these assets.

As a result, we recognized an impairment charge of $124 million in relation to the pulp and paper long-lived asset group as these assets, consisting of fixed assets, will not generate future cash flows. The impairment charge was calculated as being the difference between the net carrying value of the fixed assets and their fair value. The fair value of the fixed assets was estimated using the market approach, by reference to estimated selling prices for similar assets, less costs to sell. This fair value measurement is considered a Level 3 measurement due to the significance of their unobservable inputs. We also recognized additional provisions for severance and other costs of $13 million as well as write-off of other assets of $5 million. In 2022, we expect to incur additional closure costs of approximately $32 million, mainly related to decommissioning. The pulp and paper operations ceased at the beginning of 2022.

An impairment test was also performed for the other asset groups at Calhoun. As the undiscounted cash flows exceeded the carrying value of the respective asset groups by a substantial margin, no impairment was recognized. The remaining useful life of the assets were reassessed and remained unchanged as the indefinite idling of the pulp and paper operations has no impact on the economic life of our other assets.

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Notes to Consolidated Financial Statements

Closure costs, impairment and other related charges for the year ended December 31, 2020, were comprised of the following:

(In millions)	Accelerated Depreciation		Severance and Other Costs			Total
Paper mill at Amos (Quebec)	$	12	$	5		$	17
Paper mill at Baie-Comeau (Quebec)		26		12			38
Other		—		(2	)		(2	)
	$	38	$	15		$	53

Due to the overall decrease in demand for newsprint, accelerated by the economic context surrounding the COVID-19 pandemic, the Amos and Baie-Comeau paper mills had been temporarily idled since April 2020. As a result, we had reassessed the remaining useful lives of the fixed assets and recognized an accelerated depreciation charge of $38 million. We also recognized additional provisions for severance and other costs of $17 million, of which $8 million was paid in 2021. In March 2021, the Company announced their indefinite idling.

Closure costs, impairment and other related charges for the year ended December 31, 2019, were comprised of the following:

(In millions)	Accelerated Depreciation		Severance and Other Costs		Total
Indefinite idling
Paper mill at Augusta (Georgia) (1)	$	8	$	10	$	18

⁽¹⁾  A total amount of $4 million of severance and other costs was paid prior to 2021.

Note 6. Net Gain on Disposition of Assets

During 2020, we recorded a net gain on disposition of assets of $11 million, which included: the sale of the Augusta paper mill for total cash consideration of $10 million, resulting in a net gain of $9 million; and the sale of the Thorold (Ontario) paper mill for total cash consideration of $4 million, resulting in a net gain of $2 million.

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Notes to Consolidated Financial Statements

Note 7. Accumulated Other Comprehensive Loss

The change in our accumulated other comprehensive loss by component (net of tax) for the years ended December 31, 2021, 2020 and 2019, was as follows:

(In millions)	Unamortized Prior Service Credits (Costs)			Unamortized Actuarial Losses			Foreign Currency Translation			Total
Balance as of December 31, 2018	$	28		$	(971	)	$	(7	)	$	(950	)
Other comprehensive (loss) income before reclassifications		—			(240	)		1			(239	)
Amounts reclassified from accumulated other comprehensive loss (1)		(12	)		22			—			10
Net current period other comprehensive (loss) income		(12	)		(218	)		1			(229	)
Balance as of December 31, 2019		16			(1,189	)		(6	)		(1,179	)
Other comprehensive loss before reclassifications		—			(185	)		—			(185	)
Amounts reclassified from accumulated other comprehensive loss (1)		(17	)		67			—			50
Net current period other comprehensive loss		(17	)		(118	)		—			(135	)
Balance as of December 31, 2020		(1	)		(1,307	)		(6	)		(1,314	)
Other comprehensive income before reclassifications		—			201			—			201
Amounts reclassified from accumulated other comprehensive loss (1)		(4	)		55			—			51
Net current period other comprehensive (loss) income		(4	)		256			—			252
Balance as of December 31, 2021	$	(5	)	$	(1,051	)	$	(6	)	$	(1,062	)

⁽¹⁾  See the table below for details about these reclassifications.

The reclassifications out of accumulated other comprehensive loss for the years ended December 31, 2021, 2020 and 2019, were comprised of the following:

(In millions)	2021			2020			2019			Affected Line in the Consolidated Statements of Operations
Unamortized Prior Service Costs or Credits
Amortization of prior service costs or credits	$	(3	)	$	(4	)	$	(11	)	Non-operating pension and other postretirement benefit credits (1)
Curtailment gain		(1	)		(13	)		(1	)	Non-operating pension and other postretirement benefit credits (1)
Income tax effect of the above		—			—			—		Income tax provision
Net of tax		(4	)		(17	)		(12	)
Unamortized Actuarial Losses
Amortization of actuarial losses		72			57			28		Non-operating pension and other postretirement benefit credits (1)
Settlement loss		—			28			1		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		(17	)		(21	)		(7	)	Income tax provision
Net of tax		55			67			22
Total Reclassifications	$	51		$	50		$	10

⁽¹⁾  These items are included in the computation of net periodic benefit cost (credit) related to our pension and OPEB plans summarized in Note 16, “Pension and Other Postretirement Benefit Plans.”

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Notes to Consolidated Financial Statements

Note 8. Net Income (Loss) Per Share

The reconciliation of the basic and diluted net income (loss) per share for the years ended December 31, 2021, 2020 and 2019, was as follows:

(In millions, except per share amounts)	2021		2020		2019
Numerator:
Net income (loss) attributable to Resolute Forest Products Inc.	$	307	$	10	$	(47	)
Denominator:
Weighted-average number of Resolute Forest Products Inc. common shares outstanding		79.5		86.1		91.4
Dilutive impact of nonvested stock unit awards and stock options		0.8		0.3		—
Diluted weighted-average number of Resolute Forest Products Inc. common shares outstanding		80.3		86.4		91.4
Net income (loss) per share attributable to Resolute Forest Products Inc. common shareholders:
Basic	$	3.87	$	0.12	$	(0.51	)
Diluted	$	3.83	$	0.12	$	(0.51	)

The weighted-average number of outstanding stock options and nonvested equity-classified RSUs, DSUs and PSUs (collectively, “stock unit awards”) that were excluded from the calculation of diluted net income (loss) per share, as their impact would have been antidilutive, for the years ended December 31, 2021, 2020 and 2019, was as follows:

(In millions)	2021		2020		2019
Stock options		0.4		0.9		1.0
Stock unit awards		—		0.6		2.1

Note 9. Inventories, Net

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

(In millions)	2021		2020
Raw materials	$	159	$	132
Work in process		57		46
Finished goods		148		120
Mill stores and other supplies		146		164
	$	510	$	462

In 2021, we recorded charges of $29 million for write-downs of mill stores and other supplies principally, due to the announcement on December 16, 2021, of the indefinite idling of pulp and paper operations at the Calhoun mill.

In 2020, we recorded charges of $25 million for write-downs of mill stores and other supplies due to the temporary idling of the Amos and Baie-Comeau paper mills. The mills were indefinitely idled in March 2021.

In 2019, we recorded charges of $13 million for write-downs of mill stores and other supplies due to the indefinite idling of the Augusta paper mill.

These charges were included in “Cost of sales, excluding depreciation, amortization and distribution costs” in our Consolidated Statements of Operations.

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Notes to Consolidated Financial Statements

Note 10. Fixed Assets, Net

Fixed assets, net as of December 31, 2021 and 2020, were comprised of the following:

(Dollars in millions)	Estimated Useful Lives (Years)		2021			2020
Land and land improvements		5 – 20	$	51		$	52
Buildings		10 – 40		334			328
Machinery and equipment (1)		2 – 25		2,127			2,128
Hydroelectric power plants		10 – 40		301			301
Timberlands, and timberlands improvements and roads		10 – 20		142			136
Construction in progress				67			100
				3,022			3,045
Less: Accumulated depreciation				(1,752	)		(1,604	)
			$	1,270		$	1,441

⁽¹⁾  Internal-use software included in fixed assets, net as of December 31, 2021 and 2020, was as follows:

(In millions)	2021			2020
Machinery and equipment	$	128		$	124
Less: Accumulated depreciation		(104	)		(90	)
	$	24		$	34

Depreciation expense related to internal-use software is estimated to be $11 million in 2022, $6 million in 2023, $3 million in 2024, $2 million in 2025 and $2 million in 2026.

We recorded an impairment charge of $124 million for the year ended December 31, 2021, as a result of the announcement on December 16, 2021, of the indefinite idling of pulp and paper operations at the Calhoun mill. We also recorded accelerated depreciation of $38 million for the Amos and Baie-Comeau paper mills for the year ended December 31, 2020. See Note 5, “Closure Costs, Impairment and Other Related Charges” for more information.

Depreciation expense related to fixed assets was $158 million, $163 million and $164 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Note 11. Amortizable Intangible Assets, Net

Amortizable intangible assets, net as of December 31, 2021 and 2020, were comprised of the following:

			2021						2020
(Dollars in millions)	Estimated Useful Lives (Years)		Gross Carrying Value		Accumulated Amortization		Net		Gross Carrying Value		Accumulated Amortization		Net
Water rights (1)		10 – 40	$	19	$	10	$	9	$	19	$	9	$	10
Energy contracts		15 – 25		52		23		29		52		21		31
Customer relationships (2)		10		21		4		17		23		3		20
Other				2		—		2		2		—		2
			$	94	$	37	$	57	$	96	$	33	$	63

⁽¹⁾  In order to operate our hydroelectric generation and transmission network, we draw water from various rivers in Quebec. For some of our facilities, the use of such government-owned waters is governed by water power agreements with the province of Quebec, which set out the terms, conditions, and fees (as applicable). In some cases, the agreements are contingent on the continued operation of the related paper mills and a minimum level of capital spending in the region. For our other facilities, the right to generate hydroelectricity stems from our ownership of the riverbed on which these facilities are located.

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Notes to Consolidated Financial Statements

⁽²⁾  In connection with our acquisition of the U.S. Sawmill Business, we identified amortizable intangible assets primarily related to customer relationships. See Note 3, “Business Acquisition” for additional information.

Amortization expense related to amortizable intangible assets was $6 million, $6 million and $3 million for the years ended December 31, 2021, 2020 and 2019, respectively. Amortization expense related to amortizable intangible assets is estimated to be $5 million per year for 2022, 2023, 2024 and 2025, and $4 million for 2026.

Note 12. Operating Leases

We have operating leases for buildings, machinery, chemical equipment, rail cars, and office equipment with remaining terms of less than one year to 21 years. These leases may include renewal options for up to 15 years.

The components of lease expense for the years ended December 31, 2021, 2020 and 2019 were as follows:

(In millions)	2021		2020		2019
Operating lease cost	$	13	$	13	$	13
Variable lease cost (1)	$	20	$	20	$	21

⁽¹⁾  Variable lease cost is determined by the consumption of the underlying asset.

Supplemental information related to operating leases was as follows:

	December 31, 2021			December 31, 2020
Weighted-average remaining operating lease term (in years)		11.8			10.8
Weighted-average operating lease discount rate		3.8	%		4.6	%

	Years ended December 31,
(In millions)	2021		2020		2019
Operating cash flow payments for operating lease liabilities	$	11	$	12	$	11
Operating lease right-of-use assets obtained in exchange for operating lease liabilities	$	3	$	8	$	4

The maturities of operating lease liabilities as of December 31, 2021, were as follows:

(In millions)	Operating Leases
2022	$	10
2023		8
2024		7
2025		7
2026		6
2027 and thereafter		36
Total lease payments		74
Less: imputed interest		15
Total operating lease liabilities	$	59

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Notes to Consolidated Financial Statements

Note 13. Other Assets

Other assets as of December 31, 2021 and 2020, were comprised of the following:

(In millions)	2021		2020
Countervailing duty cash deposits on softwood lumber (1)	$	339	$	194
Anti-dumping duty cash deposits on softwood lumber (1)		58		49
Equity method investments		22		14
Restricted cash		40		42
Other		25		21
	$	484	$	320

⁽¹⁾  See Note 18, “Commitments and Contingencies” for more information.

Note 14. Accounts Payable and Other

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

(In millions)	2021		2020
Trade accounts payable	$	262	$	251
Accrued compensation		89		76
Accrued interest		6		4
Pension and other postretirement benefit obligations		14		14
Accrued provision related to Fibrek litigation (Note 18)		21		—
Income and other taxes payable		4		5
Other		25		19
	$	421	$	369

Note 15. Long-Term Debt

Overview

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

(In millions)	2021			2020
4.875% senior unsecured notes due 2026:
Principal amount	$	300		$	—
Deferred financing costs		(5	)		—
Total 4.875% senior unsecured notes due 2026		295			—
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		6			9
Other debt		1			—
Total debt		302			561
Less: Current portion of finance lease obligations and other debt		(2	)		(2	)
Long-term debt, net of current portion	$	300		$	559

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Notes to Consolidated Financial Statements

Debt instruments

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 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 $306 million as of December 31, 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 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 notes, resulting in an effective interest rate of 6%. Interest on the notes was payable semi-annually beginning November 15, 2013. In connection with the issuance of the 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. As a result of the repurchase, we recorded a net loss on extinguishment of debt of $3 million in “Other expense, net” in our Consolidated Statement of Operations for the year ended December 31, 2019.

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 outstanding $375 million aggregate principal amount of our 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 expense, net” in our Consolidated Statement of Operations for the year ended December 31, 2021.

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Notes to Consolidated Financial Statements

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

Senior Secured Credit Facility

On September 7, 2016, we entered into a senior secured credit facility for up to $185 million. This senior secured credit facility provided a term loan of $46 million with a maturity date of September 7, 2025, and a revolving credit facility of up to $139 million with a maturity date of September 7, 2022. On October 28, 2019, we entered into an amended and restated senior secured credit facility for up to $360 million, replacing our existing $185 million senior secured credit facility. The senior secured credit facility provided 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, and a six-year revolving credit facility of up to $180 million with a maturity date of October 28, 2025. On October 28, 2019, we repaid our $46 million term loan by borrowing under the revolving credit facility. In March 2020, we borrowed $180 million in term loans under the term loan facility 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 borrowings under the Revolving Credit Facility and cash on hand. The amendment then reinstated the full amount of the Term Loan Facility. There is also an uncommitted option to increase the Senior Secured Credit Facility by up to an additional $360 million, subject to certain terms and conditions.

The obligations under the Senior Secured Credit Facility are guaranteed by certain material U.S. subsidiaries of the Company and are secured by a first priority lien on assets of our Calhoun 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, at the Company’s election, bear interest at a fixed rate based on the administrative agent’s cost of funds plus a spread. The Senior Secured Credit Facility also contains hardwired benchmark replacement provisions for future transition of LIBOR. The applicable spread over the index fluctuates quarterly based upon a) the Company’s capitalization ratio and b) in the case of loans under the Term Loan Facility, the maturity date of such loan. 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 loans, and from 1.7% to 2.1% for fixed rate loans. For loans under 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 loans. The Senior Secured Credit Facility was issued by a syndicate of lenders within the farm credit system and is eligible for patronage refunds. Patronage refunds are distributions of profits from lenders in the farm credit system, which are cooperatives that are required to distribute profits to their members. Patronage distributions, which are made in either cash or stock, are received in the year after they were earned. Future refunds are dependent on future farm credit lender profits, made at the discretion of each farm credit lender.

In addition to paying interest on outstanding principal under the Senior Secured Credit Facility, we are required to pay a fee in respect of unutilized commitments based on the average daily utilization for the prior fiscal quarter ranging from 0.275% to 0.325% per annum under the Revolving Credit Facility and ranging from 0.25% to 0.35% for the Term Loan Facility during the delay draw period.

The outstanding principal balance of each term loan made under the Term Loan Facility will be subject to annual amortization payments of 5% of the initial principal amount of such term loan commencing on the fifth anniversary of each term loan’s draw date with the balance due at maturity. Principal amounts outstanding under the Revolving Credit Facility will be due and payable on April 19, 2027. Loans under the Revolving Credit Facility and the Term Loan Facility may be prepaid from time to time at our discretion without premium or penalty but subject to breakage costs, if any, in the case of LIBOR rate loans and fixed rate loans. Amounts repaid on the Term Loan Facility may not be subsequently re-borrowed. Principal amounts under the Revolving Credit Facility may be drawn, repaid, and redrawn until maturity. The Company is required to make a prepayment of 100% of the net cash proceeds in excess of $25 million in aggregate in any fiscal year from the sale or loss of any collateral, subject to certain exceptions and certain reinvestment rights.

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Notes to Consolidated Financial Statements

Pursuant to the Senior Secured Credit Facility, we are also required to maintain (i) a capitalization ratio not greater than 45% at all times; (ii) a collateral coverage ratio of not less than 1.8:1.0; and (iii) a springing consolidated fixed charge coverage ratio of 1.0:1.0, which is triggered only when adjusted availability under the ABL Credit Facility falls below the greater of $45 million or 10% of the maximum available borrowing amount under the ABL Credit Facility for two consecutive business days. The consolidated fixed charge coverage ratio is the ratio of (a) consolidated EBITDA less certain capital expenditures and less cash taxes paid, to (b) consolidated fixed charges, as determined under the Senior Secured Credit Facility.

In addition, the Senior Secured Credit Facility contains certain covenants applicable to the Company and its subsidiaries, including, among others: (i) requirements to deliver financial statements, other reports and notices; (ii) restrictions on the existence or incurrence and repayment of indebtedness; (iii) restrictions on the existence or incurrence of liens; (iv) restrictions on the Company and certain of its subsidiaries making certain restricted payments; (v) restrictions on making certain investments; (vi) restrictions on certain mergers, consolidations, and asset dispositions; (vii) restrictions on transactions with affiliates; and (viii) restrictions on modifications to material indebtedness. The Senior Secured Credit Facility includes customary representations, warranties and events of default subject to customary grace periods and notice requirements.

As of December 31, 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. As of December 31, 2020, we had $180 million of availability under the Revolving Credit Facility, which was undrawn. The fair value of the Term Loan Facility (Level 2) approximated its carrying value as of December 31, 2020, and was bearing interest at LIBOR plus a spread of 2.13%.

ABL Credit Facility

On May 14, 2019, we entered into an amendment to the five-year credit agreement dated May 22, 2015, for a senior secured asset-based revolving credit facility (or, “ABL Credit Facility”). The amended credit agreement provided for an extension of the maturity date to May 14, 2024, with an aggregate lender commitment of up to $500 million at any time outstanding, subject to borrowing base availability based on specified advance rates, eligibility criteria and customary reserves.

Effective January 21, 2021, we reduced the commitment under the Canadian tranche of our senior secured asset-based revolving credit facility by $50 million, to $250 million, resulting in an aggregate commitment of $450 million, subject to borrowing base limitations.

On December 15, 2021, we entered into a fourth amendment to the credit agreement dated May 22, 2015, which reset the facility and extended the maturity date to December 15, 2026. The agreement also contains hardwired benchmark replacement provisions for future transition of LIBOR. After the effective date, the ABL Credit Facility agreement may be amended based on agreed upon Environmental, Social and Governance (or, “ESG”) key performance indicators (or, “KPIs”) as described in the credit agreement. The ESG amendment, which requires the consent of each Lender, may provide for an increase or decrease of up to 0.05% on the applicable margin under the facility, or no adjustment, as well as an increase or decrease of up to 0.01%, or no adjustment, to the applicable unutilized commitment fee, subject to the Company’s performance on such KPIs.

The aggregate lender commitment under the facility includes a $60 million swingline sub-facility and a $200 million letter of credit sub-facility, and we may convert up to $50 million of the commitments under the facility to a first-in last-out facility (or, “FILO Facility”), subject to the consent of each converting lender. The ABL Credit Facility also provides for an uncommitted ability to increase the revolving credit facility by up to $500 million, subject to certain terms and conditions set forth in the agreement.

Availability under the facility is subject to a borrowing base, which at any time is equal to the sum of (i) 85% of eligible accounts receivable (or 90% with respect to certain insured or letter of credit backed accounts or with accounts owed by investment grade obligors), plus (ii) the lesser of (A) 70% of the lesser of the cost or market value of eligible inventory or (B) 85% of the net orderly liquidation value of eligible inventory, plus (iii) 100% of the value of eligible cash and 95% of the value of permitted investments held in deposit accounts controlled solely by the administrative and collateral agent (or, the “agent”). The credit agreement includes reserves that reduce the borrowing base, including a reserve commencing December 31, 2025, for the outstanding principal amount due under the 2026 Notes. The borrowing base is subject to other customary reserves and eligibility criteria, in the exercise of the agent’s reasonable discretion.

The obligations under the credit agreement are guaranteed by certain material subsidiaries of the Company and are secured by first priority liens on and security interests in accounts receivable, inventory and related assets.

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Notes to Consolidated Financial Statements

Loans under the credit agreement bear interest at a rate equal to, at the Borrower’s option, U.S. base rate, Canadian base rate, LIBOR or Canadian Dollar Offered Rate (or, “CDOR”), in each case plus an applicable margin. The applicable margin is between 0.00% and 0.50% with respect to the base rate loans and between 1.00% and 1.50% with respect to LIBOR loans and CDOR loans, in each case, adjusted quarterly based on the average availability under the credit facility and whether the Company is in compliance with a leverage ratio of 1.75:1.00.

In addition to paying interest on outstanding principal under the ABL Credit Facility, we are required to pay a fee in respect of unutilized commitments under the ABL Credit Facility equal to 0.25% per annum, as well as a fee in respect of outstanding letters of credit (equal to the applicable margin in respect of LIBOR and CDOR loans plus a fronting fee of 0.125% and certain administrative fees).

Loans under the ABL Credit Facility may be repaid from time to time at our discretion without premium or penalty, with the exception of breakage costs for LIBOR and CDOR loans, if any. However, no loans under the FILO Facility can be repaid unless all other loans under the credit agreement are repaid first. We are required to repay outstanding loans that exceed the maximum availability then in effect.

The credit agreement contains customary covenants for asset-based credit agreements of this type, including, among other things: (i) requirements to deliver financial statements, other reports and notices; (ii) restrictions on the existence or incurrence and repayment of indebtedness by the Company and its subsidiaries; (iii) restrictions on the existence or incurrence of liens by the Company and its subsidiaries; (iv) restrictions on the Company and certain of its subsidiaries making certain restricted payments; (v) restrictions on the Company and certain of its subsidiaries making certain investments; (vi) restrictions on certain mergers, consolidations and asset dispositions; (vii) restrictions on transactions with affiliates; (viii) restrictions on amendments or modifications to the Canadian pension and benefit plans; (ix) restrictions on modifications to material indebtedness; and (x) a springing requirement for the Company to maintain a minimum consolidated fixed charge coverage ratio, as determined under the credit agreement, of 1.0:1.0, anytime adjusted availability under the facility falls below the greater of $40 million or 10% of the maximum available borrowing amount for two consecutive business days. Subject to customary grace periods and notice requirements, the credit agreement also contains certain customary events of default.

As of December 31, 2021, we had $307 million of availability under the ABL Credit Facility, which was undrawn except for $73 million of ordinary course letters of credit outstanding, of which $53 million are to guarantee surety bonds of $83 million related to the U.S. softwood lumber cash deposits. As of December 31, 2020, we had $270 million of availability under the ABL Credit Facility, which was undrawn except for $56 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 ($174 million as of December 31, 2021), subject to borrowing base availability based on 75% of the countervailing and anti-dumping duty deposits (or, the “Duties”) imposed by the U.S. Department of Commerce and collected by Customs and Border Protection Agency (or, “U.S. Customs”) 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 outstanding principal will be repaid in consecutive monthly installments over a period of eight years, after an interest only period of two years from the date of the first draw. Outstanding amounts may be prepaid, partially or fully, at any time at our discretion, without premium or penalty, but subject to payment of accrued and unpaid interest. We are required to make a prepayment equal to any amounts reimbursed by U.S. Customs on account of the U.S. imports of certain softwood lumber products produced at our sawmills located in the province of Quebec, Canada (or, the “Quebec Prepayments”).

The obligations under the Loan Facility are secured by a first priority security interest and a control agreement on certain of our bank accounts identified to receive any Quebec Prepayments. In addition, we have agreed to transfer to the designated bank accounts any amounts constituting Quebec Prepayments, and may not grant any other security interest on such bank accounts. The Loan Facility is required to be used exclusively to finance certain of our activities and obligations in the province of Quebec, Canada, and may not be used to pay or reimburse any Duties.

The borrowings under the Loan Facility bear interest at a floating rate equal to 1.45% above the one-month Canadian banker’s acceptance rate. Interest will be payable on a monthly basis.

The Loan Facility provides for a maximum of ten draws and the fulfillment of certain conditions upon each draw. We are required to pay a fee of 0.5% of the amounts drawn at the time of each draw.

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Notes to Consolidated Financial Statements

The Loan Facility contains certain covenants, including, among others, a requirement that we do not move a substantial part of its assets outside the province of Quebec. The Lender reserves the right to terminate the Loan Facility in the event that we have not made any draw before June 30, 2023, subject to certain conditions. The Lender reserves the right to accelerate any outstanding amounts within 60 days of receiving notification of certain change of control events affecting us, if the Lender deems the transaction not to be in its best interest, acting reasonably.

As of December 31, 2021, we had C$220 million (approximately $174 million) of availability under the Loan Facility, which was undrawn. As of December 31, 2020, we had C$165 million (approximately $130 million) of availability under the Loan Facility, which was undrawn.

Finance lease obligations

We have finance lease obligations for machinery with maturity dates up to June 2025, and a warehouse with a maturity date of December 1, 2027, which can be renewed for 20 years at our option. Minimum monthly payments are determined by an escalatory price clause.

Debt maturities

The aggregate maturities of long-term debt as of December 31, 2021, were as follows:

(In millions)	Long-term debt
2022	$	2
2023		1
2024		1
2025		1
2026		296
2027		1
	$	302

Assets pledged as collateral

The carrying value of assets pledged as collateral for our total debt obligations was $1,194 million as of December 31, 2021.

Note 16. Pension and Other Postretirement Benefit Plans

We have a number of defined contribution plans covering a portion of our U.S. and Canadian employees. Under the U.S. qualified defined contribution plan, employees are allowed to make contributions that we match, and most employees also receive an automatic company contribution, regardless of the employee’s contribution. The amount of the automatic company contribution, in most instances, is a percentage of the employee’s pay, determined based on age and years of service. The Canadian registered defined contribution plans provide for mandatory contributions by employees and by us, as well as opportunities for employees to make additional optional contributions and receive, in most cases, matching contributions on those optional amounts. Our expense for the defined contribution plans totaled $18 million in 2021, $17 million in 2020 and $18 million in 2019.

We also have multiple contributory and non-contributory defined benefit pension plans covering a portion of our U.S. and Canadian employees. Benefits are based on years of service and, depending on the plan, average compensation earned by employees either during their last years of employment or over their careers. Our plan assets and cash contributions to the plans have been sufficient to provide pension benefits to participants and meet the funding requirements of the Employee Retirement Income Security Act of 1974 in the U.S. as well as applicable legislation in Canada. We also sponsor a number of OPEB plans (e.g., health care and life insurance plans) for retirees at certain locations.

Certain of the above plans are covered under collective bargaining agreements.

In December 2020, the pension plan of the Thorold paper mill, which was indefinitely idled in 2017 and sold in 2020, was wound-up following the approval of the pension benefits distribution and assets liquidation. This resulted in the conversion of the buy-in annuity contract to a buy-out contract, and the recognition of a settlement loss of $28 million in “Non-operating pension and other postretirement benefit credits” in our Consolidated Statements of Operations for the year ended December 31, 2020, and the reduction of both pension plan assets and pension benefit obligations by $98 million as of December 31, 2020.

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Notes to Consolidated Financial Statements

The following tables include both our foreign (Canada) and domestic plans. The assumptions used to measure the obligations of each of our foreign and domestic plans are not significantly different from each other, with the exception of the health care trend rates, which are presented below.

The changes in our pension and OPEB benefit obligations and plan assets for the years ended December 31, 2021 and 2020, and the funded status and reconciliation of amounts recognized in our Consolidated Balance Sheets as of December 31, 2021 and 2020, were as follows:

	Pension Plans						OPEB Plans
(In millions)	2021			2020			2021			2020
Change in benefit obligations:
Benefit obligations as of beginning of year	$	5,246		$	5,188		$	136		$	147
Service cost		16			14			1			1
Interest cost		133			151			3			4
Actuarial (gain) loss		(168	)		265			(7	)		(6	)
Participant contributions		6			7			2			2
Special termination benefits		—			3			—			—
Curtailments		(7	)		(2	)		(1	)		(1	)
Settlements		(15	)		(118	)		—			—
Benefits paid		(345	)		(341	)		(13	)		(13	)
Effect of foreign currency exchange rate changes		31			79			1			2
Benefit obligations as of end of year		4,897			5,246			122			136
Change in plan assets:
Fair value of plan assets as of beginning of year		3,806			3,862			—			—
Actual return on plan assets		296			241			—			—
Employer contributions		86			91			11			11
Participant contributions		6			7			2			2
Settlements		(15	)		(118	)		—			—
Benefits paid		(345	)		(341	)		(13	)		(13	)
Effect of foreign currency exchange rate changes		22			64			—			—
Fair value of plan assets as of end of year		3,856			3,806			—			—
Funded status as of end of year	$	(1,041	)	$	(1,440	)	$	(122	)	$	(136	)
Amounts recognized in our Consolidated Balance Sheets consisted of:
Other assets	$	2		$	—		$	—		$	—
Accounts payable and other		(3	)		(3	)		(11	)		(11	)
Pension and OPEB obligations		(1,040	)		(1,437	)		(111	)		(125	)
Net obligations recognized	$	(1,041	)	$	(1,440	)	$	(122	)	$	(136	)

The total benefit obligations and the total fair value of plan assets for pension plans with benefit obligations in excess of plan assets were $4,612 million and $3,570 million, respectively, as of December 31, 2021, and were $5,067 million and $3,627 million, respectively, as of December 31, 2020. The total accumulated benefit obligations and the total fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets were $4,588 million and $3,570 million, respectively, as of December 31, 2021, and were $5,034 million and $3,627 million, respectively, as of December 31, 2020. The total accumulated benefit obligations for all pension plans were $4,873 million and $5,212 million as of December 31, 2021 and 2020, respectively.

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Notes to Consolidated Financial Statements

The actuarial gains and losses impacting the benefit obligations for our pension and OPEB plans in 2021 are primarily due to changes in the economic environment, which resulted in an increase to the discount rates selected for the plans as of December 31, 2021, compared to December 31, 2020. The actuarial gains and losses impacting the benefit obligations for our pension and OPEB plans in 2020 were primarily due to changes in the economic environment, which resulted in a decrease to the discount rates selected for the plans as of December 31, 2020, compared to December 31, 2019.

Components of net periodic benefit cost (credit)

The components of net periodic benefit cost (credit) relating to our pension and OPEB plans for the years ended December 31, 2021, 2020 and 2019, were as follows:

	Pension Plans									OPEB Plans
(In millions)	2021			2020			2019			2021			2020			2019
Interest cost	$	133		$	151		$	181		$	3		$	4		$	6
Expected return on plan assets		(215	)		(226	)		(251	)		—			—			—
Amortization of prior service costs (credits)		1			—			—			(4	)		(4	)		(11	)
Amortization of actuarial losses (gains)		78			63			34			(6	)		(6	)		(6	)
Non-operating credits		(3	)		(12	)		(36	)		(7	)		(6	)		(11	)
Service cost		16			14			15			1			1			—
Net periodic benefit costs (credits) before special events		13			2			(21	)		(6	)		(5	)		(11	)
Curtailments, settlements and other (gains) losses (1)		(1	)		32			—			—			(14	)		—
	$	12		$	34		$	(21	)	$	(6	)	$	(19	)	$	(11	)

⁽¹⁾  Includes a settlement loss of $28 million for the year ended December 31, 2020, resulting from the wind-up of the Thorold pension plan.

The prior service costs (credits) and the actuarial gains and losses are amortized to “Non-operating pension and other postretirement benefit credits” in our Consolidated Statements of Operations, over the expected average remaining service lifetime or the average future lifetime, as applicable, of the respective plans.

Assumptions used to determine benefit obligations and net periodic benefit costs (credits)

The weighted-average assumptions used to determine the benefit obligations at the measurement dates (each December 31) and the net periodic benefit costs (credits) for the years ended December 31, 2021, 2020 and 2019, were as follows:

	Pension Plans									OPEB Plans
	2021			2020			2019			2021			2020			2019
Benefit obligations:
Discount rate		2.8	%		2.5	%		3.0	%		2.9	%		2.5	%		3.1	%
Rate of compensation increase		2.1	%		2.1	%		2.1	%
Net periodic benefit cost (credit):
Discount rate		2.5	%		3.0	%		3.8	%		2.5	%		3.1	%		3.9	%
Expected return on assets		5.7	%		6.0	%		6.5	%
Rate of compensation increase		2.1	%		2.1	%		2.1	%

The discount rate for our domestic and foreign plans was determined with a model that develops a hypothetical high-quality bond portfolio, where the bonds are theoretically purchased to settle the expected benefit payments of the plans. The discount rate reflects the single rate that produces the same discounted values as the value of the theoretical bond portfolio. In determining the expected return on assets, we considered the historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of the pension portfolio. In determining the rate of compensation increase, we reviewed historical salary increases and promotions, while considering current industry conditions, the terms of collective bargaining agreements with our employees, and the outlook for our industry. In determining the life expectancy rate of our domestic and foreign plans, we used the most recent actuarially-determined mortality tables and improvement scales. For the foreign plans, the mortality tables were adjusted with the result of our historical mortality experience study. The rates used are consistent with our future expectations of life expectancy for the employees who participate in our pension and OPEB plans.

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Notes to Consolidated Financial Statements

The assumed health care cost trend rates used to determine the benefit obligations for our domestic and foreign OPEB plans as of December 31, 2021 and 2020, were as follows:

	2021						2020
	Domestic Plan			Foreign Plans			Domestic Plan			Foreign Plans
Health care cost trend rate assumed for next year		7.0	%		4.8	%		7.2	%		4.8	%
Rate to which the cost trend rate is assumed to decline (ultimate trend rate)		4.5	%		4.5	%		4.5	%		4.5	%
Year that the rate reaches the ultimate trend rate		2033			2033			2033			2033

For the health care cost trend rates, we considered historical trends for these costs, actual experience of the plans, as well as future expectations.

Fair value of plan assets

The fair value of plan assets held by our pension plans as of December 31, 2021, was as follows:

(In millions)	Total			Level 1		Level 2			Level 3
Equity securities:
U.S. companies	$	646		$	646	$	—		$	—
Non-U.S. companies		872			872		—			—
Debt securities:
Corporate and government securities		1,197			29		1,168			—
Asset-backed securities		87			—		87			—
Cash and cash equivalents		117			117		—			—
Certain insurance contracts (1)		314			—		—			314
Other plan assets, net		(4	)		—		(4	)		—
Total before investments measured at NAV	$	3,229		$	1,664	$	1,251		$	314
Investments measured at NAV		627
	$	3,856

⁽¹⁾  The Level 3 plan assets were purchased during the year ended December 31, 2021. There were no Level 3 plan asset balances during the year ended December 31, 2020.

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Notes to Consolidated Financial Statements

The fair value of plan assets held by our pension plans as of December 31, 2020, was as follows:

(In millions)	Total		Level 1		Level 2		Level 3
Equity securities:
U.S. companies	$	737	$	737	$	—	$	—
Non-U.S. companies		1,197		1,197		—		—
Debt securities:
Corporate and government securities		1,086		36		1,050		—
Asset-backed securities		148		—		148		—
Cash and cash equivalents		179		179		—		—
Other plan assets, net		9		—		9		—
Total before investments measured at NAV	$	3,356	$	2,149	$	1,207	$	—
Investments measured at NAV		450
	$	3,806

Equity securities include large-cap, mid-cap and small-cap publicly-traded companies mainly located in the U.S., Canada and other developed and emerging countries, as well as commingled equity funds invested in the same types of securities. The fair value of the equity securities is determined based on quoted market prices (Level 1).

Debt securities include corporate bonds of U.S. and Canadian companies from diversified industries, bonds and Treasuries issued by the U.S. government and the Canadian federal and provincial governments, asset-backed securities and commingled fixed income funds invested in these same types of securities. The fair value of the debt securities is determined based on quoted market prices (Level 1), and market-corroborated inputs such as matrix prices, yield curves and indices (Level 2).

Certain insurance contracts include group contracts that have been purchased to cover a portion of the plan members. The fair value of annuity buy-in contracts changes based on fluctuations in the obligation associated with the covered plan members (Level 3).

Other plan assets, net, include accrued interest and dividends, and amounts receivable or payable for unsettled security transactions. The fair value of accrued interest and dividends is determined based on market-corroborated inputs such as declared dividends and stated interest rates (Level 2). The fair value of receivables and payables for unsettled security transactions is determined based on market-corroborated inputs such as the trade date fair value of the security (Level 2).

Investments measured at NAV are excluded from the fair value hierarchy tables. These investments are commingled funds, composed of either debt securities, equity securities or real estate investments, where the corresponding NAV per share is equal to the total net assets divided by the total number of shares.

Long-term strategy and objective

Our investment strategy and objective is to maximize the long-term rate of return on our plan assets within an acceptable level of risk in order to meet our current and future obligations to pay benefits to qualifying employees and their beneficiaries while minimizing and stabilizing pension benefit costs and contributions. Diversification of assets is achieved through strategic allocations to various asset classes, and by retaining multiple, experienced third-party investment management firms with complementary investment styles and philosophies to implement these allocations. Risk is further managed by reviewing our investment policies at least annually and monitoring our fund managers at least quarterly for compliance with mandates and performance measures. A series of permitted and prohibited investments are listed in our respective investment policies, which are provided to our fund managers. The use of derivative financial instruments for speculative purposes and investments in the equity or debt securities of Resolute and its affiliates is prohibited.

We have established a target asset allocation policy and ranges for each participating defined benefit pension plan based upon analysis of risk and return tradeoffs and correlations of asset mixes given long-term historical returns, prospective capital market returns, forecasted benefit payments and the forecasted timing of those payments. The targeted asset allocation policy of the plan assets is designed to hedge the change in the pension liabilities resulting from fluctuations in the discount rate by investing in debt and other securities, while also generating excess returns required to reduce the unfunded pension deficit by investing in equity securities with higher potential returns. Real assets (infrastructure and real estate) are also used to diversify the assets and improve the risk-return profile of the plans. The targeted asset allocation policy of each participating defined

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RESOLUTE FOREST PRODUCTS INC.

Notes to Consolidated Financial Statements

benefit pension plan is 45% equity securities, 10% real assets, and 45% debt and other fixed income securities, including up to 5% in short-term instruments required for near-term liquidity needs. Equities have an allowable range of 25% to 55%, real assets have an allowable range of 0% to 15%, while debt securities have an allowable range of 35% to 65%. Approximately 60% of the equity securities are targeted to be invested in the U.S. and Canada, with the balance in other developed and emerging countries. Substantially all of the debt securities are targeted to be invested in the U.S. and Canada. The asset allocation for each participating defined benefit pension plan is reviewed periodically and, when necessary, rebalanced to bring the asset allocation within the prescribed ranges.

Expected benefit payments and future contributions

As of December 31, 2021, benefit payments expected to be paid over the next 10 years are as follows:

(In millions)	Pension Plans (1)		OPEB Plans
2022	$	347	$	11
2023	$	330	$	10
2024	$	323	$	10
2025	$	316	$	9
2026	$	308	$	9
2027 - 2031	$	1,425	$	38

⁽¹⁾  Benefit payments are expected to be paid from the plans’ net assets.

We expect our 2022 pension contributions (excluding contributions to our defined contribution plans) to be approximately $77 million.

U.S. pension funding

The funding of our U.S. pension plan is governed by the Employee Retirement Income Security Act of 1974, as amended, and the Internal Revenue Code, and is also subject to the Moving Ahead for Progress in the 21st Century Act, the American Rescue Plan Act of 2021 and the Infrastructure Investment and Jobs Act of 2021. Under these regulations, the liabilities are discounted using 25-year average corporate bond rates within a specified corridor. During 2021, regulations were modified to implement a minimum 5% floor on the 25-year average corporate bond rates and to maintain the corridor at 5% through 2030 and then to gradually increase the corridor by 5% each year until it reaches 30% for 2035 and beyond. Under current regulations, funding shortfall is amortized over 15 years for purposes of determining minimum contribution requirements.

Canadian pension funding

Quebec plans

The funding of our Quebec pension plans is subject to Quebec’s Supplemental Pension Plans Act (or, the “SPPA”), which is the pension plan funding regime generally applicable to pension plans in that province. Our contributions to our Quebec plans are determined on a going concern basis under the Quebec’s SPPA.

Ontario plans

The funding of our Ontario pension plans is subject to the Ontario Pension Benefits Act (or, the “PBA”), which is the pension plan funding regime generally applicable to pension plans in that province. The PBA provides for funding pension fund deficits on a going concern basis, or on a solvency basis if the solvency funded status of a pension plan is below 85%.

Additional undertakings

Our principal Canadian subsidiaries had entered into certain undertakings with the Governments of Ontario and Quebec, which expired in 2015 and 2016, respectively. The expiration of those undertakings did not eliminate ongoing obligations we incurred under the terms of those undertakings prior to their expiration, including the undertaking requiring us to make an additional solvency deficit reduction contribution to our pension plans of C$75, payable over four years, for each metric ton of capacity reduced in Quebec or Ontario, in the event of downtime of more than six consecutive months or nine cumulative months over a period of 18 months. Accordingly, we made additional contributions for past capacity reductions of C$4 million and C$2 million in 2019 and 2020, respectively. The 2020 contribution was the last one required to be made.

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Notes to Consolidated Financial Statements

Note 17. Income Taxes

(Loss) income before income taxes by taxing jurisdiction for the years ended December 31, 2021, 2020 and 2019, was as follows:

(In millions)	2021			2020			2019
U.S.	$	(229	)	$	(126	)	$	(205	)
Foreign		733			187			216
	$	504		$	61		$	11

The income tax provision for the years ended December 31, 2021, 2020 and 2019, was comprised of the following:

(In millions)	2021			2020			2019
U.S. Federal and State:
Current	$	(3	)	$	—		$	—
Deferred		—			—			—
		(3	)		—			—
Foreign:
Current		—			—			—
Deferred		(192	)		(51	)		(58	)
		(192	)		(51	)		(58	)
Total:
Current		(3	)		—			—
Deferred		(192	)		(51	)		(58	)
	$	(195	)	$	(51	)	$	(58	)

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RESOLUTE FOREST PRODUCTS INC.

Notes to Consolidated Financial Statements

Effective income tax rate reconciliation

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 years ended December 31, 2021, 2020 and 2019, as a result of the following:

(In millions)	2021			2020			2019
Income before income taxes	$	504		$	61		$	11
Income tax provision:
Expected income tax provision		(106	)		(13	)		(2	)
Changes resulting from:
Valuation allowance (1)		54			(11	)		(43	)
Foreign exchange		(3	)		(6	)		2
U.S. tax on non-U.S. earnings		(115	)		(23	)		(7	)
State income taxes, net of federal income tax benefit		10			6			7
Foreign tax rate differences		(38	)		(10	)		(11	)
Other, net (2)		3			6			(4	)
	$	(195	)	$	(51	)	$	(58	)

⁽¹⁾  During 2021, we used $54 million of deferred income tax assets that were fully reserved 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 excess of current year U.S. operating losses.

During 2020 and 2019, we recorded an increase to our valuation allowance of $11 million and $43 million, respectively, related to our U.S. operations.

⁽²⁾  During 2020, we recorded a $4 million adjustment related to the settlement of an insurance claim in connection with our acquisition of Atlas.

Deferred income taxes

At each reporting period, we assess whether it is more likely than not that the deferred income tax assets will be realized, based on the review of all available positive and negative evidence, including future reversals of existing taxable temporary differences, estimates of future taxable income, past operating results, and prudent and feasible tax planning strategies. In our evaluation process, we give the most weight to historical income or losses. The carrying value of our deferred income tax assets reflects our expected ability to generate sufficient future taxable income in certain tax jurisdictions to utilize these deferred income tax assets.

In assessing our ability to realize the deferred income tax assets of our U.S. operations, we reviewed all available evidence, including historical U.S. operating losses, the GILTI inclusion and estimates of future taxable income. Following our assessment, we concluded that the existing negative evidence outweighed the positive evidence. As a result, we recognized a full valuation allowance against our net U.S. deferred income tax assets. A valuation allowance does not reduce our underlying tax attributes, nor hinders our ability to use them in the future.

The rapidly changing dynamics in the wood products segment resulted in a significant GILTI inclusion for the year, creating U.S. taxable income. This taxable income is entirely offset by existing U.S. tax attributes included in deferred income tax assets that have been fully reserved. If current market dynamics are sustained, we could release our valuation allowance in future periods, in full or in part. This may affect our consolidated financial position and results of operations.

For Canadian operations, the positive evidence, which included a review of historical and forecasted earnings, resulted in the conclusion that no significant valuation allowances were required for our deferred income tax assets, as they were determined to be more likely than not to be realized. We continue to maintain a valuation allowance on net capital loss carryforwards of $37 million.

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Notes to Consolidated Financial Statements

Net deferred income tax assets as of December 31, 2021 and 2020, were comprised of the following:

(In millions)	2021			2020
Fixed assets	$	(33	)	$	(57	)
Operating lease right-of-use assets		(14	)		(15	)
Investment in partnership		(26	)		(20	)
Other		(8	)		(5	)
Deferred income tax liabilities		(81	)		(97	)
Fixed assets		178			297
Pension and OPEB plans		300			408
Net operating loss carryforwards and deduction limitation		572			660
Net capital loss carryforwards		41			41
Undeducted research and development expenditures		145			195
Tax credit carryforwards		99			98
Operating lease liabilities		14			15
Goodwill		27			28
Other		69			44
Deferred income tax assets		1,445			1,786
Valuation allowance		(711	)		(774	)
Net deferred income tax assets	$	653		$	915
Amounts recognized in our Consolidated Balance Sheets consisted of:
Deferred income tax assets	$	653		$	915

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RESOLUTE FOREST PRODUCTS INC.

Notes to Consolidated Financial Statements

The balance of tax attributes and their dates of expiration as of December 31, 2021, were as follows:

(In millions)	Related Deferred Income Tax Asset			Year of Expiration
Net operating loss and deduction limitation carryforwards:
U.S. federal: $1,618	$	340	(1)	2029 – 2037
U.S. federal and deduction limitation: $506		106	(1)	Indefinite
U.S. state: $2,109		107	(1)	2022 – 2041
U.S. state and deduction limitation: $253		8	(1)	Indefinite
Canadian federal and provincial (excluding Quebec): $24		4		2038
Quebec: $61		6		2028 – 2039
Other		1		Indefinite
	$	572
Net capital loss carryforwards:
U.S. federal and state: $23	$	5	(1)	2025
Canadian federal and provincial (excluding Quebec): $118		31		Indefinite
Quebec: $54		5		Indefinite
	$	41
Undeducted research and development expenditures:
Canadian federal and provincial (excluding Quebec): $400	$	69		Indefinite
Quebec: $843		76		Indefinite
	$	145
Tax credit carryforwards:
Canadian research and development, and other	$	80		2022 – 2041
U.S. state and other		19	(1)	2022 – 2036
	$	99

⁽¹⁾  As of December 31, 2021, we had a full valuation allowance against our U.S. operations net deferred income tax assets.

Our U.S. federal net operating loss carryforwards are subject to annual limitations under § 382 of the U.S. Internal Revenue Code of 1986, as amended, (or, “IRC § 382”), resulting from a previous ownership change. We do not expect that IRC § 382 would limit the utilization of our available U.S. federal net operating loss carryforwards prior to their expiration.

We consider our foreign earnings to be permanently invested. Accordingly, we do not provide for the additional U.S. and foreign income taxes that could become payable upon remittance of undistributed earnings of our foreign subsidiaries. It is not practicable to estimate the income tax liability that might be incurred if such earnings were remitted to the U.S.

Unrecognized tax benefits

The following table summarizes the activity related to our gross unrecognized tax benefits for the years ended December 31, 2021 and 2020:

(In millions)	2021			2020
Beginning of year	$	28		$	29
(Decrease) increase resulting from:
Settlements with taxing authorities		(2	)		(2	)
Positions taken in the prior period		—			1
End of year	$	26		$	28

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Notes to Consolidated Financial Statements

There are no unrecognized tax benefits that would affect the effective tax rate as of December 31, 2021.

In the normal course of business, we are subject to audits from federal, state, provincial and other tax authorities. U.S. federal tax returns for 2017 and subsequent years, as well as Canadian tax returns for 2016 and subsequent years, remain subject to examination by tax authorities.

We do not expect a significant change to the amount of unrecognized tax benefits over the next 12 months. However, any adjustments arising from certain ongoing examinations by tax authorities could alter the timing or amount of taxable income or deductions, or the allocation of income among tax jurisdictions, and these adjustments could differ from the amount accrued. We believe that taxes accrued in our Consolidated Balance Sheets fairly represent the amount of income taxes to be settled or realized in the future.

Note 18. Commitments and Contingencies

Commitments

In the normal course of business, we have entered into or renegotiated various supply agreements, water rights agreements, purchase commitments and harvesting rights agreements (for land that we manage for which we make payments to various Canadian provinces based on the amount of timber harvested).

As of December 31, 2021, these commitments were as follows:

(In millions)	Commitments (1)
2022	$	31
2023		17
2024		13
2025		17
2026		6
2027 and thereafter		21
	$	105

⁽¹⁾  Includes energy purchase obligations of $31 million through 2027 for certain of our tissue, pulp and paper mills.

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 December 31, 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 2022.

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RESOLUTE FOREST PRODUCTS INC.

Notes to Consolidated Financial Statements

Countervailing duty and anti-dumping investigations of softwood lumber

On November 25, 2016, countervailing duty and anti-dumping petitions were filed with the U.S. Department of Commerce (or, “Commerce”) and the U.S. International Trade Commission (or, “ITC”) by certain U.S. softwood lumber products producers and forest landowners, requesting that the U.S. government impose countervailing and anti-dumping duties on Canadian-origin softwood lumber products exported to the U.S. One of our subsidiaries was identified in the petitions as being a Canadian exporting producer of softwood lumber products to the U.S. and was selected as a mandatory respondent to be investigated by Commerce in both the countervailing duty and anti-dumping investigations.

Countervailing Duties – On April 24, 2017, Commerce announced its preliminary determination in the countervailing duty investigation; as a result, from April 28, 2017 to August 25, 2017, we were required to pay cash deposits to U.S. Customs at a rate of 12.82% for countervailing duties on the vast majority of our U.S. imports of Canadian-produced softwood lumber. On November 2, 2017, Commerce issued its final determination in the countervailing investigation; as a result, from December 28, 2017 to November 30, 2020, we were required to pay cash deposits to U.S. Customs at a new rate of 14.70%. On November 23, 2020, Commerce issued its final determination in the first administrative review of the countervailing investigation; as a result, from December 1, 2020 to December 1, 2021, we were required to pay cash deposits to U.S. Customs at a rate of 19.10%. On November 24, 2021, Commerce issued its final determination in the second administrative review of the countervailing investigation; as a result, since December 2, 2021, we have been required to pay cash deposits to U.S. Customs at a new rate of 18.07%. Commerce is expected to issue its final determination in the third administrative review of the countervailing investigation in the third or fourth quarters of 2022, following which a new rate will take effect for Resolute; this new rate was estimated at 15.48% in a non-binding, preliminary determination released on January 31, 2022, but is subject to modification in the upcoming final determination. Through December 31, 2021, our cash deposits totaled $339 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, from November 30, 2020 to December 1, 2021, we were required to pay cash deposits to U.S. Customs at a rate of 1.15%. On November 24, 2021, Commerce issued its final determination in the second administrative review of the anti-dumping investigation; as a result, since December 2, 2021, we have been required to pay cash deposits to U.S. Customs at a new rate of 11.59%. Commerce is expected to issue its final determination in the third administrative review of the antidumping investigation in the third or fourth quarters of 2022, following which a new rate will take effect for Resolute; this new rate was estimated at 4.76% in a non-binding, preliminary determination released on January 31, 2022, but is subject to modification in the upcoming final determination. Through December 31, 2021, our cash deposits totaled $58 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; but a panelist withdrew on October 29, 2021; the hearing in this matter was scheduled to occur in March 2022, although the proceeding has been suspended pending appointment of a substitute panelist. 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.

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RESOLUTE FOREST PRODUCTS INC.

Notes to Consolidated Financial Statements

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 its redetermination on remand that maintained the affirmative final injury determinations, and on May 22, 2020, the Panel issued its final decision and affirmed in its entirety the ITC’s injury determination on remand.

WTO Appeal – In addition, on August 24, 2020, the World Trade Organization’s (or, “WTO”) dispute panel issued a report (or, the “Panel Report”) in the case brought by the government of Canada in “United States — Countervailing Measures on Softwood Lumber from Canada” (DS533), concluding, among other things, that Commerce acted inconsistently with the Agreement on Subsidies and Countervailing Measures on most of the matters. On September 28, 2020, the United States notified the WTO’s dispute settlement body of its decision to appeal the Panel Report.

Financial assurance - We are required by U.S. Customs to provide surety bonds to secure the payment of our cash deposits. As of December 31, 2021, we had $83 million of surety bonds outstanding in favor of U.S. Customs, of which $53 million were secured by letters of credit. For more information, see Note 15, “Long-Term Debt – Debt instruments – ABL Credit Facility” to our Consolidated Financial Statements.

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 were 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 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, “Quebec Superior Court”) approving the arrangement on July 27, 2012. Certain former shareholders of Fibrek exercised rights of dissent in respect of the transaction, asking for a judicial determination of the fair value of their claim under the Canada Business Corporations Act. On September 26, 2019, the Quebec Superior Court rendered a decision fixing the fair value of the shares of the dissenting shareholders at C$1.99 per share, or C$31 million in aggregate, plus interest and an additional indemnity, for a total estimated at C$44 million payable in cash. We had previously accrued C$14 million for the payment of the dissenting shareholders’ claims. Following the court decision, we accrued an additional C$30 million ($23 million), and as a result recorded $23 million in “Other expense, net” in our Consolidated Statement of Operations for the year ended on December 31, 2019. Of the total amount of C$44 million, C$19 million ($14 million) was payable immediately and paid on October 2, 2019. The remaining balances of C$27 million ($21 million) as of December 31, 2021, and C$25 million ($20 million) as of December 31, 2020, which include interest, are recorded in “Accounts payable and other” as of December 31, 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 ($24 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 2022.

Partial wind-ups of pension plans

On June 12, 2012, we filed a motion for directives with the Quebec Superior Court, the court with jurisdiction in the creditor protection proceedings under the Companies’ Creditors Arrangement Act (Canada) (or, the “CCAA Creditor Protection 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 ($119 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 twelve months.

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Notes to Consolidated Financial Statements

Contingency gain

In 2017, we filed a lawsuit against the Government of Canada alleging that measures taken by the provincial Government of Nova Scotia and the Government of Canada damaged Resolute and its investments in Canada, in violation of the investment protections extended to foreign investors under North American Free Trade Agreement Articles 1102, 1105 and 1110. The total amount for damages claimed is substantial but the amount and timing of the ultimate recovery is uncertain. As a result, any recovery from this litigation is a gain contingency and will be recognized if, and when, realized or realizable.

Environmental matters

We are subject to a number of federal or national, state, provincial, and local environmental laws, regulations, and orders in various jurisdictions. We believe our operations are in material compliance with current applicable environmental laws and regulations. Environmental regulations promulgated and orders issued in the future could require substantial additional expenditures for compliance and could have a material impact on us, in particular, and the industry in general.

We have environmental liabilities of $13 million and $15 million recorded as of December 31, 2021 and 2020, primarily related to environmental remediation related to closed sites. The amount of these liabilities represents management’s estimate of the ultimate settlement based on an assessment of relevant factors and assumptions and could be affected by changes in facts or assumptions not currently known to management for which the outcome cannot be reasonably estimated at this time. These liabilities are included in “Accounts payable and other” or “Other liabilities” in our Consolidated Balance Sheets.

We also have asset retirement obligations of $36 million and $25 million recorded as of December 31, 2021 and 2020, 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 19. Share Capital

Common stock

We are authorized under our certificate of incorporation, as amended and restated, to issue up to 190 million shares of common stock, par value $0.001 per share, of which 14,320,960 shares have been reserved for issuance under the Incentive Plans (as defined in Note 20, “Share-Based Compensation”).

Treasury stock

On December 7, 2021, we announced a new share repurchase program, authorized by our board of directors, of up to ten million shares of our common stock or $100 million, whichever occurs first. No shares were repurchased under this plan in 2021.

With our repurchase of 4.6 million shares at an average price of $10.64 for a total of $48 million during the year ended December 31, 2021, we completed our $100 million share repurchase program, which was launched in March 2020 and authorized the repurchase of shares of up to 15% of our common stock, for an aggregate consideration of up to $100 million. Under this program, we also repurchased 6.9 million shares at an average price of $4.28 for a total of $30 million in 2020.

During the year ended December 31, 2019, we repurchased 4.8 million shares at an average price of $4.98 for a total of $24 million under our $150 million share repurchase program, which was completed in 2019.

Dividends

We declared and paid a special dividend on our common stock of $1.00 per share ($79 million) in 2021. We did not declare or pay any dividends on our common stock during the year ended December 31, 2020 and 2019.

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: $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 during the year ended December 31, 2021.

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RESOLUTE FOREST PRODUCTS INC.

Notes to Consolidated Financial Statements

Preferred stock

We are authorized under our certificate of incorporation, as amended and restated, to issue ten million shares of preferred stock, par value $0.001 per share. As of December 31, 2021 and 2020, no preferred shares were issued and outstanding.

Note 20. Share-Based Compensation

Incentive Plans

The Resolute Forest Products Equity Incentive Plan, as amended (or, the “2010 Incentive Plan”), administered by the human resources and compensation/nominating and governance committee of the board of directors, became effective in 2010 and provides for the grant of equity-based and liability-based awards, including stock options, stock appreciation rights, restricted stock, RSUs, DSUs, PSUs (collectively, “stock incentive awards”), and cash incentive awards to certain of our officers, directors, employees, consultants and advisors. The 2010 Incentive Plan reserved for issuance 9 million shares for stock incentive awards. In 2019, we established and adopted the Resolute Forest Products 2019 Equity Incentive Plan (or, the “2019 Incentive Plan”), which authorized 3 million shares to be issued as stock incentive awards. In 2020, an additional 2.3 million shares were authorized, for a total of 5.3 million shares. Since the adoption of the 2019 Incentive Plan, no more awards can be granted. As of December 31, 2021, 1.5 million shares were available for grants under the 2019 Incentive Plan. We refer to both the 2010 Incentive Plan and the 2019 Incentive Plan as the “Incentive Plans”.

Awards for employees who retire (upon meeting certain age and service criteria) at least six months after the grant date and prior to the end of the vesting period will continue to vest after retirement, in accordance with the normal vesting schedule. The requisite service periods for the stock incentive awards are reduced on an individual basis, as necessary, to reflect the grantee’s individual retirement eligibility date.

The share-based compensation expense under the Incentive Plans for the years ended December 31, 2021, 2020 and 2019, was as follows:

	2021		2020		2019
Equity-based awards	$	8	$	4	$	4
Liability-based awards		30		10		(2	)
	$	38	$	14	$	2

For the years ended December 2021, 2020 and 2019, we recognized tax benefit of $3.5 million, $1.2 million and nil, respectively. As of December 31, 2021, there was $10 million of unrecognized compensation cost for equity-based awards, which is expected to be recognized over a remaining service period of 2.7 years. For liability-based awards, unrecognized compensation cost as of December 31, 2021, was $11 million, which is expected to be recognized over a remaining service period of 1.9 years.

Stock options

Under the Incentive Plans, stock options become exercisable ratably over a period of four years and, unless terminated earlier in accordance with their terms, expire 10 years from the date of grant. New shares of our common stock are issued upon the exercise of a stock option. In certain cases, we withhold stock options and settle a net amount of shares in respect of stock option costs and applicable taxes. We have not granted any stock options since 2013. Since the adoption of the 2019 Incentive Plan, stock options can no longer be granted.

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RESOLUTE FOREST PRODUCTS INC.

Notes to Consolidated Financial Statements

The activity of outstanding stock options for the year ended December 31, 2021, was as follows:

	Number of Shares			Weighted- Average Exercise Price		Weighted- Average Contractual Life (years)
Balance as of December 31, 2020		912,901		$	16.09		1.8
Exercised		(118,485	)		11.80
Forfeited		(151,442	)		14.40
Expired		(253,988	)		20.76
Balance as of December 31, 2021		388,986		$	15.00		1.7
Exercisable as of December 31, 2021		388,986		$	15.00		1.7

The total intrinsic value of stock options exercised in 2021 was less than $1 million. No stock options were exercised in 2020 and 2019.

Restricted stock units and deferred stock units

Under the Incentive Plans, each RSU and DSU granted provides the holder upon vesting the right to receive one share of our common stock for equity-based awards, and the equivalent in cash for liability-based awards. The awards vest ratably over a period of four years for employees and one year for directors. Awards to employees are settled upon vesting, while awards to directors are settled ratably over a period of three years or upon separation from the board of directors, as applicable, based on the director’s country of residency. We withhold units and settle a net amount of shares in respect of applicable taxes.

The activity of nonvested RSUs and DSUs for the year ended December 31, 2021, was as follows:

	Number of Units
	Equity-Based Awards			Liability-Based Awards			Total			Weighted- Average Fair Value at Grant Date
Balance as of December 31, 2020		1,279,015			1,128,264			2,407,279		$	5.14
Granted		354,311			554,771			909,082		$	10.40
Vested		(750,452	)		(747,647	)		(1,498,099	)	$	6.38
Forfeited		—			(101,457	)		(101,457	)	$	5.23
Balance as of December 31, 2021		882,874			833,931			1,716,805		$	6.84

There were 169,832 equity-based and 341,651 liability-based RSUs and DSUs granted to directors that vested but were not settled as of December 31, 2021.

The weighted-average grant-date fair value of all RSUs and DSUs granted in 2020 and 2019, was $3.87 and $5.55, respectively. The total fair value of RSUs and DSUs vested in 2021, 2020 and 2019, was $16 million, $7 million and $5 million, respectively, of which $8 million, $3 million and $3 million were related to equity-based awards, respectively, and $8 million, $4 million and $2 million were related to liability-based awards, respectively. We paid $8 million, $3 million and $1 million for liability-based RSUs and DSUs in 2021, 2020 and 2019, respectively.

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RESOLUTE FOREST PRODUCTS INC.

Notes to Consolidated Financial Statements

Performance stock units

Under the Incentive Plans, each PSU provides the holder the right to receive upon vesting one share of our common stock for equity-based awards, and the equivalent in cash for liability-based awards, subject to an adjustment based on market and/or performance conditions. The awards vest after a period of up to 40 months upon which they are settled. No awards vest when the minimum thresholds are not achieved. We withhold units and settle a net amount of shares in respect of applicable taxes. The fair value of PSUs granted was estimated using a Monte Carlo simulation model, using the following assumptions:

	2021	2020	2019
Expected volatility (1)	76% - 82%	57% - 77%	56% - 58%
Risk-free interest rate	0.06% - 0.96%	0.11% - 2.99%	1.58% - 1.70%

⁽¹⁾  The volatility is based on our historical volatility over the expected remaining life of the award.

The activity of nonvested PSUs for the year ended December 31, 2021, was as follows:

	Number of Units
	Equity-Based Awards			Liability-Based Awards			Total			Weighted- Average Fair Value at Grant Date
Balance as of December 31, 2020		1,795,403			1,311,327			3,106,730		$	6.05
Granted		402,306			333,722			736,028		$	10.60
Vested		(387,616	)		(433,418	)		(821,034	)	$	8.20
Performance adjustment		45,199			52,201			97,400		$	8.58
Forfeited		—			(114,367	)		(114,367	)	$	5.48
Balance as of December 31, 2021		1,855,292			1,149,465			3,004,757		$	6.69

The weighted-average grant-date fair value of all PSUs granted in 2020 and 2019, was $4.09 and $5.29, respectively. The total fair value of PSUs vested in 2021, 2020 and 2019, was $8 million, $5 million and $7 million, respectively, of which $4 million, $4 million and $6 million were related to equity-based awards, respectively, and $4 million, $1 million and $1 million were related to liability-based awards, respectively. We paid $4 million, $1 million and $1 million for liability-based PSUs in 2021, 2020 and 2019, respectively.

Deferred Compensation Plan

In 2011, the board of directors adopted the Resolute Forest Products Outside Director Deferred Compensation Plan (or, the “Deferred Compensation Plan”), which allows non-employee directors to surrender 50% or 100% of their cash fees in exchange for DSUs or RSUs, as applicable, based on the director’s country of residency. The number of awards issued pursuant to the Deferred Compensation Plan is based on 110% of the fees earned, resulting in a 10% premium incentive.

Under the Deferred Compensation Plan, each RSU and DSU granted provides the holder the right to receive payment in cash in an amount equal to the fair market value of one share of our common stock upon vesting. The awards have a nonforfeitable right or vest ratably over a period of three years, as applicable, and are settled with cash ratably over a period of three years or upon separation from the board of directors, as applicable, based on the director’s country of residency. All of our outstanding stock incentive awards pursuant to the Deferred Compensation Plan were accounted for as liability awards.

Share-based compensation expense under the Deferred Compensation Plan for the years ended December 31, 2021 and 2020, was $5 million and $2 million, respectively. There was a $1 million reversal in share-based compensation expense for the year ended December 31, 2019.

RSUs and DSUs outstanding under the Deferred Compensation Plan as of December 31, 2021 and 2020, were 484,064 and 481,056, respectively. The total fair value of RSUs and DSUs vested in 2021, 2020 and 2019 was $1 million, less than $1 million and less than $1 million, respectively. We paid $1 million for liability-based RSUs and DSUs in 2021. There was no cash paid in 2020 and 2019.

Note 21. 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.

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RESOLUTE FOREST PRODUCTS INC.

Notes to Consolidated Financial Statements

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, inventory write-downs related to closures, start-up costs, 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.”

In each of 2021, 2020 and 2019, no assets were identifiable by segment and reviewed by management.

Information about certain segment data for the years ended December 31, 2021, 2020 and 2019, was as follows:

(In millions)	Market Pulp (1)			Tissue			Wood Products (2)			Paper			Segment Total		Corporate and Other			Total
Sales
2021	$	813		$	161		$	1,718		$	972		$	3,664	$	—		$	3,664
2020	$	668		$	173		$	1,025		$	934		$	2,800	$	—		$	2,800
2019	$	797		$	165		$	616		$	1,345		$	2,923	$	—		$	2,923
Depreciation and amortization
2021	$	24		$	19		$	42		$	62		$	147	$	17		$	164
2020	$	24		$	18		$	43		$	69		$	154	$	15		$	169
2019	$	23		$	18		$	34		$	72		$	147	$	20		$	167
Operating income (loss)
2021	$	99		$	(24	)	$	772		$	(19	)	$	828	$	(244	)	$	584
2020	$	(1	)	$	(1	)	$	276		$	(46	)	$	228	$	(129	)	$	99
2019	$	39		$	(16	)	$	(6	)	$	82		$	99	$	(82	)	$	17
Capital expenditures
2021	$	23		$	4		$	50		$	24		$	101	$	11		$	112
2020	$	15		$	8		$	26		$	23		$	72	$	6		$	78
2019	$	29		$	8		$	23		$	43		$	103	$	10		$	113

⁽¹⁾  Inter-segment sales of $31 million, $28 million and $36 million, were excluded from market pulp sales for the years ended December 31, 2021, 2020 and 2019, respectively. These sales were transacted either at the lowest market price of the previous month or cost.

⁽²⁾  Wood products sales to our joint ventures, which are transacted at arm’s length negotiated prices, were $65 million, $28 million and $22 million for the years ended December 31, 2021, 2020 and 2019, respectively.

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RESOLUTE FOREST PRODUCTS INC.

Notes to Consolidated Financial Statements

Sales are attributed to countries based on the location of the customer. No single customer, related or otherwise, accounted for 10% or more of our 2021, 2020 or 2019 consolidated sales. No country in the “Other countries” group in the table below exceeded 2% of consolidated sales. Sales by country for the years ended December 31, 2021, 2020 and 2019, were as follows:

(In millions)	2021		2020		2019
U.S.	$	2,591	$	2,038	$	2,026
Foreign countries:
Canada		764		463		405
Mexico		60		63		87
Other countries		249		236		405
		1,073		762		897
	$	3,664	$	2,800	$	2,923

Long-lived assets by country as of December 31, 2021 and 2020, were as follows:

(In millions)	2021		2020
U.S.	$	518	$	666
Canada		863		898
	$	1,381	$	1,564

Note 22. Subsequent Event

The following significant event occurred subsequent to December 31, 2021:

• On February 14, 2022, we entered into an agreement with Louisiana-Pacific Canada Ltd., a wholly-owned subsidiary of Louisiana-Pacific Corporation, to acquire the remaining 50% equity interest in two joint ventures that produce I-joists for a cash consideration of $50 million, subject to customary adjustments. These joint ventures, in which we previously owned a 50% equity interest, are comprised of Resolute-LP Engineered Wood Larouche Inc. and Resolute-LP Engineered Wood St-Prime Limited Partnership. The acquisition is subject to certain closing conditions and is expected to close in the first half of 2022. Once approved and completed, the acquisition will be accounted for as a business combination in accordance with the acquisition method of accounting.

43

Report of Independent Auditors

To the Board of Directors of Resolute Forest Products Inc.

Opinion

We have audited the accompanying consolidated financial statements of Forest Products Inc. and its subsidiaries (the “Company”), which comprise the consolidated balance sheets as of December 31, 2021 and 2020, and the related consolidated statements of operations, comprehensive income (loss), changes in equity and cash flows for each of the three years in the period ended December 31, 2021, including the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

We conducted our audit in accordance with auditing standards generally accepted in the United States of America (US GAAS). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Responsibilities of Management for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date the consolidated financial statements are available to be issued.

PricewaterhouseCoopers LLP

1250 René-Lévesque Boulevard West, Suite 2500, Montréal, Quebec, Canada H3B 4Y1

T: +1 514 205 5000, F: +1 514 876 1502

“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with US GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the consolidated financial statements.

In performing an audit in accordance with US GAAS, we:

• Exercise professional judgment and maintain professional skepticism throughout the audit.

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances.

• Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the consolidated financial statements.

• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

Other Information

Management is responsible for the other information included in the Annual Report on Form 10-K. The other information comprises items under Parts I and II of the Annual Report on Form 10-K but does not include the consolidated financial statements and our auditors’ report thereon. Our opinion on the consolidated financial statements does not cover the other information, and we do not express an opinion or any form of assurance thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the consolidated financial statements or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report.

/s/ PricewaterhouseCoopers LLP

Partnership of Chartered Professional Accountants

Montréal, Quebec, Canada

March 1, 2022