Discontinued Operations

3 Months Ended

Mar. 31, 2021

Discontinued Operations And Disposal Groups [Abstract]

NOTE 3.

DISCONTINUED OPERATIONS

Sale of Personal Care business

On March 1, 2021, Domtar completed the previously announced sale of the Company’s Personal Care business to American Industrial Partners (“AIP”) for a purchase price of $920 million in cash, including elements of working capital estimated at $130 million, subject to customary adjustments. Domtar received a net amount of $897 million, which represents the selling price minus the estimated settlements of the net indebtedness and other elements of working capital adjustments. In connection with the sale, the Company entered into Transition Services Agreements with AIP pursuant to which the Company agreed to provide various back-office and information technology support until the business is fully separated from Domtar.

The results of operations of the Company’s Personal Care business were reclassified to discontinued operations. These results have been summarized in (Loss) earnings from discontinued operations, net of taxes on the Company’s Consolidated Statements of Earnings (Loss) and Comprehensive Income (Loss) for each period presented. The Consolidated Statements of Cash Flows were not reclassified to reflect discontinued operations. Personal Care was previously disclosed as a separate reportable business segment.

Major components of (loss) earnings from discontinued operations:

	For the three months ended
	March 31,			March 31,
	2021			2020
	$			$
Sales		154			266
Operating expenses
Cost of sales, excluding depreciation and amortization		111			196
Depreciation and amortization		10			14
Selling, general and administrative		24			36
Closure and restructuring costs		1			—
Other operating loss, net		1			—
		147			246
Operating income		7			20
Net loss on disposition of discontinued operations		(32	)		—
(Loss) earnings from discontinued operations before income taxes		(25	)		20
Income tax benefit		(3	)		—
Net (loss) earnings from discontinued operations		(22	)		20

Major classes of assets and liabilities classified as held for sale in the accompanying Balance Sheets were as follows:

	At
	December 31,
	2020
	$
Assets
Receivables		110
Inventories		138
Prepaid expenses		3
Income and other taxes receivable		3
Property, plant and equipment, net		351
Operating lease right-of-use assets		15
Intangible assets, net ⁽²⁾⁽³⁾		554
Other assets		2
Total assets		1,176
Loss on classification as held for sale		(43	)
Total assets of the disposal group classified as held for sale on the Consolidated Balance Sheets ⁽¹⁾		1,133

Liabilities
Trade and other payables		128
Income and other taxes payable		12
Operating lease liabilities due within one year		8
Long-term debt		1
Operating lease liabilities		8
Deferred income taxes and other		130
Other liabilities and deferred credits		8
Total liabilities of the disposal group classified as held for sale on the Consolidated Balance Sheets ⁽¹⁾		295

⁽¹⁾

Total assets and liabilities of discontinued operations are classified in current assets and liabilities, respectively, in the Company’s Consolidated Balance Sheet at December 31, 2020.

⁽²⁾

Intangible assets, net at December 31, 2020 are comprised of $290 million of indefinite-lived assets and $264 million of definite-lived assets.

⁽³⁾

Indefinite-lived intangible assets of the disposal group held for sale consists of trade names ($248 million) and catalog rights ($42 million) following the business acquisitions in the Company’s former Personal Care segment.

Cash Flows from Discontinued Operations:

	For the three months ended
	March 31,			March 31,
	2021			2020
	$			$
Cash flows from operating activities		16			6
Cash flows used for investing activities		(3	)		(8	)

Use of proceeds

As previously announced, the Company intends to use $600 million of the proceeds of the sale to reduce debt and $300 million to repurchase shares.

During the quarter, the Company used $223 million of the proceeds to repurchase shares and repaid the $294 million of outstanding indebtedness under its Term Loan Agreement.

Additionally, on April 8, 2021, the Company redeemed the 4.4% Notes, originally due in 2022, at a redemption price of 100 percent of the principal amount of $300 million, plus accrued and unpaid interest, as well as a make-whole premium of $11 million. As at March 31, 2021, the 4.4% Notes were reclassified and presented under Long-term debt due within one year on the Consolidated Balance Sheets. The debt extinguishment as well as the related loss on debt extinguishment, will be recognized in the second quarter of 2021.