(Registrant’s telephone ~~number, including area code: (803) 802-7500~~number)

~~__________________________~~Securities registered pursuant to Section 12(b) of the Act: None.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. ~~YES~~ Yes☒ NO ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation ST (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). ~~YES~~ Yes☒ NO ☐ *

*The Registrant is a voluntary filer and not subject to the filing requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934. Although not subject to these filing requirements, the Registrant has filed all reports that would have been required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months had the Registrant been subject to such requirements.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒

~~At October 31, 2017, the registrant had 62,693,709~~There are no longer publicly traded common shares of ~~common stock,~~ ~~$47.32 par value per share,~~ ~~outstanding.~~Domtar Corporation.

(1) Adjusted to reflect the retrospective combination of the Company and Skookumchuck Pulp Inc., as if the combination had been in effect since the inception of common control on November 30, 2021 (refer to Note 3 “Acquisition of businesses”).

The accompanying notes are an integral part of the consolidated financial statements.

NOTE 1.

~~NOTE~~ 1._________________

~~_________________~~

BASIS OF PRESENTATION

On June 29, 2023, Domtar completed the acquisition of all the outstanding common and preferred shares of Skookumchuck Pulp Inc. (“SPI”) for a purchase consideration of $185 million. Paper Excellence group of companies owns both Domtar and SPI. The acquisition of SPI from Paper Excellence was accounted for as a transaction between entities under common control in accordance with ASC 805-50, Business Combination – Related Issues, which requires retrospective combination of entities as if the combination had been in effect since the inception of common control. Accordingly, the financial information for Domtar and SPI has been combined from the inception of common control which was November 30, 2021. Refer to Note 3 “Acquisition of businesses” for more information on the acquisition of SPI.

On March 1, 2023, Paper Excellence completed the acquisition of all the outstanding common shares of Resolute Forest Products Inc. (“Resolute”) through Domtar by means of a merger of Terra Acquisition Sub Inc. (a Domtar wholly-owned subsidiary) with and into Resolute, with Resolute continuing as the surviving corporation and as a subsidiary of Domtar (the “Acquisition”). See Note 3 “Acquisition of businesses” for additional information on the Acquisition.

For purposes of the Company’s financial statement presentation, Domtar was determined to be the accounting acquirer in the Acquisition. The Consolidated financial statements for the three and six months ended June 30, 2023 reflect the results of operations and financial position of Domtar, including the results of operations of Resolute, since the acquisition date.

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, in the opinion of Management, include all adjustments that are necessary for the fair statement of Domtar Corporation’s (“the Company”) financial position, results of operations, and cash flows for the interim periods presented. ~~Results for the first nine months of the year may not necessarily be indicative of full year results.~~ It is suggested that these consolidated financial statements be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Domtar Corporation Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016,~~2022, as filed with the Securities and Exchange Commission. The December 31, ~~2016~~2022 Consolidated Balance Sheet, presented for comparative purposes in this interim report, was derived from audited consolidated financial statements, as adjusted for the impact of SPI acquisition, but does not include all disclosures required by accounting principles generally accepted in the United States of America.

The preparation of the Consolidated Financial Statements requires management to make estimates and assumptions with respect to the reported amounts of assets, liabilities, revenue, and expenses and the disclosure of contingent assets and liabilities. Results for the first half of the year may not necessarily be indicative of full-year results.

NOTE 2.

_________________

~~NOTE~~ 2.

~~_________________~~

RECENT ACCOUNTING PRONOUNCEMENTS

FUTURE ACCOUNTING CHANGES

~~REVENUE~~TRANSITION AWAY FROM ~~CONTRACTS WITH CUSTOMERS~~INTERBANK OFFERED RATES

~~In May 2014,~~On March 12, 2020, the FASB issued ASU ~~2014-09,~~2020-04, “~~Revenue~~Reference Rate Reform (Topic 848):Facilitation of the Effects of Reference Rate Reform on Financial Reporting”. The ASU provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued.

The amendments in the ASU are elective and apply to entities that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform.

On December 22, 2022, the FASB issued ASU 2022-06 “Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848”. The amendments in this ASU defer the sunset date of Topic 848 from ~~Contracts with Customers.” The core principal of this guidance is that an entity should recognize revenue,~~December 31, 2022, to ~~depict the transfer of promised goods or services to customers, in an amount that reflects the consideration for~~December 31, 2024, after which ~~the entity is entitled to, in exchange for those goods and services. This new guidance~~entities will ~~supersede the revenue recognition requirements found in topic 605.~~

~~ASU 2014-09 will~~no longer be effective for annual reporting periods beginning after December 15, 2017 including interim periods within that reporting period. Early adoption is permitted only for annual and interim periods beginning after December 15, 2016.

~~Entities are~~ permitted to ~~adopt~~apply the ~~new revenue standard by restating all prior periods under~~relief in Topic 848.

As of June 30, 2023, the ~~full retrospective approach following ASC 250 “Accounting Changes and Error Corrections”~~ or entities can elect to use a modified retrospective approach. Under the modified retrospective approach, entities will recognize the cumulative effect of initially applying the standard as an adjustment to the opening balance of retained earningsCompany has not yet elected any optional expedients provided in the ~~period of initial application and comparative prior year periods would not be adjusted.~~

~~The Company is currently finalizing its assessment of the impact that the guidance will have on the consolidated financial statements and related disclosures.~~standard. The Company will ~~adopt~~apply the ~~new revenue standards in its first quarter of 2018 utilizing~~accounting relief, if necessary, as relevant contract and hedge accounting relationship modifications are made during the ~~full retrospective~~reference rate reform transition method. The Company has identified similar performance obligations under the new guidance as compared with deliverables previously identified. As a result, the Company expects the timing and amount of its revenue to remain substantially the same.

period. The Company does not expect ~~this new guidance to have a material impact on the consolidated financial statements aside from the additional required disclosures.~~

~~FINANCIAL INSTRUMENTS~~

~~In January 2016, the FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities,~~” which amends the guidance on the classification and measurement of financial instruments. Although the ASU retains many current requirements, it significantly revises an entity’s accounting related to the classification and measurement of investments in equity securities and the presentation of certain fair value changes for financial liabilities measured at fair value. The ASU also amends certain disclosure requirements associated with the fair value of financial instruments.

The amendments in this update are effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2017. To adopt the amendments, companies will be required to make a cumulative-effect adjustment to beginning retained earnings as of the beginning of the fiscal year in which the guidance is effective. Early adoption is permitted.

~~The Company does not expect this new guidance to have a material impact on the consolidated financial statements.~~

~~DOMTAR CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~SEPTEMBER 30, 2017~~

~~(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED~~)

~~(UNAUDITED)~~

~~NOTE 2 – RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)~~

~~LEASES~~

~~In February~~ ~~2016, the FASB issued ASU 2016-02, “Leases,~~” which requires lessees to recognize a right-of-use asset and a lease liability for all of their leases with a lease term greater than 12 months while continuing to recognize expenses in the statement of earnings in a manner similar to current accounting standards. For lessors, the new standard modifies the classification criteria and the accounting for sales-type and direct financing leases.

As a lessee, Domtar’s various leases under existing guidance are classified as operating leases that are not recorded on the balance sheet but are recorded in the statement of earnings as expense is incurred. Upon adoption of the new guidance, the Company will be required to record substantially all leases on the Consolidated Balance Sheets as a right-of-use asset and a lease liability. The timing of expense recognition and classification in the Consolidated Statements of Earnings and Comprehensive Income could change based on the classification of leases as either operating or financing.

This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted as of the beginning of an interim or annual reporting period.

~~The Company will adopt the ASU on January 1, 2019 using the modified retrospective approach required by the guidance.~~

The Company has begun its impact assessment, including taking an inventory of its outstanding leases and analyzing all contracts that contain a lease. While the Company’s evaluation of this guidance is in the early stages, the Company currently expects the adoption of this guidance to have a material impact on ~~its consolidated balance sheet.~~

~~DERIVATIVES AND HEDGING~~

~~In March 2016, the FASB issued ASU 2016-05, “Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships,~~” which clarifies that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument in an existing hedging relationship would not, in and of itself, be considered a termination of the derivative instrument or a change in a critical term of the hedging relationship. As long as all other hedge accounting criteria in ASC 815 are met, a hedging relationship in which the hedging derivative instrument is novated would not be discontinued or require redesignation. This clarification applies to both cash flow and fair value hedging relationships. This ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted as of the beginning of an interim or annual reporting period.

~~The Company does not expect this new guidance to have a material impact on~~ the consolidated financial statements.

~~In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows,~~” which amends ASC 230 to add or clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows. The new guidance is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. This ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The guidance must be applied retrospectively to all periods presented but it may be applied prospectively if retrospective application would be impracticable. Early adoption is permitted.

~~The Company does not expect this new guidance to have a material impact on the consolidated financial statements.~~

~~In January 2017, the FASB issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment,”~~ which removes the requirement for an entity to calculate the implied fair value of goodwill in measuring a goodwill impairment loss, referred to as the Step II test. As a result, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount for which the carrying value exceeds the reporting unit’s fair value. The impairment loss recognized should be recorded against goodwill and should not exceed the total amount of goodwill allocated to that reporting unit. This ASU is effective for annual or any interim goodwill impairment tests performed in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests with measurement dates after January 1, 2017.

~~The Company expects to adopt this new guidance concurrently with its 2017 annual goodwill impairment test.~~

NOTE 6.

~~NOTE~~4._________________

~~_________________~~

~~EARNINGS PER COMMON SHARE~~

~~The following table provides the reconciliation between basic and diluted earnings per common share:~~

For the three months ended

For the nine months ended

September 30,

September 30,

September 30,

September 30,

2017

2016

2017

2016

Net earnings

$
70

$
59

$
128

$
81

Weighted average number of common shares
outstanding (millions)

62.7

62.6

62.6

62.6

Effect of dilutive securities (millions)

0.2

0.1

0.2

0.1

Weighted average number of diluted common shares
outstanding (millions)

62.9

62.7

62.8

62.7

Basic net earnings per common share (in dollars)

$
1.12

$
0.94

$
2.04

$
1.29

Diluted net earnings per common share (in dollars)

$
1.11

$
0.94

$
2.04

$
1.29

The following table provides the securities that could potentially dilute basic earnings per common share in the future, but were not included in the computation of diluted earnings per common share because to do so would have been anti-dilutive:

For the three months ended

For the nine months ended

September 30,

September 30,

September 30,

September 30,

2017

2016

2017

2016

Options

312,893

412,372

419,161

412,372

~~DOMTAR CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~SEPTEMBER 30, 2017~~

~~(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED~~)

~~(UNAUDITED)~~

~~NOTE~~ 5.

~~_________________~~

PENSION PLANS AND OTHER POST-RETIREMENT BENEFIT PLANS

DEFINED CONTRIBUTION PLANS

The Company has several defined contribution ~~plans and multiemployer~~ plans. The pension expense under these plans is equal to the Company’s contribution. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2023, the pension expense was $9$13 million and ~~$28~~$26 million, respectively ~~(2016~~(2022 – ~~$11~~$8 million and ~~$29~~$20 million, respectively).

The Company expects to contribute approximately $26 million under these plans during the remainder of the year.

DEFINED BENEFIT PLANS AND OTHER POST-RETIREMENT BENEFIT PLANS

The ~~Company sponsors both contributory~~Company's employees participate in various employee benefit plans.

Prior to the Acquisition, Resolute provided a range of benefits to its employees and ~~non-contributory U.S.~~retirees, including pension benefits and ~~non-U.S. defined benefit pension plans. Non-unionized employees in Canada joining~~post-retirement benefits. As part of the Acquisition, the Company ~~after January 1, 1998 participate in a defined contribution pension plan. Salaried employees in~~assumed the ~~U.S. joining~~assets and liabilities associated with these plans. Accordingly, on the acquisition date, the Company ~~after January 1, 2008 participate in a defined contribution~~recorded assets of $19 million and liabilities of $656 million on the Consolidated Balance Sheet related to Resolute's pension ~~plan. Unionized~~ and non-union hourly employees in the U.S. that are not grandfathered under the existing defined benefit pension plans, participate in a defined contribution pension plan for future service. The Company also sponsors a number of other post-retirement benefit ~~plans for eligible U.S.~~plans.

The underlying fair value of the pension fund assets and ~~non-U.S. employees;~~liabilities related to the ~~plans are unfunded and include life insurance programs and medical and dental benefits. The Company also provides supplemental unfunded~~ defined benefit pension plans and ~~supplemental unfunded defined contribution pension~~post-retirement benefit plans ~~to certain senior management employees.~~of Resolute were $3,029 million and $3,666 million, respectively, at the time of the Acquisition.

Components of net periodic benefit cost for pension plans and other post-retirement benefit plans:



	For the three months ended					For the six months ended
	June 30, 2023					June 30, 2023
	Pension plans			Other post-retirement benefit plans		Pension plans			Other post-retirement benefit plans
	$			$		$			$
Service cost		8			—		12			—
Interest expense		55			2		80			2
Expected return on plan assets		(61	)		—		(90	)		—
Net periodic benefit cost		2			2		2			2



	For the three months ended					For the nine months ended					For the three months ended					For the six months ended
	September 30, 2017					September 30, 2017					June 30, 2022					June 30, 2022
	Pension plans			Other post-retirement benefit plans		Pension plans			Other post-retirement benefit plans		Pension plans			Other post-retirement benefit plans		Pension plans			Other post-retirement benefit plans
	$			$		$			$		$			$		$			$
Service cost		8			1		23			2		5			—		11			—
Interest expense		13			—		38			2		9			—		18			1
Expected return on plan assets		(20	)		—		(60	)		—		(18	)		—		(37	)		—
Amortization of net actuarial loss		2			—		6			—
Amortization of prior year service costs		1			—		4			—
Settlement gain (1)												(8	)		—		(8	)		—
Net periodic benefit cost		4			1		11			4		(12	)		—		(16	)		1

DOMTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023

(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED)

(UNAUDITED)

NOTE 6 – PENSION PLANS AND OTHER POST-RETIREMENT BENEFIT PLANS (CONTINUED)

(1) During the second quarter of 2022, the Company entered into agreements with insurance companies to purchase group annuity buy-out contracts and transfer approximately $105 million (CDN $135 million) of its Quebec, Canada defined benefit plans' projected benefit obligations and $85 million of its U.S. defined benefit plans' projected benefit obligations. The transactions closed in April 2022 for Canada and in June 2022 for the U.S. and were funded with pension plan assets. Additionally, the Company entered into agreements with existing insurers to convert $141 million (CDN $180 million) of existing buy-in annuity contracts to buy-out annuity contracts to complete the full transfer of these obligations. These annuity buy-out transactions transferred responsibility for pension benefits for approximately 3,253 retirees and their beneficiaries. Settlement accounting rules required a remeasurement of the plans as of April 30, 2022 for Canada and June 30, 2022 for the U.S. and the Company recognized a non-cash pension settlement gain of $8 million before tax in the second quarter of 2022.

~~Components~~The components of net periodic benefit cost for pension plans and other post-retirement benefits plans, other than service cost, are presented in Non-service components of net periodic benefit ~~plans:~~cost on the Consolidated Statement of Earnings (Loss) and Comprehensive Income.

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2023, the Company contributed ~~$38~~$16 million and ~~$44~~$22 million, respectively, ~~(2016~~(2022 – ~~$18~~$2 million and ~~$27~~$4 million, respectively) to the pension plans and ~~nil~~$4 million and $2$6 million, respectively, ~~(2016~~(2022 – $1$1 million and $3$2 million, respectively) to the other post-retirement benefit plans.

The Company expects to make cash contributions of approximately $32 million to the pension plans and $7 million to the other post-retirement benefit plans during the remainder of the year.

NOTE 7.

~~NOTE~~ 6._________________

~~_________________~~

~~OTHER OPERATING (INCOME) LOSS, NET~~

Other operating (income) loss, net is an aggregate of both recurring and occasional loss or income items and, as a result, can fluctuate from period to period. The Company’s other operating (income) loss, net includes the following:

For the three months ended

For the nine months ended

September 30,

September 30,

September 30,

September 30,

2017

2016

2017

2016

$

$

$

$

Gain on sale of property, plant and equipment

(4
)

—

(4
)

—

Reversal of contingent consideration

(2
)

—

(2
)

—

Bad debt expense

—

—

1

—

Environmental provision

—

—

2

—

Litigation settlement

—

—

—

2

Foreign exchange loss

—

1

1

5

Other

(1
)

(1
)

(4
)

(3
)
Other operating (income) loss, net

(7
)

—

(6
)

4

~~DOMTAR CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~SEPTEMBER 30, 2017~~

~~(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED~~)

~~(UNAUDITED)~~

~~NOTE~~ 7.

~~_________________~~

INCOME TAXES

InFor the ~~third~~second quarter of ~~2017,~~2023, the Company’s income tax benefit was $9 million, consisting of a current income tax benefit of $5 million and a deferred income tax benefit of $4 million. This compares to an income tax expense of $14 million in the second quarter of 2022, consisting of a current income tax expense of $23 million and a deferred income tax benefit of $9 million. The Company made payments, net of income tax refunds, of $16 million during the second quarter of 2023. The effective tax rate was $327% compared with an effective tax rate of 24% in the second quarter of 2022. The Company’s tax provision for interim periods is determined using an estimate of its annual effective tax rate and then adjusting for discrete items arising in that quarter. In each interim quarter the Company updates its estimate of the annual effective tax rate and, if the estimated annual tax rate changes, makes a cumulative adjustment in that quarter. The effective tax rate for the second quarter of 2023 was favorably impacted by such a cumulative adjustment, mainly due to a change in the mix of earnings or loss between jurisdictions. This was more than offset by a $5 million unfavorable deferred tax impact related to the change in expected future provincial effective tax rates after the amalgamation with Skookumchuck Pulp Inc.

For the first six months of 2023, the Company’s income tax benefit was $65 million, consisting of a current income tax expense of ~~$10~~$6 million and a deferred income tax benefit of $7$71 million. This compares to an income tax expense of ~~$16~~$19 million in the ~~third quarter~~first six months of ~~2016,~~2022, consisting of a current income tax expense of $5 million and a deferred income tax expense of $11 million. The Company made income tax payments, net of refunds, of $3 million during the third quarter of 2017. The effective tax rate was 4% compared with an effective tax rate of 21% in the third quarter of 2016. The effective tax rate for the third quarter of 2017 was favorably impacted by the recognition of previously unrecognized tax benefits due to the expiration of certain statutes of limitations. The effective tax rates for both the third quarter of 2017 and third quarter of 2016 were impacted by the finalization of certain estimates in connection with the filing of the Company’s 2016 and 2015 income tax returns, respectively.

~~In the first nine months of 2017, the Company’s income tax expense was $17 million, consisting of a current income tax expense of $36~~$26 million and a deferred income tax benefit of ~~$19 million. This compares to an income tax expense of $19 million in the first nine months of 2016, consisting of a current income tax expense of $13 million and a deferred income tax expense of $6~~$7 million. The Company made ~~income tax~~ payments, net of income tax refunds, of ~~$18~~$66 million during the first ~~nine~~six months of ~~2017.~~2023. The effective tax rate was ~~12%~~-433% compared to an effective tax rate of ~~19%~~24% in the first ~~nine~~six months of ~~2016. The~~2022.The effective tax rate for the first ~~nine months~~half of 2017 was favorably impacted by the recognition of previously unrecognized tax benefits, due to the expiration of certain statutes of limitations as well as by various enacted law changes in several U.S. states. The effective tax rates for both the first nine months of 2017 and 2016 were impacted by the finalization of certain estimates in connection with the filing of the Company’s 2016 and 2015 income tax returns, respectively. Additionally, the effective tax rate for the first nine months of 20162023 was impacted by the ~~approval~~reversal of ~~a state~~the valuation allowance on Skookumchuck Pulp Inc.’s tax ~~credit~~loss carryforwards due to management’s assessment that the future income of Skookumchuck Pulp Inc. would be sufficient to utilize the losses prior to expiration. There were also transaction costs incurred in the ~~U.S.~~first half of 2023 which provided minimal tax benefit.

NOTE 8.

~~NOTE~~ 8._________________

~~_________________~~INVENTORIES

~~INVENTORIES~~

The following table presents the components of inventories:


	September 30,		December 31,	June 30,		December 31,
	2017		2016	2023		2022
	$		$	$		$
Work in process and finished goods		429	413		717		400
Raw materials		133	132		265		147
Operating and maintenance supplies		225	214		319		171
		787	759		1,301		718

NOTE 9.

~~NOTE~~ 9._________________

~~_________________~~

~~GOODWILL~~

~~Changes in the carrying value of goodwill are as follows:~~

OTHER ASSETS

	~~September 30, 2017~~
	$
~~Balance at December 31, 2016~~		~~550~~
~~Effect of foreign currency exchange rate change~~		28
~~Balance at end of period~~		~~578~~

~~The goodwill at September 30, 2017 is entirely related to the Personal Care reporting segment.~~

~~DOMTAR CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~SEPTEMBER 30, 2017~~

~~(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED~~)

~~(UNAUDITED)~~

~~NOTE~~ ~~10.~~

~~_________________~~

~~INTANGIBLE ASSETS~~

The following table presents the components of ~~intangible~~other assets:

September 30, 2017

December 31, 2016

Estimated useful lives
(in years)

Gross carrying
amount

Accumulated
amortization

Net

Gross carrying
amount

Accumulated
amortization

Net

$

$

$

$

$

$

Definite-lived intangible
   assets subject
   to amortization

Water rights

40

3

(1
)

2

3

(1
)

2

Customer relationships

10 – 40

389

(75
)

314

369

(60
)

309

Technology

7 – 20

8

(3
)

5

8

(3
)

5

Non-Compete

9

1

(1
)

—

1

—

1

License rights

12

29

(11
)

18

28

(8
)

20

430

(91
)

339

409

(72
)

337

Indefinite-lived intangible
   assets not subject
   to amortization

Water rights

4

—

4

4

—

4

Trade names

243

—

243

225

—

225

License rights

6

—

6

6

—

6

Catalog rights

40

—

40

36

—

36

Total

723

(91
)

632

680

(72
)

608


	June 30,		December 31,
	2023		2022
	$		$
Pension asset - defined benefit pension plans		247		219
Countervailing duty and anti-dumping duty cash deposits on softwood lumber		145		—
Other		69		32
		461		251

~~Amortization expense related~~As of June 30, 2023, a total of $584 million of estimated countervailing and anti-dumping duty cash deposits on softwood lumber were paid. Of this amount, $563 million of deposits were paid at acquisition date and were included in the preliminary purchase price allocation (refer to ~~intangible assets for~~Note 3 “Acquisition of businesses”). These deposits are measured since the ~~three~~acquisition date, using a model based on the assumption that a settlement would be reached and ~~nine months ended September 30, 2017 was $4 million and $14 million, respectively (2016 – $5 million and $14 million, respectively).~~

~~Amortization expense for~~that a certain percentage of the ~~next five years related to intangible assets is expected to~~deposits would be ~~as follows:~~recovered after a certain period of time.

2017

2018

2019

2020

2021

$

$

$

$

$

Amortization expense related to intangible assets

21 ⁽¹⁾

21

21

21

21

⁽¹⁾ ~~Represents twelve months of amortization~~

DOMTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~SEPTEMBER~~JUNE 30, ~~2017~~2023

(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE ~~NOTED~~)NOTED)

(UNAUDITED)

NOTE 10.

~~NOTE~~ ~~11.~~_________________

~~_________________~~ASSET CONVERSION COSTS

~~CLOSURE AND RESTRUCTURING COSTS AND LIABILITY AND IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT~~Conversion of Kingsport, Tennessee mill

~~Plymouth, North Carolina~~The Company has entered the linerboard market with the conversion of the Kingsport paper machine. Once in full operation, the mill

~~On September 23, 2016,~~ will produce and market approximately 600,000 tons annually of high-quality recycled linerboard and medium, providing the Company ~~announced~~with a ~~plan to optimize fluff pulp manufacturing at the Plymouth, North Carolina mill.~~strategic footprint in a growing adjacent market. The ~~restructuring, which is expected to be~~conversion was fully completed in 2018, includes the permanent closure of a pulp dryer and idling of assets, in addition to a workforce reduction of approximately 100 positions. The streamlining process will right-size the mill to an annualized production target of approximately 380,000 metric tons of fluff pulp. The Company recorded $5 million of severance and termination costs under Closure and restructuring costs during the third quarter of 2016.

~~Ashdown, Arkansas mill~~

On December 10, 2014, the Company announced a project to convert a paper machine at its Ashdown, Arkansas mill to a high quality fluff pulp line used in absorbent applications such as baby diapers, feminine hygiene and adult incontinence products. The Company also invested in a pulp bale line that will provide flexibility to manufacture papergrade softwood pulp, contingent on market conditions. The conversion work commenced during the second quarter of 2016 and the production of bale softwood pulp began in the third quarter of 2016. The fluff pulp line will allow for the production of up to 516,000 metric tons of fluff pulp per year once the machine is in full operation. The project resulted in the permanent reduction of 364,000 short tons of annual uncoated freesheet production capacity on March 31, 2016.

~~The Company recorded $5 million and $29 million for~~June 2023. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2023, the Company recorded $33 million and $63 million, respectively, ~~of accelerated depreciation~~ under ~~Impairment of property, plant and equipment~~Asset conversion costs on the Consolidated Statement of Earnings (Loss) and Comprehensive ~~Income. The Company also recorded $5~~Income (2022 – $12 million and ~~$26~~$25 million, of costs related to the fluff pulp conversion outage under Closure and restructuring costs for the three and nine months ended September 30, 2016. During the first quarter of 2016, the Company recorded $1 million of severance and termination costs under Closure and restructuring costs.respectively).

~~Other costs~~

For the three and nine months ended September 30, 2016, other costs related to previous and ongoing closures include nil and $1 million, respectively, of severance and termination costs related to the Pulp and Paper reporting segment.

DOMTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~SEPTEMBER~~JUNE 30, ~~2017~~2023

(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE ~~NOTED~~)NOTED)

(UNAUDITED)

NOTE 11.

_________________

LONG-TERM DEBT


		Par			June 30,		December 31,
	Maturity	Amount		Currency	2023		2022
		$			$		$
Unsecured notes
6.25% Notes	2042		116	USD		121		121
6.75% Notes	2044		150	USD		156		157
Senior secured notes
6.75% Notes	2028		642	USD		642		642
ABL Revolving Credit Facility	2028		300	USD		300		—
First Lien Term Loan	2028		353	USD		350		639
Farm Credit Term Loan A	2030		658	USD		652		—
Farm Credit Term Loan B	2028		276	USD		276		—
Other				USD		—		14
Finance lease obligations	2023 - 2028					5		4
						2,502		1,577

Less: Unamortized debt issuance costs						31		27

Less: Due within one year						67		47
						2,404		1,503

ABL REVOLVING CREDIT FACILITY

On March 1, 2023, the Company amended its ABL Revolving Credit Facility that matures on March 1, 2028 (extended from November 30, 2026). The Company’s ABL Revolving Credit Facility provides for revolving loans and letters of credit of up to $1.0 billion (up from $400 million), subject to borrowing base capacity. On March 1, 2023, the ABL Revolving Credit Facility was drawn by $210 million to partially fund the Acquisition and provide liquidity.

The ABL Revolving Credit Facility, when specified excess availability is less than the greater of $87.5 million and 10% of the lesser of the borrowing base and maximum borrowing capacity, requires the maintenance of a fixed charge coverage ratio of 1.00 to 1.00 at the end of each fiscal quarter for the trailing twelve month period. This covenant did not apply as at June 30, 2023.

On June 30, 2023, the Company had borrowings of $300 million and $179 million of letters of credit outstanding under this facility, leaving unused commitments of $521 million available.

FARM CREDIT TERM LOAN

On March 1, 2023, the Company entered into a Term Loan Credit Agreement (the “Farm Credit Term Loan”) for $949 million, consisting of two tranches: (a) $666 million of Farm Credit Term Loan A used to refinance renewable energy investments and facilitate the Acquisition and (b) $283 million of Farm Credit Term Loan B used to repay $283 million of borrowings under the First Lien Term Loan Facility.

Farm Credit Term Loan A will mature on March 1, 2030 and Farm Credit Term Loan B will mature on November 30, 2028. The Farm Credit Term Loan bears interest at a floating rate per annum, at Domtar’s option, (i) at SOFR (adjusted by 0.10%) plus 6.00% or a base rate plus 5.00%, with respect to Farm Credit Term Loan A and (ii) at SOFR (adjusted by 0.10%) plus 5.75% or a base rate plus 4.75%, with respect to Farm Credit Term Loan B. The SOFR rate is subject to an interest rate floor of 0.75% and the base rate is subject to an interest rate floor of 1.75%. Borrowings under the Company's Farm Credit Term Loan will amortize in equal quarterly installments in an amount equivalent to 5.00% per annum of the principal amount. The Farm Credit Term Loan ranks pari passu with the First Lien Term Loan Credit Agreement and the Senior Secured Notes.

DOMTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023

(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED)

(UNAUDITED)

NOTE ~~12.~~11 – LONG-TERM DEBT (CONTINUED)

~~_________________~~

The Company is required to offer to prepay the loans under the Farm Credit Term Loan, the First Lien Term Loan Facility and the Senior Secured Notes with 100% of the net cash proceeds of certain asset sales subject to reinvestment rights. The Company is required to prepay the Farm Credit Term Loan and First Lien Term Loan Facility with 100% of the net cash proceeds of certain debt issuances and 50% of excess cash flow, subject to certain exceptions.

The Farm Credit Term Loan contains customary negative covenants, including, but not limited to, restrictions on the Company's ability and that of its restricted subsidiaries to merge and consolidate with other companies, incur indebtedness, grant liens or security interests on assets, make investments, pay dividends or make other restricted payments, sell or otherwise transfer assets or enter into transactions with affiliates.

The Farm Credit Term Loan provides that, upon the occurrence of certain events of default, the Company's obligations thereunder may be accelerated. Such events of default include payment defaults to the lenders thereunder, material inaccuracies of representations and warranties, covenant defaults, cross-defaults to other material indebtedness, voluntary and involuntary bankruptcy, insolvency, corporate arrangement, winding-up, liquidation or similar proceedings, material money judgments, change of control and other customary events of default.

The Company repaid $8 million of Farm Credit Term Loan A and $3 million of Farm Credit Term Loan B respectively, in the second quarter of 2023 as required for quarterly amortization. At June 30, 2023 there was $658 million of borrowings under Farm Credit Term Loan A and $276 million of borrowings under Farm Credit Term Loan B.

FIRST LIEN TERM LOAN FACILITY

During the second quarter of 2023, the Company repaid $4 million as required for quarterly amortization. The Company also repaid $283 million on March 1, 2023 pursuant to the Acquisition and related to the issue of Farm Credit Term Loan B for $283 million. At June 30, 2023 there was $353 million of borrowings outstanding under the First Lien Term Loan Facility.

On January 7, 2022, the Company utilized $127 million under the Delayed Draw Term Loan facility to fund a portion of the redemptions of the Existing Domtar Notes pursuant to the Domtar Notes Change of Control Offers that terminated on January 3, 2022. The remainder of the Delayed Draw Term Loan facility was cancelled.

REDEMPTION OF RESOLUTE NOTES

Resolute had $300 million of notes outstanding upon the Acquisition taking place. On February 14, 2023, Resolute delivered notice of redemption to holders of the 4.875% senior notes due 2026. The redemption notice provided for the full redemption of $300 million principal amount of the notes on March 1, 2023 at a redemption price equal to 102.438% of the principal amount of the notes redeemed, plus accrued and unpaid interest. The redemption of the notes was subject to the consummation of the Acquisition. Following the redemption on March 1, 2023, no Resolute notes remain outstanding.

SENIOR SECURED NOTES

On January 7, 2022, $133 million of the 6.75% Senior Secured Notes due 2028 were redeemed, with accrued interest of $2 million, as a result of the Domtar Existing Notes Change of Control Offers that terminated on January 3, 2022.

EXISTING DOMTAR NOTES CHANGE OF CONTROL OFFERS

On January 3, 2022, $134 million of the 6.25% Notes due 2042 and $100 million of the 6.75% Notes due 2044 were tendered pursuant to the offer. In addition, $3 million of premium and $6 million of accrued interest were paid. As a result, $116 million of the 6.25% Notes due 2042 and $150 million of the 6.75% Notes due 2044, remain outstanding as of June 30, 2023.

DOMTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023

(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED)

(UNAUDITED)

NOTE 12.

_________________

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS BY COMPONENT

The following table presents the changes in Accumulated other comprehensive loss by component(1) for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and the year ended December 31, ~~2016:~~2022:


	Net derivative gains (losses) on cash flow hedges			Pension items(2)			Post-retirement benefit items(2)			Foreign currency items			Total
	$			$			$			$			$
Balance at December 31, 2021		—			17			(1	)		8			24
Natural gas swap contracts		14		N/A			N/A			N/A				14
Currency options		(2	)	N/A			N/A			N/A				(2	)
Foreign exchange forward contracts		(16	)	N/A			N/A			N/A				(16	)
Net (loss) gain	N/A				(11	)		9		N/A				(2	)
Foreign currency items	N/A			N/A			N/A				(71	)		(71	)
Other comprehensive (loss) income before reclassifications		(4	)		(11	)		9			(71	)		(77	)
Amounts reclassified from Accumulated other comprehensive income		(8	)		(7	)		(1	)		—			(16	)
Net current period other comprehensive (loss) income		(12	)		(18	)		8			(71	)		(93	)
Balance at December 31, 2022		(12	)		(1	)		7			(63	)		(69	)
Natural gas swap contracts		(5	)	N/A			N/A			N/A				(5	)
Currency options		1		N/A			N/A			N/A				1
Foreign exchange forward contracts		8		N/A			N/A			N/A				8
Net gain	N/A				—			—		N/A				—
Foreign currency items	N/A			N/A			N/A				26			26
Other comprehensive income before reclassifications		4			—			—			26			30
Amounts reclassified from Accumulated other comprehensive loss		11			—			—			—			11
Net current period other comprehensive income		15			—			—			26			41
Balance at June 30, 2023		3			(1	)		7			(37	)		(28	)

Net derivative
(losses) gains on
cash flow hedges

Pension items⁽²⁾

Post-retirement
benefit items⁽²⁾

Foreign currency
items

Total

$

$

$

$

$

Balance at December 31, 2015

(30
)

(190
)

(10
)

(271
)

(501
)
Natural gas swap contracts

4

N/A

N/A

N/A

4

Net investment hedge

(1
)

N/A

N/A

N/A

(1
)
Currency options

8

N/A

N/A

N/A

8

Foreign exchange forward contracts

16

N/A

N/A

N/A

16

Net gain

N/A

(38
)

(1
)

N/A

(39
)
Foreign currency items

N/A

N/A

N/A

(7
)

(7
)
Other comprehensive income (loss)
   before reclassifications

27

(38
)

(1
)

(7
)

(19
)
Amounts reclassified from Accumulated
   other comprehensive loss

14

7

—

—

21

Net current period other comprehensive
   income (loss)

41

(31
)

(1
)

(7
)

2

Balance at December 31, 2016

11

(221
)

(11
)

(278
)

(499
)
Natural gas swap contracts

(3
)

N/A

N/A

N/A

(3
)
Currency options

13

N/A

N/A

N/A

13

Foreign exchange forward contracts

1

N/A

N/A

N/A

1

Foreign currency items

N/A

N/A

N/A

142

142

Other comprehensive income
   before reclassifications

11

—

—

142

153

Amounts reclassified from Accumulated
   other comprehensive loss

(6
)

7

—

—

1

Net current period other comprehensive income

5

7

—

142

154

Balance at September 30, 2017

16

(214
)

(11
)

(136
)

(345
)
(1)

All amounts are after tax. Amounts in parentheses indicate losses.

(2)

The projected benefit obligation is actuarially determined on an annual basis as of December 31.

⁽¹⁾	~~All amounts are after tax. Amounts in parenthesis indicate losses.~~

⁽²⁾	~~The accrued benefit obligation is actuarially determined on an annual basis as of December 31.~~

DOMTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~SEPTEMBER~~JUNE 30, ~~2017~~2023

(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE ~~NOTED~~)NOTED)

(UNAUDITED)

NOTE ~~12.~~12 – CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS BY COMPONENT (CONTINUED)

The following ~~table presents~~tables present reclassifications out of Accumulated other comprehensive loss:


Details about Accumulated other comprehensive loss components	Amounts reclassified from Accumulated other comprehensive loss⁽¹⁾							Amounts reclassified from Accumulated other comprehensive loss
	For the three months ended							For the three months ended
	September 30, 2017			September 30, 2016				June 30,			June 30,
	$			$				2023			2022
								$			$
Net derivative (losses) gains on cash flow hedge
Natural gas swap contracts		1			2		⁽²⁾
Currency options and forwards		(5	)		1		⁽²⁾
Natural gas swap contracts (1)									—			5
Currency options and forwards (1)									(4	)		1
Total before tax		(4	)		3				(4	)		6
Tax benefit (expense)		2			(2	)			1			(2	)
Net of tax		(2	)		1				(3	)		4

Amortization of defined benefit pension items
Amortization of net actuarial loss and prior year service cost		3			2		⁽³⁾
Amortization of net actuarial gain (2) (3)									—			8
Total before tax									—			8
Tax expense		(1	)		—				—			(2	)
Net of tax		2			2				—			6

Amortization of other post-retirement benefit items
Discontinued operations									—			1
Total before tax									—			1
Tax expense									—			—
Net of tax									—			1

Details about Accumulated other comprehensive loss components

Amounts reclassified from
Accumulated other
comprehensive loss⁽¹⁾

For the nine months ended

September 30, 2017

September 30, 2016

$

$

Net derivative (losses) gains on cash flow hedges

Natural gas swap contracts

—

12

⁽²⁾
Currency options and forwards

(10
)

12

⁽²⁾
Total before tax

(10
)

24

Tax benefit (expense)

4

(10
)
Net of tax

(6
)

14

Amortization of defined benefit pension items

Amortization of net actuarial loss and prior year
service cost

10

7

⁽³⁾
Tax expense

(3
)

(2
)

Net of tax

7

5

⁽¹⁾	~~Amounts in parentheses indicate losses.~~

⁽²⁾	~~These amounts are included in Cost of Sales in the Consolidated Statements of Earnings and Comprehensive Income.~~

⁽³⁾	~~These amounts are included in the computation of net periodic benefit cost (see Note 5 “Pension Plans and Other Post-Retirement Benefit Plans” for more details).~~

DOMTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~SEPTEMBER~~JUNE 30, ~~2017~~2023

(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE ~~NOTED~~)NOTED)

(UNAUDITED)

NOTE ~~13.~~ 12 – CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS BY COMPONENT (CONTINUED)

~~_________________~~

~~SHAREHOLDERS’ EQUITY~~


	Amounts reclassified from Accumulated other comprehensive loss
	For the six months ended
	June 30,			June 30,
	2023			2022
	$			$
Net derivatives (losses) gains on cash flow hedge
Natural gas swap contracts (1)		(7	)		6
Currency options and forwards (1)		(8	)		2
Total before tax		(15	)		8
Tax benefit (expense)		4			(2	)
Net of tax		(11	)		6

Amortization of defined benefit pension items
Amortization of net actuarial gain (2) (3)		—			8
Total before tax		—			8
Tax expense		—			(2	)
Net of tax		—			6

Amortization of other post-retirement benefit items
Discontinued operations		—			1
Total before tax		—			1
Tax expense		—			—
Net of tax		—			1

~~On February 21, 2017, May 3, 2017, and August 1, 2017, the Company’s Board~~

(1)

These amounts are included in Cost of Directors approved a quarterly dividend of $0.42 per share, respectively, to be paid to holders of the Company’s common stock. Dividends of $26 million were paid on April 17, 2017, July 17, 2017 and October 16, 2017, respectively, to shareholders of record on April 3, 2017, July 3, 2017 and October 2, 2017, respectively.

On October 31, 2017, the Company’s Board of Directors approved a quarterly dividend of $0.42 per share to be paid to holders of the Company’s common stock. This dividend is to be paid on January 15, 2018, to shareholders of record on January 2, 2018.

~~STOCK REPURCHASE PROGRAM~~

The Company’s Board of Directors has authorized a stock repurchase program (the “Program”) of up to $1.3 billion. Under the Program, the Company is authorized to repurchase, from time to time, shares of its outstanding common stock on the open market orSales in privately negotiated transactions. The timing and amount of stock repurchases will depend on a variety of factors, including the market conditions as well as corporate and regulatory considerations. The Program may be suspended, modified or discontinued at any time, and the Company has no obligation to repurchase any amount of its common stock under the Program. The Program has no set expiration date. The Company repurchases its common stock in part to reduce the dilutive effects of stock options and awards, and to improve shareholders’ returns.

The Company makes open market purchases of its common stock using general corporate funds. Additionally, the Company may enter into structured stock repurchase agreements with large financial institutions using general corporate funds in order to lower the average cost to acquire shares. The agreements would require the Company to make up-front payments to the counterparty financial institutions, which would result in either the receipt of stock at the beginning of the term of the agreements followed by a share adjustment at the maturity of the agreements, or the receipt of either stock or cash at the maturity of the agreements, depending upon the price of the stock.

~~During the first nine months of 2017, there were no shares repurchased under the Program.~~

~~During the first nine months of 2016, the Company repurchased 304,915 shares at an average price of $32.21 for a total cost of $10 million.~~

Since the inception of the Program, the Company has repurchased 24,853,827 shares at an average price of $39.33 for a total cost of $977 million. All shares repurchased are recorded as Treasury stock on the Consolidated ~~Balance Sheets under~~Statements of Earnings (Loss) and Comprehensive Income.

(2)

These amounts are included in the ~~par value method at $0.01 per share.~~computation of net periodic benefit cost (see Note 6 “Pension Plans and Other Post-Retirement Benefit Plans” for more details).

(3)

Includes the non-cash pension settlement gain of $8 million recognized in the second quarter of 2022.

DOMTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~SEPTEMBER~~JUNE 30, ~~2017~~2023

(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE ~~NOTED~~)NOTED)

(UNAUDITED)

NOTE 13.

~~NOTE14.~~_________________

~~_________________~~

COMMITMENTS AND CONTINGENCIES

~~ENVIRONMENT~~ENVIRONMENTAL MATTERS

~~The following table reflects changes in the reserve for environmental remediation and asset retirement obligations:~~

	~~September 30, 2017~~
	$
~~Balance at beginning of year~~		50
~~Additions~~		3
~~Environmental spending~~		(6	)
~~Effect of foreign currency exchange rate change~~		3
~~Balance at end of period~~		50

The Company is subject to environmental laws and regulations enacted by federal, provincial, state and local authorities. The Company may also incur substantial costs in relation to enforcement actions (including orders requiring corrective measures, installation of pollution control equipment or other remedial actions) as a result of violations of, or liabilities under, environmental laws and regulations applicable to its past and present properties. The Company’s ongoing efforts to identify potential environmental concerns that may be associated with such properties may result in additional environmental costs and liabilities which cannot be reasonably estimated at this time.

~~On February 16, 2010,~~A former owner of the ~~government~~Company’s Dryden, Ontario manufacturing site (the "Dryden Property") operated a chlor-alkali plant during the 1960s and 1970s, during which time, mercury and other pollutants were used and discharged into the environment. In conjunction with the sale and redevelopment of ~~British Columbia~~the Dryden Property, the Province of Ontario (the “Province”) provided a broad indemnity (the "Indemnity") in 1985 to the then purchaser of the Dryden Property and its successors and assigns with respect to the discharge of any pollutant, including mercury, by the historical operators of the Dryden Property. This Indemnity subsequently was assigned to the Company in connection with its purchase of the Dryden Property.

As the current owner of the Dryden Property, the Company is actively engaged with the Province with respect to the management of the historical contamination.

The Province issued a ~~Remediation Order~~Director's order under environmental laws to ~~Seaspan International Ltd. (“Seaspan”)~~certain prior owners of the Dryden Property in connection with a nearby waste disposal site that was unrelated to the Dryden Property. The Director's order required certain work to be conducted by those prior owners at that nearby site. The prior owners asserted that the Indemnity covered the work required by the Director’s order. Following extensive litigation, the Supreme Court of Canada found, among other things, that the Indemnity covered third-party claims, but not first-party claims, such as the Director's order.

In the future, the Province may challenge whether the Company has the benefit of the Indemnity. In addition to the Indemnity, Domtar has other recourses relating to the historical contamination.

The situation involving the historical contamination is continuing to develop, and the Company cannot predict its outcome. While the Company currently does not believe that it will be required to incur costs that would have a material impact on its results of operations or financial condition, there is no certainty that this is in ~~order to define and implement a remediation plan to address soil, sediment and groundwater issues. Construction began in January 2017 and is expected to be completed in 2019.~~ fact the case.

The Company ~~previously~~has environmental liabilities of $59 million recorded anas of June 30, 2023 primarily related to environmental ~~reserve~~remediation related to ~~address its estimated exposure.~~closed sites. The ~~possible cost in excess~~amount of these liabilities represents management’s estimate of the ~~reserve is~~ultimate settlement based on an assessment of relevant factors and assumptions and could be affected by changes in facts or assumptions not ~~considered~~currently known to management for which the outcome cannot be ~~material for~~reasonably estimated at this ~~matter.~~time.

The Company also has asset retirement obligations of $54 million recorded as of June 30, 2023, primarily consisting of liabilities associated with landfills, sludge basins and the dismantling of retired assets.

These liabilities are included in Trade and other payables and Other liabilities and deferred credits in the Consolidated Balance Sheets.

Additionally, the Company has asset retirement obligations with indeterminate settlement dates. The fair value of these liabilities cannot be estimated due to the lack of sufficient information to estimate the settlement dates of the obligation. The Company will recognize liability in the period in which sufficient information becomes available. These asset retirement obligations relate mainly to disposal of potentially hazardous materials that may be required if the Company undergoes major maintenance, renovation or demolition, and to closure of retention ponds that may be required if it ceases its operations.

The U.S. Environmental Protection Agency ~~(“EPA”~~(the “EPA”) and/or various state agencies have notified the Company that it may be a potentially responsible party under the Comprehensive Environmental Response Compensation and Liability Act, commonly known as ~~“Superfund,”~~“Superfund”, and similar state laws with respect to other hazardous waste sites as to which no proceedings have been instituted against the Company. The Company continues to take remedial action under its Care and Control Program at its former wood preserving sites, and at a number of operating sites, due to possible soil, sediment or groundwater contamination.

~~Climate change regulation~~

Various national and local laws and regulations have been established or are emerging in jurisdictions where the Company currently has, or may have in the future, manufacturing facilities or investments. The Company does not expect to be disproportionately affected by these measures compared with other pulp and paper producers located in these jurisdictions.

The United States EPA Clean Power Plan regulation is being litigated and has been stayed. EPA is also proposing to repeal the Clean Power Plan in accordance with President Trump’s Executive Order issued on March 28, 2017. The EPA has filed a motion with the D.C. Circuit to hold the case in abeyance while it reconsiders the rule, which the D.C. Circuit granted in part to allow time for additional briefing on how and whether the litigation should proceed. Regardless of the outcome for the Clean Power Plan, the Company does not expect to be disproportionately affected compared with other pulp and paper producers located in the states where the Company operates.

The Government of Canada is reviewing national policies to further reduce greenhouse gases (“GHG”) and has announced its intent to impose a cost on carbon emissions. The Company does not expect its facilities to be disproportionately affected by these measures compared with other pulp and paper producers in Canada.

DOMTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~SEPTEMBER~~JUNE 30, ~~2017~~2023

(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE ~~NOTED~~)NOTED)

(UNAUDITED)

NOTE ~~14.~~13 – COMMITMENTS AND CONTINGENCIES (CONTINUED)

The provinces of Quebec and Ontario have GHG cap-and-trade systems with reduction targets. British Columbia has a carbon tax that applies to the purchase of fossil fuels within the province. The Company does not expect to be disproportionately affected compared to the other pulp and paper producers located in these provinces.CONTINGENCIES

~~CONTINGENCIES~~

In the normal course of operations, the Company becomes involved in various legal actions mostly related to contract disputes, patent infringements, environmental and product warranty claims, and labor issues. While the final outcome with respect to actions outstanding or pending at ~~September~~June 30, ~~2017~~2023, cannot be predicted with certainty, it is management’s opinion that their resolution will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.

~~Spanish Competition Investigation~~INDEMNIFICATIONS

On October 15, 2015, the Competition Directorate of Spain’s National Commission of Markets and Competition (“CNMC”) filed a Statement of Objections against a number of industry participants alleging the existence of a series of agreements between manufacturers, distributors and pharmacists to fix prices and to allocate margins for heavy adult incontinence products within the pharmacy channel in Spain during the period from December 1996 through January 2014. Among the parties named in the Statement of Objections was Indas, which the Company acquired in January 2014, and two of its affiliates.

On January 4, 2016, the Competition Directorate issued a proposed decision confirming the allegations of the Statement of Objections. The proposed decision recommended the imposition of fines on the parties without recommending the amount of any fines. The Company recorded a €0.2 million ($0.2 million) provision in the fourth quarter of 2015 in Other operating (income) loss, net.

On May 26, 2016, the CNMC rendered its final decision, which declared that a number of manufacturers of adult heavy incontinence products, the sector association and certain individuals participated in price fixing during the period from December 1996 through January 2014. Indas and one of its subsidiaries were fined a total of €13.5 million ($14.9 million) for their participation. A provision was recorded in the second quarter of 2016 in the amount of €13.3 million ($14.7 million) in Other operating (income) loss, net.

The sellers of Indas made representations and warranties to the Company in the purchase agreement regarding, among other things, Indas’ and its subsidiary’s compliance with competition laws. The liability retained by the sellers was backed by a retained purchase price of €3 million ($3.3 million) and bank guarantees of €9 million ($9.9 million).

On June 27, 2016, in light of the CNMC decision, the sellers, in terms of their indemnity obligations, agreed to the appropriation by the Company of the retained purchase price and the release of the bank guarantees. Accordingly, a recovery of €12 million ($13.2 million) was recorded in the second quarter of 2016 and included in Other operating (income) loss, net.

~~In July 2016, the fines were paid and Indas and two of its affiliates named in the final decision appealed the decision to the Spanish courts.~~

The Company purchased limited insurance coverage with respect to the purchase agreement, and is seeking to recover the remaining €1.5 million ($1.7 million) under the insurance policy. Any recovery from the insurers would be recorded in the period when the proceeds are received.

~~DOMTAR CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~SEPTEMBER 30, 2017~~

~~(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED~~)

~~(UNAUDITED)~~

~~NOTE 14. COMMITMENTS AND CONTINGENCIES (CONTINUED)~~

~~INDEMNIFICATIONS~~

In the normal course of business, the Company offers indemnifications relating to the sale of its businesses and real estate. In general, these indemnifications may relate to claims from past business operations, compliance with laws, the failure to abide by covenants and the breach of representations and warranties included in the sales agreements. Typically, such representations and warranties relate to taxation, environmental, product and employee matters. The terms of these indemnification agreements are generally for an unlimited period of time. At ~~September~~June 30, ~~2017,~~2023, the Company is unable to estimate the potential maximum liabilities for these types of indemnification guarantees as the amounts are contingent upon the outcome of future events, the nature and likelihood of which cannot be reasonably estimated at this time. Accordingly, no provision has been recorded. These indemnifications have not yielded a significant expense in the past.

Pension Plans

The Company has indemnified and held harmless the trustees of its pension funds, and the respective officers, directors, employees and agents of such trustees, from any and all costs and expenses arising out of the performance of their obligations under the relevant trust agreements, including in respect of their reliance on authorized instructions from the Company or for failing to act in the absence of authorized instructions. These indemnifications survive the termination of such agreements. At ~~September~~June 30, ~~2017,~~2023, the Company has ~~not~~not recorded a liability associated with these indemnifications, as it does not expect to make any payments pertaining to these indemnifications.

CLIMATE CHANGE AND AIR QUALITY REGULATIONS

Various national and local laws and regulations relating to climate change have been established or are emerging in jurisdictions where the Company currently has, or may have in the future, manufacturing facilities or investments.

In 2019, the EPA repealed the Clean Power Plan and replaced it with the “Affordable Clean Energy” (“ACE”) rule. The ACE rule was legally challenged in the U.S. Court of Appeals for the D.C. Circuit. The Court vacated the ACE rule and, the repeal of the Clean Power Plan, but the court stayed its mandate as to the Clean Power Plan repeal to avoid reinstating that now outdated rule. However, on June 30, 2022, the Supreme Court reversed the D.C. Circuit’s decision, holding that the Clean Power Plan was an “extraordinary” case of an agency claiming transformative power over a “major question” of policy without a clear statement from Congress. The decision does not completely bar the EPA from regulating greenhouse gas emissions from the power sector but prohibits the EPA from imposing standards based on “generation shifting” away from coal-fired power plants to natural gas plants and renewable resources. On May 23, 2023, the EPA proposed a new climate change rule for existing power plants and repealed the ACE rule. The new rule requires, by 2030, all coal-fired power plants to choose between carbon capture and sequestration, natural gas-co-firing, or retirement by 2032 (or 2035 with a 20% operating limit). The new rule also applies to all new gas combustion turbines and existing turbines that are large and frequently operated, requiring carbon capture and sequestration or the co-firing of or conversion to hydrogen in lieu of natural gas. While the rule, if finalized as proposed, would dramatically change the electric power sector, the Company does not expect to be disproportionately affected compared with other pulp and paper producers located in the states where the Company operates.

30The province of Quebec has a greenhouse gas (“GHG”) cap-and-trade system with reduction targets. Ontario has its GHG Emission Performance Standards regulation. The Company does not expect its facilities to be disproportionately affected by these measures compared to the other pulp and paper producers located in these provinces.

The Government of Canada has established a federal carbon pricing system that took effect in 2019. The Federal program is a backstop and takes effect if a province does not have a carbon pricing program or if a provincial program is not rigorous enough to meet federal requirements.

DOMTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~SEPTEMBER~~JUNE 30, ~~2017~~2023

(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE ~~NOTED~~)NOTED)

(UNAUDITED)

NOTE ~~15.~~ 13 – COMMITMENTS AND CONTINGENCIES (CONTINUED)

~~_________________~~

The EPA finalized amendments revising certain aspects of its Industrial Boiler Maximum Achievable Control Technology Standard (“MACT”), or Boiler MACT. The revised rule responded to two court decisions that remanded certain issues for further review by the EPA, and it includes revisions to 34 different emission limitations that could apply to some of the Company’s facilities. Although the EPA has indicated that a small number of facilities may need to reduce emissions further compared to the current limits, the EPA does not expect additional costs to be significant and the Company does not expect its facilities to be disproportionately affected compared to other U.S. pulp and paper producers.

LEGAL MATTERS

The Company becomes involved in various legal proceedings, claims and governmental inquiries, investigations, and other disputes in the normal course of business, including matters related to contracts, torts, 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, the Company regularly assesses the status of the matters and establishes provisions (including legal costs expected to be incurred) when it believes 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, the Company believes that the ultimate disposition of these matters outstanding or pending as of June 30, 2023, will not have a material adverse effect on the Company's Consolidated Financial Statements.

ASBESTOS-RELATED LAWSUITS

The Company is 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 the Company disputes the plaintiffs’ allegations and intends 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 the Company is unable to reasonably estimate a range of possible losses, which may not be covered in whole or in part by its insurance coverage. However, unfavorable rulings, judgments or settlement terms could materially impact the Consolidated Financial Statements. Hearings for certain of these matters are scheduled to occur in the next twelve months.

COUNTERVAILING DUTY AND ANTI-DUMPING INVESTIGATIONS ON SOFTWOOD LUMBER

On November 25, 2016, countervailing duty and anti-dumping petitions were filed with the U.S. Department of Commerce (“Commerce”) and the U.S. International Trade Commission (“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 the Company’s 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.

DOMTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023

(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED)

(UNAUDITED)

NOTE 13 – COMMITMENTS AND CONTINGENCIES (CONTINUED)

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, the Company was required to pay cash deposits to the U.S. Customs and Border Protection agency (“U.S. Customs”) at a rate of 12.82% for countervailing duties on the vast majority of its 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, the Company was 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 order; as a result, from December 1, 2020 to December 1, 2021, the Company was 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 order; as a result, from December 2, 2021, to August 8, 2022, the Company was required to pay cash deposits to U.S. Customs at a rate of 18.07%. Commerce issued its final determination dated August 3, 2022, in the third administrative review of the countervailing order; as a result, from August 9, 2022 to July 31, 2023, the Company has been required to pay cash deposits to U.S. Customs at a rate of 10.10%. Commerce issued its final determination dated July 26, 2023, in the fourth administrative review of the countervailing order; as a result, since August 1, 2023, the Company has been required to pay cash deposits to U.S. Customs at a new rate of 1.79%. Through June 30, 2023, the Company’s cash deposits paid totaled $457 million.

Anti-dumping Duties

On June 26, 2017, Commerce announced its preliminary determination in the anti-dumping investigation; as a result, from June 30, 2017 to November 7, 2017, the Company was required to pay cash deposits to U.S. Customs at a rate of 4.59% for anti-dumping duties on the vast majority of the Company's 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, the Company was required to pay cash deposits to U.S. Customs at a rate of 3.20%. On November 23, 2020, Commerce issued its final determination in the first administrative review of the anti-dumping order; as a result, from November 30, 2020 to December 1, 2021, the Company was 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 order; as a result, from December 2, 2021, to August 8, 2022, the Company was required to pay cash deposits to U.S. Customs at a rate of 11.59%. Commerce issued its final determination dated August 3, 2022, in the third administrative review of the anti-dumping order; as a result, from August 9, 2022 to July 31, 2023, the Company has been required to pay cash deposits to U.S. Customs at a rate of 4.76%. Commerce issued its final determination dated July 26, 2023, in the fourth administrative review of the anti-dumping order; as a result, since August 1, 2023, the Company has been required to pay cash deposits to U.S. Customs at a new rate of 6.20%. Through June 30, 2023, the Company’s cash deposits paid totaled $127 million.

Ongoing Administrative Reviews

Following Commerce’s completion of the Canadian softwood lumber investigation and the first, second, third, and fourth administrative reviews, the fifth administrative review remains pending. On March 14, 2023, Commerce published a notice initiating the fifth administrative review of the countervailing duty and anti-dumping orders on softwood lumber products from Canada; in decisions published on April 19, and 20, 2023, the Company was not selected as a mandatory respondent in the countervailing and anti-dumping proceedings, respectively.

DOMTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023

(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED)

(UNAUDITED)

NOTE 13 – COMMITMENTS AND CONTINGENCIES (CONTINUED)

Ongoing Appellate Reviews

On December 14, 2017 and January 4, 2018, the Company filed complaints supporting appellate reviews of the final results of Commerce’s countervailing and anti-dumping investigations on softwood lumber from Canada, respectively, before a binational panel formed pursuant to the North American Free Trade Agreement or United States-Mexico-Canada Agreement, as the case may be (“Panel”). The hearing for the anti-dumping appellate review took place on June 6 and 7, 2023, as the Company now awaits a ruling by the Panel, while the hearing for the countervailing appellate review is expected to take place on September 27-29, 2023. On January 6, 2021 and January 19, 2021, the Company filed its complaints supporting appellate Panel reviews of the final results in the countervailing and anti-dumping first administrative reviews. The Company filed similar complaints with respect to the second administrative reviews on January 12, 2022, and with respect to the third administrative reviews on September 16, 2022. Further, on May 8, 2023, the Company filed with the U.S. Court of International Trade ("CIT") a complaint supporting an appellate review of Commerce's final results in the sunset review of the anti-dumping order.

Ongoing Sunset Reviews

In parallel, on December 1, 2022, Commerce and the ITC published notices that automatically initiated five-year “sunset” reviews to determine whether revocation, for the future, of the anti-dumping and countervailing duty orders on softwood lumber products from Canada would likely lead to continuation or recurrence of dumping or subsidies (Commerce) and of material injury (ITC). Commerce released final results in the sunset reviews of the countervailing and anti-dumping orders on March 27 and April 3, 2023, respectively, finding that revocation of the orders would be likely to lead to continuation or recurrence of countervailable subsidies and of dumping. The countervailing and anti-dumping sunset reviews before the ITC remain pending.

World Trade Organization Appeal

In addition, on August 24, 2020, the World Trade Organization’s (the “WTO”) dispute panel issued a report (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 U.S. notified the WTO’s dispute settlement body of its decision to appeal the Panel Report.

Financial assurance

The Company is required by U.S. Customs to provide surety bonds to secure the payment of its cash deposits. As of June 30, 2023, the Company had $101 million of surety bonds outstanding in favor of U.S. Customs, of which $62 million were secured by letters of credit.

FIBREK ACQUISITION

Effective July 31, 2012, the Company completed the final step of the transaction pursuant to which it acquired the remaining 25.40% of the outstanding Fibrek Inc. shares, following the approval of Fibrek’s shareholders on July 23, 2012, and the issuance of a final order by the Quebec Superior Court in Canada (the “Quebec Superior Court”) approving the arrangement on July 27, 2012. Certain former shareholders of Fibrek exercised rights of dissent in respect of the transaction, asking for a judicial determination of the fair value of their claim under the Canada Business Corporations Act. On September 26, 2019, the Quebec Superior Court rendered a decision fixing the fair value of the shares of the dissenting shareholders at C$1.99 per share, or $23 million (C$31 million) in aggregate, plus interest and an additional indemnity, for a total estimated at $33 million (C$44 million) payable in cash. Of the amount, $14 million (C$19 million) was payable immediately and paid on October 2, 2019. The remaining balance of $22 million (C$29 million) as of June 30, 2023 which includes accrued interest, is recorded in Trade and other payables in the Consolidated Balance Sheet. The Company has appealed 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 $23 million (C$30 million) was registered on its 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 was held in November 2022 and the Company is awaiting a decision.

DOMTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023

(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED)

(UNAUDITED)

NOTE 13 – COMMITMENTS AND CONTINGENCIES (CONTINUED)

PARTIAL WIND-UPS OF PENSION PLANS

On June 12, 2012, the Company 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) (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. The Company contends, 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 the Company's 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 ($113 million), would have to be funded if the Company does not obtain the relief sought. The hearing in this matter is scheduled in the first quarter of 2024.

SUPERFUND SITE

On May 17, 2023, the EPA issued a General Notice of Liability and Demand for Reimbursement of Response Costs Expended at the Barite Hill/Nevada Goldfields Superfund Site (the “Notice of Liability”) to the Company. The Notice of Liability states that the EPA believes that the Company may be liable under Section 107(a) of the Comprehensive, Environmental Response, Compensation, and Liability Act (“CERCLA”) for costs the EPA has incurred at the Barite Hill/Nevada Goldfields Superfund Site (the “Site”). The approximate total response costs identified by the EPA in the Notice of Liability through January 19, 2023 was approximately $21 million. The Company believes that the EPA may also seek to hold it responsible for future remediation costs at the Site.

The Company recognized a provision of $15 million, with respect to the EPA’s cause of action for past costs described in the Notice of Liability, in Other liabilities in the preliminary purchase price allocation. See Note 3 “Acquisition of businesses” for more information. The Company is in the process of evaluating the impact of the Notice of Liability and the provision may be adjusted during the measurement period.

MENOMINEE FIRE

Prior to the Acquisition, on October 6, 2022, a fire in a third-party owned warehouse that the Company leases adjacent to its Menominee recycled pulp mill damaged and, in some cases, destroyed, the warehouse, as well as certain of the Company’s property, plant and equipment and inventories, which resulted in the temporary idling of the facility. The mill was restarted during the first quarter of 2023, operating at limited capacity. The fire incident resulted in third-party damages, costs and expenses, in addition to damages to the Menominee facility. The Company currently does not believe it is probable that it will incur any material loss related to third party claims, nor could any possible loss contingency be reasonably estimable at the present time.

The Company maintains insurance coverage, subject to customary deductibles and limits. Anticipated insurance recoveries related to losses and incremental costs incurred, in excess of the deductible, are recognized when receipt is probable. The anticipated insurance recoveries related to the fire, in excess of the net book value of the damaged operating assets and related to business interruption, will not be recognized until all contingencies related to the claim have been resolved.

Prior to the Acquisition, total costs of $32 million, net of deductible, were determined probable to be recovered, of which $18 million were received. The balance of $14 million was recorded under Receivables on the Consolidated Balance Sheet at the acquisition date.

For the three and six months ended June 30, 2023, the Company recognized direct costs of $13 million and $19 million, respectively, which were determined probable to be recovered and recognized an equivalent amount of recovery in reduction of Cost of sales. The Company also recognized a gain on disposition of property, plant and equipment of $4 million under Other operating loss (income), net on the Consolidated Statement of Earnings (Loss) and Comprehensive Income. For the three and six months ended June 30, 2023, $27 million and $29 million, respectively, were received from the insurer, and as of June 30, 2023, an amount of $8 million was recorded under Receivables on the Consolidated Balance Sheet.

DOMTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023

(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED)

(UNAUDITED)

NOTE 13 – COMMITMENTS AND CONTINGENCIES (CONTINUED)

The Company expects to continue to record additional costs and recoveries until the assessment is completed and insurance claims are fully settled. At this time, the Company expects that its total insurance claim will amount to approximately $90 million ($80 million, net of deductible). The timing and the amounts of additional insurance recoveries, including for business interruption, are not known at this time.

DOMTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023

(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED)

(UNAUDITED)

NOTE 14.

_________________

SEGMENT DISCLOSURES

~~The Company’s~~ Following the recent acquisition of Resolute Forest Products Inc. on March 1, 2023, the Company revised its segment structure and now operates as two reportable segments as described below, which also represent its two operating ~~segments. Each reportable segment offers different products and services and requires different manufacturing processes, technology and marketing strategies. The following summary briefly describes~~segments based on the ~~operations included in each of the Company’s reportable segments:~~Company's organizational structure:

•

~~Pulp and Paper~~Domtar – consists of the design, manufacturing, marketing and distribution of communication, specialty and packaging papers, as well as softwood, hardwood and fluff pulp and ~~hardwood market pulp.~~

high quality airlaid and ultrathin laminated cores.

•

~~Personal Care~~Resolute – consists of the design, manufacturing, marketing and distribution of ~~absorbent hygiene products.~~

market pulp, tissue, wood products and paper.

An analysis and reconciliation of the Company’s business segment information to the respective information in the financial statements is as follows:

For the three months ended

For the nine months ended

September 30,

September 30,

September 30,

September 30,

SEGMENT DATA

2017

2016

2017

2016

$

$

$

$

Sales by segment

Pulp and Paper

1,054

1,054

3,126

3,193

Personal Care

253

231

743

675

Total for reportable segments

1,307

1,285

3,869

3,868

Intersegment sales

(15
)

(15
)

(49
)

(44
)
Consolidated sales

1,292

1,270

3,820

3,824

Sales by product group

Communication papers

597

638

1,798

1,952

Specialty and packaging papers

167

172

486

518

Market pulp

275

229

793

679

Absorbent hygiene products

253

231

743

675

Consolidated sales

1,292

1,270

3,820

3,824

Depreciation and amortization
   of property, plant and equipment

Pulp and Paper

63

71

190

216

Personal Care

17

16

49

47

Total for reportable segments

80

87

239

263

Impairment of property, plant and
   equipment - Pulp and Paper

—

5

—

29

Consolidated depreciation and amortization and impairment
   of property, plant and equipment

80

92

239

292

Operating income (loss)

Pulp and Paper

93

89

192

143

Personal Care

8

15

37

44

Corporate

(12
)

(12
)

(34
)

(38
)
Consolidated operating income

89

92

195

149

Interest expense, net

16

17

50

49

Earnings before income taxes

73

75

145

100

Income tax expense

3

16

17

19

Net earnings

70

59

128

81



	For the three months ended						For the six months ended
	June 30,			June 30,			June 30,			June 30,
SEGMENT DATA	2023			2022			2023			2022
	$			$			$			$
Sales by segment
Domtar		1,100			1,148			2,285			2,219
Resolute		635			—			875			—
Total for reportable segments		1,735			1,148			3,160			2,219
Intersegment sales		(5	)		—			(7	)		—
Consolidated sales		1,730			1,148			3,153			2,219
Sales by product group
Communication papers		625			635			1,273			1,214
Specialty and packaging papers		266			189			495			364
Market pulp		411			324			800			641
Newsprint		99			—			141			—
Tissue		57			—			77			—
Wood		272			—			367			—
Consolidated sales		1,730			1,148			3,153			2,219
Operating income (loss) from continuing operations
Domtar		44			66			167			98
Resolute		(23	)		—			(57	)		—
Consolidated operating income from continuing operations		21			66			110			98
Interest expense, net		58			24			103			45
Non-service components of net periodic benefit cost		(4	)		(17	)		(8	)		(26	)
(Loss) earnings before income taxes		(33	)		59			15			79
Income tax (benefit) expense		(9	)		14			(65	)		19
(Loss) earnings from continuing operations		(24	)		45			80			60
Earnings from discontinued operations, net of taxes		11			5			13			18
Net (loss) earnings		(13	)		50			93			78

DOMTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~SEPTEMBER~~JUNE 30, ~~2017~~2023

(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE ~~NOTED~~)NOTED)

(UNAUDITED)

NOTE 15.

_________________

RELATED PARTY TRANSACTIONS

~~NOTE 16.~~

~~_________________~~

~~SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION~~

~~The following information is presented as required under Rule 3-10~~Following the acquisition of ~~Regulation S-X, in connection~~SPI, on June 29, 2023, the purchase price of $185 million was financed by the seller, an affiliated company with the ~~Company’s~~ issuance ~~of debt securities that are fully and unconditionally guaranteed~~ by Domtar of a $50 million unsecured note due July 15, 2023, a $35 million unsecured note due after June 30, 2031 and $100 million preferred shares redeemable by the holder after June 30, 2031, with Domtar having the option to satisfy the redemption with cash or Domtar securities. Refer to Note 3 “Acquisition of businesses” for details.

The Company has other receivables with Paper ~~Company, LLC, a 100% owned subsidiary~~Excellence and their affiliates of ~~the Company, Domtar Industries LLC (and subsidiaries, excluding Domtar Funding LLC), Domtar A.W. LLC, Attends Healthcare Products Inc., EAM Corporation, Associated Hygienic Products LLC~~$11 million and Home Delivery Incontinent Supplies Co., all 100% owned subsidiaries of the Company (“Guarantor Subsidiaries”), on a joint and several basis. Pursuant to the amendment and restatement of the 2016 Credit Agreement on August 18, 2016, the Guaranteed Debt will not be guaranteed by certain of Domtar’s 100% owned subsidiaries; including Domtar Delaware Holdings Inc. and its foreign subsidiaries, including Attends Healthcare Limited, Domtar Inc. and Laboratorios Indas. S.A.U.. Also excluded are Ariva Distribution Inc., Domtar Delaware Investments Inc., Domtar Delaware Holdings LLC, Domtar AI Inc., Domtar Personal Care Absorbent Hygiene Inc., Domtar Wisconsin Dam Corp. and Palmetto Enterprises LLC, (collectively the “Non-Guarantor Subsidiaries”). The subsidiary’s guarantee may be released in certain customary circumstances, such as if the subsidiary is sold or sells all of its assets, if the subsidiary’s guarantee of the Credit Agreement is terminated or released and if the requirements for legal defeasance to discharge the indenture have been satisfied.

~~The following supplemental condensed consolidating financial information sets forth, on an unconsolidated basis, the Balance Sheets~~$13 million at ~~September~~June 30, ~~2017~~2023 and December 31, ~~2016,~~2022, respectively.

The Company has other payables with Paper Excellence and their affiliates of $1 million and $111 million at June 30, 2023 and December 31, 2022, respectively.

For the three and six months ended June 30, 2023, the Company recognized $2 million and $4 million, respectively (2022 – $3 million and $6 million, respectively) of management fees paid to an affiliated company. These costs are included in the Consolidated Statements of Earnings (Loss) and Comprehensive Income ~~for the three~~under Selling, general and nine months ended September 30, 2017 and 2016 and the Statements of Cash Flows for the nine months ended September 30, 2017 and 2016 for Domtar Corporation (the “Parent”), and on a combined basis for the Guarantor Subsidiaries and, on a combined basis, the Non-Guarantor Subsidiaries. The supplemental condensed consolidating financial information reflects the investments of the Parent in the Guarantor Subsidiaries, as well as the investments of the Guarantor Subsidiaries in the Non-Guarantor Subsidiaries, using the equity method.administrative expense.

For the three months ended

September 30, 2017

Non-

CONDENSED CONSOLIDATING STATEMENT OF EARNINGS

Guarantor

Guarantor

Consolidating

AND COMPREHENSIVE INCOME

Parent

Subsidiaries

Subsidiaries

Adjustments

Consolidated

$

$

$

$

$

Sales

—

1,059

522

(289
)

1,292

Operating expenses

Cost of sales, excluding depreciation and amortization

—

901

400

(289
)

1,012

Depreciation and amortization

—

58

22

—

80

Selling, general and administrative

4

37

77

—

118

Other operating income, net

—

—

(7
)

—

(7
)

4

996

492

(289
)

1,203

Operating (loss) income

(4
)

63

30

—

89

Interest expense (income), net

15

21

(20
)

—

16

(Loss) earnings before income taxes

(19
)

42

50

—

73

Income tax (benefit) expense

(4
)

(4
)

11

—

3

Share in earnings of equity accounted investees

85

39

—

(124
)

—

Net earnings

70

85

39

(124
)

70

Other comprehensive income

69

69

61

(130
)

69

Comprehensive income

139

154

100

(254
)

139

~~DOMTAR CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~SEPTEMBER 30, 2017~~

~~(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED~~)

~~(UNAUDITED)~~

~~NOTE 16. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED)~~

For the nine months ended

September 30, 2017

Non-

CONDENSED CONSOLIDATING STATEMENT OF EARNINGS

Guarantor

Guarantor

Consolidating

AND COMPREHENSIVE INCOME

Parent

Subsidiaries

Subsidiaries

Adjustments

Consolidated

$

$

$

$

$

Sales

—

3,156

1,537

(873
)

3,820

Operating expenses

Cost of sales, excluding depreciation and amortization

—

2,749

1,179

(873
)

3,055

Depreciation and amortization

—

175

64

—

239

Selling, general and administrative

8

101

228

—

337

Other operating income, net

—

(2
)

(4
)

—

(6
)

8

3,023

1,467

(873
)

3,625

Operating (loss) income

(8
)

133

70

—

195

Interest expense (income), net

48

63

(61
)

—

50

(Loss) earnings before income taxes

(56
)

70

131

—

145

Income tax (benefit) expense

(13
)

1

29

—

17

Share in earnings of equity accounted investees

171

102

—

(273
)

—

Net earnings

128

171

102

(273
)

128

Other comprehensive income

154

163

146

(309
)

154

Comprehensive income

282

334

248

(582
)

282

For the three months ended

September 30, 2016

Non-

CONDENSED CONSOLIDATING STATEMENT OF

Guarantor

Guarantor

Consolidating

EARNINGS AND COMPREHENSIVE INCOME

Parent

Subsidiaries

Subsidiaries

Adjustments

Consolidated

$

$

$

$

$

Sales

—

1,044

516

(290
)

1,270

Operating expenses

Cost of sales, excluding depreciation and amortization

—

879

380

(290
)

969

Depreciation and amortization

—

65

22

—

87

Selling, general and administrative

3

28

76

—

107

Impairment of property, plant and equipment

—

5

—

—

5

Closure and restructuring costs

—

10

—

—

10

Other operating (income) loss, net

—

(1
)

1

—

—

3

986

479

(290
)

1,178

Operating (loss) income

(3
)

58

37

—

92

Interest expense (income), net

16

14

(13
)

—

17

(Loss) earnings before income taxes

(19
)

44

50

—

75

Income tax (benefit) expense

(4
)

(3
)

23

—

16

Share in earnings of equity accounted investees

74

27

—

(101
)

—

Net earnings

59

74

27

(101
)

59

Other comprehensive income

3

7

7

(14
)

3

Comprehensive income

62

81

34

(115
)

62

~~DOMTAR CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~SEPTEMBER 30, 2017~~

~~(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED~~)

~~(UNAUDITED)~~

~~NOTE 16. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED)~~

For the nine months ended

September 30, 2016

Non-

CONDENSED CONSOLIDATING STATEMENT OF EARNINGS

Guarantor

Guarantor

Consolidating

AND COMPREHENSIVE INCOME

Parent

Subsidiaries

Subsidiaries

Adjustments

Consolidated

$

$

$

$

$

Sales

—

3,150

1,535

(861
)

3,824

Operating expenses

Cost of sales, excluding depreciation and amortization

—

2,725

1,168

(861
)

3,032

Depreciation and amortization

—

193

70

—

263

Selling, general and administrative

13

80

221

—

314

Impairment of property, plant and equipment

—

29

—

—

29

Closure and restructuring costs

—

33

—

—

33

Other operating loss (income), net

1

(2
)

5

—

4

14

3,058

1,464

(861
)

3,675

Operating (loss) income

(14
)

92

71

—

149

Interest expense (income), net

48

30

(29
)

—

49

(Loss) earnings before income taxes

(62
)

62

100

—

100

Income tax (benefit) expense

(14
)

1

32

—

19

Share in earnings of equity accounted investees

129

68

—

(197
)

—

Net earnings

81

129

68

(197
)

81

Other comprehensive income

103

97

63

(160
)

103

Comprehensive income

184

226

131

(357
)

184

~~DOMTAR CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~SEPTEMBER 30, 2017~~

~~(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED~~)

~~(UNAUDITED)~~

~~NOTE 16. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED)~~

September 30, 2017

Non-

Guarantor

Guarantor

Consolidating

CONDENSED CONSOLIDATING BALANCE SHEET

Parent

Subsidiaries

Subsidiaries

Adjustments

Consolidated

$

$

$

$

$

Assets

Current assets

Cash and cash equivalents

10

3

130

—

143

Receivables

—

335

324

—

659

Inventories

—

536

251

—

787

Prepaid expenses

11

27

9

—

47

Income and other taxes receivable

—

3

14

(4
)

13

Intercompany accounts

292

367

85

(744
)

—

Total current assets

313

1,271

813

(748
)

1,649

Property, plant and equipment, net

—

1,888

886

—

2,774

Goodwill

—

313

265

—

578

Intangible assets, net

—

270

362

—

632

Investments in affiliates

4,310

2,898

—

(7,208
)

—

Intercompany long-term advances

6

81

1,466

(1,553
)

—

Other assets

36

28

134

(47
)

151

Total assets

4,665

6,749

3,926

(9,556
)

5,784

Liabilities and shareholders' equity

Current liabilities

Trade and other payables

47

405

235

—

687

Intercompany accounts

299

97

348

(744
)

—

Income and other taxes payable

11

—

25

(4
)

32

Long-term debt due within one year

—

—

1

—

1

Total current liabilities

357

502

609

(748
)

720

Long-term debt

792

299

73

—

1,164

Intercompany long-term loans

610

942

1

(1,553
)

—

Deferred income taxes and other

—

558

170

(47
)

681

Other liabilities and deferred credits

20

138

175

—

333

Shareholders' equity

2,886

4,310

2,898

(7,208
)

2,886

Total liabilities and shareholders' equity

4,665

6,749

3,926

(9,556
)

5,784

~~DOMTAR CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~SEPTEMBER 30, 2017~~

~~(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED~~)

~~(UNAUDITED)~~

~~NOTE 16. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED)~~

December 31, 2016

Non-

Guarantor

Guarantor

Consolidating

CONDENSED CONSOLIDATING BALANCE SHEET

Parent

Subsidiaries

Subsidiaries

Adjustments

Consolidated

$

$

$

$

$

Assets

Current assets

Cash and cash equivalents

17

14

94

—

125

Receivables

—

305

308

—

613

Inventories

—

548

211

—

759

Prepaid expenses

15

19

6

—

40

Income and other taxes receivable

—

16

15

—

31

Intercompany accounts

331

184

47

(562
)

—

Total current assets

363

1,086

681

(562
)

1,568

Property, plant and equipment, net

—

2,000

825

—

2,825

Goodwill

—

313

237

—

550

Intangible assets, net

—

279

329

—

608

Investments in affiliates

3,976

2,678

—

(6,654
)

—

Intercompany long-term advances

6

80

1,411

(1,497
)

—

Other assets

15

18

103

(7
)

129

Total assets

4,360

6,454

3,586

(8,720
)

5,680

Liabilities and shareholders' equity

Current liabilities

Bank indebtedness

—

12

—

—

12

Trade and other payables

48

391

217

—

656

Intercompany accounts

136

115

311

(562
)

—

Income and other taxes payable

16

—

6

—

22

Long-term debt due within one year

63

—

—

—

63

Total current liabilities

263

518

534

(562
)

753

Long-term debt

841

299

78

—

1,218

Intercompany long-term loans

560

937

—

(1,497
)

—

Deferred income taxes and other

—

556

126

(7
)

675

Other liabilities and deferred credits

20

168

170

—

358

Shareholders' equity

2,676

3,976

2,678

(6,654
)

2,676

Total liabilities and shareholders' equity

4,360

6,454

3,586

(8,720
)

5,680

~~DOMTAR CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~SEPTEMBER 30, 2017~~

~~(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED~~)

~~(UNAUDITED)~~

~~NOTE 16. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED)~~

For the nine months ended

September 30, 2017

CONDENSED CONSOLIDATING STATEMENT OF
CASH FLOWS

Parent

Guarantor
Subsidiaries

Non-
Guarantor
Subsidiaries

Consolidating
Adjustments

Consolidated

$

$

$

$

$

Operating activities

Net earnings

128

171

102

(273
)

128

Changes in operating and intercompany assets and
liabilities and non-cash items, included in net earnings

43

(176
)

56

273

196

Cash flows provided from (used for) operating activities

171

(5
)

158

—

324

Investing activities

Additions to property, plant and equipment

—

(61
)

(50
)

—

(111
)
Proceeds from disposals of property, plant and equipment

—

—

8

—

8

Cash flows used for investing activities

—

(61
)

(42
)

—

(103
)
Financing activities

Dividend payments

(78
)

—

—

—

(78
)
Net change in bank indebtedness

—

(12
)

—

—

(12
)
Change in revolving credit facility

(50
)

—

—

—

(50
)
Proceeds from receivables securitization facility

—

—

25

—

25

Repayments of receivables securitization facility

—

—

(35
)

—

(35
)
Repayments of long-term debt

(63
)

—

—

��

(63
)
Increase in long-term advances to related parties

—

—

(79
)

79

—

Decrease in long-term advances to related parties

12

67

—

(79
)

—

Other

1

—

—

—

1

Cash flows (used for) provided from financing activities

(178
)

55

(89
)

—

(212
)
Net (decrease) increase in cash and cash equivalents

(7
)

(11
)

27

—

9

Impact of foreign exchange on cash

—

—

9

—

9

Cash and cash equivalents at beginning of period

17

14

94

—

125

Cash and cash equivalents at end of period

10

3

130

—

143

~~DOMTAR CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~SEPTEMBER 30, 2017~~

~~(IN MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED~~)

~~(UNAUDITED)~~

~~NOTE 16. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED)~~

For the nine months ended

September 30, 2016

CONDENSED CONSOLIDATING STATEMENT OF
   CASH FLOWS

Parent

Guarantor
Subsidiaries

Non-
Guarantor
Subsidiaries

Consolidating
Adjustments

Consolidated

$

$

$

$

$

Operating activities

Net earnings

81

129

68

(197
)

81

Changes in operating and intercompany assets and
   liabilities and non-cash items, included in net earnings

(4,288
)

4,205

115

197

229

Cash flows (used for) provided from operating activities

(4,207
)

4,334

183

—

310

Investing activities

Additions to property, plant and equipment

—

(246
)

(56
)

—

(302
)
Acquisition of business, net of cash acquired

—

(1
)

—

—

(1
)
Other

—

—

1

—

1

Cash flows used for investing activities

—

(247
)

(55
)

—

(302
)
Financing activities

Dividend payments

(76
)

—

—

—

(76
)
Stock repurchase

(10
)

—

—

—

(10
)
Net change in bank indebtedness

—

1

—

—

1

Change in revolving credit facility

60

—

—

—

60

Proceeds from receivables securitization facility

—

—

140

—

140

Repayments of receivables securitization facility

—

—

(40
)

—

(40
)
Repayments of long-term debt

(38
)

(1
)

(1
)

—

(40
)
Increase in long-term advances to related parties

—

(4,089
)

(172
)

4,261

—

Decrease in long-term advances to related parties

4,261

—

—

(4,261
)

—

Other

(3
)

—

—

—

(3
)
Cash flows provided from (used for) financing
   activities

4,194

(4,089
)

(73
)

—

32

Net (decrease) increase in cash and cash equivalents

(13
)

(2
)

55

—

40

Impact of foreign exchange on cash

—

—

2

—

2

Cash and cash equivalents at beginning of period

49

2

75

—

126

Cash and cash equivalents at end of period

36

—

132

—

168

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with Domtar Corporation’s unaudited interim financial statements and notes thereto included in this Quarterly Report on Form 10-Q. This MD&A should also be read in conjunction with the historical financial information contained in our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2022, filed with the Securities and Exchange Commission (“SEC”) on ~~February 24, 2017.~~March 3, 2023. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in forward-looking statements. Factors that might cause a difference include, but are not limited to, those discussed below under “outlook”, “Forward-looking statements”, as well as in Item 1A, Risk Factors, in Part II, of this report. Throughout this MD&A, unless otherwise specified, “Domtar Corporation,” “the Company,” “Domtar,” “we,” “us” and “our” refers to Domtar Corporation and its subsidiaries. ~~Domtar Corporation’s common stock is listed on the New York Stock Exchange and the Toronto Stock Exchange.~~ Except where otherwise indicated, all financial information reflected herein is determined on the basis of accounting principles generally accepted in the United States.

The information contained on our ~~website,~~ ~~www.domtar.com~~,websites is not incorporated by reference into this Form 10-Q and should in no way be construed as a part of this or any other report that we file with or furnish to the SEC.

In accordance with industry practice, in this report, the term “ton” or the symbol “ST” refers to a short ton, an imperial unit of measurement equal to 0.9072 metric tons. The term “metric ton” or the symbol “ADMT” refers to an air dry metric ~~ton.~~ton, and the term MBF refer to a million board feet. In this report, unless otherwise indicated, all dollar amounts are expressed in U.S. dollars, and the term “dollars” and the symbol “$” refer to U.S. dollars. In the following discussion, unless otherwise noted, references to increases or decreases in income and expense items, prices, contribution to net earnings (loss), and shipment volumes are based on the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016.~~June 30, 2022. The three month and ~~nine~~six month periods are also referred to as the ~~third~~second quarter and first ~~nine months~~half of ~~2017~~2023 and ~~2016.~~2022. Reference to notes refers to footnotes to the consolidated financial statements and notes thereto included in Item 1 of this Form 10-Q.

~~This MD&A~~Recent Events and Items Affecting Comparability of Financial Results

Domtar Corporation acquired Skookumchuck pulp mill, from Paper Excellence

On June 29, 2023, we completed the acquisition of all the outstanding common and preferred shares of Skookumchuck Pulp Inc. (“SPI”), a pulp mill in British Columbia, for a purchase consideration of $185 million. Paper Excellence group of companies owns both Domtar and SPI. The acquisition of SPI from Paper Excellence was accounted for as a transaction between entities under common control, which requires retrospective combination of entities as if the combination had been in effect since the inception of common control. Accordingly, the financial information for Domtar and SPI has been combined from the inception of common control which was November 30, 2021. Refer to Item 1, Financial Statements and Supplementary Data, under Note 3 “Acquisition of businesses” for more information on the acquisition of SPI.

Paper Excellence completes the acquisition of Resolute Forest Products through Domtar Corporation

On March 1, 2023, Paper Excellence completed the acquisition of Resolute Forest Products ("Resolute") through Domtar (referred to as "the Acquisition"). The acquisition date fair value of the consideration transferred is ~~intended~~approximately $1.696 billion, less cash acquired of $480 million and including the contingent value right on softwood lumber duty deposit refunds. The Resolute businesses manufacture and market a diverse range of products, including market pulp, tissue, wood products and paper. Total net sales for Resolute during its most recent pre-acquisition year ended December 31, 2022, were $3.8 billion. Refer to ~~provide investors~~Overview section below as well as Item 1, Financial Statements and Supplementary Data, under Note 3 “Acquisition of Business” for additional information.

As a condition to obtain the approval of the Acquisition from the Canadian Competition Bureau, we were required to commit to the divestiture of our Dryden, Ontario pulp mill (Domtar) and Thunder Bay, Ontario pulp and paper mill (Resolute), within a short period of time following the Acquisition. Each mill will be sold to an independent purchaser that have been approved by the Commissioner. On February 26, 2023, we entered into an Asset Purchase Agreement to sell the Dryden pulp mill and related assets for a purchase price of $240 million in cash, subject to customary adjustments and to customary closing conditions. The transaction closed on August 1, 2023. On May 26, 2023, we entered into an Asset Purchase Agreement to sell the Thunder Bay pulp and paper mill and related assets for a purchase price of $219 million in cash, subject to customary adjustments. The transaction closed on August 1, 2023.

The assets and liabilities related to the Dryden pulp mill were presented as held for sale in the Consolidated Balance Sheet as of June 30, 2023 and measured at their fair values. For the Thunder Bay pulp and paper mill, at the time of the Acquisition on March 1, 2023, the sale of the mill met the criteria for discontinued operations and as such, earnings are included within Earnings (loss) from discontinued operations, net of taxes in the Consolidated Statement of Earnings (Loss) and Comprehensive income for the period from March 1, 2023, to June 30, 2023. The Consolidated Statement of Cash Flows were not reclassified to reflect discontinued operations. In addition, the related assets and liabilities of the Thunder Bay mill are classified as held for sale in the Consolidated Balance Sheets and are measured at their fair values at June 30, 2023. Refer to Item 1, Financial Statements and Supplementary Data, under Note 4 “Discontinued Operations” for additional information on the Discontinued Operations.

Domtar was determined to be the accounting acquirer in the Acquisition which was accounted for using the acquisition method of accounting. Under the acquisition method of accounting, the purchase consideration allocated to Resolute’s assets and liabilities is based upon their estimated preliminary fair values at the acquisition date. Following the Acquisition date, the operating results of the Resolute business have been included in our consolidated financial statements. Our second quarter of 2023 reflects Resolute financial results for the period from April 1, 2023 to June 30, 2023, our first half of 2023 includes Resolute financial results for the four months from March 1, 2023 to June 30, 2023, and our second quarter of 2022 and first half of 2022 have no financial results from Resolute. These financial statements may not be indicative of our future performance. Refer to Item 1, Financial Statements and Supplementary Data, under Note 3 “Acquisition of Business” for additional information.

Paper Excellence Acquired Domtar Corporation

On November 30, 2021, Paper Excellence completed the acquisition of all the outstanding common shares of Domtar Corporation by means of a merger of Pearl Merger Sub (a wholly-owned subsidiary) with and into the Company with the Company continuing as the surviving corporation and as a subsidiary of Paper Excellence (the “Merger”).

As a condition to obtain the approval of the Merger from the Canadian Competition Bureau, we were required to commit to the divestiture of our Kamloops, British Columbia pulp mill, within a short period of time following the Merger. On June 1, 2022, the mill and related assets, were sold to an independent acquirer approved by the Commissioner. The assets and liabilities related to the pulp mill for periods prior to the sale, were presented as held for sale in the Consolidated Balance Sheet. At the time of the Merger, the sale of the pulp mill met the criteria for discontinued operations and as such, earnings were included within Earnings (loss) from discontinued operations, net of taxes in the Consolidated Statement of Earnings (Loss) and Comprehensive income for the period from January 1, 2022 to June 30, 2022. Refer to Item 1, Financial Statements and Supplementary Data, under Note 4 “Discontinued Operations” for additional information on the Discontinued Operations.

OVERVIEW

We design, manufacture, market and distribute a wide variety of wood-based products including paper, market pulp, wood products and tissue, which are marketed in approximately 60 countries.

As discussed above, on March 1, 2023, we acquired Resolute, and Resolute became a wholly-owned subsidiary of the Company. Prior to the Acquisition, the Company operated in one segment. Effective March 1, 2023, the former business of Domtar and Resolute were managed separately. Following this acquisition, we revised our segment structure and we now operate as two reportable segments as described below, which also represents our two operating segments based on our organizational structure: Domtar and Resolute. We began to report on our reorganized segment structure during the first quarter of 2023. In addition, in the second quarter of 2023, we completed the acquisition of SPI, which requires retrospective combination of entities as if the combination had been in effect since the inception of common control. Accordingly, the financial information for Domtar and SPI has been combined from the inception of common control which was November 30, 2021 and we have reflected this structure for all historical periods presented for our Domtar segment.

Our segment measure of profit (operating income (loss) from continuing operations) is used by management to evaluate performance and make operational decisions. Management believes that this measure allows for a better understanding of ~~our recent performance, financial condition~~cost trends, operating efficiencies, prices and ~~outlook. Topics discussed~~volume. Business segment operating income (loss) is defined as earnings (loss) from continuing operations before income taxes and ~~analyzed include:~~

~~Overview~~

~~Highlights for the three month~~equity losses, interest expense, net, and ~~nine month periods ended September 30, 2017~~

~~Outlook~~

~~Consolidated Results~~non-service components of ~~Operations and Segment Review~~

~~Liquidity and Capital Resources~~

~~OVERVIEW~~net periodic benefit cost.

Domtar: We design, manufacture, market and distribute a wide variety of fiber-based products including communication papers and specialty and packaging ~~papers,~~papers. We are the largest integrated manufacturer and ~~absorbent hygiene products.~~marketer of uncoated freesheet paper in North America. We are also an important supplier of specialty and packaging papers. The foundation of our business is a network of ~~wood~~ fiber converting assets that produce paper and packaging grade as well as fluff and specialty pulp. ~~More than 50%~~Domtar segment is the legacy business of Domtar before the Acquisition. To learn more, visit www.domtar.com.

We have eight integrated pulp and paper mills, excluding our ~~pulp~~packaging mill in Kingsport, with an annual paper production ~~is consumed internally to manufacture paper and other consumer products, with the balance sold as market pulp. We are the largest integrated marketer~~capacity of approximately 2.4 million tons of uncoated freesheet paper, ~~in North America~~ serving a variety of customers, including merchants, retail outlets, stationers, printers, publishers, converters and end-users. Our paper manufacturing operations are supported by eleven converting and forms manufacturing operations (including a network of eight plants located offsite from our paper making operations). We produce a wide variety of paper, including office papers, printing and publishing papers, digital & production inkjet papers, technical and specialty papers and converting papers. We have started operations at our newly converted packaging mill in Kingsport and once in full operation, the mill will manufacture packaging materials made from 100% recycled content. The mill will produce and market approximately 600,000 tons annually of high quality recycled linerboard and corrugated medium, providing us with a strategic footprint in a growing market. We produce softwood and fluff pulp at 11 pulp and paper mills in North America, with total capacity of 3.4 million metric tons. Approximately 60% of our pulp is consumed internally to manufacture paper, with the balance being sold as market pulp. We also purchase limited amount of papergrade pulp from third parties for specific grades and optimize the logistics of our pulp capacity while reducing transportation costs. We produce fluff pulp at our pulp mill at Plymouth, softwood pulp at our Skuukumchuck pulp mill and

we also produce market pulp in excess of our internal requirements at our pulp and paper mills mainly in Ashdown, Espanola and Marlboro. We can sell approximately 1.6 million metric tons of pulp per year depending on market conditions.

Resolute: We are ~~also~~ a ~~marketer~~global leader in the forest products industry with a diverse range of products, including market pulp, tissue, wood products and paper. We are a large and growing North American producer of lumber and other wood products, the largest producer of uncoated mechanical papers in North America, a ~~broad line~~competitive pulp producer in North America, and a leading global producer of ~~incontinence care products as well as infant diapers.~~newsprint. Resolute segment is the legacy business of Resolute before the Acquisition. To learn more, visit ~~www.domtar.com~~www.resolutefp.com.

We ~~have~~own or operate 14 sawmills in Canada and three sawmills in the U.S. South, with a total mechanical capacity of approximately 2,859 million board feet. Our Canadian sawmills produce dimension spruce-pine-fir lumber and provide wood chips to our pulp and paper mills in Canada. Our U.S. sawmills produce dimension lumber and decking from southern yellow pine and provide wood chips and other wood residue to third party pulp and paper mills and other end users. We also operate two ~~reportable segments as described below, which also represent our~~remanufactured wood products facilities that manufacture bed frame components, finger joints, and furring strips, two ~~operating segments. Each reportable segment offers different~~engineered wood products facilities that produce I-joists for the construction industry, and ~~services~~one wood pellet facility. We produce softwood, hardwood and ~~requires different manufacturing processes, technology~~recycled bleached kraft pulp at three facilities in North America, with total capacity of 0.8 million metric tons. We produce newsprint and ~~marketing strategies. The following summary briefly describes the operations included in each~~specialty papers at six mills strategically located to serve major markets with a total capacity of ~~our reportable segments.~~

~~Pulp~~1.4 million tons. Our specialty papers comprise uncoated mechanical papers, including supercalendered paper and ~~Paper: Our Pulp and Paper segment consists of the design, manufacturing, marketing and distribution of communication, specialty and packaging papers,~~white paper, as well as ~~softwood, fluff~~uncoated freesheet papers. We produce tissue products at three facilities and ~~hardwood market pulp.~~convert at four facilities in North America. With total capacity of 128,000 short tons, we operate four tissue machines and 14 converting lines. We manufacture a range of tissue products for the retail and away-from-home markets, including recycled and virgin paper products, covering premium, value and economy grades.

~~Personal Care: Our Personal Care segment consists of the design, manufacturing, marketing and distribution of absorbent hygiene products.~~

HIGHLIGHTS FOR THE THREE MONTH PERIOD ENDED ~~SEPTEMBER~~JUNE 30, ~~2017~~2023

~~Operating income decreased by 3% while net earnings increased by 19%, from~~For the ~~third~~second quarter of ~~2016.~~

~~Sales increased by 2%~~2023, we reported operating income from continuing operations of $21 million, compared to operating income from continuing operations of $66 million in the ~~third~~second quarter of ~~2016, mostly due to~~2022.

The second quarter of 2023 includes three months of operations of Resolute, while the ~~inclusion~~second quarter of 2022 has no results of ~~Home Delivery Incontinent Supplies (“HDIS”), acquired on October 1, 2016. Net~~operations from Resolute. Excluding the operations of Resolute in the second quarter of 2023, the decrease of $22 million in operating income from continuing operations is principally driven by lower volume mainly in paper, higher maintenance expense as well as lower production, partially offset by higher average selling prices for our paper ~~were down~~products and some of our pulp products.

These and other factors that affected the comparison of financial results are discussed in the consolidated results of operations and segment review.

HIGHLIGHTS FOR THE FIRST SIX MONTHS ENDED JUNE 30, 2023

For the first half of 2023, we reported operating income from continuing operations of $110 million, compared to operating income from continuing operations of $98 million in the ~~third quarter~~first half of ~~2016~~2022.

The first half of 2023 includes four months of operations of Resolute following its acquisition on March 1, 2023, while ~~net~~the first half of 2022 has no results of operations from Resolute. Excluding the operations of Resolute in the first half of 2023 for the month of March to June 2023, the increase of $69 million in operating income from continuing operations is principally driven by higher average selling prices for most of our pulp ~~were up. Our manufactured~~and paper products, partially offset by lower volume mainly in paper, higher maintenance expense as well as lower production.

These and other factors that affected the comparison of financial results are discussed in the consolidated results of operations and segment review.

OUTLOOK

Market conditions in all our businesses remain challenging, with the rapid decline of pulp and paper volumes ~~were down while our pulp volumes were up when compared to the third quarter of 2016.~~

~~We paid $26 million~~ in ~~dividends.~~

~~HIGHLIGHTS FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2017~~

~~Operating income and net earnings increased by 31% and 58%, respectively, from the first nine months of 2016.~~

Sales were relatively flat as compared to the first nine months of 2016. Net average selling prices for paper were down from the first nine months of 2016 while net average selling prices for pulp were up. Our manufactured paper volumes were down while our pulp volumes were up when compared to the first nine months of 2016. Our Personal Care sales were up, in part due to the acquisition of HDIS.

~~We paid $78 million in dividends.~~

Three months ended

Nine months ended

Variance

Variance

FINANCIAL HIGHLIGHTS

September 30, 2017

September 30, 2016

$

%

September 30, 2017

September 30, 2016

$

%

(In millions of dollars, unless otherwise noted)

Sales

$
1,292

$
1,270

$
22

2
%

$
3,820

$
3,824

$
(4
)

-
%
Operating income

89

92

(3
)

(3
%)

195

149

46

31
%
Net earnings

70

59

11

19
%

128

81

47

58
%
Net earnings per common share
(in dollars)¹:

Basic

$
1.12

$
0.94

$
0.18

19
%

$
2.04

$
1.29

$
0.75

58
%
Diluted

$
1.11

$
0.94

$
0.17

18
%

$
2.04

$
1.29

$
0.75

58
%

At September 30, 2017

At December 31, 2016

Total assets

$
5,784

$
5,680

Total long-term debt, including current portion

$
1,165

$
1,281

¹	~~See Note 4 “Earnings per Common Share” of the financial statements in this Quarterly Report on Form 10-Q for more information on the calculation of net earnings per common share.~~

~~OUTLOOK~~

~~In the fourth quarter,~~recent months. While demand is still weak, we expect ~~higher maintenance~~pulp and paper volume to gradually increase in the second half of the year, while prices are expected to continue to be under pressure and decline slightly over the balance of the year. We will continue to closely monitor our inventory levels and balance production with demand. For our wood business, we expect a continued recovery in lumber pricing in the second half of the year as a result of the good underlying fundamentals in long-term housing, an unprecedented wildfire season in Quebec regions, Canada and industry capacity curtailments. Overall input costs ~~in Pulp and Paper. Paper~~are expected to remain elevated, however some favorability is expected for the remainder of the year in energy and chemicals, and we expect to benefit from lower planned maintenance costs. Our near-term focus continues to be negatively impacted by seasonally unfavorable mix while Pulp should continue to realize higher prices following recently announced price increases. Personal Care should benefit from higher volume, favorable raw materialon controlling costs and ~~seasonally lower marketing expenses.~~maximizing a strong cash flow.

CONSOLIDATED RESULTS OF OPERATIONS AND SEGMENT REVIEW

This section presents a discussion and analysis of our ~~third~~second quarter and first ~~nine months~~half of ~~2017~~2023 and ~~2016~~2022 sales, operating income ~~(loss)~~from continuing operations and other information relevant to the understanding of our results of operations.


	Three months ended								Six months ended
FINANCIAL HIGHLIGHTS	June 30, 2023			June 30, 2022		$ change			June 30, 2023			June 30, 2022		$ change
(In millions of dollars, unless otherwise noted)
Sales (1)	$	1,730		$	1,148	$	582		$	3,153		$	2,219	$	934
Operating income from continuing operations (1)		21			66		(45	)		110			98		12
(Loss) earnings from continuing operations (1)		(24	)		45		(69	)		80			60		20
Earnings from discontinued operations, net of taxes (1)		11			5		6			13			18		(5	)
Net (loss) earnings (1)	$	(13	)	$	50	$	(63	)	$	93		$	78	$	15

Sales (1), per segment
Domtar	$	1,100		$	1,148	$	(48	)	$	2,285		$	2,219	$	66
Resolute		635			—		635			875			—		875
Total for reportable segments		1,735			1,148		587			3,160			2,219		941
Intersegment sales		(5	)		—		(5	)		(7	)		—		(7	)
Consolidated sales	$	1,730		$	1,148	$	582		$	3,153		$	2,219	$	934

Operating income (loss) from continuing operations (1), per segment
Domtar	$	44		$	66	$	(22	)	$	167		$	98	$	69
Resolute		(23	)		—		(23	)		(57	)		—		(57	)
Consolidated Operating income from continuing operations	$	21		$	66	$	(45	)	$	110		$	98	$	12

				At June 30, 2023		At December 31, 2022
Total assets				$	7,262	$	4,874
Total long-term debt, including current portion of long-term debt and due to related party				$	2,656	$	1,652

(1) As a result of the closing of the Acquisition of Resolute on March 1, 2023, the Company’s consolidated financial statements for the six months ended June 30, 2023, only reflect Resolute financial results for the period from March 1, 2023 to June 30, 2023.

ANALYSIS OF NET SALES

By Business Segment

Three months ended

Nine months ended

Variance

Variance

September 30, 2017

September 30, 2016

$

%

September 30, 2017

September 30, 2016

$

%

Pulp and Paper

$
1,054

$
1,054

-

-%

$
3,126

$
3,193

(67
)

-2%

Personal Care

253

231

22

10%

743

675

68

10%

Total for reportable segments

1,307

1,285

22

2%

3,869

3,868

1

-%

Intersegment sales

(15
)

(15
)

-

(49
)

(44
)

(5
)

Consolidated

1,292

1,270

22

2%

3,820

3,824

(4
)

-%

Shipments

Paper - manufactured
(in thousands of ST)

722

744

(22
)

-3%

2,165

2,282

(117
)

-5%

Communication papers

597

620

(23
)

-4%

1,801

1,904

(103
)

-5%

Specialty and Packaging papers

125

124

1

1%

364

378

(14
)

-4%

Paper - sourced from third parties
(in thousands of ST)

29

35

(6
)

-17%

84

96

(12
)

-13%

Paper - total (in thousands of ST)

751

779

(28
)

-4%

2,249

2,378

(129
)

-5%

Pulp (in thousands of ADMT)

424

369

55

15%

1,260

1,098

162

15%

ANALYSIS OF CHANGES IN SALES

Third quarter of 2017 versus Third quarter of 2016

First nine months of 2017 versus First nine months of 2016

% Change in Net Sales due to

% Change in Sales due to

Net Price

Volume / Mix

Currency

Total

Net Price

Volume / Mix

Currency

Total

Pulp and Paper

-
%

-
%

-
%

-
%

-1
%

-1
%

-
%

-2
%
Personal Care

-1
%

9
%
^(a)

2
%

10
%

-2
%

13
%
^(a)

-1
%

10
%
Consolidated sales

-
%

2
%

-
%

2
%

-1
%

1
%

-
%

-
%

~~Commentary:~~

~~(a)~~

~~Includes sales of HDIS acquired on October 1, 2016.~~

ANALYSIS OF OPERATING INCOME (LOSS)

Three months ended

Nine months ended

By Business Segment

Variance

Variance

September 30, 2017

September 30, 2016

$

%

September 30, 2017

September 30, 2016

$

%

Operating income (loss)

Pulp and Paper

93

89

4

4
%

192

143

49

34
%
Personal Care

8

15

(7
)

-47
%

37

44

(7
)

-16
%
Corporate

(12
)

(12
)

-

-
%

(34
)

(38
)

4

11
%
Consolidated operating income (loss)

89

92

(3
)

-3
%

195

149

46

31
%

Third quarter of 2017 versus Third quarter of 2016

$ Change in Segmented Operating Income (Loss) due to

Volume/Mix

Net Price

Input Costs ^(b)

Operating
Expenses^(c)

Currency

Depreciation/
Impairment ^(d)

Restructuring ^(e)

Other Income/
Expense ^(f)

Total

Pulp and Paper

2

(4
)

3

(25
)

(1
)

14

10

5

4

Personal Care

—

^(a)

(3
)

(2
)

(1
)

(1
)

—

—

—

(7
)
Corporate

—

—

—

(2
)

—

—

—

2

—

Consolidated operating income (loss)

2

(7
)

1

(28
)

(2
)

14

10

7

(3
)

~~(a)~~

~~Includes results of HDIS acquired on October 1, 2016.~~

~~(b)~~

~~Includes raw material (such as fiber, chemicals, nonwovens and super absorbent polymers) and energy expenses.~~

~~(c)~~

~~Includes maintenance, freight costs, selling, general and administrative (“SG&A”) expenses and other costs.~~

~~(d)~~

In the third quarter of 2017, we did not record any accelerated depreciation compared to $5 million of accelerated depreciation in the third quarter of 2016 related to the conversion of a paper machine to a high quality fluff pulp line at our Ashdown mill. Depreciation charges were lower by $9 million in the third quarter of 2017, excluding foreign currency impact.

~~(e)~~

In the third quarter of 2017, there were no restructuring charges. In the third quarter of 2016, we incurred restructuring charges of $10 million related to the conversion at Ashdown described above ($5 million) and the announced closure of a pulp dryer and idling of related assets at our Plymouth mill ($5 million) related to our plan to optimize fluff pulp manufacturing.

~~(f)~~

~~Third quarter of 2017 other operating income/~~

~~expense includes:~~

~~Third quarter of 2016 other operating income/~~

~~expense includes:~~

~~- Gain on sale of property, plant and equipment~~

~~($4 million)~~

~~- Reversal of contingent consideration ($2 million)~~

~~- Other income ($1 million)~~

~~- Foreign exchange loss of working capital items ($1 million)~~

~~- Other income ($1 million)~~

~~Commentary –Third~~Second quarter of ~~2017~~2023 compared to ~~Third~~Second quarter of ~~2016~~2022

Analysis of Sales

Sales in the second quarter of 2023 increased by $582 million, or 51% when compared to sales in the second quarter of 2022. Excluding the inclusion of three months of operations of Resolute in the second quarter of 2023, sales for the second quarter of 2023 amounted to $1,100 million, a decrease of $48 million, or 4%, compared to the second quarter of 2022. This decrease in sales is mostly due to a decrease in our paper sales volume, partially offset by an increase in our net average selling prices for paper and pulp.

Analysis of change in Operating Income from continuing operations

Operating income from continuing operations in the second quarter of 2023 decreased by $45 million when compared to the second quarter of 2022. Excluding the inclusion of three month of operations of Resolute in the second quarter of 2023, operating income from continuing operations amounted to $44 million, a decrease of $22 million compared to operating income from continuing operations of $66 million in the second quarter of 2022. This decrease is principally driven by higher maintenance and fixed costs, lower production as well as lower volume in paper, partially offset by higher average selling prices for our paper products and some of our pulp products. In the second quarter of 2023, we recognized asset conversion costs of $33 million related to our previously announced decision to repurpose assets at our Kingsport mill compared to $12 million in the second quarter of 2022. In addition, we recognized $5 million of

transaction costs related to our Acquisition of Resolute, compared to $3 million in the second quarter of 2022 related to our November 30, 2021 Merger with Paper Excellence.

First half of 2023 compared to first half of 2022

Analysis of Sales

Sales in the first half of 2023 increased by $934 million, or 42% when compared to sales in the first half of 2022. Excluding the inclusion of four months of operations of Resolute in the first half of 2023, sales for the first half of 2023 amounted to $2,285 million, an increase of $66 million, or 3%, compared to the first half of 2022. This increase in sales is mostly due to an increase in our net average selling prices for pulp and paper, partially offset by a decrease in our pulp and paper sales volume.

Analysis of change in Operating Income from continuing operations

Operating income from continuing operations in the first half of 2023 increased by $12 million when compared to the first half of 2022. Excluding the inclusion of four months of operations of Resolute in the first half of 2023, operating income from continuing operations amounted to $167 million, an increase of $69 million compared to operating income from continuing operations of $98 million in the first half of 2022. This increase is principally driven by higher average selling prices for the majority of our pulp and paper products, partially offset by lower volume in pulp and paper, higher maintenance and fixed costs as well as lower production. In the first half of 2023, we recognized asset conversion costs of $63 million related to our previously announced decision to repurpose assets at our Kingsport mill compared to $25 million in the first half of 2022. In addition, we recognized $38 million of transaction costs related to our Acquisition of Resolute compared to $6 million in the first half of 2022 related to our November 30, 2021 Merger with Paper Excellence.

OTHER FACTORS

Interest Expense, net

We incurred ~~$16~~$58 million of net interest expense in the ~~third~~second quarter of ~~2017, a decrease~~2023, an increase of $1$34 million compared to net interest expense of ~~$17~~$24 million in the ~~third~~second quarter of ~~2016. This decrease is~~2022. Interest expense increased due to higher floating rates for LIBOR and SOFR as well as higher debt levels in June 2023 mostly due to the Resolute Acquisition. In the second quarter of 2023, we had capitalized interest of $1 million, compared to $5 million in the second quarter of 2022, mostly related to our mill conversion. See section “Capital Resources” below for more information on our debt structure following our Acquisition on March 1, 2023.

We incurred $103 million of net interest expense in the first half of 2023, an increase of $58 million compared to net interest expense of $45 million in the first half of 2022. Interest expense increased due to higher floating rates for LIBOR and SOFR as well as higher debt levels in June 2023 mostly due to the Resolute Acquisition. In the first half of 2023, we had capitalized interest of $4 million, compared to $9 million in the first half of 2022, mostly related to our mill conversion. See section “Capital Resources” below for more information on our debt structure following our Acquisition on March 1, 2023.

Non-Service Components of net periodic benefit cost

For the second quarter of 2023, our non-service components of net periodic benefit cost were a benefit of $4 million, a decrease ~~in interest expense as~~of $13 million when compared to the second quarter of 2022. This decreased benefit was mostly related to a ~~result~~non-cash pension settlement gain of ~~the repayment at maturity of the 9.5% Notes due in August 2016 and of the 10.75% Notes due in June 2017 and a reduction~~$8 million recorded in the ~~amortization~~second quarter of ~~debt issue costs.~~2022. Refer to Item 1, Financial Statements and Supplementary Data, under Note 6 “Pension Plans and Other Post-Retirement Benefit Plans” for additional information.

For the first half of 2023, our non-service components of net periodic benefit cost were a benefit of $8 million, a decrease of $18 million when compared to the first half of 2022. This ~~decrease~~decreased benefit was ~~partially offset by a reduction in capitalized interest and an increase in interest expense~~mostly related to a non-cash pension settlement gain of $8 million recorded in the ~~Term Loan Agreement.~~

~~Income Taxes~~

~~In the third~~second quarter of ~~2017,~~2022. Refer to Item 1, Financial Statements and Supplementary Data, under Note 6 “Pension Plans and Other Post-Retirement Benefit Plans” for additional information.

Income Taxes

For the second quarter of 2023, our income tax ~~expense~~benefit was $3$9 million, consisting of a current income tax ~~expense~~benefit of ~~$10~~$5 million and a deferred income tax benefit of $7$4 million. This compares to an income tax expense of ~~$16~~$14 million in the ~~third~~second quarter of ~~2016,~~2022, consisting of a current income tax expense of $5 million and a deferred income tax expense of $11 million. We made income tax payments, net of refunds, of $3 million during the third quarter of 2017. Our effective tax rate was 4% compared with an effective tax rate of 21% in the third quarter of 2016. The effective tax rate for the third quarter of 2017 was favorably impacted by the recognition of previously unrecognized tax benefits due to the expiration of certain statutes of limitations. The effective tax rates for both the third quarter of 2017 and third quarter of 2016 were impacted by the finalization of certain estimates in connection with the filing of our 2016 and 2015 income tax returns, respectively.

First nine months of 2017 versus First nine months of 2016

$ Change in Segmented Operating Income (Loss) due to

Volume/Mix

Net Price

Input Costs ^(b)

Operating
Expenses^(c)

Currency

Depreciation/
Impairment ^(d)

Restructuring ^(e)

Other Income/
Expense ^(f)

Total

Pulp and Paper

(18
)

(32
)

14

(23
)

13

55

33

7

49

Personal Care

7

^(a)

(11
)

4

(4
)

(3
)

—

—

—

(7
)
Corporate

—

—

—

2

(1
)

—

—

3

4

Consolidated operating income (loss)

(11
)

(43
)

18

(25
)

9

55

33

10

46

~~(a)~~

~~Includes results of HDIS acquired on October 1, 2016.~~

~~(b)~~

~~Includes raw material (such as fiber, chemicals, nonwovens and super absorbent polymers) and energy expenses.~~

~~(c)~~

~~Includes maintenance, freight costs, SG&A expenses and other costs.~~

~~(d)~~

In the first nine months of 2017, we did not record any accelerated depreciation compared to $29 million of accelerated depreciation related to the conversion of a paper machine to a high quality fluff pulp line at our Ashdown mill, recorded in the first nine months of 2016. Depreciation charges were lower by $26 million in the first nine months of 2017, excluding foreign currency impact.

~~(e)~~

In the first nine months of 2017, there were no restructuring charges. In the first nine months of 2016, we incurred restructuring charges of $33 million mostly related to the conversion at Ashdown described above and the closure of a pulp dryer and idling of related assets at our Plymouth mill, related to our plan to optimize fluff pulp manufacturing.

~~(f)~~

~~First nine months of 2017 other operating income/~~

~~expense includes:~~

~~First nine months of 2016 other operating income/~~

~~expense includes:~~

~~- Gain on sale of property, plant and equipment~~

~~($4 million)~~

~~- Reversal of contingent consideration ($2 million)~~

~~- Environmental provision ($2 million)~~

~~- Bad debt expense ($1 million)~~

~~- Foreign exchange loss on working capital items~~

~~($1 million)~~

~~- Other income ($4 million)~~

~~- Foreign exchange loss on working capital items ($5 million)~~

~~- Litigation settlement ($2 million)~~

~~- Other income ($3 million)~~

~~Commentary – First nine months of 2017 compared to first nine months of 2016~~

~~Interest Expense, net~~

We incurred $50 million of net interest expense in the first nine months of 2017, an increase of $1 million compared to net interest expense of $49 million in the first nine months of 2016. This increase was mostly due to a reduction in capitalized interest and an increase in interest expense related to the Term Loan Agreement. This increase was partially offset by the repayment at maturity of the 9.5% Notes due in August 2016 and of the maturity of the 10.75% Notes due in June 2017.

~~Income Taxes~~

~~In the first nine months of 2017, our income tax expense was $17 million, consisting of current income tax expense of $36~~$23 million and a deferred income tax benefit of ~~$19~~$9 million. We made payments, net of income tax refunds, of $16 million during the second quarter of 2023. The effective tax rate was 27% compared with an effective tax rate of 24% in the second quarter of 2022. Our tax provision for interim periods is determined using an estimate of its annual effective tax rate and then adjusting for discrete items arising in that quarter. In each interim quarter we update our estimate of the annual effective tax rate and, if the estimated annual tax rate changes, makes a cumulative adjustment in that quarter. The effective tax rate for the second quarter of 2023 was favorably impacted by such a cumulative adjustment, mainly due to a change in the mix of earnings or loss between jurisdictions. This was more than offset by a $5 million unfavorable deferred tax impact related to the change in expected future provincial effective tax rates after the amalgamation with SPI.

For the first six months of 2023, our income tax benefit was $65 million, consisting of a current income tax expense of $6 million and a deferred income tax benefit of $71 million. This compares to an income tax expense of $19 million in the first ~~nine~~six months of ~~2016,~~2022, consisting of a current income tax expense of ~~$13~~$26 million and a deferred income tax ~~expense~~benefit of $6$7 million. We made ~~income tax~~ payments, net of income tax refunds, of ~~$18~~$66 million during the first ~~nine~~six months of ~~2017. Our~~2023. The effective tax rate was ~~12%~~-433% compared to an effective tax rate of ~~19%~~24% in the first ~~nine~~six months of ~~2016.~~2022. The effective tax rate for the first ~~nine months~~half of 2017 was favorably impacted by the recognition of previously unrecognized tax benefits due to the expiration of certain statutes of limitations as well as by various enacted law changes in several U.S. states. The effective tax rates for both the first nine months of 2017 and the first nine months of 2016 were impacted by the finalization of certain estimates in connection with the filing of our 2016 and 2015 income tax returns, respectively. Additionally, the effective tax rate for the first nine months of 20162023 was impacted by the reversal of the valuation allowance on SPI tax loss carryforwards due to management’s assessment that the future income of SPI would be sufficient to utilize the losses prior to expiration. There were also transaction costs incurred in the first half of 2023 which provided minimal tax benefit.

Discontinued Operations

For the second quarter of 2023, we reported earnings from discontinued operations, net of taxes, of $11 million, (second quarter of 2022 - earnings from discontinued operations, net of taxes of $5 million) and for the first half of 2023, we reported earnings from discontinued operations, net of taxes, of $13 million, (first half of 2022 - earnings from discontinued operations, net of taxes of $18 million).

Mandated sale of Thunder Bay, Ontario mill

As a condition to obtain the approval of ~~a state tax credit in~~ the ~~U.S.~~

~~Commentary – Segment Review~~

~~Pulp and Paper Segment~~

Sales in our Pulp and Paper segment remained relatively flat when compared to sales in the third quarter of 2016. Our net average selling price for paper decreased while our net average selling price for pulp increased. Paper sales volume decreasedMarch 1, 2023, Acquisition from the ~~third quarter~~Canadian Competition Bureau, we were required to commit to the divestiture of ~~2016 while~~Resolute's pulp ~~sales volume increased from~~and paper mill in Thunder Bay, Ontario, within a short period of time following the ~~third quarter of 2016.~~

~~Operating income in our Pulp~~Acquisition. On August 1, 2023, the mill was sold to an independent acquirer approved by the Commissioner. The assets and Paper segment amounted to $93 million in the third quarter of 2017, an increase of $4 million, when compared to operating income of $89 million in the third quarter of 2016. Our results were positively impacted by:

Lower depreciation charges ($14 million) due to accelerated depreciation related to our 2014 decision to convert a paper machine at our Ashdown facility to a high quality fluff pulp line in the third quarter of 2016 and lower depreciation charges due to certain assets being fully depreciated

~~Lower restructuring costs mostly~~liabilities related to the ~~conversion of a~~pulp and paper ~~machine to a high quality fluff pulp line at our Ashdown~~ mill ~~recorded~~for periods after the Acquisition, are presented as held for sale in the ~~third quarter~~Consolidated Balance Sheet. At the time of ~~2016 ($5 million)~~the Acquisition, the sale of the pulp and paper mill met the ~~announced closure~~criteria for discontinued operations and as such, earnings were included within Earnings (loss) from discontinued operations, net of ~~a pulp dryer and idling of related assets at our Plymouth mill ($5 million) related to our plan to optimize fluff pulp manufacturing~~

~~Lower other operating income/expense ($5 million)~~

~~Lower input costs ($3 million) mostly related to lower energy costs due to a boiler conversion and lower fiber costs as a result of improved yields, partially offset by higher chemical costs~~

~~Higher volume/mix ($2 million) mostly related to higher volume of pulp partially offset by lower volume of paper~~

~~This increase was partially offset by:~~

~~Higher operating expenses ($25 million) mostly due to higher maintenance costs as a result of timing of outages~~

~~Lower average selling prices for paper partially offset by higher average selling prices for pulp ($4 million)~~

~~Negative impact of a stronger Canadian dollar on our Canadian denominated expenses, partially offset by our hedging program ($1 million)~~

~~Sales in our Pulp and Paper segment decreased by $67 million, or 2% when compared to sales~~taxes in the ~~first nine months~~Consolidated Statement of ~~2016. This decrease~~Earnings (Loss) and Comprehensive income for all periods presented after the acquisition date of March 1, 2023. Refer to Item 1, Financial Statements and Supplementary Data, under Note 4 “Discontinued Operations” for additional information on the Discontinued Operations.

Mandated sale of Kamloops, British Columbia mill

As a condition to obtain the approval of the November 30, 2021, Merger from the Canadian Competition Bureau, we were required to commit to the divestiture of Domtar pulp mill in ~~sales is mostly due~~Kamloops, British Columbia, within a short period of time following the Merger. On June 1, 2022, the mill was sold to ~~a decrease in net average selling prices for paper as well as a decrease in our paper sales volumes. This decrease was partially offset~~an independent acquirer approved by ~~an increase in our pulp sales volumes~~the Commissioner. The assets and ~~an increase in net average selling prices for pulp.~~

Operating income in our Pulp and Paper segment amounted to $192 million in the first nine months of 2017, an increase of $49 million, when compared to operating income of $143 million in the first nine months of 2016. Our results were positively impacted by:

Lower depreciation charges ($55 million) due to accelerated depreciation related to our 2014 decision to convert a paper machine at our Ashdown facility to a high quality fluff pulp line in the first nine months of 2016 and lower depreciation charges due to certain assets being fully depreciated

~~Lower restructuring costs mostly~~liabilities related to the ~~conversion of a paper machine~~pulp mill for periods prior to ~~a high quality fluff pulp line at our Ashdown mill and~~ the ~~announced closure of a pulp dryer and idling of related assets at our Plymouth mill related to our plan to optimize fluff pulp manufacturing, recorded~~sales, were presented as held for sale in the ~~first nine months~~Consolidated Balance Sheet. At the time of ~~2016 ($33 million)~~

~~Lower input costs ($14 million) mostly related~~the Merger, the sale of the pulp mill met the criteria for discontinued operations and as such, earnings were included within Earnings (loss) from discontinued operations, net of taxes in the Consolidated Statement of Earnings (Loss) and Comprehensive income for the period from January 1, 2022 to ~~lower fiber costs as a result of improved yields~~June 30, 2022. Refer to Item 1, Financial Statements and ~~better weather~~Supplementary Data, under Note 4 “Discontinued Operations” for additional information on the Discontinued Operations.

Economic conditions and ~~lower energy costs, partially offset by higher chemicals costs~~uncertainties

~~Positive impact of our hedging program, partially offset by a stronger Canadian dollar on our Canadian denominated expenses ($13 million)~~

~~Lower other operating income/expense ($7 million)~~

~~This increase was partially offset by:~~

~~Lower average selling prices for paper, partially offset by higher average selling prices for pulp ($32 million)~~

~~Higher operating expenses ($23 million) mostly due to higher freight, packaging and compensation costs and partially offset by lower maintenance costs~~

~~Lower volume/mix ($18 million) mostly related to lower volume of paper, partially offset by higher volume of pulp~~

The markets in which ~~our pulp and paper business~~we operate are highly competitive with well-established domestic and foreign manufacturers. In uncoated freesheet, we compete primarily on the basis of product quality, breadth of offering, service solutions and competitively priced paper products. We also compete with electronic transmission and document storage alternatives. As a result of

~~such competition, we are experiencing ongoing decreasing demand for most of our existing paper products.~~ Most of our products are commodities ~~and~~that are widely available from other producers as well. Because commodity products have few distinguishing qualities from producer to producer, competition for these products is based primarily on price, which is determined by supply relative to demand.

Prices for our products have been and are likely to continue to be highly volatile. We also compete on the basis of product quality, breadth of offering and service solutions. Further, we compete against electronic transmission and document storage alternatives. As a result of such competition, we may experience ongoing decreasing demand for most of our existing paper products. The pulp market is highly fragmented with many manufacturers competing worldwide. Competition is primarily on the basis of access to low-cost wood fiber, product quality and ~~competitively priced~~pricing of other pulp products. We compete in North America with both large North American and numerous smaller local lumber producers in a highly competitive market. Because there are few distinctions between lumber from different producers, competition is primarily based on price. Our newsprint market faces competition from both large global producers and numerous smaller regional producers. Price and customer relationships are important competitive determinants. Refer to our "Outlook" section above, for our near-term expection on the economic conditions and uncertainties.

Commentary – Segment Review

Following the Resolute Acquisition, we revised our segment structure and began to manage and report our operating results through two reportable segments defined by the two legacy organizations: Domtar and Resolute. We began to report on our reorganized segment structure during the first quarter of 2023 and have reflected this structure for all historical periods presented. In addition, in the ~~fourth~~second quarter ~~we expect higher maintenance costs. Paper~~of 2023, following the acquisition of SPI, financial information for Domtar and SPI has been combined from the inception of common control which was November 30, 2021.

Our segment measure of profit (operating income (loss) from continuing operations) is ~~expected~~used by management to ~~be negatively impacted~~evaluate performance and make operational decisions. Management believes that this measure allows for a better understanding of cost trends, operating efficiencies, prices and volume. Business segment operating income (loss) is defined as earnings (loss) from continuing operations before income taxes and equity losses, interest expense, net, and non-service components of net periodic benefit cost. Corporate expenses are allocated to the related segment.



DOMTAR	Three months ended							Six months ended

(In millions of dollars, unless otherwise noted)	June 30, 2023		June 30, 2022		$ change			June 30, 2023		June 30, 2022		$ change
Sales	$	1,100	$	1,148	$	(48	)	$	2,285	$	2,219	$	66
Operating Income from continuing operations		44		66		(22	)		167		98		69

Shipments
Paper - manufactured (in thousands of ST)		510		576		(66	)		1,041		1,141		(100	)
Communication papers		427		477		(50	)		866		940		(74	)
Specialty and Packaging papers		83		99		(16	)		175		201		(26	)
Pulp (in thousands of ADMT)		333		343		(10	)		672		706		(34	)

Sales

Domtar segment sales in the second quarter of 2023 decreased by ~~seasonally unfavorable mix while Pulp should continue to realize higher prices following recently announced price increases.~~

~~Personal Care Segment~~

~~Sales in our Personal Care segment increased by $22~~$48 million, or ~~10%~~4% when compared to sales in the ~~third~~second quarter of ~~2016.~~2022. This ~~increase~~decrease in sales ~~was driven by higher sales volume/mix of 9%~~is mostly due to ~~the acquisition of HDIS on October 1, 2016~~a decrease in our pulp and ~~favorable foreign currency of 2%, net of our hedging program, mostly between the Euro and U.S Dollar. This increase was~~paper sales volumes, partially offset by ~~lower~~an increase in our net average selling prices for pulp and paper.

Domtar segment sales in the first half of ~~1%.~~

~~Operating income decreased~~2023 increased by $7$66 million, or ~~47% in the third quarter of 2017 compared to the third quarter of 2016. Our results were negatively impacted by:~~

~~Lower average net selling prices ($3 million)~~

~~Higher input costs ($2 million) mostly due to higher raw material indices and usage of fluff~~

~~Higher operating expenses ($1 million) mostly due to higher salaries and wages and higher SG&A expenses~~

~~Negative impact of our hedging program partially offset by favorable foreign exchange mostly between the U.S. Dollar and Euro ($1 million)~~

~~Sales in our Personal Care segment increased by $68 million, or 10%~~3% when compared to sales in the first ~~nine months~~half of ~~2016.~~2022. This increase in sales ~~was driven by higher sales volume/mix of 13%~~is mostly due to ~~the acquisition of HDIS on October 1, 2016,~~an increase in our net average selling prices for pulp and paper, partially offset by ~~lower selling prices of 2%~~a decrease in our pulp and ~~unfavorable foreign currency rates of 1% due to fluctuations between European currencies.~~paper sales volumes.

Operating income ~~decreased $7~~from continuing operations

Operating income from continuing operations in our Domtar segment amounted to $44 million ~~or 16%~~ in the ~~first nine months~~second quarter of ~~2017~~2023, a decrease of $22 million, when compared to operating income from continuing operations of $66 million in the ~~first nine months~~second quarter of ~~2016.~~

2022. Our results were negatively impacted by:

•

~~Lower average net selling prices ($11 million)~~

Higher operating expenses ($463 million) mostly due to higher ~~salaries and wages and higher SG&A expenses~~

~~Unfavorable foreign exchange mostly between~~maintenance costs in part due to the ~~GBP and Euro, net~~timing of ~~our hedging program ($3 million)~~

~~This decrease was~~some major maintenance as well as lower production, partially offset ~~by:~~

by lower freight costs

•

~~Higher sales~~Lower volume and mix ($726 million)

•

Higher asset conversion charges ($21 million) in the second quarter of 2023. We recorded $33 million of asset conversion costs for our Kingsport mill as part of the conversion to a linerboard facility compared to $12 million in the second quarter of 2022

•

Higher other operating loss ($11 million)

•

Higher Transaction costs ($2 million) mainly related to our Acquisition of Resolute

These decreases were partially offset by:

•

Higher net average selling prices for pulp and paper ($67 million)

•

Lower input costs ($414 million) mostly related to lower energy costs partially offset by higher costs of chemical

•

Lower depreciation charges ($11 million) when compared to the second quarter of 2022 due to the application of the acquisition method of accounting as of the date of our 2021 Merger, resulting in a new basis of the Company’s assets, finalized in the fourth quarter of 2022

•

Positive impact of a lower Canadian dollar on our Canadian dollar denominated expenses, partially offset by the lower gains from our foreign currency hedging program ($9 million)

Operating income from continuing operations in our Domtar segment amounted to $167 million in the first half of 2023, an increase of $69 million, when compared to operating income from continuing operations of $98 million in the first half of 2022. Our results were positively impacted by:

•

Higher net average selling prices for pulp and paper ($251 million)

•

Lower depreciation charges ($27 million) when compared to the frist half of 2022 due to the application of the acquisition method of accounting as of the date of our 2021 Merger, resulting in a new basis of the Company’s assets, finalized in the fourth quarter of 2022

•

Positive impact of a lower Canadian dollar on our Canadian dollar denominated expenses, partially offset by the lower gains from our foreign currency hedging program ($19 million)

These increases were partially offset by:

•

Higher operating expenses ($74 million) mostly due to ~~favorable pricing as a result of lower negotiated contract pricing~~

~~In our absorbent hygiene products business, we compete~~higher maintenance costs in ~~an industry with fundamental drivers for long-term growth. While we are expected to benefit from the overall increase in healthcare spending~~part due to ~~an aging population, it is not clear how recent administrative changes~~the timing of some major maintenance as well as lower production, partially offset by lower freight costs

(1) Includes wood pellets measured by mass, converted to board feet using a density-based conversion ratio, as well as engineered wood products measured by linear feet, converted to board feet.

(2) Tissue converted products, which are measured in cases, are converted to short tons.

Resolute segment generated sales of $635 million for ~~performance awards are based on management’s best estimate~~the second quarter of 2023. Our second quarter of 2022 had no sales from Resolute.

Resolute segment generated sales of $875 million for the ~~final performance measurement.~~first half of 2023. Our first half of 2022 had no sales from Resolute.

Operating loss from continuing operations in our Resolute segment amounted to $23 million for the second quarter of 2023. Our second quarter of 2022 had no results from Resolute. We recorded $2 million of transaction costs under Transaction costs in the second quarter of 2023, related to the acquisition. In addition, in the second quarter of 2023, we recorded approximately $15 million of costs related to the forest fires in Quebec regions, Canada.

Operating loss from continuing operations in our Resolute segment amounted to $57 million for the first half of 2023. Our first half of 2022 had no results from Resolute. We recorded $25 million of transaction costs under Transaction costs in 2023, related to the acquisition. In addition, in the second quarter of 2023, we recorded approximately $15 million of costs related to the forest fires in Quebec regions, Canada.

Our principal cash requirements are for ongoing operating costs, pension contributions, working capital and capital expenditures, as well as principal and interest payments on our debt and income tax payments. We expect to fund our liquidity needs primarily with internally generated funds from our operations and, to the extent necessary, through borrowings under our ~~contractually committed $700 million credit~~$1.0 billion ABL Revolving Credit facility, of which ~~$700~~$521 million ~~is currently~~was undrawn and available ~~or through our $150 million receivables securitization facility,~~as of ~~which $39 million is currently undrawn and available.~~June 30, 2023. Under adverse market conditions, there can be no assurance that these agreements would be available or sufficient. See “Capital Resources” below.

Our ability to make payments on the requirements mentioned above will depend on our ability to generate cash in the future, which is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. Our credit ~~and receivable securitization facilities~~facility and debt indentures impose various restrictions and covenants on us that could limit our ability to respond to market conditions, to provide for unanticipated capital investments or to take advantage of business opportunities.

A portion of our cash is held outside the U.S. by foreign subsidiaries. The earnings of the foreign subsidiaries ~~which~~ reflect full provision for local income ~~taxes, are currently~~taxes. We remain indefinitely reinvested in the outside basis differences of our foreign operations. We do not intend on repatriating those funds and no provision is made for income taxes that would be payable upon the distribution of earnings from foreign subsidiaries as computation of these amounts is not practical.subsidiaries.

Our operating cash flow requirements are primarily for salaries and benefits, the purchase of raw materials, including fiber and energy, and other expenses such as income tax and property taxes.

Cash flows ~~from~~used for operating activities, including discontinued operations, totaled ~~$324~~$168 million in the first ~~nine months~~half of ~~2017,~~2023, a ~~$14~~$401 million ~~increase~~difference compared to cash flows from operating activities, including discontinued operations, of ~~$310~~$233 million in the first ~~nine months~~half of ~~2016.~~2022. This increase in cash flows ~~provided from~~used for operating activities is primarily due to ~~a decrease~~an increase in working capital requirements in the first nine months of 2017 when compared to the first nine months of 2016 as well as an increase in profitability (excluding the non-cash impairment charge of $29 million in the first nine months of 2016). Werequirements. In addition, we made income tax payments, net of refunds, of ~~$18~~$66 million induring the first ~~nine months~~half of ~~2017~~2023 compared to income tax payments, net of refunds, of ~~$37~~$11 million during the first ~~nine months~~half of 2016. We paid $33 million of employer pension and other post-retirement contribution in excess of pension and other post-retirement expense in the first nine months of 2017 compared to $16 million in the first nine months of 2016.2022.

Cash flows used for investing activities, including discontinued operations, in the first ~~nine months~~half of ~~2017~~2023 amounted to ~~$103~~$1,241 million, a ~~$199~~$1,284 million ~~decrease~~difference compared to cash ~~flows used for~~flow provided from investing activities, including discontinued operations, of ~~$302~~$43 million in the first ~~nine months~~half of ~~2016.~~2022.

The use of cash for investing activities in the first ~~nine months~~half of ~~2017~~2023 was mostly attributable to the acquisition of the Resolute business, net of cash acquired, for a total of $1,098 million, additions to property, plant and equipment of ~~$111~~$143 million and was partially offset by the proceeds from ~~disposals~~the sale of property, plant and equipment of $8$7 million.

The ~~use~~source of cash provided from investing activities in the first ~~nine months~~half of ~~2016~~2022 was attributable to ~~additions~~the proceeds from the sales of our Kamloops mills ($237 million) and proceeds from sale of property, plant and equipment of $23 million and was partially offset by addition to property, plant and equipment of ~~$302~~$217 million.

Our annual capital expenditures for ~~2017~~2023 should increase due to the inclusion of our newly acquired subsidiary Resolute, partially decrease due to the completion of the Kingsport mill conversion and are expected to ~~be approximately~~total between ~~$185~~$370 million and ~~$190~~$380 million.

Cash flows provided from financing activities, including discontinued operations, totaled $1,075 million in the first half of 2023 compared to cash flows used for financing activities, ~~totaled $212~~including discontinued operations, of $369 million in the first ~~nine months~~half of ~~2017 compared to cash flows provided from financing activities~~2022.

The use of cash in the first nine months of 2017 was primarily the result of dividend payments ($78 million), the net repayments of borrowings under our credit facilities (revolver and receivable securitization) and long-term debt ($123 million) and a decrease in our bank indebtedness ($12 million).

~~The~~ cash flows provided from financing activities in the first ~~nine months~~half of ~~2016~~2023 was ~~primarily~~attributable to the ~~result~~proceeds from the issuance of ~~net proceeds~~the Farm Credit Term Loan ($930 million), issuance of capital ($500 million) and borrowing under our ABL Revolving Credit Facility ($300 million). This was partially offset by the partial repayment of our First Lien Term Loan Facility ($283 million) as well as repayment of the assumed debt acquired under the Resolute Acquisition on March 1, 2023 ($307 million).

The use of cash flows from financing activities in the first half of 2022 was attributable to the redemptions of the 6.25% Notes due 2042 and the 6.75% Notes due 2044 (“Existing Domtar Notes”) pursuant to the Domtar Notes Change of Control Offers that terminated on January 3, 2022. To partially finance these repayments, we utilized $127 million under the Delayed Draw Term Loan facility as well as borrowings under our ~~credit facilities (revolver and receivable securitization) ($120 million) and an increase~~ABL Revolving Credit Facility, which was fully repaid in ~~our bank indebtedness ($1 million). These were partially offset by dividend payments ($76 million) and~~ the ~~repurchase~~second quarter of 2022 with the proceeds from the sales of our ~~common stock~~Kamloops mill ($10150 million). As a result, we repaid $134 million of the 6.25% Notes due 2042 and $100 million of the 6.75% Notes due 2044. In addition, $133 million of the Senior Secured Notes were redeemed as a result of the Domtar Existing Notes Change of Control Offers.

Net indebtedness, consisting of bank indebtedness, ~~and~~ long-term debt and due to related party, net of cash and cash equivalents and restricted cash, was ~~$1,022~~$2,598 million as of ~~September~~June 30, ~~2017~~2023 compared to ~~$1,168~~$1,278 million as of December 31, ~~2016.~~2022. The increase in our net indebtedness is mainly as a result of the Resolute Acquisition and SPI.

On March 1, 2023, we amended our ABL Revolving Credit Facility to mature on March 1, 2028 (extended from November 30, 2026). Our ABL Revolving Credit Facility provides for revolving loans and letters of credit in an aggregate amended amount of up to $1.0 billion (up from $400 million), subject to borrowing base capacity. On March 1, 2023, the ABL Revolving Credit Facility was drawn by $210 million to partially fund the Acquisition and provide liquidity.

Borrowings under the ABL Revolving Credit Facility bears interest at a floating rate per annum of, at our option, SOFR (adjusted by 0.10%) plus an applicable margin of 1.50% to 2.00% or a base rate plus 0.50% to 1.00%, in each case, depending on excess availability. The base rate is subject to an interest rate floor of 1.00%. Utilization of the ABL Revolving Credit Facility will be limited by borrowing base calculations based on the sum of specified percentages of eligible accounts receivable, plus specified percentages of eligible inventory, minus the amount of any applicable reserves. The ABL Revolving Credit Facility will be subject to an unused line fee of 0.25% to 0.375%, depending upon utilization.

Our ABL Revolving Credit Facility, when specified excess availability is less than the greater of $87.5 million and 10% of the lesser of the borrowing base and maximum borrowing capacity, requires the maintenance of a fixed charge coverage ratio of 1.00 to 1.00 at the end of each fiscal quarter for the trailing twelve month period. This covenant did not apply as at June 30, 2023.

On June 30, 2023, we had borrowings of $300 million and $179 million of letters of credit outstanding under this facility, leaving unused commitments available to us of $521 million.

On March 1, 2023, we entered into a Term Loan Credit Agreement (the “Farm Credit Term Loan”) for $949 million, consisting of two tranches: (a) $666 million of Farm Credit Term Loan A (as defined in the Farm Credit Term Loan) used to refinance renewable energy investments and facilitate the Acquisition and (b) $283 million of Farm Credit Term Loan B (as defined in the Farm Credit Term Loan) used to repay $283 million of borrowings under the Term Loan Facility.

Our Farm Credit Term Loan will mature (i) with respect to the Farm Credit Term Loan A, on March 1, 2030 and (ii) with respect to the Farm Credit Term Loan B, on November 30, 2028. Our Farm Credit Term Loan bear interest at a floating rate per annum of, at Domtar’s option, (i) with respect to the Farm Credit Term Loan A, SOFR (adjusted by 0.10%) plus 6% or a base rate plus 5%, and (ii) with respect to the Farm Credit Term Loan B, SOFR (adjusted by 0.10%) plus 5.75% or a base rate plus 4.75%. The SOFR rate is subject to an interest rate floor of 0.75% and the base rate is subject to an interest rate floor of 1.75%. Borrowings under our Farm Credit Term Loan will amortize in equal quarterly installments in an amount equivalent to 5% per annum of the principal amount. The Farm Credit Term Loan ranks pari passu with the First Lien Term Loan Credit Agreement and the Senior Secured Notes.

We are required to offer to prepay the loans under the Farm Credit Term Loan, the Term Loan Facility and the Senior Secured Notes ~~Maturity~~with 100% of the net cash proceeds of certain asset sales subject to reinvestment rights. We are required to prepay the Farm Credit Term Loan and Term Loan Facility with 100% of the net cash proceeds of certain debt issuances and 50% of excess cash flow, subject to certain exceptions.

~~Our 9.5%~~We repaid $8 million of the Farm Credit Term Loan A and $3 million of the Farm Credit Term Loan B in the second quarter of 2023 as required for quarterly amortization. At June 30, 2023 there was $658 million of borrowings under the Farm Credit Term Loan A and $276 million of borrowings under the Farm Credit Term Loan B.

On November 30, 2021, we entered into a First Lien Term Loan Facility maturing November 30, 2028, of which $525 million was immediately drawn and up to $250 million was available as a Delayed Draw Term Loan. On January 7, 2022, we utilized $127 million under the Delayed Draw Term Loan facility to fund a portion of the redemptions of the Existing Domtar Notes pursuant to the Domtar Notes Change of Control Offers that terminated on January 3, 2022. The remainder of the Delayed Draw Term Loan facility was cancelled.

Borrowings under our First Lien Term Loan Facility amortize in equal quarterly installments in an amount equal to 5% per annum. The interest rate margin applicable to borrowings under our First Lien Term Loan Facility is, at our option, either (1) LIBOR plus 5.50%, subject to a LIBOR floor of 0.75%. or (2) the base rate plus 4.50%, subject to a base rate floor of 1.75%.

During the second quarter of 2023, we repaid $4 million as required for quarterly amortization. We also repaid $283 million on March 1, 2023 pursuant to the Acquisition and related to the issue of the Farm Credit Term Loan B for $283 million. At June 30, 2023 there was $353 million of borrowings outstanding under the First Lien Term Loan Facility.

Pearl Merger Sub Inc., a newly formed, wholly-owned subsidiary of Pearl Excellence Holdco L.P., a Delaware limited partnership, was the initial issuer of the $775 million aggregate principal amount of ~~$39 million, matured on August 1, 2016.~~

~~Our 10.75%~~6.75% Senior Secured Notes ~~in aggregate principal amount~~due 2028 (the “Notes”). This Note issue was part of ~~$63 million, matured on June 1, 2017.~~

Infinancing related to the ~~third quarter of 2015, a wholly owned subsidiary~~acquisition of Domtar ~~borrowed $300~~by Pearl Excellence Holdco L.P. Upon the completion of the acquisition, the initial issuer was merged with and into Domtar with Domtar surviving the Merger and becoming the obligor of the Notes.

The Notes mature on October 1, 2028 and interest on the Notes is payable in cash semi-annually in arrears on April 1 and October 1 of each year, commencing on April 1, 2022.

Pending completion of the Domtar Existing Notes Change of Control Offers that terminated on January 3, 2022, $250 million of the proceeds of the Notes issue was set aside as restricted cash to fund approximately half of funds required to complete the Change of Control Offers. Such funds are reflected as restricted cash and included in Cash and cash equivalents on the Balance Sheet at December 31, 2021. Funds not utilized were to be used to redeem a portion of the Senior Secured Notes at a 100% price. On January 7, 2022, $133 million of the Senior Secured Notes were redeemed as a result of the Domtar Existing Notes Change of Control Offers that terminated on January 3, 2022, leaving $642 million of Notes outstanding as of June 30, 2023.

We are required to offer to prepay the loans under ~~an unsecured 10-year~~the Farm Credit Term Loan, ~~Agreement that matures on July 20, 2025,~~the First Lien Term Loan Facility and the Senior Secured Notes with ~~certain domestic banks. The Company and certain significant domestic subsidiaries~~100% of the ~~Company unconditionally guarantee any obligations from time~~net cash proceeds of certain asset sales subject to ~~time arising under~~reinvestment rights.

We are required to prepay the Farm Credit Term Loan ~~Agreement. On August 18, 2016, Domtar entered into an amendment to its~~and First Lien Term Loan ~~Agreement, pursuant to which, among other things, certain insignificant subsidiaries were released from their guarantees~~Facility with 100% of the ~~borrower’s obligations under the~~net cash proceeds of certain debt issuances and 50% of excess cash flow, subject to certain exceptions.

~~Borrowings under~~ the First Lien Term Loan ~~Agreement bear interest at LIBOR plus a margin~~Facility and the Senior Secured Notes contains customary negative covenants, including, but not limited to, restrictions on our ability and that of ~~1.875%. The~~our restricted subsidiaries to merge and consolidate with other companies, incur indebtedness, grant liens or security interests on assets, make investments, pay dividends or make other restricted payments, sell or otherwise transfer assets or enter into transactions with affiliates.

Our ABL Revolving Credit Facility, Farm Credit Term Loan, ~~Agreement contains customary covenants, including two financial covenants: (i) an interest coverage ratio, as defined in~~ the First Lien Term Loan Agreement, that must be maintained at a level of not less than 3 to 1 and (ii) a leverage ratio, as defined in the Term Loan Agreement that must be maintained at a level of not greater than 3.75 to 1. At September 30, 2017, we were in compliance with these financial covenants.

In August 2016, we amended and restated our unsecured revolving credit facility (the “Credit Agreement”) with certain domestic and foreign banks, increasing the amount available from $600 million to $700 million and extending the Credit Agreement’s maturity date from October 3, 2019 to August 18, 2021. The amendment also allows certain foreign subsidiaries to be borrowers under the facility. The maturity date of the facility may be extended by one year and the ~~lender commitments may be increased by up to $400 million, subject to lender approval and customary requirements.~~

Borrowings by the Company under the Credit Agreement are guaranteed by our significant domestic subsidiaries. Borrowings by foreign borrowers under the Credit Agreement are guaranteed by the Company, our significant domestic subsidiaries and certain of our foreign significant subsidiaries. The amendment allowed certain insignificant domestic subsidiariesSenior Secured Notes provides that, ~~were previously guarantors, to be released from their guarantees of any obligations under the credit facility.~~

Borrowings under the Credit Agreement bear interest at the LIBOR, EURIBOR Canadian bankers’ acceptance or prime rate as applicable, plus a margin linked to our credit rating. In addition, we pay facility fees quarterly at rates dependent on our credit ratings.

The Credit Agreement contains customary covenants and events of default for transactions of this type, including two financial covenants: (i) an interest coverage ratio, as defined in the Credit Agreement, that must be maintained at a level of not less than 3 to 1 and (ii) a leverage ratio, as defined in the Credit Agreement that must be maintained at a level of not greater than 3.75 to 1 (or 4.00 to 1 upon the occurrence of certain ~~qualifying~~events of default, our obligations thereunder may be accelerated. Such events of default include payment defaults to the lenders thereunder, material ~~acquisitions). At September 30, 2017, we were~~inaccuracies of representations and warranties, covenant defaults, cross-defaults to other material indebtedness, voluntary and involuntary bankruptcy, insolvency, corporate arrangement, winding-up, liquidation or similar proceedings, material money judgments, change of control and other customary events of default.

Our obligations under our ABL Revolving Credit Facility are guaranteed by our immediate parent (a company which has no assets other than Domtar shares) and our wholly-owned material U.S. subsidiaries and wholly-owned material Canadian subsidiaries. Our ABL Revolving Credit Facility has a first-priority lien on the current assets of such U.S. and Canadian subsidiaries, and a second-priority lien on the fixed assets of our wholly-owned material U.S. subsidiaries, excluding principal properties (second in ~~compliance~~priority to the liens securing our First Lien Term Loan Facility (“First Lien Term Loan Facility”) discussed above), in each case, subject to permitted liens.

Our obligations under our Farm Credit Term Loan, the First Lien Term Loan Facility and the Senior Secured Notes are guaranteed by our immediate parent (a company with ~~these financial covenants. At September 30, 2017, we had~~ no ~~borrowings (September 30, 2016 – $110 million)~~assets other than Domtar shares) and ~~no outstanding letters~~all of ~~credit (September 30, 2016 – nil), leaving $700 million unused~~the Issuer’s direct and ~~available under this facility.~~

Weindirect wholly-owned material U.S. subsidiaries. Our Farm Credit Term Loan, the First Lien Term Loan Facility and the Senior Secured Notes have a first priority lien on the fixed assets of our wholly-owned material U.S. subsidiaries, representing 63% of the Consolidated Fixed Assets, and a second-priority lien on the current asset collateral in the U.S. (second in priority to the liens securing our ABL Revolving Credit Facility discussed above), in each case, subject to other permitted liens.

Following the change of control of Domtar, Domtar was obligated, pursuant to the indenture governing the 6.25% Notes due 2042 and the 6.75% Notes due 2044 (“Existing Domtar Notes”), to make the Existing Domtar Notes Change of Control Offers, pursuant to which Domtar offered to repurchase all of the Existing Domtar Notes from holders at a purchase price of 101%. Up to $250 million under the First Lien Term Loan was available on a delayed draw basis (“Delayed Draw Term Loan”) and up to $250 million aggregate principal amount of the 6.75% Senior Secured Notes was earmarked for the repurchase of the Existing Domtar Notes pursuant to the Existing Domtar Notes Change of Control Offers. Up to $250 million aggregate principal amount of the Senior Secured Notes was subject to special mandatory redemption to the extent proceeds were not used to fund the redemptions of the Existing Domtar Notes pursuant to the Existing Domtar Notes Change of Control Offers.

On January 3, 2022, $134 million of the 6.25% Notes due 2042 and $100 million of the 6.75% Notes due 2044 were tendered pursuant to the offer. In addition, $3 million of premium was paid. As a result, $116 million of the 6.25% Notes due 2042 and $150 million ~~receivables securitization facility that matures~~of the 6.75% Notes due 2044, remain outstanding as of June 30, 2023.

Following the acquisition of SPI, on June 29, 2023, the purchase price of $185 million was financed by the seller, an affiliated company with the issuance by Domtar of a $50 million unsecured note due July 15, 2023, a $35 million unsecured note due after June 30, 2031 and $100 million preferred shares redeemable by the holder after June 30, 2031, with Domtar having the option to satisfy the redemption with cash or Domtar securities. Refer to Note 3 “Acquisition of businesses” of the financial statements in ~~March 2019.~~this Quarterly Report on Form 10-Q.

~~At September 30, 2017, borrowings under the receivables securitization facility amounted to $60 million and $51~~Redemption of Resolute Notes

Resolute had $300 million of ~~letters of credit were issued under~~notes outstanding upon the program (September 30, 2016 – $100 million and $48 million, respectively). The program contains certain termination events, which include, but are not limited to, matters related to receivable performance, certain defaults occurring under the credit facility or our failure to repay or satisfy material obligations. At September 30, 2017, we had $39 million unused and available under this facility.

Acquisition taking place. On February ~~21, 2017, May 3, 2017 and August 1, 2017, our Board~~14, 2023, Resolute had delivered notice of ~~Directors approved a quarterly dividend of $0.42 per share, respectively, to be paid~~redemption to holders of ~~our common stock. Dividends~~the 4.875% Senior Notes due 2026. The redemption notice provided for the full redemption of ~~$26~~$300 million ~~were paid~~principal amount of the notes on ~~April 17, 2017, July 17, 2017~~March 1, 2023 at a redemption price equal to 102.438% of the principal amount of the Notes redeemed, plus accrued and ~~October 16, 2017, respectively,~~unpaid interest. The redemption of the Notes was subject to ~~shareholders~~the consummation of ~~record~~the Acquisition. Following the redemption on ~~April 3, 2017, July 3, 2017 and October 2, 2017, respectively.~~March 1, 2023, no Resolute notes remain outstanding.

On October 31, 2017, our Board of Directors approved a quarterly dividend of $0.42 per share to be paid to holders of our common stock. This dividend is to be paid on January 15, 2018, to shareholders of record on January 2, 2018.GUARANTEES

~~In the normal course of business, we finance certain of our activities off balance sheet through operating leases.~~

In the normal course of business, we offer indemnifications relating to the sale of our businesses and real estate. In general, these indemnifications may relate to claims from past business operations, compliance with laws, the failure to abide by covenants and the breach of representations and warranties included in sales agreements. Typically, such representations and warranties relate to taxation, environmental, product and employee matters. The terms of these indemnification agreements are generally for an unlimited period of time. At ~~September~~June 30, ~~2017,~~2023, we were unable to estimate the potential maximum liabilities for these types of indemnification guarantees as the amounts are contingent upon the outcome of future events, the nature and likelihood of which cannot be reasonably estimated at this time. Accordingly, no provision has been recorded. These indemnifications have not yielded significant expenses in the past.

We have indemnified and held harmless the trustees of our pension funds, and the respective officers, directors, employees and agents of such trustees, from any and all costs and expenses arising out of the performance of their obligations under the relevant trust agreements, including in respect of their reliance on authorized instructions from us or for failing to act in the absence of authorized instructions. These indemnifications survive the termination of such agreements. At ~~September~~June 30, ~~2017,~~2023, we have not recorded a liability associated with these indemnifications, as we do not expect to make any payments pertaining to these indemnifications.

Refer to Note 2 “Recent Accounting Pronouncements,” of the financial statements in this Quarterly Report on Form 10-Q.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates, assumptions and choices amongst acceptable accounting methods that affect our reported results of operations and financial position. Critical accounting estimates pertain to matters that contain a significant level of management estimates about future events, encompass the most complex and subjective judgments and are subject to a fair degree of measurement uncertainty. On an ongoing basis, management reviews its estimates, including those related to environmental matters and asset retirement obligations, impairment and useful lives of long-lived assets, closure and restructuring costs, ~~goodwill and~~ intangible assets impairment, pension and other post-retirement benefit plans, income taxes ~~business combinations~~ and contingencies related to legal claims. These critical accounting estimates and policies have been reviewed with the Audit Committee of our Board of Directors. We believe these accounting policies, and others, should be reviewed as they are essential to understanding our results of operations, cash flows and financial condition. Actual results could differ from those estimates.

~~There has not been any material change to our policies since December 31, 2016.~~ For more details on critical accounting policies, refer to our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2022.

There has not been any material change to our policies since December 31, 2022, except for the following addition related to our recent acquisition of Resolute.

As of June 30, 2023, a total of $584 million of estimated countervailing and anti-dumping duty cash deposits on softwood lumber were paid. Of this amount, $563 million of deposits were paid at acquisition date and were included in the preliminary purchase price allocation. These deposits are measured since the acquisition date, using a model based on the assumption that a settlement would be reached and that a certain percentage of the deposits would be recovered after a certain period of time.

The information included in this Quarterly Report on Form 10-Q contains forward-looking statements relating to trends in, or representing management’s beliefs about, Domtar Corporation’s future growth, results of operations, performance, liquidity and business prospects and opportunities. These forward-looking statements are generally denoted by the use of words such as “anticipate”, “believe”, “expect”, “intend”, “aim”, “target”, “plan”, “continue”, “estimate”, “project”, “may”, “will”, “should” and similar expressions. These statements reflect management’s current beliefs and are based on information currently available to management. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to known and unknown risks and uncertainties and other factors that could cause actual results to differ materially from historical results or those anticipated. Accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will occur, or if any ~~occurs,~~occur, what effect they will have on ~~Domtar Corporation’s~~our results of operations or financial condition. These factors include, but are not limited to:

You are cautioned not to unduly rely on such forward-looking statements, which speak only as of the date made, when evaluating the information presented in this Quarterly Report on Form 10-Q. Unless specifically required by law, Domtar Corporation disclaims any obligation to update or revise these forward-looking statements to reflect new events or circumstances.

Information relating to quantitative and qualitative disclosure about market risk is contained in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~ 2022. There ~~have~~has not been noany material ~~changes i~~nchange in our exposure to market risk since December 31, ~~2016.~~2022. A full discussion on Quantitative and Qualitative Disclosure about Market Risk, is found in Note 35 “Derivatives and Hedging Activities and Fair Value Measurement,” of the financial statements in this Quarterly Report on Form 10-Q.

Our operating income can be impacted by the following sensitivities that reflect our recent Acquisition:

2. Based on estimated 2023 consumption levels. The allocation between energy sources may vary during the year in order to take advantage of market condition.

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports under the Securities and Exchange Act of 1934, as amended (“Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. As of ~~September~~June 30, ~~2017,~~2023, an evaluation was performed by members of management, at the direction and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the Exchange Act). Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of ~~September~~June 30, ~~2017,~~2023, our disclosure controls and procedures were effective.

There were no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect our internal control over financial reporting during the period covered by this report.

See Note 1413 “Commitments and Contingencies” of the financial statements in this Quarterly Report on Form 10-Q for the discussion regarding legal proceedings.

~~For a description of previously reported legal proceedings refer to Part I, Item 3, “Legal Proceedings,” of our Annual~~ITEM 1A. RISK FACTORS

You should read the following risk factors carefully in connection with evaluating the Company's business and the forward-looking information contained in this Quarterly Report on Form ~~10-K for~~10-Q. Any of the ~~year ended December 31, 2016.~~

~~Our Annual~~following risks could materially and adversely affect our business, financial condition, operating results and the actual outcome of matters described in this Quarterly Report on Form ~~10-K~~10-Q. While the Company believes it has identified and discussed below the key risk factors affecting our business, there may be additional risks and uncertainties that the Company does not presently know or that does not currently believe to be significant that may adversely affect our business, financial condition or operating results in the future.

Failure to successfully implement the Company’s business diversification and integration initiatives could have a material adverse effect on its business, results of operations and financial position.

The Company is pursuing strategic initiatives that management considers important to its long-term success. The intent of these initiatives is to help grow and diversify the business and counteract the secular decline in the North American paper business. These initiatives may involve organic growth, conversion of assets, other strategic transactions and projects to complement, expand or optimize its business. The success of these initiatives will depend on, among other things, the Company's ability to identify potential strategic initiatives, understand the key trends and principal drivers affecting those businesses and to execute the initiatives in a cost-effective manner. There are significant risks involved with the execution of such initiatives, including significant business, economic and competitive uncertainties, many of which are outside the Company’s control. In connection with any acquisition, conversion, strategic transaction or project, the Company may not successfully integrate an acquired business, assets, technologies, processes, controls, policies, and operations with ours or realize some or all of the anticipated benefits and synergies of the acquisition, conversion, strategic transaction or project. In connection with such transactions, the Company may face challenges associated with entering a new market, production location, product category or meeting customers’ demands. The Company may also face issues with the separation of processes and loss of synergies following the divestiture of businesses or idling or closure of facilities.

Strategic acquisitions, like its most recent acquisition of Resolute, may expose the Company to additional risks. The Company may have to compete for acquisition targets and any acquisition it makes may fail to accomplish its strategic objectives or may not perform as expected. In addition, the costs of integrating an acquired business may exceed its estimates and may require significant time and attention from senior management. Accordingly, the Company cannot predict whether it will succeed in implementing these strategic initiatives. If it fails to successfully diversify its business, or if the diversification strategy does not produce the expected outcomes, it may have a material adverse effect on the Company’s competitive position, financial condition and operating results.

Asset conversion, like its most recent conversion of one of its mill to a containerboard production facility, can be capital intensive and can involve the shutdown of a facility for an extended period, followed by an extended ramp-up and customer certification process. In addition, the success of a conversion depends upon demand over time for the new product relative to the previously produced paper products, as well as costs and other factors, and there can be no assurance that a conversion will be as successful as expected.

The Company’s paper products are vulnerable to long-term declines in demand due to competing technologies or materials.

The Company’s paper business competes with electronic transmission and document storage alternatives, as well as with paper grades it does not produce, such as uncoated groundwood. As a result of such competition, the Company is experiencing ongoing decreasing demand for most of its existing paper products. As the use of these alternatives grows, demand for paper products is likely to decline further. Declines in demand for the Company’s paper products may adversely affect its business, results of operations and financial position.

Fluctuations and volatility in the prices of and the demand for the Company’s products due to factors such as economic cyclicality and changes in consumer preferences or trends could have a material adverse effect on its business, results of operations and financial position.

Historically, economic and market shifts, fluctuations in capacity and changes in foreign currency exchange rates have created cyclical changes in prices, demand and margins for the Company’s products. The length and magnitude of industry cycles have varied over time, both by market and by product, but generally reflect changes in macroeconomic conditions and levels of capacity. Any decline or stagnation in macroeconomic conditions could lead to experience lower sales volumes and reduced margins for the Company's products.

During periods of weak or weakening global economic conditions, the Company would expect any increase in unemployment or lower gross domestic product growth rates to adversely affect demand for its products as its customers delay or reduce their expenditures. For example, during an economic downturn, the Company's paper products could face more intense pressure from electronic substitution, end consumers may reduce printed newspaper and magazine subscriptions as a direct result of their financial circumstances, contributing to lower demand for the Company's products by its customers. In addition, demand for the Company's market pulp products is generally associated with the production rates of paper producers, as well as consumption trends for products such as tissue, toweling and absorbent products. An economic downturn in the U.S. or Canada could also negatively affect the U.S. or Canadian housing industry and the repair and remodeling segment, which are significant drivers of demand for the Company's lumber and other wood-based products.

Most of the Company’s products are commodities that are widely available from other producers. Because commodity products have few distinguishing qualities from producer to producer, competition for these products is based primarily on price, which is determined by supply relative to demand.

In addition, consumer preferences and trends are constantly changing based on, among other factors, cost, convenience and health concerns and perceptions and an increased awareness of Environmental, Social and Governance (“ESG”) considerations. These consumer preferences and trends may affect the prices of the Company's products. The Company results may be adversely affected if the Company fails to anticipate trends that would enable it to offer products that respond to changing customer preferences and technological and regulatory developments.

As a result, prices for all of the Company’s products are driven by many factors outside of its control and may be volatile. The price for any one or more of these products may fall below its cash production costs, requiring the Company to incur losses on product sales or curtail production at one or more of its manufacturing facilities, or both. If the prices or demand for its products decline, this could adversely affect the Company’s business, results of operations and financial position.

The Company may have difficulty obtaining wood fiber at favorable prices, or at all.

Wood fiber is the principal raw material used by the Company’s business. The primary source for wood fiber is wood chips and logs for its pulp and paper mills and timber for its wood products business.

Wood fiber is a commodity, and prices historically have been impacted by a variety of factors. Environmental litigation and regulatory developments, activist campaigns and litigation advanced by Indigenous groups or other stakeholders, alternative use for energy production and reduction in harvesting related to the reduced demand, have caused, and may cause in the future, significant reductions in the amount of timber available for commercial harvest in the U.S. and Canada or that meet standards required for third-party certifications. In addition, future domestic or foreign legislation and litigation concerning the use of timberlands, the protection of habitats and endangered or other species, including the woodland caribou, the promotion of forest health and biodiversity and the response to and prevention of catastrophic wildfires could also affect timber supplies. Availability of harvested timber may be further limited by adverse weather, fire, insect infestation, disease, ice storms, windstorms, flooding, climate change effects and other natural and man-made causes, thereby reducing supply and increasing prices. Wood fiber pricing is subject to regional market influences, and the Company’s cost of wood fiber may increase in particular regions due to market shifts in those regions. Any sustained increase in wood fiber prices would increase the Company’s operating costs, and the Company may be unable to increase prices for its products in response to increased wood fiber costs due to additional factors affecting the demand or supply of these products.

The Company currently meets its wood fiber requirements by purchasing wood fiber from third parties and by harvesting timber pursuant to its forest licenses and forest management agreements. If the Company’s cutting rights, pursuant to its forest licenses or forest management agreements are reduced, or any third-party supplier of wood fiber, timber or market pulp stops selling, is unable to sell wood fiber to the Company or at a favorable price for any of the reasons described above, the Company's financial condition or results of operations could be materially and adversely affected.

Inflation or a sustained increase in the cost of the Company’s purchased energy or other raw materials and services would lead to higher manufacturing costs, thereby reducing its margins.

The Company’s operations consume substantial amounts of energy such as biomass, natural gas, electricity, fuel oil and wood residue. The main raw materials the Company uses in its manufacturing process are wood fiber and chemicals. The prices for raw materials and energy are volatile, affected by inflation, and may change rapidly, which impacts the Company's manufacturing costs, directly affects its results of operations and may contribute to earnings volatility. While the Company purchases substantial portions of its energy under supply contracts, most of these contracts are based on market pricing. The Company also relies on service providers and contractors in its operations, the costs of which have also increased due to workforce shortages and inflation.

For the commodity products of the Company, the relationship between supply and demand, rather than changes in the cost of raw materials or purchased energy, will determine the Company’s ability to increase prices. Consequently, the Company may be unable to pass on increases in its operating costs to its customers. Any sustained increase in raw material or energy prices without any corresponding increase in product pricing would reduce the Company’s operating margins and may have a material adverse effect on its business and results of operations.

The Company also generates electricity at its hydroelectric and power generation facilities. There can be no certainty that the Company will be able to maintain the water rights necessary for its hydroelectric power generating facilities, or to renew such rights or power sales contracts on favorable conditions. The closure of certain machines or facilities located in Quebec could trigger the exercise of termination rights by the Quebec government under water rights agreements. The amount of electricity the Company can generate at its hydroelectric facilities is also subject to the volume of rain or snowfall and is therefore variable from one year ~~ended~~to the next.

The Company could experience disruptions in operations and/or increased labor costs due to labor disputes or occupational health and safety issues.

Approximately 57% of the Company’s employees are represented by unions through collective bargaining agreements generally negotiated on a facility-by-facility basis. In the future, the Company may not be able to negotiate acceptable new collective bargaining agreements, which could result in strikes or work stoppages or other labor disputes by affected workers. Renewal of collective bargaining agreements could also result in higher wages or benefits paid to union members. In addition, labor organizing activities could occur at any of the Company’s facilities. Therefore, the Company could experience a disruption of its operations or higher ongoing labor costs, which could have a material adverse effect on its business and results of operations.

Occupational health and safety issues could also cause disruptions in operations or otherwise affect labor-related costs, including workforce availability and logistics constraints related to pandemic measures and the resulting economic conditions.

A material disruption in the Company’s supply chain, manufacturing or distribution operations could prevent us from meeting customer demand, reduce its sales and/or negatively impact its results of operations.

The Company’s ability to manufacture, distribute and sell products is critical to its operations. Any event that disrupts or limits transportation, delivery services or the operations of the Company’s suppliers, including workforce shortages and economic conditions resulting from pandemic conditions, could materially and adversely affect the Company's business, including increasing its inventory levels. The Company’s supply chain, manufacturing or distribution operations are subject to inherent risks such as:

Events such as those listed above can cause personal injury and loss life, disrupt the Company’s supply chain and impair its ability to manufacture or sell its products and have resulted in operating losses in the past. Any interruption or facility damage could prevent the Company from meeting customer demand for its products as well as require additional resources and/or require unplanned expenditures. If one or more of these machines or facilities were to incur significant downtime, it may have a material adverse effect on the Company’s results of operations and financial position. In addition, some of these hazards can result in, among other things: reputational damage; the imposition of civil or criminal penalties; workers’ compensation; and other claims against the Company with respect to workplace exposure, exposure of contractors and others located on or off the Company's premises.

The Company is subject to physical, financial, regulatory, transition and litigation risks associated with global, regional, and local weather conditions and climate change.

The Company’s operations and the operations of its suppliers are subject to climate variations, which impact the productivity of forests, the frequency and severity of wildfires, the availability of water, the distribution and abundance of species, and the spread of disease or insect epidemics, which in turn may adversely or positively affect timber production and fiber availability. Over the past several years, changing weather patterns and climatic conditions due to natural and man-made causes have added to the unpredictability and frequency of natural disasters such as hurricanes, earthquakes, hailstorms, wildfires, drought, flooding, snow, ice storms, the spread of disease, and insect infestations. Any of these natural disasters or other conditions could also affect woodlands or cause variations in the cost of raw materials, such as virgin fiber. Changes in precipitation could make wildfires more frequent or more severe and could adversely affect timber harvesting or the Company's hydroelectric generation. The effects of global, regional and local weather conditions, and climate change, including the costs of complying with evolving climate change regulations and any related litigation could also adversely impact its results of operations.

Implementation of climate-change mitigation programs could increase the Company's costs in the short term, including as a result of potential GHG emissions reporting obligations in the U.S. and more detailed mandatory reporting in both Ontario and Quebec, all of which may require additional resources for monitoring, tracking, calibrating and reporting information, as well as training and verification. Carbon price mechanisms, such as the cap-and-trade system in Quebec, have an impact on the operational costs of covered facilities, as well as the cost of fuel from distributors operating under the programs. The price of carbon in Canada could continue to increase, and a price on carbon could be introduced in the U.S. International reporting protocols could change their standards for reporting GHG emissions, including changing the distinction that is currently made between CO2 emissions from biomass combustion at stationary sources and CO2 generated from fossil fuels. Regulatory bodies could also change their position on the carbon-neutrality of biomass energy, which would significantly alter its carbon footprint. Adopting and incorporating new technologies to help with the transition toward a low-carbon economy are also transitional risks that could represent significant costs to the Company or may expose us to unforeseen risks.

There is increased focus on sustainability reporting and the importance of ESG scores from customers and other stakeholders, which may impact the Company's business.

Sustainability/ESG reporting frameworks are numerous and evolving rapidly. Sustainability governance, performance and disclosures are reviewed and monitored by customers, stakeholders and ESG scoring service providers using different methodologies, which may impact how stakeholders perceive, justifiably or not, the Company as a debtor, customer, supplier or business partner. In the event that the Company was unable to achieve its stated sustainability targets, goals and commitments or if its sustainability statements were challenged as erroneous, inaccurate or incomplete, whether justified or not, the Company could sustain damage to its reputation and expose itself to litigation and liability. Evolving standards and regulations related to climate change, sustainability and ESG reporting may also result in additional compliance costs, impose strain on its human capital resources, and expose the Company to a new type of credit risk.

The Company could be required to curtail production, shut down machine or facilities, restructure operations or dispose of facilities or business.

The Company is continuously seeking the most cost-effective means and structure to serve its customers and to respond to changes in its markets and declining demand for some of its products or to address productivity issues. Accordingly, from time to time, the Company has, and is likely to again curtail production, indefinitely or permanently shut-down machines or facilities, sell non-core assets and otherwise restructure operations to improve competitiveness and profitability. As a result, restructuring and divestiture costs have been, and are expected to be, a recurring component of the Company's operating expenses, and may vary significantly from year to year depending on the scope of such activities. Divestitures and restructuring may also result in significant financial charges for the impairment of assets, including intangible assets. Furthermore, such activities may divert the attention of management, disrupt its ordinary operations, or result in a reduction in the volume of products produced and sold. There is no guarantee that any such activities will achieve their goals, and if the Company cannot successfully manage the associated risks, its financial condition and results of operations could be adversely affected.

If the Company is unable to offer products certified to globally recognized forestry management and chain of custody standards or meet customers’ product specifications, it could adversely affect the Company's ability to compete.

Based on market interest, the Company offers a number of its products, including pulp and paper, wood and tissue, with specific designations to one or more globally recognized forest management and chain of custody standards as well as product specifications to meet customers’ requirements. The Company's ability to conform to new or existing guidelines for certification depends on a number of factors, many of which are beyond its control, such as: changes to the standards or the interpretation or the application of the standards; the collaboration of its suppliers in timely sharing product information; the adequacy of government-implemented conservation measures; and the existence of territorial disputes between Indigenous peoples and governments. If the Company is unable to offer

certified products, for which demand is growing, or to meet commitments to supply certified products or meet the product specifications of its customers, it could adversely affect the marketability of the Company's products and its ability to compete with other producers.

Negative publicity, even if unjustified, could have a negative impact on the Company’s brands and the marketability of its products.

While the Company believes that it has established a reputation for transparent communications, social and corporate governance, responsible forestry practices, and overall sustainability leadership, negative publicity, whether or not justified, relating to its operations and its business or to its industry, could tarnish the Company's reputation or reduce the value of its brands and market demand for its products. In addition, the actions of activists, including legislative initiatives or other campaigns affecting boreal- sourced forest products, whether justified or not, could impede or delay the Company's ability to access raw materials or obtain third-party certifications with respect to forest management and chain of custody standards that the Company seeks in order to supply certified products to its customers. Activist campaigns could affect the Company's revenues and require the Company to incur significant expenses and dedicate substantial resources to defend itself, rebuild its reputation, and restore the value of its brands.

The Company is currently transitioning from certain legacy system applications, and during the transition, such legacy systems may be more vulnerable to attack or failure and implementation of the transition may cause disruptions to the Company's business IT systems.

The Company is currently in the process of replacing certain legacy system applications with an integrated business management software platform. Prior to the completion of this upgrading process, the Company may not have supplier or third-party support for legacy systems in the event of failure or required updates, and such legacy systems may be more vulnerable to breakdown, malicious intrusion, and random attack. The Company may also experience difficulties maintaining or replacing the hardware infrastructure required to operate these legacy systems. Such legacy systems, if not properly functioning prior to their replacement, could adversely affect the Company's business.

During the process of replacing legacy systems, the Company could experience disruptions to its business IT systems and normal operating processes because of the projects’ complexity. The potential adverse consequences could include delays, loss of information, decreased management reporting capabilities, damage to the Company's ability to process transactions, harm to its control environment, diminished employee productivity, business interruptions, and unanticipated increases in costs. Further, the Company's ability to achieve anticipated operational benefits from new platforms is not assured.

The Company could incur substantial costs as a result of compliance with, violations of or liabilities under applicable environmental laws and regulations. It could also incur costs as a result of asbestos-related personal injury litigation.

The Company is subject to a wide range of general and industry-specific laws and regulations in the U.S. and Canada, relating to pollution and the protection of the environment and natural resources as well as several requirements stipulated in its facilities’ permits, including those governing air emissions, greenhouse gases and climate change, water usage, wastewater discharges, harvesting, silvicultural activities, storage, management and disposal of hazardous substances and wastes, the investigation and cleanup of contaminated sites, landfill and wastewater treatment system operation and closure obligations, forest management and operations, endangered species and their habitat, health and safety matters, carbon pricing and climate change. In particular, the pulp and paper industry in the U.S. is subject to the United States Environmental Protection Agency’s (“EPA”) Cluster Rules.

The Company has incurred, and expects that it will continue to incur, significant capital, operating and other expenditures complying with applicable environmental laws and regulations as a result of remedial obligations. The Company could also incur substantial costs, such as civil, administrative or criminal fines, sanctions and enforcement actions (including orders limiting its operations or requiring corrective measures, installation of pollution control equipment or other remedial actions), cleanup and closure costs, and third-party claims for property damage and personal injury as a result of violations of, or liabilities under, environmental laws and regulations. The Company’s ongoing efforts to identify potential environmental concerns that may be associated with its past and present properties may lead to future environmental investigations. Those efforts may result in the determination of additional environmental costs and liabilities which cannot be reasonably estimated at this time.

As the owner and operator of real estate, the Company may be liable under environmental laws for cleanup, closure and other damages resulting from the presence and release of hazardous substances, including asbestos, on or from its properties or operations, including properties that it no longer owns. The amount and timing of environmental expenditures is difficult to predict, and, in some cases, the Company’s liability may be imposed without regard to contribution or to whether it knew of, or caused, the release of hazardous substances and may exceed forecasted amounts or the value of the property itself. The discovery of additional contamination or the imposition of additional cleanup obligations at the Company’s or third-party sites may result in significant additional costs. Any material liability the Company incurs could adversely impact its financial condition or preclude it from making capital expenditures that would otherwise benefit its business.

In addition, the Company may also be liable under health and safety laws for related exposure of employees, contractors and other persons to substances and waste on or from its current or former properties or injuries, including asbestos-related personal injury litigation arising out of exposure to asbestos on or from its properties or operations and may incur substantial costs as a result of any defense, settlement, or adverse judgment in such litigation. The Company may not have access to insurance proceeds to cover costs associated with asbestos-related personal injury litigation.

Enactment of new environmental laws or regulations or changes in existing laws or regulations, or interpretation thereof, might require significant expenditures. For additional information, refer to Item 1, Financial Statements and Supplementary Data, under Note 13 “Commitments and Contingencies”. The Company may be unable to generate funds or other sources of liquidity and capital to fund environmental liabilities or expenditures.

The Company is subject to a wide variety of laws, regulations and other government requirements that may change in significant ways, and the cost of compliance or failure to comply, could have a material adverse effect on its business, financial results or condition.

In addition to environmental laws, the Company’s business and operations are subject to a broad range of regulation under a wide variety of U.S. federal and state and Canadian laws, regulations and other government requirements, including among others, those relating to antitrust and competition laws, financial reporting and disclosure obligations, custom and trade, timber and water rights, occupational health and safety laws, data privacy, pension, benefit plans, labor and employment laws, the manufacture and sale of consumer products, including product safety and liability, the environment, and Indigenous peoples, among others. Many of these laws and regulations are complex and subject to evolving and differing interpretation. Compliance with these laws and regulations, including changes to them or their interpretations or enforcement, or introduction of new laws and regulations, has required in the past, and could require in the future, substantial expenditures by the Company and adversely affect its results of operations. In addition, noncompliance with laws and regulations could significantly damage and require the Company to spend substantial amounts of money to rebuild its reputation which may have a material adverse effect on the Company’s financial position, results of operations or cash flows.

The Company's ability to comply with these laws and regulations often depends, at least in part, on compliance by independent third parties, such as contractors and agents it retains to provide services. For example, its compliance with customs requirements for international shipments depends in part on compliance by its customs brokers, sureties, transportation companies, and external advisors, in addition to its own employees and consultants, and the Company could be liable for noncompliance by any of them, even if inadvertent. Failure to comply with laws and regulations can also be the result of unintended consequences, such as unforeseen consequences of information technology modifications, upgrades, or replacements. Although the Company strives to comply with laws and regulations applicable, no company can assure that it will successfully prevent, detect, or remediate all potential instances of non-compliance, and any failure to do so could be material, require substantial expenditures, and adversely affect its results of operations.

For additional information, refer to Item 1, Financial Statements and Supplementary Data, under Note 13 “Commitments and Contingencies.”

Products the Company produces in one country and export to another may become subject to additional duties or other international trade remedies or restrictions.

The Company produces products in the U.S. and Canada and sells products worldwide. Under trade and investment treaties and domestic trade laws, custom duties (also called tariffs) can be imposed by national governments where imports are “dumped” or “subsidized” and such imports cause material injury, or an imminent threat of injury, to a domestic industry. International trade laws also generally provide that national governments can adopt countervailing measures, including countervailing duties, regarding imported products that are subsidized through foreign government programs under certain circumstances. A trade remedy investigation or proceeding may involve allegations of either dumping, subsidization, or both, which are generally initiated at the request of local producers. Where injurious dumping is found, the trade remedy is typically an anti-dumping duty order. Where injurious subsidization is found, the trade remedy is typically a countervailing duty order. In principle, a tariff equal to the amount of dumping or subsidization, as applicable, should be imposed on the importer of the product. Tariffs can be legally challenged before local or international review bodies, but national governments will generally continue levying deposits on estimated customs duties during the pendency of such review proceedings, which can span over many years. Legal rules applicable to tariffs could also be modulated should certain national governments amend their legislation or withdraw from international treaties on tariffs or should such international treaties be renegotiated or terminated. The imposition of additional customs duties or deposit requirements in respect of estimated duties on one or more of the Company's products could materially affect its cash flow, and the competitive position of its operations relating to the affected product.

In addition, national governments could also impose non-tariff measures to restrict the import of some or all of the Company's imported products, such as quotas, tariff-rate quotas, import bans, licensing regimes, price bands or targeted domestic taxes. While such non-tariff measures could be legally challenged under existing trade treaties, non-tariff measures adopted by any country where the Company sells its products internationally could materially affect its cash flow, and the competitive position of its operations relating to the affected products.

The Company is subject to countervailing and anti-dumping duty orders on the vast majority of its U.S. imports of softwood lumber products produced at is Canadian sawmills, which could materially affect its results of operations and cash flows.

Most of the Company's U.S. imports of softwood lumber products produced in Canada are subject to orders requiring the Company to pay cash deposits to U.S. Customs for estimated countervailing and anti-dumping duties. These cash deposit requirements are the result of petitions filed, shortly after the 2006 Softwood Lumber Agreement expired in October 2015, by U.S. softwood lumber products producers and forest landowners with Commerce and the U.S. International Trade Commission.

All countervailing and anti-dumping duty orders issued by the U.S. Department of Commerce (“Commerce”) in the present softwood lumber dispute have been appealed before a binational review panel established under the North American Free Trade Agreement and its successor, the United States-Mexico-Canada Agreement (or, the “USMCA”). Deposits paid to U.S. Customs in the present dispute will not be converted into actual duties unless and until appeals have been exhausted.

The Company’s recently acquired subsidiary, Resolute Forest Products Inc., have been required to pay cash deposits for estimated countervailing duties and anti-dumping duties on most of its U.S. imports of softwood lumber products produced at its Canadian sawmills, since April 28, 2017, and June 30, 2017, respectively. Subsequently, Commerce maintained cash deposits at varying rates as a result of annual administrative reviews; following the initial investigation, there were four administrative reviews and could remain subject to further administrative reviews for years to come. As of June 30, 2023, the rates for estimated countervailing and anti-dumping duties applicable to the Company's U.S. imports of softwood lumber products were 10.10% and 4.76%, respectively and cumulatively.

These rates will apply until Commerce sets new duty rates in subsequent administrative reviews, or until new rates are set on appeal through a remand determination by the binational review panel established under the USMCA. Commerce issued its final determination dated July 26, 2023, in the fourth administrative review of the countervailing and anti-dumping orders, following which new rates will take effect for the Company, starting August 1, 2023; the new rates are 1.79% for countervailing duties and 6.20% for anti-dumping duties.

The Company cannot provide any assurance regarding the estimated or final duty rates that may be determined by Commerce in its future administrative reviews. During any period in which the Company's U.S. imports of softwood lumber products from its Canadian sawmills are subject to countervailing or anti-dumping cash deposit requirements or duty requirements, its cash flows and the competitive position of those products and its related Canadian operations could be materially affected.

The Company is and may become a party to a number of legal proceedings, claims, governmental inquiries, investigations, and other disputes, and adverse judgments could have a material adverse effect on its financial condition.

The Company may become involved in various legal proceedings, claims, governmental inquiries, investigations, and other disputes in the normal course of business. These could include, for example, matters related to contracts, transactions, commercial and trade disputes, taxes, environmental and climate change issues, activist’s claims for 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, intellectual property, financial reporting and disclosure obligations, corporate governance, Indigenous peoples’ claims, antitrust, governmental regulations, and other matters. Although the outcome of these matters is subject to many variables and cannot be predicted with any degree of certainty, the Company regularly assesses the status of the matters and establishes provisions (including legal costs expected to be incurred) when it believes an adverse outcome is probable, and the amount can be reasonably estimated. Legal proceedings that the Company believes could have a material adverse effect if not resolved in its favor, or that the Company believes to be significant, are discussed in Item 1, Note 13 “Commitments and Contingencies” of this Quarterly Report on Form 10-Q. However, the Company's reports do not disclose or discuss all matters of which it is aware. If the Company assessment of the probable outcome or materiality of a matter is not correct, the Company may not have made adequate provision for such loss and its financial condition, cash flows, or results of operations could be adversely impacted.

Some matters that the Company may be involved in from time-to-time result from claims brought by us against third parties, including customers, suppliers, governments or governmental agencies, activists and others. Even if such a matter does not involve a claim for damages or other penalty or remedial action against us, such a matter could nevertheless adversely affect its relationships with those and other third parties.

The Company may incur substantially more debt. This could increase risks associated with its leverage.

Net indebtedness, consisting of bank indebtedness, long-term debt and due to related party, net of cash and cash equivalents and restricted cash, was $2,598 million as of June 30, 2023 compared to $1,278 million as of December 31, ~~2016, contains important risk~~2022. The increase in the Company net indebtedness is mainly as a result of the Resolute and SPI Acquisition. The Company may incur substantial additional indebtedness in the future. Although the Company’s debt agreements contain restrictions on the incurrence of additional secured and unsecured indebtedness, these restrictions are subject to a number of qualifications and exceptions, and additional indebtedness incurred in

compliance with these restrictions could be substantial. Refer to Item 1, Note 11 “Long-term debt”, of this Quarterly Report on Form 10-Q for more details.

The Company’s operations require substantial capital, and it may not have adequate capital resources to provide for all of its capital requirements.

The Company’s businesses are capital intensive and require ongoing capital expenditures in order to maintain its equipment, increase its operating efficiency, comply with environmental laws and innovate to remain competitive.

If the Company’s available cash resources and cash generated from operations are not sufficient to fund its operating needs, make pension contributions, and finance its working capital, capital expenditures, and duty cash deposits, the Company would have to obtain additional funds from borrowings or other available sources or reduce or delay its capital expenditures. The Company may not be able to obtain additional funds on favorable terms, or at all.

In addition, the Company’s debt service obligations will reduce its available cash flows. If the Company cannot maintain or upgrade its equipment as it requires or allocate funds to ensure environmental compliance, it could be required to curtail or cease some of its manufacturing operations, or it may become unable to manufacture products that compete effectively in one or more of its product lines.

The Company’s ability to generate the significant amount of cash needed to pay interest and principal on the Company’s secured and unsecured long-term indebtedness and service its other debt and financial obligations and its ability to refinance all or a portion of its indebtedness or obtain additional financing depends on many factors beyond the Company’s control.

Net indebtedness, consisting of bank indebtedness, long-term debt and due to from related party, net of cash and cash equivalents and restricted cash, was $2,598 million as of June 30, 2023 compared to $1,278 million as of December 31, 2022. The increase in our net indebtedness is mainly as a result of the Resolute Acquisition. The Company’s ability to make payments on and refinance its debt, including the Company’s secured and unsecured long-term notes, its First Lien Term Loan Facility and Farm Credit Term Loan and amounts borrowed under its ABL Revolving Credit Facility, if any, and other financial obligations and to fund its operations will depend on its ability to generate substantial operating cash flow. The Company’s cash flow generation will depend on its future performance, which will be subject to prevailing economic conditions and to financial, business and other factors, many of which are beyond its control.

The Company’s business may not generate sufficient cash flow from operations and future borrowings may not be available to the Company under its ABL Revolving Credit Facility or otherwise in amounts sufficient to enable the Company to service its indebtedness, including the Company’s secured and unsecured long-term notes, its First Lien Term Loan Facility and Farm Credit Term Loan and borrowings, if any, under its ABL Revolving Credit Facility or to fund its other liquidity needs. If the Company cannot service its debt, the Company will have to take actions such as reducing or delaying capital investments, selling assets, restructuring or refinancing its debt or seek additional equity capital. Any of these remedies may not be executed on commercially reasonable terms, or at all, and may impede the implementation of its business strategy. Furthermore, the secured and unsecured long-term notes, the First Lien Term Loan Facility, Farm Credit Term Loan and the ABL Revolving Credit Facility may restrict the Company from adopting any of these alternatives. Because of these and other factors that may be beyond its control, the Company may be unable to service its indebtedness.

The Company is subject to the potential loss of important customers or a significant change in customer relationships or in customer demand for its products, as well as accounts receivable credit risk exposure, which could materially adversely affect the Company’s business, financial condition or results of operations.

The Company heavily relies on a small number of significant customers. Losing important customers, decrease demand for its products from an important customer or increases in accounts receivable credit risk exposure due to financial difficulties of its customers, could materially adversely affect the Company’s business, financial condition or results of operations.

An increase in interest rates could have a material adverse effect on the Company's business.

Borrowings under the Company's ABL Revolving Credit Facility and under its First Lien Term Loan and Farm Credit Term Loan bear interest at rates that are calculated based on LIBOR or SOFR or a base rate plus, in each case, an applicable margin. As a result, the Company is exposed to risks associated with an increase in interest rates, including if the U.S. Federal Reserve raises its benchmark interest rate. The Company may utilize derivative financial instruments, such as interest rate swaps, to manage its interest rate risk. There can be no assurance, however, that increases in interest rates will not adversely affect the Company's business, financial position and results of operations by causing an increase in interest expense. Significantly higher interest rates may also, among other things, reduce the availability and increase the cost of obtaining new debt and refinancing existing indebtedness.

The Company has liabilities with respect to its pension plans and the actual cost of its pension plan obligations could exceed current provisions.

Since pension fund obligations are primarily long-term in nature, losses in pension fund investments, if any, would result in increased contributions by the Company, over a period of time ranging from 5 to 15 years, depending upon the applicable legislation for funding pension deficits. Losses, if any, would also impact the Company’s results over a longer period of time and immediately increase liabilities and reduce equity.

The Company’s future funding obligations for its defined benefit pension plans depend upon changes to the level of benefits provided by the plans, the future performance of assets set aside in trusts for these plans, the level of interest rates used to determine minimum funding levels, actuarial data and experience, and any changes in government laws and regulations. The Company also has significant liabilities related to unfunded plans which are also subject to the future performance of the assets set aside in trusts for these plans and their underlying actuarial assumptions.

It is also possible that regulators, including Canadian provincial pension regulators, could attempt to compel additional funding of certain of the Company's pension plans, including its Canadian registered pension plans, in respect of plan members associated with sites it formerly operated. On June 12, 2012, one of our subsidiaries 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. A partial wind-up would likely shorten the period in which any deficit, which could reach up to $111 million ($CDN150 million), within those plans, would have to be funded if the Company does not obtain the relief sought. At this time, the Company cannot estimate the additional contributions, if any, that may be required in future years, but they could be material.

The Company may be subject to losses that might not be covered in whole or in part by its insurance coverage.

The Company maintains property, business interruption, credit, general liability, casualty, and other types of insurance, including environmental liability, that the Company believes are in accordance with customary industry practices, but the Company is not fully insured against all potential hazards inherent in its business, including losses resulting from human error, natural disasters, war risks, or terrorist acts. As is typical in the industry, the Company also does not maintain insurance for any loss to its access to standing timber from natural disasters, regulatory changes, or other causes. Changes in insurance market conditions, including the impact of climate change on the insurance industry, have caused, and may in the future cause, ~~our actual~~premiums and deductibles for certain insurance policies to increase substantially and in some instances, for certain insurance to become unavailable or available only for reduced amounts of coverage. If the Company were to incur a significant liability for which it was not fully insured, or at all, the Company might not be able to finance the amount of the uninsured liability on terms acceptable to the Company or at all, and might be obligated to divert a significant portion, or all, of its cash flow from normal business operations.

The Company faces intense competition in its markets, and the failure to compete effectively could have a material adverse effect on its business and results of operations.

The Company competes with U.S., Canadian, European, and Asian producers and, for many of its product lines with global producers, some of which may have greater financial resources and lower production costs than the Company. The principal basis for competition is selling price. Because the markets for the Company’s products are highly competitive, actions by competitors can affect the Company's ability to ~~differ~~compete and the volatility of prices at which its products are sold. For example, favorable market price conditions of wood, pulp or paper products could attract investments from competitors, including the reopening of plants in markets where the Company competes, which in turn could have an impact on the Company's sales, results of operations and cash flows.

The Company’s ability to maintain satisfactory margins depends largely on its ability to control its costs. The Company's industries also are particularly sensitive to other factors including innovation, design, quality and service, with varying emphasis on these factors depending on the product line. The Company cannot provide assurance that it will compete effectively and maintain current levels of sales and profitability which could have a material adverse effect on its business and results of operations.

Conditions in the global geopolitical and economic environment, including the global capital and credit markets, can adversely affect the Company’s business, results of operations and financial position.

A significant or prolonged downturn in the general economic environment may affect the Company’s sales and profitability. The Company has exposure to counterparties with which it routinely executes transactions. Such counterparties include commercial banks, insurance companies and other financial institutions, some of which may be exposed to bankruptcy or liquidity risks. A bankruptcy or

illiquidity event by one of its significant counterparties may materially ~~from those projected~~and adversely affect the Company’s access to capital, future business and results of operations. In addition, the Company’s customers and suppliers may be adversely affected by severe economic conditions. This could result in reduced demand for its products or its inability to obtain necessary supplies at reasonable costs, or at all.

The Company may be negatively impacted by geopolitical issues or crises in individual countries or regions, including sovereign risk related to a default by or deterioration in the credit worthiness of local governments, change in the terms of, or countries that are parties to, bilateral and multi-lateral trade agreements and arrangements, limitation on the ability of potential customers to import products or obtain foreign currency for payment of imported products and political and economic instability, including pandemics, significant civil unrest, acts of war or terrorist activities, or unstable or unpredictable governments in countries in which the Company operates or trades.

The Company has manufacturing operations in the U.S. and Canada. As a result, it is exposed to movements in foreign currency exchange rates in Canada. The Company sells its products mainly in transactions denominated in U.S. dollars, but it also sells in certain local currencies, including the Canadian dollar, the euro, and the pound sterling. Certain assets and liabilities, including a substantial portion of the Company net pension and other postretirement benefit obligations and its deferred income tax assets, are denominated in currencies other than the U.S. dollar and are exposed to foreign currency movements. The Company’s earnings are affected by increases or decreases in the value of the Canadian dollar relative to the U.S. dollar. Additionally, there has been, and may continue to be, volatility in currency exchange rates. The Company’s risk management policy allows hedging a significant portion of its exposure to fluctuations in foreign currency exchange rates for periods up to three years. The Company may use foreign exchange derivative instruments to mitigate its exposure to fluctuations in foreign currency exchange rates. There can be no assurance that the Company will be protected against substantial foreign currency fluctuations. Currency exchange rates could adversely affect the Company’s results of operations and financial position.

A global pandemic (or any ~~forward-looking statement.~~ ~~There~~disease outbreak, including epidemics, pandemics, or similar widespread public health concerns such as the recent COVID-19 pandemic) could have ~~been no~~a material adverse effect on the Company’s business operations, results of operations, cash flows and financial position.

The Company is subject to a number of risks and uncertainties related to pandemics, including the COVID-19 pandemic, its resulting variants, illnesses, and related impacts, the nature, intensity and duration of which are uncertain and difficult to predict.

The COVID-19 pandemic, including related governmental responses and economic impacts, market disruptions and changes ~~from~~in consumer habits, has heightened the risks and uncertainties described in the risk factors, ~~described~~and should be read in ~~our Annual Report~~conjunction therewith. The outbreak of future pandemics is difficult to predict and could have similar or greater impacts.

The Company’s financial results could be affected by changes in U.S. and foreign tax laws or in the mix of its U.S. and foreign earnings, as well as adjustments to its estimates of uncertain tax issues or results from audits by U.S. or foreign tax authorities.

The Company is subject to U.S. and foreign tax laws and regulations. Tax laws, regulations, and administrative practices in various jurisdictions may be subject to significant change, with or without notice, due to economic, political and other conditions, and significant judgment is required in evaluating and estimating its provision and accruals for these taxes. International tax norms governing each country’s jurisdiction to tax cross-border international trade have evolved partly due to the Base Erosion and Profit Shifting project led by the Organization for Economic Cooperation and Development and supported by the G20. Changes in these laws and regulations, or any change in the position of tax authorities regarding their application, administration or interpretation could adversely affect the Company’s financial results. In addition, a number of countries are actively pursuing changes to their tax laws applicable to multinational corporations, such as the U.S. Tax Cuts and Jobs Acts (“U.S. Tax Reform”), enacted in 2017. Finally, foreign governments may enact tax laws in response to the U.S. Tax Reform that could result in further changes to global taxation and materially impact the Company’s financial results.

The Company’s effective tax rates could be affected by changes in the mix of earnings in countries with differing statutory tax rates or changes in the valuation of deferred tax assets and liabilities. The Company is also subject to the examination of its tax returns and other matters by tax authorities and governmental bodies. The Company regularly assesses the likelihood of an adverse outcome resulting from these examinations to determine the adequacy of its provision for taxes. Taxing authorities may disagree with the positions the Company has taken regarding the tax treatment or characterization of its transactions. If any tax authorities were successful in challenging the tax treatment or characterization of any of the Company’s transactions, it could also adversely affect its financial results.

The Company’s intellectual property rights are valuable, and any inability to protect them could reduce the value of its products and its brands.

The Company relies on ~~Form 10-K~~patent, trademark and other intellectual property laws of the U.S. and other countries to protect its intellectual property rights. However, the Company may be unable to prevent third parties from using its intellectual property without its authorization, which may reduce any competitive advantage it has developed. If the Company had to litigate to protect these rights, any proceedings could be costly, and it may not prevail. The Company cannot guarantee that any U.S. or foreign patents, issued or pending, will provide it with any competitive advantage or will not be challenged by third parties. Additionally, the Company has obtained and applied for U.S. and foreign trademark registrations and will continue to evaluate the registration of additional service marks and trademarks, as appropriate. The Company cannot guarantee that any of its pending patent or trademark applications will be approved by the applicable governmental authorities and, even if the applications are approved, third parties may seek to oppose or otherwise challenge these registrations. The failure to secure any pending patent or trademark applications may limit the Company’s ability to protect the intellectual property rights that these applications were intended to cover.

Difficulties in the Company's employees’ relations or difficulties identifying, attracting, and retaining employees for work, could lead to operational disruptions or increase costs.

The success of the Company is substantially dependent, in part, on maintaining good relations with its employees and minimizing employee turnover and on the efforts and abilities of its key personnel, including its executive management team, to develop and implement its business strategies and manage its operations. Work stoppages, excessive employee turnover, or difficulty in attracting and retaining employees, particularly for work in remote locations and certain positions with specialized skill sets, could lead to operational disruptions or increased costs. The failure to retain key personnel or to develop successors with appropriate skills and experience for key positions in the Company could adversely affect the development and achievement of critical organizational strategies, goals and objectives. In addition, as experienced workers retire, the Company could encounter loss of knowledge and specialized skills sets, which could lead to operational disruptions or increased costs. There can be no assurance that the Company will be able to retain or develop the key personnel it needs and the failure to do so may adversely affect its financial condition and results of operations.

The Company's operations could be adversely affected by disruptions to its Information Technology (IT) Services.

The Company’s IT systems, some of which are dependent on services provided by third parties, serve an important role in the efficient operation of its business. The protection of customers, employees and company data is critical to the Company’s business. This role includes ordering and managing materials from suppliers, managing its inventory, converting materials to finished products, facilitating order entry and fulfillment and processing of transactions, summarizing and reporting its financial results, facilitating internal and external communications, administering human resources functions, retaining certain personal information and providing other processes necessary to manage its business. The failure of the Company’s IT systems, including any failure of the Company’s current systems and/or as a result of transitioning to additional or replacement IT systems, as the case may be, to perform as the Company anticipates could disrupt the Company’s business and could result in, among other things, transactions errors, processing inefficiencies, disruption of production and/or deliveries, loss of data and the loss of sales and customers, which could have a material adverse effect on the Company’s business, financial position and results of operations and the effectiveness of its internal control over financial reporting could be negatively impacted. Additionally, the regulatory environment surrounding information security data privacy and data protection is becoming increasingly restrictive and is evolving frequently.

The Company is exposed to the risk of cyber incidents in the normal course of business. Cyber incidents may be deliberate attacks for the ~~year ended December 31, 2016.~~theft of intellectual property or other sensitive information or may be the result of unintentional events. Like most companies, the Company's information technology systems may be vulnerable to interruption due to a variety of events beyond the Company's control, including, but not limited to, natural disasters, terrorist attacks, power and/or telecommunications failures, computer viruses, hackers and other security issues. The Company has technology security initiatives and disaster recovery plans in place to mitigate the Company's risk to these vulnerabilities, including protection of confidential or personal information, but these measures may not be adequate or implemented properly to ensure that the Company's operations are not disrupted. Cybersecurity and privacy related incidents and vulnerabilities may remain undetected for an extended period of time. The Company’s IT systems have been, and will likely continue to be, subject to computer viruses or other malicious codes, unauthorized access attempts, phishing and other cyber-incidents, none of which, to the Company's knowledge, have had a material impact on its business information systems or operations. The Company cannot guarantee that its security efforts will prevent breaches or breakdowns to its IT systems or those of its third-party providers. Potential consequences of a material cyber incident, which could result in confidential or personal information being accessed, obtained, damaged or used by unauthorized or improper persons, include damage to the Company’s reputation, litigation, inefficiencies or production downtimes and increased cyber security protection and remediation costs. Such consequences could have a negative impact on the Company’s ability to meet customers’ orders, resulting in a delay or decrease to its revenue and a reduction to its operating margins. Recent developments in cybersecurity and privacy legislation in different jurisdictions are imposing additional obligations on the Company and could expand its potential liability in the event of a cybersecurity or privacy incident.

As of June 30, 2023, there are no publicly traded common shares of Domtar Corporation.

During the third quarter and the first nine months of 2017, we did not repurchase any shares under our stock repurchase program (the “Program”). We currently have $323 million of remaining availability under our Program. The Program may be suspended, modified or discontinued at any time and we have no obligation to repurchase any amount of our common stock under the Program. The Program has no set expiration date. We repurchase our common stock, from time to time, in part to reduce the dilutive effects of our stock options and awards and to improve shareholders’ returns. The timing and amount of stock repurchases will depend on a variety of factors, including market conditions, availability under the program as well as corporate and regulatory considerations. All shares repurchased are recorded as Treasury stock on the Consolidated Balance Sheets under the par value method at $0.01 per share.

~~Not applicable.~~On August 1, 2023, the Company and its wholly-owned subsidiaries Domtar Inc. and Domtar Paper Company, LLC completed the previously announced sale of the Dryden pulp mill and related assets to Dryden Fibre North America, LLC and Dryden Fibre Canada ULC, subsidiaries of First Quality Enterprises, LLC, for a purchase price of $240 million in cash, subject to customary adjustments. The description of the transaction does not purport to be complete and is qualified in its entirety by reference to the Asset Purchase Agreement by and among the Company, Domtar Inc., Domtar Paper Company, LLC and First Quality Enterprises, LLC (formerly known as First Quality Enterprises, Inc.), dated as of February 26, 2023. The Asset Purchase Agreement was filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on February 28, 2023, the contents of which are incorporated herein by reference.

On August 1, 2023, the Company, through its wholly-owned subsidiary Resolute FP Canada Inc. (“Resolute FP”), completed the previously announced sale of the Thunder Bay pulp and paper mill and related assets to Thunder Bay Pulp and Paper Inc, an affiliate of Atlas Holdings LLC for a purchase price of $219 million in cash, subject to customary adjustments. The description of the transaction does not purport to be complete and is qualified in its entirety by reference to the Asset Purchase Agreement by and among Resolute FP and the Purchaser, dated as of May 26, 2023. The Asset Purchase Agreement is being filed as Exhibit 2.1 to this Quarterly Report on Form 10-Q.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized.


~~DELAWARE~~Delaware		20-5901152
(State ~~or other jurisdiction~~ of ~~incorporation or organization)~~Incorporation)		(I.R.S. Employer Identification No.)
~~234 Kingsley Park Drive~~ ~~Fort Mill, SC~~	~~29715~~
~~(Address of principal executive offices)~~	~~(Zip Code)~~


PART I.I	FINANCIAL INFORMATION	3

ITEM 1.	FINANCIAL STATEMENTS (UNAUDITED)	3

	CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) AND COMPREHENSIVE INCOME	3

	CONSOLIDATED BALANCE SHEETS	4

	CONSOLIDATED ~~STATEMENT~~STATEMENTS OF SHAREHOLDERS’ EQUITY	5

	CONSOLIDATED STATEMENTS OF CASH FLOWS	67

	INDEX FOR NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	78

	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	89

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	3941

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK	4954

ITEM 4.	CONTROLS AND PROCEDURES	5054

PART II	OTHER INFORMATION	5056

ITEM 1.	LEGAL PROCEEDINGS	5056

ITEM 1A.	RISK FACTORS	5156

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	5167

ITEM 3.	DEFAULT UPON SENIOR SECURITIES	5167

ITEM 4.	MINE SAFETY DISCLOSURES	5167

ITEM 5.	OTHER INFORMATION	5167

ITEM 6.	EXHIBITS	5268


NOTE 1	BASIS OF PRESENTATION	89

NOTE 2	RECENT ACCOUNTING PRONOUNCEMENTS	910

NOTE 3	ACQUISITION OF BUSINESSES	11

NOTE 4	DISCONTINUED OPERATIONS	14

NOTE 5	DERIVATIVES AND HEDGING ACTIVITIES AND FAIR VALUE MEASUREMENT	1217

NOTE 46	~~EARNINGS PER COMMON SHARE~~	17

~~NOTE 5~~	PENSION PLANS AND OTHER POST-RETIREMENT BENEFIT PLANS	1821

NOTE 67	~~OTHER OPERATING (INCOME) LOSS, NET~~INCOME TAXES	1923

NOTE 78	~~INCOME TAXES~~INVENTORIES	2024

NOTE 89	~~INVENTORIES~~OTHER ASSETS	2125

NOTE 910	~~GOODWILL~~ASSET CONVERSION COSTS	2226

NOTE 1011	~~INTANGIBLE ASSETS~~LONG-TERM DEBT	2327

NOTE 1112	~~CLOSURE AND RESTRUCTURING COSTS AND LIABILITY AND IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT~~	24
~~NOTE 12~~	CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS BY COMPONENT	2529

NOTE 13	~~SHAREHOLDERS’ EQUITY~~COMMITMENTS AND CONTINGENCIES	2732

NOTE 14	~~COMMITMENTS AND CONTINGENCIES~~SEGMENT DISCLOSURES	2839

NOTE 15	~~SEGMENT DISCLOSURES~~RELATED PARTY TRANSACTIONS	3140

~~NOTE 16~~	~~SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION~~	32

Commodity	Notional contractual quantity under derivative contracts MMBTU⁽²⁾		Notional contractual value under derivative contracts (in millions of dollars)			Percentage of forecasted purchases under derivative contracts
Natural Gas
2017 ⁽¹⁾		2,310,000		$	7		33%
2018		12,695,000		$	38		49%
2019		11,430,000		$	34		44%
2020		8,880,000		$	27		34%
2021		3,920,000		$	12		15%
2022		2,070,000		$	6		8%


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	Three months ended			Three months ended			Nine months ended			Nine months ended
	September 30,			September 30,			September 30,			September 30,
	2017			2016			2017			2016
	(Unaudited)
	$			$			$			$
Sales		1,292			1,270			3,820			3,824
Operating expenses
Cost of sales, excluding depreciation and amortization		1,012			969			3,055			3,032
Depreciation and amortization		80			87			239			263
Selling, general and administrative		118			107			337			314
Impairment of property, plant and equipment (NOTE 11)		—			5			—			29
Closure and restructuring costs (NOTE 11)		—			10			—			33
Other operating (income) loss, net (NOTE 6)		(7	)		—			(6	)		4
		1,203			1,178			3,625			3,675
Operating income		89			92			195			149
Interest expense, net		16			17			50			49
Earnings before income taxes		73			75			145			100
Income tax expense (NOTE 7)		3			16			17			19
Net earnings		70			59			128			81
Per common share (in dollars) (NOTE 4)
Net earnings
Basic		1.12			0.94			2.04			1.29
Diluted		1.11			0.94			2.04			1.29
Weighted average number of common shares outstanding (millions)
Basic		62.7			62.6			62.6			62.6
Diluted		62.9			62.7			62.8			62.7
Cash dividends per common share		0.42			0.42			0.83			1.22

Net earnings		70			59			128			81
Other comprehensive income (NOTE 12):
Net derivative gains (losses) on cash flow hedges:
Net gains (losses) arising during the period, net of tax of $(6) and $(8), respectively (2016 – $4 and $(14), respectively)		9			(6	)		11			23
Less: Reclassification adjustment for (gains) losses included in net earnings, net of tax of $2 and $4, respectively (2016 – $(2) and $(10), respectively)		(2	)		1			(6	)		14
Foreign currency translation adjustments		60			6			142			61
Change in unrecognized gains and prior service cost related to pension and post-retirement benefit plans, net of tax of $(1) and $(3), respectively (2016 – nil and $(2), respectively)		2			2			7			5
Other comprehensive income		69			3			154			103
Comprehensive income		139			62			282			184

	Issued and outstanding common shares (millions of shares)		Common stock, at par		Additional paid-in capital		Retained earnings			Accumulated other comprehensive loss			Total shareholders' equity
	(Unaudited)
			$		$		$			$			$
Balance at December 31, 2016		62.6		1		1,963		1,211			(499	)		2,676
Stock-based compensation, net of tax		0.1		—		6		—			—			6
Net earnings		—		—		—		128			—			128
Net derivative gains on cash flow hedges:
Net gains arising during the period, net of tax of $(8)		—		—		—		—			11			11
Less: Reclassification adjustments for gains included in net earnings, net of tax of $4		—		—		—		—			(6	)		(6	)
Foreign currency translation adjustments		—		—		—		—			142			142
Change in unrecognized gains and prior service cost related to pension and post-retirement benefit plans, net of tax of $(3)		—		—		—		—			7			7
Cash dividends declared		—		—		—		(78	)		—			(78	)
Balance at September 30, 2017		62.7		1		1,969		1,261			(345	)		2,886


	For the three months ended
	June 30, 2023
	Additional paid-in capital			Retained earnings			Accumulated other comprehensive loss			Total shareholders' equity
	(Unaudited)
	$			$			$			$
Balance at March 31, 2023 (1)		2,185			354			(65	)		2,474
Net loss		—			(13	)		—			(13	)
Net derivative gains on cash flow hedges:
Net gains arising during the period, net of tax of $(3)		—			—			9			9
Less: Reclassification adjustment for losses included in net loss, net of tax of $(1)		—			—			3			3
Foreign currency translation adjustments		—			—			25			25
Transaction with Skookumchuck Pulp Inc.'s stockholders (NOTE 3)		(130	)		—			—			(130	)
Deemed dividend		(55	)		—			—			(55	)
Balance at June 30, 2023		2,000			341			(28	)		2,313


	For the three months ended (1)
	June 30, 2022
	Additional paid-in capital		Deficit			Accumulated other comprehensive income			Total shareholders' equity
	(Unaudited)
	$		$			$			$
Balance at March 31, 2022		1,846		(348	)		52			1,550
Net earnings		—		50			—			50
Net derivative losses on cash flow hedges:
Net losses arising during the period, net of tax of $2		—		—			(7	)		(7	)
Less: Reclassification adjustment for gains included in net earnings, net of tax of $2		—		—			(4	)		(4	)
Foreign currency translation adjustments		—		—			(20	)		(20	)
Change in unrecognized gains and prior service cost related to pension and post-retirement benefit plans, net of tax of $(4)		—		—			11			11
Balance at June 30, 2022		1,846		(298	)		32			1,580


	For the six months ended (1)
	June 30, 2022
	Additional paid-in capital		Deficit			Accumulated other comprehensive income			Total shareholders' equity
	(Unaudited)
	$		$			$			$
Balance at December 31, 2021		1,846		(376	)		24			1,494
Net earnings		—		78			—			78
Net derivative gains on cash flow hedges:
Net gains arising during the period, net of tax of $(3)		—		—			10			10
Less: Reclassification adjustment for gains included in net earnings, net of tax of $2		—		—			(6	)		(6	)
Foreign currency translation adjustments		—		—			(7	)		(7	)
Change in unrecognized gains and prior service cost related to pension and post-retirement benefit plans, net of tax of $(4)		—		—			11			11
Balance at June 30, 2022		1,846		(298	)		32			1,580


Fair value of net assets acquired at the date of acquisition - Preliminary values
Receivables	$	309
Inventories		525
Prepaid expenses		30
Other current assets		13
Property, plant and equipment		672
Operating lease right-of-use assets		47
Intangible assets, net (1)		69
Deferred income tax assets		775
Other assets (2)		187
Assets held for sale		265
Total assets		2,892

Less: Assumed Liabilities
Trade and other payables		544
Operating lease liabilities (including short-term portion)		49
Long-term debt (including short-term portion)		312
Pension and other post-retirement benefit obligations		643
Other liabilities		87
Liabilities held for sale		41
Total liabilities		1,676

Fair value of net assets acquired at the date of acquisition		1,216


	For the three months ended		For the six months ended
	June 30,		June 30,		June 30,
	2022		2023		2022
	(Unaudited)		(Unaudited)
	$		$		$

Sales		2,094		3,602		4,052
Net earnings		161		157		280



	At
	June 30,
	2023
	$
Assets
Receivables		84
Inventories		93
Prepaid expenses		2
Long-term assets		351
Total assets of the disposal groups classified as held for sale on the Consolidated Balance Sheets (1)		530

Liabilities
Trade and other payables		59
Operating lease liabilities		5
Other liabilities and deferred credits		8
Total liabilities of the disposal groups classified as held for sale on the Consolidated Balance Sheets (1)		72


Fair Value of financial instruments at:	September 30, 2017		Quoted prices in active markets for identical assets (Level 1)		Significant observable inputs (Level 2)		Significant unobservable inputs (Level 3)			Balance sheet classification	June 30, 2023		Quoted prices in active markets for identical assets (Level 1)		Significant observable inputs (Level 2)		Significant unobservable inputs (Level 3)			Balance sheet classification
	$		$		$		$				$		$		$		$
Derivatives designated as hedging instruments:
Asset derivatives
Currency derivatives		22		—		22		—	(a)	Prepaid expenses		7		—		7		—	(a)	Prepaid expenses
Natural gas swap contracts		2		—		2		—	(a)	Prepaid expenses		1		—		1		—	(a)	Prepaid expenses
Currency derivatives		7		—		7		—	(a)	Other assets		3		—		3		—	(a)	Other assets
Natural gas swap contracts		1		—		1		—	(a)	Other assets
Total Assets		32		—		32		—				11		—		11		—

Liabilities derivatives
Currency derivatives		5		—		5		—	(a)	Trade and other payables		4		—		4		—	(a)	Trade and other payables
Natural gas swap contracts		1		—		1		—	(a)	Trade and other payables		1		—		1		—	(a)	Trade and other payables
Currency derivatives		1		—		1		—	(a)	Other liabilities and deferred credits
Natural gas swap contracts		4		—		4		—	(a)	Other liabilities and deferred credits
Total Liabilities		11		—		11		—				5		—		5		—

Other Instruments:
Stock-based compensation - liability awards		6		6		—		—		Trade and other payables
Stock-based compensation - liability awards		16		16		—		—		Other liabilities and deferred credits
Long-term debt due within one year												67		—		67		—	(b)	Long-term debt due within one year
Long-term debt		1,241		—		1,241		—	(b)	Long-term debt		2,243		—		2,243		—	(c)	Long-term debt


Fair Value of financial instruments at:	December 31, 2022		Quoted prices in active markets for identical assets (Level 1)		Significant observable inputs (Level 2)		Significant unobservable inputs (Level 3)			Balance sheet classification
	$		$		$		$
Derivatives designated as hedging instruments:
Asset derivatives
Currency derivatives		2		—		2		—	(a)	Prepaid expenses
Natural gas swap contracts		4		—		4		—	(a)	Prepaid expenses
Currency derivatives		1		—		1		—	(a)	Other assets
Total Assets		7		—		7		—

Liabilities derivatives
Currency derivatives		16		—		16		—	(a)	Trade and other payables
Natural gas swap contracts		3		—		3		—	(a)	Trade and other payables
Currency derivatives		3		—		3		—	(a)	Other liabilities and deferred credits
Total Liabilities		22		—		22		—

Other Instruments:
Long-term debt due within one year		47		—		47		—	(b)	Long-term debt due within one year
Long-term debt		1,321		—		1,321		—	(c)	Long-term debt

Fair Value of financial instruments at:	December 31, 2016		Quoted prices in active markets for identical assets (Level 1)		Significant observable inputs (Level 2)		Significant unobservable inputs (Level 3)			Balance sheet classification
	$		$		$		$
Derivatives designated as hedging instruments:
Asset derivatives
Currency derivatives		18		—		18		—	(a)	Prepaid expenses
Natural gas swap contracts		6		—		6		—	(a)	Prepaid expenses
Currency derivatives		6		—		6		—	(a)	Other assets
Natural gas swap contracts		2		—		2		—	(a)	Other assets
Total Assets		32		—		32		—

Liabilities derivatives
Currency derivatives		10		—		10		—	(a)	Trade and other payables
Natural gas swap contracts		1		—		1		—	(a)	Trade and other payables
Currency derivatives		6		—		6		—	(a)	Other liabilities and deferred credits
Natural gas swap contracts		4		—		4		—	(a)	Other liabilities and deferred credits
Total Liabilities		21		—		21		—

Other Instruments:
Stock-based compensation - liability awards		2		2		—		—		Trade and other payables
Stock-based compensation - liability awards		17		17		—		—		Other liabilities and deferred credits
Long-term debt		1,313		—		1,313		—	(b)	Long-term debt

		September 30, 2017							December 31, 2016
	Estimated useful lives (in years)	Gross carrying amount		Accumulated amortization			Net		Gross carrying amount		Accumulated amortization			Net
		$		$			$		$		$			$
Definite-lived intangible assets subject to amortization
Water rights	40		3		(1	)		2		3		(1	)		2
Customer relationships	10 – 40		389		(75	)		314		369		(60	)		309
Technology	7 – 20		8		(3	)		5		8		(3	)		5
Non-Compete	9		1		(1	)		—		1		—			1
License rights	12		29		(11	)		18		28		(8	)		20
			430		(91	)		339		409		(72	)		337
Indefinite-lived intangible assets not subject to amortization
Water rights			4		—			4		4		—			4
Trade names			243		—			243		225		—			225
License rights			6		—			6		6		—			6
Catalog rights			40		—			40		36		—			36
Total			723		(91	)		632		680		(72	)		608

	Net derivative (losses) gains on cash flow hedges			Pension items⁽²⁾			Post-retirement benefit items⁽²⁾			Foreign currency items			Total
	$			$			$			$			$
Balance at December 31, 2015		(30	)		(190	)		(10	)		(271	)		(501	)
Natural gas swap contracts		4		N/A			N/A			N/A				4
Net investment hedge		(1	)	N/A			N/A			N/A				(1	)
Currency options		8		N/A			N/A			N/A				8
Foreign exchange forward contracts		16		N/A			N/A			N/A				16
Net gain	N/A				(38	)		(1	)	N/A				(39	)
Foreign currency items	N/A			N/A			N/A				(7	)		(7	)
Other comprehensive income (loss) before reclassifications		27			(38	)		(1	)		(7	)		(19	)
Amounts reclassified from Accumulated other comprehensive loss		14			7			—			—			21
Net current period other comprehensive income (loss)		41			(31	)		(1	)		(7	)		2
Balance at December 31, 2016		11			(221	)		(11	)		(278	)		(499	)
Natural gas swap contracts		(3	)	N/A			N/A			N/A				(3	)
Currency options		13		N/A			N/A			N/A				13
Foreign exchange forward contracts		1		N/A			N/A			N/A				1
Foreign currency items	N/A			N/A			N/A				142			142
Other comprehensive income before reclassifications		11			—			—			142			153
Amounts reclassified from Accumulated other comprehensive loss		(6	)		7			—			—			1
Net current period other comprehensive income		5			7			—			142			154
Balance at September 30, 2017		16			(214	)		(11	)		(136	)		(345	)

	For the three months ended
	September 30, 2017
							Non-
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS				Guarantor			Guarantor			Consolidating
AND COMPREHENSIVE INCOME	Parent			Subsidiaries			Subsidiaries			Adjustments			Consolidated
	$			$			$			$			$
Sales		—			1,059			522			(289	)		1,292
Operating expenses
Cost of sales, excluding depreciation and amortization		—			901			400			(289	)		1,012
Depreciation and amortization		—			58			22			—			80
Selling, general and administrative		4			37			77			—			118
Other operating income, net		—			—			(7	)		—			(7	)
		4			996			492			(289	)		1,203
Operating (loss) income		(4	)		63			30			—			89
Interest expense (income), net		15			21			(20	)		—			16
(Loss) earnings before income taxes		(19	)		42			50			—			73
Income tax (benefit) expense		(4	)		(4	)		11			—			3
Share in earnings of equity accounted investees		85			39			—			(124	)		—
Net earnings		70			85			39			(124	)		70
Other comprehensive income		69			69			61			(130	)		69
Comprehensive income		139			154			100			(254	)		139

	For the nine months ended
	September 30, 2017
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
	$			$			$			$			$
Operating activities
Net earnings		128			171			102			(273	)		128
Changes in operating and intercompany assets and liabilities and non-cash items, included in net earnings		43			(176	)		56			273			196
Cash flows provided from (used for) operating activities		171			(5	)		158			—			324
Investing activities
Additions to property, plant and equipment		—			(61	)		(50	)		—			(111	)
Proceeds from disposals of property, plant and equipment		—			—			8			—			8
Cash flows used for investing activities		—			(61	)		(42	)		—			(103	)
Financing activities
Dividend payments		(78	)		—			—			—			(78	)
Net change in bank indebtedness		—			(12	)		—			—			(12	)
Change in revolving credit facility		(50	)		—			—			—			(50	)
Proceeds from receivables securitization facility		—			—			25			—			25
Repayments of receivables securitization facility		—			—			(35	)		—			(35	)
Repayments of long-term debt		(63	)		—			—			��			(63	)
Increase in long-term advances to related parties		—			—			(79	)		79			—
Decrease in long-term advances to related parties		12			67			—			(79	)		—
Other		1			—			—			—			1
Cash flows (used for) provided from financing activities		(178	)		55			(89	)		—			(212	)
Net (decrease) increase in cash and cash equivalents		(7	)		(11	)		27			—			9
Impact of foreign exchange on cash		—			—			9			—			9
Cash and cash equivalents at beginning of period		17			14			94			—			125
Cash and cash equivalents at end of period		10			3			130			—			143

	Three months ended										Nine months ended
					Variance										Variance
FINANCIAL HIGHLIGHTS	September 30, 2017		September 30, 2016		$			%			September 30, 2017		September 30, 2016		$			%
(In millions of dollars, unless otherwise noted)
Sales	$	1,292	$	1,270	$	22			2	%	$	3,820	$	3,824	$	(4	)		-	%
Operating income		89		92		(3	)		(3	%)		195		149		46			31	%
Net earnings		70		59		11			19	%		128		81		47			58	%
Net earnings per common share (in dollars)¹:
Basic	$	1.12	$	0.94	$	0.18			19	%	$	2.04	$	1.29	$	0.75			58	%
Diluted	$	1.11	$	0.94	$	0.17			18	%	$	2.04	$	1.29	$	0.75			58	%

															At September 30, 2017			At December 31, 2016
Total assets															$	5,784		$	5,680
Total long-term debt, including current portion															$	1,165		$	1,281

ANALYSIS OF NET SALES
By Business Segment	Three months ended											Nine months ended
							Variance											Variance
	September 30, 2017			September 30, 2016			$			%		September 30, 2017			September 30, 2016			$			%
Pulp and Paper	$	1,054		$	1,054			-			-%	$	3,126		$	3,193			(67	)		-2%
Personal Care		253			231			22			10%		743			675			68			10%
Total for reportable segments		1,307			1,285			22			2%		3,869			3,868			1			-%
Intersegment sales		(15	)		(15	)		-					(49	)		(44	)		(5	)
Consolidated		1,292			1,270			22			2%		3,820			3,824			(4	)		-%

Shipments
Paper - manufactured (in thousands of ST)		722			744			(22	)		-3%		2,165			2,282			(117	)		-5%
Communication papers		597			620			(23	)		-4%		1,801			1,904			(103	)		-5%
Specialty and Packaging papers		125			124			1			1%		364			378			(14	)		-4%
Paper - sourced from third parties (in thousands of ST)		29			35			(6	)		-17%		84			96			(12	)		-13%
Paper - total (in thousands of ST)		751			779			(28	)		-4%		2,249			2,378			(129	)		-5%
Pulp (in thousands of ADMT)		424			369			55			15%		1,260			1,098			162			15%

ANALYSIS OF CHANGES IN SALES
	Third quarter of 2017 versus Third quarter of 2016													First nine months of 2017 versus First nine months of 2016
	% Change in Net Sales due to													% Change in Sales due to
	Net Price			Volume / Mix				Currency			Total			Net Price			Volume / Mix				Currency			Total
Pulp and Paper		-	%		-	%			-	%		-	%		-1	%		-1	%			-	%		-2	%
Personal Care		-1	%		9	%	^(a)		2	%		10	%		-2	%		13	%	^(a)		-1	%		10	%
Consolidated sales		-	%		2	%			-	%		2	%		-1	%		1	%			-	%		-	%

ANALYSIS OF OPERATING INCOME (LOSS)
	Three months ended												Nine months ended
By Business Segment							Variance												Variance
	September 30, 2017			September 30, 2016			$			%			September 30, 2017			September 30, 2016			$			%
Operating income (loss)
Pulp and Paper		93			89			4			4	%		192			143			49			34	%
Personal Care		8			15			(7	)		-47	%		37			44			(7	)		-16	%
Corporate		(12	)		(12	)		-			-	%		(34	)		(38	)		4			11	%
Consolidated operating income (loss)		89			92			(3	)		-3	%		195			149			46			31	%

Third quarter of 2017 versus Third quarter of 2016

	$ Change in Segmented Operating Income (Loss) due to
	Volume/Mix			Net Price			Input Costs ^(b)			Operating Expenses^(c)			Currency			Depreciation/ Impairment ^(d)		Restructuring ^(e)		Other Income/ Expense ^(f)		Total
Pulp and Paper		2			(4	)		3			(25	)		(1	)		14		10		5		4
Personal Care		—	^(a)		(3	)		(2	)		(1	)		(1	)		—		—		—		(7	)
Corporate		—			—			—			(2	)		—			—		—		2		—
Consolidated operating income (loss)		2			(7	)		1			(28	)		(2	)		14		10		7		(3	)


SENSITIVITY ANALYSIS
(In millions of dollars, unless otherwise noted)
Each $10/unit change in the selling price of the following products1:
Papers			40
Pulp - net position			22
Wood			20
Tissue			1

Foreign exchange
(US $0.01 change in relative value to the Canadian dollar before hedging)			33
Energy 2
Natural gas: $0.25/MMBtu change in price before hedging			9


Exhibit Number	Exhibit Description	~~Incorporated by reference to:~~Form	Exhibit	Filing Date
~~Exhibit~~ ~~Number~~2.1	~~Exhibit Description~~Asset Purchase Agreement, dated May 26, 2023, between Thunder Bay Pulp and Paper Inc., and Resolute FP Canada Inc.	~~Form~~	~~Exhibit~~	~~Filing Date~~

~~12.1~~2.2	~~Computation of Ratio of Earnings~~Supplement to ~~Fixed Charges~~the Asset Purchase Agreement, dated July 31, 2023, between Thunder Bay Pulp and Paper Inc., and Resolute FP Canada Inc.
~~31.1~~
31.1	Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2	Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

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

32.2	Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002~~2002
~~101.INS~~	~~XBRL Instance Document~~
101.INS	XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
~~101.SCH~~
101.SCH	Inline XBRL Taxonomy Extension Schema

101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase

101.LAB	Inline XBRL Taxonomy Extension Label Linkbase


101.PRE
~~101.PRE~~		Inline XBRL Extension Presentation Linkbase

104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)


DOMTAR CORPORATION

Date: ~~November~~August 3, ~~2017~~2023

By:	/s/ ~~Daniel Buron~~Joseph Ragan
	~~Daniel Buron~~Joseph Ragan
	~~Senior Vice-President and~~ Chief Financial Officer

~~By:~~	~~/s/ Razvan L. Theodoru~~
	~~Razvan L. Theodoru~~
	~~Vice-President, Corporate Law~~ (Principal Accounting Officer and ~~Secretary~~Duly Authorized Officer)

Large accelerated filer

Accelerated filer

Non-accelerated filer

☐ ~~(Do not check if a small reporting company)~~☒

Small reporting company

Emerging growth company