First quarter 2006 special items, net of tax, consisted of a $17.9 million gain related to asset sales, a $13.5 million charge related to tax adjustments, and other net charges of $4.1 million. Before these special items, the net loss for the first quarter of 2006 was $19.1 million, or $0.33 per diluted share, compared with the 2005 first quarter net loss before special items of $12.6 million, or $0.22 per diluted share. "A stronger Canadian dollar, seasonally weak coated pricing, and higher labor related expenses affected first quarter results," said Arnold M. Nemirow, Chairman, President and Chief Executive Officer. "We look forward to both steadily improving markets and a better cost structure throughout the year. Also, our timberland sale program is ahead of schedule and is expected to significantly exceed our target of $300 million."




Price for coated papers decreased
The company's average transaction price for coated papers decreased $25 per short ton in the first quarter compared with the fourth quarter of 2005 due to seasonally slow markets and product mix shifts. The company's average operating cost increased $36 per short ton. In the first quarter, a scheduled pulp maintenance outage at the Catawba, SC facility increased the production costs of coated paper by approximately $4 million. Compared to the fourth quarter, the cost per ton of specialty papers increased by 5%. The conversion of one of the newsprint machines at Calhoun, TN to a lightly coated product is expected to be completed during the second quarter. The company expects the 18 day outage and startup to reduce operating income by approximately $5 million.

Price for newsprint increased
The company's average transaction price for newsprint increased $18 per metric ton in the first quarter. During the quarter, the company's average operating costs increased by $21 per metric ton primarily due to a stronger Canadian dollar and higher labor related costs. The company's average transaction price for market pulp increased $6 per metric ton compared to the fourth quarter of 2005. Average operating costs decreased $26 per metric ton compared to the fourth quarter due to lower repair costs and increased production. As previously announced, the company will permanently close its high cost Thunder Bay pulp line 'A' in the second quarter. Earnings are expected to improve by $20 million annually, beginning in 2007, due to this closure. The company's average transaction price for lumber increased $12 per thousand board feet and shipments increased 7% compared to the fourth quarter of 2005. During the quarter, the company paid countervailing and antidumping duties of approximately $4 million, bringing the total paid to-date to approximately $105 million.

About Bowater
Bowater Incorporated, headquartered in Greenville, SC, is a leading producer of newsprint, coated mechanical and specialty papers. In addition, the company makes bleached kraft pulp and lumber products. The company has 12 pulp and paper mills in the United States, Canada and South Korea and 10 North American sawmills that produce softwood lumber. Bowater also operates two facilities that convert a base sheet to coated products. Bowater's operations are supported by approximately 1.1 million acres of timberlands owned or leased in the United States and Canada and 28 million acres of timber cutting rights in Canada. Bowater is one of the world's largest consumers of recycled newspapers and magazines. Bowater common stock is listed on the New York Stock Exchange and the Pacific Exchange.


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