##### 



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR
THE QUARTERLY PERIOD ENDED March 31, 2007.
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 FOR THE TRANSITION PERIOD FROM            TO
 COMMISSION FILE NUMBER: 1-1872
 BOWATER INCORPORATED
  Delaware
    
    62-0721803(State of Incorporation)
    
    (I.R.S. Employer Identification No.)
  
   
  þ o
 
 þ o o
 o þ
  Class
    
    OutstandingCommon Stock, $1.00 Par Value
    
    56,217,139 Shares




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##### 



BOWATER INCORPORATED
TABLE OF CONTENTS
 Page NumberPART I            FINANCIAL INFORMATIONItem 1. Financial Statements:Consolidated
Statements of Operations for the Three Months Ended March 31, 2007 and 2006
    
    
    3Consolidated Balance Sheets at March 31, 2007 and December 31, 2006
    
    
    4Consolidated Statements of Stockholders Equity for the Three Months Ended March 31,
2007 and 2006
    
    
    5Consolidated
Statements of Cash Flows for the Three Months Ended March 31, 2007 and 2006
    
    
    6Notes to Consolidated Financial Statements
    
    
    7 - 17Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    18 - 32Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    32 - 33Item 4. Controls and Procedures
    
    
    33PART II            OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    34Item 1A. Risk Factors
    
    
    34 - 39Item 5.
Other Information
    
    
    39Item 6. Exhibits
    
    
    39SIGNATURES
    
    
    40




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##### 



BOWATER INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in millions of US dollars except per-share amounts)
 Three Months EndedMarch 31,2007
    
    2006Sales
    
    $
    771.6
    
    
    $
    893.2Costs and expenses:Cost of sales, excluding depreciation, amortization
and cost of timber harvested
    
    
    600.5
    
    
    
    680.2Depreciation, amortization and cost of timber harvested
    
    
    79.9
    
    
    
    81.1Distribution costs
    
    
    75.3
    
    
    
    82.9Selling and administrative expense
    
    
    48.7
    
    
    
    38.0Net gain on disposition of assets
    
    
    (57.9
    )
    
    
    (28.8
    )Operating income
    
    
    25.1
    
    
    
    39.8Interest expense
    
    
    (47.3
    )
    
    
    (49.4
    )Other (expense) income, net
    
    
    (4.4
    )
    
    
    6.5Loss before income taxes, minority interests and
cumulative effect of accounting
change
    
    
    (26.6
    )
    
    
    (3.1
    )Income tax provision
    
    
    (1.7
    )
    
    
    (13.1
    )Minority interests, net of tax
    
    
    (7.1
    )
    
    
    Loss before cumulative effect of accounting change
    
    
    (35.4
    )
    
    
    (16.2
    )Cumulative effect of accounting change, net of tax
    
    
    
    
    
    
    (2.6
    )Net loss
    
    $
    (35.4
    )
    
    $
    (18.8
    )Loss per share:Basic loss per common share:Loss before cumulative effect of accounting change
    
    $
    (0.62
    )
    
    $
    (0.28
    )Cumulative effect of accounting change, net of tax
    
    
    
    
    
    
    (0.05
    )Net loss
    
    $
    (0.62
    )
    
    $
    (0.33
    )Diluted loss per common share:Loss before cumulative effect of accounting change
    
    $
    (0.62
    )
    
    $
    (0.28
    )Cumulative effect of accounting change, net of tax
    
    
    
    
    
    
    (0.05
    )Net loss
    
    $
    (0.62
    )
    
    $
    (0.33
    )Average number of shares outstanding (in millions):Basic and diluted
    
    
    57.4
    
    
    
    57.4Dividends declared per common share
    
    $
    0.20
    
    
    $
    0.20
  3




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##### 



BOWATER INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Unaudited, in millions of US dollars except share and per-share amounts)
 March 31,
    
    December 31,2007
    
    2006AssetsCurrent assets:Cash and cash equivalents
    
    $
    98.3
    
    
    $
    98.9Accounts receivable, net
    
    
    414.5
    
    
    
    444.5Inventories
    
    
    376.9
    
    
    
    349.8Timberlands held for sale
    
    
    15.6
    
    
    
    18.7Other current assets
    
    
    54.8
    
    
    
    47.1Total current assets
    
    
    960.1
    
    
    
    959.0Timber and timberlands
    
    
    57.2
    
    
    
    60.8Fixed assets, net
    
    
    2,827.1
    
    
    
    2,877.9Goodwill
    
    
    590.7
    
    
    
    590.2Other assets
    
    
    153.8
    
    
    
    158.0Total assets
    
    $
    4,588.9
    
    
    $
    4,645.9Liabilities and shareholders equityCurrent liabilities:Current installments of long-term debt
    
    $
    15.8
    
    
    $
    14.9Accounts payable and accrued liabilities
    
    
    428.5
    
    
    
    431.2Total current liabilities
    
    
    444.3
    
    
    
    446.1Long-term debt, net of current installments
    
    
    2,246.0
    
    
    
    2,251.6Pension and other postretirement benefit
obligations
    
    
    634.0
    
    
    
    651.1Other long-term liabilities
    
    
    90.5
    
    
    
    92.5Deferred income taxes
    
    
    308.4
    
    
    
    313.0Minority interests in subsidiaries
    
    
    69.7
    
    
    
    59.0Commitments and contingenciesShareholders equity:Common stock, $1 par value. Authorized
100,000,000 shares; issued
67,812,567 and 67,585,104 shares at March 31, 2007 and December 31,
2006, respectively
    
    
    67.8
    
    
    
    67.6Exchangeable shares, no par value. Unlimited shares
authorized; 1,202,154
and 1,423,830 outstanding at March 31, 2007 and December 31, 2006,
respectively
    
    
    56.8
    
    
    
    67.6Additional paid-in capital
    
    
    1,645.0
    
    
    
    1,630.1Retained deficit
    
    
    (120.7
    )
    
    
    (76.0
    )Accumulated other comprehensive loss
    
    
    (367.2
    )
    
    
    (371.0
    )Treasury stock at cost, 11,598,820 and 11,600,717 shares at March 31,
2007 and December 31, 2006, respectively
    
    
    (485.7
    )
    
    
    (485.7
    )Total shareholders equity
    
    
    796.0
    
    
    
    832.6Total liabilities and
shareholders equity
    
    $
    4,588.9
    
    
    $
    4,645.9
  4




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##### 



BOWATER INCORPORATED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(Unaudited, in millions of US dollars except share and per-share amounts)
 For the three months ended March 31, 2007
 AccumulatedAdditional
    
    
    
    
    
    Other
    
    
    
    
    
    TotalCommon
    
    Exchangeable
    
    Paid In
    
    Retained
    
    Comprehensive
    
    Treasury
    
    ShareholdersStock
    
    Shares
    
    Capital
    
    Deficit
    
    Loss
    
    Stock
    
    EquityBalance at December 31, 2006
    
    $
    67.6
    
    
    $
    67.6
    
    
    $
    1,630.1
    
    
    $
    (76.0
    )
    
    $
    (371.0
    )
    
    $
    (485.7
    )
    
    $
    832.6Cumulative adjustment to retained deficit for
adoption of
FIN 48
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.3
    
    
    
    
    
    
    
    
    
    
    
    2.3Dividends on common stock ($0.20 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11.6
    )
    
    
    
    
    
    
    
    
    
    
    (11.6
    )Retraction of exchangeable shares (221,676
shares issued
and exchangeable shares retracted)
    
    
    0.2
    
    
    
    (10.8
    )
    
    
    10.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Share-based compensation costs for equity
awards
    
    
    
    
    
    
    
    
    
    
    4.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4.6Restricted stock units vested (5,787 shares,
net of shares
forfeited for employee withholding taxes)
    
    
    
    
    
    
    
    
    
    
    (0.3
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.3
    )Treasury stock used for dividend reinvestment
plans and
to pay employee and director benefits
(1,897 shares)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (35.4
    )
    
    
    
    
    
    
    
    
    
    
    (35.4
    )Change in unrealized prior service costs,
net of tax of
$0.9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.8
    )
    
    
    
    
    
    
    (0.8
    )Change in actuarial gains and losses, net
of tax of $2.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7.9
    
    
    
    
    
    
    
    7.9Foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4.2
    )
    
    
    
    
    
    
    (4.2
    )Change in unrealized gain on hedged
transactions, net
of tax of $0.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    0.9Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (31.6
    )Balance at March 31, 2007
    
    $
    67.8
    
    
    $
    56.8
    
    
    $
    1,645.0
    
    
    $
    (120.7
    )
    
    $
    (367.2
    )
    
    $
    (485.7
    )
    
    $
    796.0
  AccumulatedAdditional
    
    
    
    
    
    Other
    
    
    
    
    
    TotalCommon
    
    Exchangeable
    
    Paid In
    
    Retained
    
    Comprehensive
    
    Treasury
    
    ShareholdersStock
    
    Shares
    
    Capital
    
    Earnings
    
    Loss
    
    Stock
    
    EquityBalance at December 31, 2005
    
    $
    67.5
    
    
    $
    68.1
    
    
    $
    1,621.6
    
    
    $
    100.1
    
    
    $
    (156.0
    )
    
    $
    (485.8
    )
    
    $
    1,215.5Cumulative adjustment to retained earnings for adoption
of SAB 108
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8.6
    
    
    
    
    
    
    
    
    
    
    
    8.6Dividends on common stock ($0.20 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11.5
    )
    
    
    
    
    
    
    
    
    
    
    (11.5
    )Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18.8
    )
    
    
    
    
    
    
    
    
    
    
    (18.8
    )Minimum pension liability, net of tax of
$0.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.1
    )
    
    
    
    
    
    
    (0.1
    )Change in unrealized gain on hedged transactions, net
of tax of $6.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10.4
    )
    
    
    
    
    
    
    (10.4
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29.3
    )Balance at March 31, 2006
    
    $
    67.5
    
    
    $
    68.1
    
    
    $
    1,621.6
    
    
    $
    78.4
    
    
    $
    (166.5
    )
    
    $
    (485.8
    )
    
    $
    1,183.3
  5




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##### 



BOWATER INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in millions of US dollars)
 Three Months EndedMarch 31,
    
    March 31,2007
    
    2006Cash flows from operating activities:Net loss
    
    $
    (35.4
    )
    
    $
    (18.8
    )Adjustments
to reconcile net loss to net cash (used for) provided by operating activities:Cumulative effect of accounting change, net of tax
    
    
    
    
    
    
    2.6Share-based compensation
    
    
    4.6
    
    
    
    (0.9
    )Depreciation, amortization and cost of timber harvested
    
    
    79.9
    
    
    
    81.1Deferred income taxes
    
    
    (3.4
    )
    
    
    4.6Minority interests, net of tax
    
    
    7.1
    
    
    
    Net pension (contributions) benefit costs
    
    
    (10.5
    )
    
    
    4.8Net gain on disposition of assets
    
    
    (57.9
    )
    
    
    (28.8
    )Changes in working capital:Accounts receivable, net
    
    
    29.9
    
    
    
    (26.0
    )Inventories
    
    
    (27.1
    )
    
    
    (11.6
    )Income taxes receivable and payable
    
    
    4.7
    
    
    
    7.3Accounts payable and accrued liabilities
    
    
    (12.1
    )
    
    
    6.9Other, net
    
    
    4.5
    
    
    
    0.8Net cash
(used for) provided by operating activities
    
    
    (15.7
    )
    
    
    22.0Cash flows from investing activities:Cash invested in fixed assets, timber and timberlands
    
    
    (25.9
    )
    
    
    (37.5
    )Dispositions of assets, including timber and timberlands
    
    
    64.6
    
    
    
    36.8Direct acquisition costs related to the proposed merger with Abitibi-Consolidated Inc.
    
    
    (9.2
    )
    
    
    Net cash provided by (used for) investing activities
    
    
    29.5
    
    
    
    (0.7
    )Cash flows from financing activities:Cash dividends
    
    
    (11.3
    )
    
    
    (11.5
    )Short-term financing
    
    
    8.0
    
    
    
    201.7Short-term financing repayments
    
    
    (8.0
    )
    
    
    (209.0
    )Payments of long-term debt
    
    
    (3.1
    )
    
    
    (10.0
    )Net cash used for financing activities
    
    
    (14.4
    )
    
    
    (28.8
    )Net decrease in cash and cash equivalents
    
    
    (0.6
    )
    
    
    (7.5
    )Cash and cash equivalents:Beginning of year
    
    
    98.9
    
    
    
    30.1End of year
    
    $
    98.3
    
    
    $
    22.6Supplemental disclosures of cash flow information:Cash paid during the period for:Interest, including capitalized interest of $0 and $1.3
    
    $
    24.4
    
    
    $
    26.0Income taxes
    
    $
    
    
    
    $
    1.6
  6




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##### 



BOWATER INCORPORATED
Notes to Consolidated Financial Statements  Unaudited
 1. Summary of Significant Accounting Policies
     2. Inventories
 March 31,
    
    December 31,(Unaudited, in millions)
    
    2007
    
    2006At lower of cost or market:Raw materials
    
    $
    82.0
    
    
    $
    87.7Work in process
    
    
    21.7
    
    
    
    20.1Finished goods
    
    
    153.1
    
    
    
    123.0Mill stores and other supplies
    
    
    133.5
    
    
    
    132.0390.3
    
    
    
    362.8Excess of current cost over LIFO inventory value
    
    
    (13.4
    )
    
    
    (13.0
    )$
    376.9
    
    
    $
    349.8
 7




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##### 



BOWATER INCORPORATED
Notes to Consolidated Financial Statements  Unaudited
 3. Other (Expense) Income, Net
  Three Months EndedMarch 31,(Unaudited, in millions)
    
    2007
    
    2006Foreign exchange (loss) gain
    
    $
    (3.1
    )
    
    $
    1.8(Losses) earnings from equity method investments
    
    
    (1.8
    )
    
    
    2.3Interest income
    
    
    1.9
    
    
    
    1.1Miscellaneous (loss) income
    
    
    (1.4
    )
    
    
    1.3$
    (4.4
    )
    
    $
    6.5
 4. Timberlands Held for Sale
   5. Accumulated Other Comprehensive Loss
  March 31,
    
    December 31,(Unaudited, in millions)
    
    2007
    
    2006Unrealized prior service costs (1)
    
    $
    (24.0
    )
    
    $
    (23.2
    )Unrealized actuarial gains and losses (2)
    
    
    (351.0
    )
    
    
    (358.9
    )Unrealized transition obligation (3)
    
    
    (0.1
    )
    
    
    (0.1
    )Foreign currency translation (4)
    
    
    7.8
    
    
    
    12.0Unrealized gain on hedging transactions (5)
    
    
    0.1
    
    
    
    (0.8
    )$
    (367.2
    )
    
    $
    (371.0
    )
 (1)
    
    Net of deferred tax benefit of $2.4 million and $1.5 million, respectively. Net of minority interest of $2.3 million and $2.4 million, respectively.(2)
    
    Net of deferred tax benefit of $107.3 million and $109.6 million, respectively. Net of minority interest of $5.0 million and $5.2 million, respectively.(3)
    
    Net of deferred tax benefit of $0.1 million and $0.1 million, respectively.(4)
    
    No tax effect is recorded for foreign currency translation
since the foreign net assets translated are deemed indefinitely invested.(5)
    
    Net of deferred taxes of $0.1 million and a deferred tax benefit of $0.5 million, respectively.
 8




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##### 



BOWATER INCORPORATED
Notes to Consolidated Financial Statements  Unaudited
 6. Loss Per Share
  Three Months EndedMarch 31,(Unaudited, in millions)
    
    2007
    
    2006Basic weighted-average number of common shares outstanding
    
    
    57.4
    
    
    
    57.4Effect of potentially dilutive securities:Stock options
    
    
    
    
    
    
    Restricted stock units
    
    
    
    
    
    
    Diluted weighted-average number of common shares outstanding
    
    
    57.4
    
    
    
    57.4
  7. Pension and Other Postretirement Expense
  Pension Plans
    
    Other Postretirement PlansThree Months Ended
    
    Three Months EndedMarch 31,
    
    March 31,(Unaudited, in millions)
    
    2007
    
    2006
    
    2007
    
    2006Components of net periodic benefit cost:Service cost
    
    $
    9.1
    
    
    $
    10.9
    
    
    $
    0.5
    
    
    $
    1.0Interest cost
    
    
    30.3
    
    
    
    29.2
    
    
    
    3.1
    
    
    
    4.0Expected return on plan assets
    
    
    (32.1
    )
    
    
    (29.6
    )
    
    
    
    
    
    
    Amortization of prior service cost (credit)
    
    
    1.1
    
    
    
    1.4
    
    
    
    (2.8
    )
    
    
    (1.5
    )Recognized net actuarial loss
    
    
    6.8
    
    
    
    8.9
    
    
    
    1.6
    
    
    
    2.0Curtailments and settlements
    
    
    4.5
    
    
    
    4.6
    
    
    
    (3.2
    )
    
    
    (0.2
    )Net periodic benefit cost (credit)
    
    $
    19.7
    
    
    $
    25.4
    
    
    $
    (0.8
    )
    
    $
    5.3
    9




---



##### 



BOWATER INCORPORATED
Notes to Consolidated Financial Statements  Unaudited
    8. Income Taxes
  Three Months EndedMarch 31,(Unaudited, in millions)
    
    2007
    
    2006Loss before income taxes, minority interest and cumulative effect
of accounting change
    
    $
    (26.6
    )
    
    $
    (3.1
    )Expected income tax benefit
    
    
    9.3
    
    
    
    1.1Increase (decrease) in income taxes resulting from:Valuation allowance (1)
    
    
    (13.0
    )
    
    
    (13.5
    )Foreign exchange
    
    
    (0.8
    )
    
    
    (3.0
    )State income taxes, net of federal income tax benefit
    
    
    (0.1
    )
    
    
    (0.8
    )Foreign taxes
    
    
    0.5
    
    
    
    1.0Other, net
    
    
    2.4
    
    
    
    2.1Income tax provision
    
    $
    (1.7
    )
    
    $
    (13.1
    )
 (1)
    
    During the first quarter of 2007 and 2006, income tax benefits of approximately $13.0
million and $13.5 million generated on our current quarter Canadian operating losses were entirely
offset by tax charges to increase our valuation allowance related to these tax benefits.
  10




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##### 



BOWATER INCORPORATED
Notes to Consolidated Financial Statements  Unaudited
 9. Financial Instruments
   Canadian Dollar Forward Contracts
  British Pound Sterling Forward Contracts
  Natural Gas Swap Agreements
  11




---



##### 



BOWATER INCORPORATED
Notes to Consolidated Financial Statements  Unaudited
  Range OfU.S.$/CDN$and U.S.$/GBP$Notional
    
    Asset /(Liability)
    
    Exchange Rates(Unaudited, in millions of U.S. dollars
    
    Amount of
    
    
    
    
    
    and Natural Gasexcept rates and prices)
    
    Derivatives
    
    Fair Market Value
    
    Index PricesAs of March 31, 2007:Foreign Currency Exchange Agreements:Canadian dollarDue in 2007
    
    $
    8.0
    
    
    $
    0.2
    
    
    $
    .8444  .8444British pound sterlingDue in 2007
    
    $
    38.9
    
    
    $
    0.1
    
    
    $
    1.9553  1.9732Natural Gas Swap Agreements:Due in 2007
    
    $
    7.7
    
    
    $
    0.8
    
    
    $
    5.78  8.72Due in 2008
    
    $
    0.1
    
    
    $
    
    
    
    $
    8.45  9.00As of December 31, 2006:Foreign Currency Exchange Agreements:Canadian dollarDue in 2007
    
    $
    76.0
    
    
    $
    (0.4
    )
    
    $
    .8592  .8801Natural Gas Swap Agreements:Due in 2007
    
    $
    9.0
    
    
    $
    (1.1
    )
    
    $
    5.87  8.98
   Three Months EndedMarch 31,(Unaudited, in millions)
    
    2007
    
    2006Gains (losses) reclassified on matured cash flow hedges
    
    $
    1.3
    
    
    $
    (17.6
    )Unrealized gains for change in value on outstanding cash flow hedges
    
    
    0.2
    
    
    
    0.81.5
    
    
    
    (16.8
    )Income tax (provision) benefit
    
    
    (0.6
    )
    
    
    6.4Net decrease (increase) in Accumulated other comprehensive loss
    
    $
    0.9
    
    
    $
    (10.4
    )
  12




---



##### 



BOWATER INCORPORATED
Notes to Consolidated Financial Statements  Unaudited
 10.
    
    Commitments and ContingenciesBowater is involved in various legal proceedings relating to contracts, commercial
disputes, taxes, environmental issues, employment and workers compensation claims and
other matters. We periodically review the status of these proceedings with both inside and
outside counsel. We believe that the ultimate disposition of these matters will not have a
material adverse effect on our financial condition, but it could have a material adverse
effect on the results of operations in a given quarter or the year.On September 30, 2005, the Ministry of Justice of the Province of Quebec (MOJ) cited one of our
subsidiaries, Bowater Canadian Forest Products, Inc. (BCFPI), in connection with effluent water
quality of the Dolbeau mill. BCFPI settled this citation on March 29, 2007, by agreeing to pay a
fine and costs totaling CDN $158,000. The Dolbeau mill has taken steps to improve its effluent
quality and has experienced only two other exceedences since January 1, 2005.There have been no other material developments to the legal proceedings described in our Annual
Report on Form 10-K filed on March 1, 2007.
 11.
    
    Share Based CompensationWe maintain incentive stock plans that provide for grants of stock options, equity
participation rights (EPRs) and restricted stock units to our directors, officers and
key employees. These plans are described more fully in our 2006 Annual Report on Form
10-K.Effective January 1, 2006, we adopted the fair value recognition provisions of SFAS No. 123R,
Share-based Payments and related interpretations (SFAS 123R). The adoption of SFAS 123R
resulted in a charge for the cumulative effect of accounting change of $2.6 million, net of tax, (or
$0.05 per share) that we recorded in the first quarter of 2006.The following table details the share-based compensation expense (excluding the cumulative effect
of accounting change) recorded in the Consolidated Statements of Operations by award:
 Three Months EndedMarch 31,(Unaudited, in millions)
    
    2007
    
    2006Stock Options
    
    $
    0.3
    
    
    $
    Restricted Stock Units
    
    
    4.2
    
    
    
    EPRs
    
    
    0.1
    
    
    
    (0.9
    )Share-based compensation expense (income)
    
    $
    4.6
    
    
    $
    (0.9
    )
  Three Months EndedMarch 31,(Unaudited, in millions)
    
    2007
    
    2006Stock Options
    
    $
    (0.2
    )
    
    $
    Restricted Stock Units
    
    
    (1.1
    )
    
    
    EPRs
    
    
    
    
    
    
    0.3Tax (benefit) provision
    
    $
    (1.3
    )
    
    $
    0.3
 13




---



##### 



BOWATER INCORPORATED
Notes to Consolidated Financial Statements  Unaudited
 Stock Options
   WeightedAverage
    
    
    
    
    
    AggregateNumber Of
    
    Weighted
    
    Remaining
    
    
    
    
    
    IntrinsicOptions
    
    Average
    
    Contractual
    
    
    
    
    
    Value(Unaudited)
    
    (000s)
    
    Exercise Price
    
    Life (years)
    
    
    
    
    
    ($000)Outstanding at December 31, 2006
    
    
    4,982
    
    
    $
    43.45Granted during the period
    
    
    72
    
    
    
    27.87Exercised during the period
    
    
    
    
    
    
    Canceled during the period
    
    
    (212
    )
    
    
    41.88Outstanding at March 31, 2007
    
    
    4,842
    
    
    $
    43.28
    
    
    
    4.9
    
    
    
    
    
    
    $
    Exercisable at March 31, 2007
    
    
    4,465
    
    
    $
    44.63
    
    
    
    4.5
    
    
    
    
    
    
    $
    
    14




---



##### 



BOWATER INCORPORATED
Notes to Consolidated Financial Statements  Unaudited
 Restricted Stock Units
      Weighted AverageNumber Of Units
    
    Fair Value at Grant(Unaudited)
    
    (000s)
    
    DateOutstanding at December 31, 2006
    
    
    665
    
    
    $
    26.11Granted during the period
    
    
    364
    
    
    
    27.85Vested during the period
    
    
    
    
    
    
    26.35Forfeited during the period
    
    
    (4
    )
    
    
    26.59Outstanding at March 31, 2007
    
    
    1,025
    
    
    $
    26.72
  15




---



##### 



BOWATER INCORPORATED
Notes to Consolidated Financial Statements  Unaudited
 Equity Participation Rights
    WeightedAverageWeighted
    
    Remaining
    
    
    
    
    
    AggregateNumber of
    
    Average
    
    Contractual
    
    
    
    
    
    IntrinsicRights
    
    Exercise
    
    Term
    
    
    
    
    
    Value(Unaudited)
    
    (000s)
    
    Price
    
    (years)
    
    
    
    
    
    ($000)Outstanding at December 31, 2006
    
    
    2,010
    
    
    $
    47.91Granted during the period
    
    
    
    
    
    
    Settled during the period
    
    
    
    
    
    
    Canceled during the period
    
    
    (100
    )
    
    
    38.93Outstanding at March 31, 2007
    
    
    1,910
    
    
    $
    48.14
    
    
    
    3.4
    
    
    
    
    
    
    $
    Exercisable at March 31, 2007
    
    
    1,910
    
    
    $
    48.14
    
    
    
    3.4
    
    
    
    
    
    
    $
    
 12.
    
    Off-Balance Sheet Debt GuaranteesIn connection with Bowaters 1999 land sale and note monetization, we guarantee 25% of the
outstanding investor notes principal balance of Timber Note Holdings LLC, one of our Qualified
Special Purpose Entities (QSPEs). Bowater guarantees approximately $6.8 million of the investor
notes principal balance at March 31, 2007. This guarantee is proportionately reduced by annual
principal repayments on the investor notes (annual minimum repayments of $2.0 million) through
2008. The remaining investor notes principal amount is to be repaid in 2009. Timber Note
Holdings LLC has assets of approximately $31.7 million and obligations of approximately $27.3
million, which include the investor notes. Bowater would be required to perform on the
guarantee if the QSPE were to default on the investor notes or if there were a default on the
notes receivable, neither of which has ever occurred.13.
    
    Segment InformationDuring the third quarter of 2006, we announced that we were realigning our organizational
structure to move from a divisional organization to a functional organization that supports and
focuses on our multi-product line manufacturing and sales across our mill base. As a result of
this organizational realignment, we now manage our business based on the products that we
manufacture and sell to external customers and, therefore, our reportable segments changed. Our
new reportable segments are coated papers, specialty papers, newsprint, market pulp, and
lumber. Prior year information has been recast to the current year presentation of our
reportable segments.None of the income or loss items following Operating income in our Consolidated Statements of
Operations are allocated to our segments, since those items are reviewed separately by Bowaters
management. For the same reason, impairments, employee termination costs, gains on dispositions of
assets and other discretionary charges
 16




---



##### 



BOWATER INCORPORATED
Notes to Consolidated Financial Statements  Unaudited
    Coated
    
    
    Specialty
    
    
    
    
    
    
    Market
    
    
    
    
    
    
    Corporate
    
    
    Consolidated(Unaudited, in millions)
    
    
    
    
    
    Papers
    
    
    Papers
    
    
    Newsprint
    
    
    Pulp
    
    
    Lumber
    
    
    and Other
    
    
    TotalSalesFirst Quarter
    
    
    2007
    
    
    $
    128.5
    
    
    $
    141.2
    
    
    $
    302.9
    
    
    $
    133.1
    
    
    $
    62.8
    
    
    $
    3.1
    
    
    $
    771.6First Quarter
    
    
    2006
    
    
    
    152.9
    
    
    
    130.9
    
    
    
    373.5
    
    
    
    129.4
    
    
    
    96.5
    
    
    
    10.0
    
    
    
    893.2Operating Income (loss)(1)First Quarter
    
    
    2007
    
    
    $
    8.6
    
    
    $
    (8.7
    )
    
    $
    (4.1
    )
    
    $
    18.7
    
    
    $
    (13.6
    )
    
    $
    24.2
    
    
    $
    25.1First Quarter
    
    
    2006
    
    
    
    21.7
    
    
    
    (8.2
    )
    
    
    17.8
    
    
    
    0.3
    
    
    
    1.3
    
    
    
    6.9
    
    
    
    39.8
 (1)
    
    Corporate and other operating loss includes net gains from dispositions of
assets of $57.9 million and $28.8 million for the three months ended March 31, 2007
and 2006, respectively. 14.
    
    Combination with Abitibi-Consolidated Inc.In January 2007, Bowater and Abitibi announced a definitive agreement to combine in
an all-stock merger of equals (the combined company is
referred to as AbitibiBowater). The definitive agreement
was amended on May 7, 2007. The combination has been approved unanimously by the Boards of Directors of both
companies, which received fairness opinions from their respective financial advisors. The
combination is subject to approval by the shareholders of both companies, regulatory
approvals, and customary closing conditions. The combination is expected to be completed in the
third quarter of 2007. Abitibi and Bowater will continue to operate separately until the
transaction closes. In connection with this announced combination, we have approved a retention
and severance program for approximately 320 Bowater employees who may be impacted by the
pending combination with Abitibi. This program provides a retention bonus for employees who
remain with Bowater through the closing of the combination or its cancellation for any reason
and an additional retention bonus for employees who remain with Bowater for a transition
period following closing of the combination. The costs associated with these programs are
expensed as incurred. Also in connection with the combination, we have incurred $12.6 million
in direct acquisition costs as of March 31, 2007. These costs have been capitalized
in our Consolidated Balance Sheet under the assumption that Bowater
will be deemed the acquirer in this combination for accounting
purposes.
 17




---



##### 



BOWATER INCORPORATED AND SUBSIDIARIES
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Cautionary Statements Regarding Forward-Looking Information and Use of Third Party Data
   Accounting Policies and Estimates
    Overview of Financial Performance
    18




---



##### 



BOWATER INCORPORATED AND SUBSIDIARIES
   Business Strategy and Outlook
    19




---



##### 



BOWATER INCORPORATED AND SUBSIDIARIES
 Business and Financial Review
 Consolidated Results of Operations
 Three Months EndedMarch 31,(In millions)
    
    2007
    
    
    2006
    
    
    ChangeSales
    
    $
    771.6
    
    
    $
    893.2
    
    
    $
    (121.6
    )Operating income
    
    
    25.1
    
    
    
    39.8
    
    
    
    (14.7
    )Significant items that improved (lowered) operating income:Product pricing
    
    
    
    
    
    
    
    
    
    $
    (13.5
    )Shipment volume
    
    
    
    
    
    
    
    
    
    
    (108.1
    )Change in total sales
    
    
    
    
    
    
    
    
    
    
    (121.6
    )Manufacturing costs
    
    
    
    
    
    
    
    
    
    
    83.7Employee termination costs
    
    
    
    
    
    
    
    
    
    
    (2.8
    )Change in total manufacturing costs
and depreciation, amortization, and cost of
timber harvested
    
    
    80.9Distribution costs
    
    
    
    
    
    
    
    
    
    
    7.6Selling and administrative expenses
    
    
    
    
    
    
    
    
    
    
    (10.7
    )Gain on disposition of assets
    
    
    
    
    
    
    
    
    
    
    29.1$
    (14.7
    )
 Three months ended March 31, 2007 versus March 31, 2006
 Sales
 Operating income
 Product pricing
 Shipment volume
 Manufacturing costs
 Employee termination costs
 20




---



##### 



BOWATER INCORPORATED AND SUBSIDIARIES
 Distribution costs
 Gain on disposition of assets
 Segment Results of Operations
   21




---



##### 



BOWATER INCORPORATED AND SUBSIDIARIES
 Coated Papers
 Three Months Ended March 31,2007
    
    
    2006
    
    
    2007 vs. 2006Average price (per short ton)
    
    $
    710
    
    
    $
    795
    
    
    $
    (85
    )Shipments (thousands of short tons)
    
    
    181.1
    
    
    
    192.4
    
    
    
    (11.3
    )Downtime (thousands of short tons)
    
    
    10.1
    
    
    
    16.8
    
    
    
    (6.7
    )Inventory at end of the quarter (thousands of short tons)
    
    
    50.5
    
    
    
    46.3
    
    
    
    4.2(In millions)Sales
    
    $
    128.5
    
    
    $
    152.9
    
    
    $
    (24.4
    )Segment income
    
    
    8.6
    
    
    
    21.7
    
    
    
    (13.1
    )Significant items that improved (lowered) segment income:Product pricing
    
    
    
    
    
    
    
    
    
    $
    (14.8
    )Shipment volume
    
    
    
    
    
    
    
    
    
    
    (9.6
    )Change in total sales
    
    
    
    
    
    
    
    
    
    
    (24.4
    )Manufacturing costs
    
    
    
    
    
    
    
    
    
    
    10.7Distribution costs
    
    
    
    
    
    
    
    
    
    
    0.3Selling and administrative expenses
    
    
    
    
    
    
    
    
    
    
    0.3$
    (13.1
    )
 Three months ended March 31, 2007 versus March 31, 2006
   Coated Papers Third Party Data:
 22




---



##### 



BOWATER INCORPORATED AND SUBSIDIARIES
 Specialty
Papers
 Three Months Ended March 31,2007
    
    
    2006
    
    
    2007 vs. 2006Average price (per short ton)
    
    $
    653
    
    
    $
    655
    
    
    $
    (2
    )Shipments (thousands of short tons)
    
    
    216.3
    
    
    
    199.8
    
    
    
    16.5Downtime (thousands of short tons)
    
    
    5.8
    
    
    
    
    
    
    
    5.8Inventory at end of the quarter (thousands of short tons)
    
    
    56.5
    
    
    
    34.9
    
    
    
    21.6(In millions)Sales
    
    $
    141.2
    
    
    $
    130.9
    
    
    $
    10.3Segment loss
    
    
    (8.7
    )
    
    
    (8.2
    )
    
    
    (0.5
    )Significant items that improved (lowered) segment loss:Product pricing
    
    
    
    
    
    
    
    
    
    $
    (0.7
    )Shipment volume
    
    
    
    
    
    
    
    
    
    
    11.0Change in total sales
    
    
    
    
    
    
    
    
    
    
    10.3Manufacturing costs
    
    
    
    
    
    
    
    
    
    
    (9.1
    )Distribution costs
    
    
    
    
    
    
    
    
    
    
    (1.8
    )Selling and administrative expenses
    
    
    
    
    
    
    
    
    
    
    0.1$
    (0.5
    )
 Three months ended March 31, 2007 versus March 31, 2006
    Specialty Papers Third Party Data:
 23




---



##### 



BOWATER INCORPORATED AND SUBSIDIARIES
 Newsprint
 Three Months Ended March 31,2007
    
    
    2006
    
    
    2007 vs. 2006Average price (per metric ton)
    
    $
    618
    
    
    $
    622
    
    
    $
    (4
    )Shipments (thousands of metric tons)
    
    
    489.9
    
    
    
    600.4
    
    
    
    (110.5
    )Downtime (thousands of metric tons)
    
    
    63.0
    
    
    
    42.1
    
    
    
    20.9Inventory at end of the quarter (thousands of metric tons)
    
    
    93.5
    
    
    
    75.7
    
    
    
    17.8(In millions)Sales
    
    $
    302.9
    
    
    $
    373.5
    
    
    $
    (70.6
    )Segment (loss) income
    
    
    (4.1
    )
    
    
    17.8
    
    
    
    (21.9
    )Significant items that improved (lowered) segment (loss) income:Product pricing
    
    
    
    
    
    
    
    
    
    $
    (1.2
    )Shipment volume
    
    
    
    
    
    
    
    
    
    
    (69.4
    )Change in total sales
    
    
    
    
    
    
    
    
    
    
    (70.6
    )Manufacturing costs
    
    
    
    
    
    
    
    
    
    
    44.1Distribution costs
    
    
    
    
    
    
    
    
    
    
    3.5Selling and administrative expenses
    
    
    
    
    
    
    
    
    
    
    1.1$
    (21.9
    )
 Three months ended March 31, 2007 versus March 31, 2006
    Newsprint Third Party Data:
 24




---



##### 



BOWATER INCORPORATED AND SUBSIDIARIES
  Market Pulp
 Three Months Ended March 31,2007
    
    
    2006
    
    
    2007 vs. 2006Average price (per metric ton)
    
    $
    629
    
    
    $
    523
    
    
    $
    106Shipments (thousands of metric tons)
    
    
    211.7
    
    
    
    247.4
    
    
    
    (35.7
    )Downtime (thousands of metric tons)
    
    
    6.5
    
    
    
    4.1
    
    
    
    2.4Inventory at end of the quarter (thousands of metric tons)
    
    
    54.6
    
    
    
    86.3
    
    
    
    (31.7
    )(In millions)Sales
    
    $
    133.1
    
    
    $
    129.4
    
    
    $
    3.7Segment income
    
    
    18.7
    
    
    
    0.3
    
    
    
    18.4Significant items that improved (lowered) segment income:Product pricing
    
    
    
    
    
    
    
    
    
    $
    21.5Shipment volume
    
    
    
    
    
    
    
    
    
    
    (17.8
    )Change in total sales
    
    
    
    
    
    
    
    
    
    
    3.7Manufacturing costs
    
    
    
    
    
    
    
    
    
    
    15.3Distribution costs
    
    
    
    
    
    
    
    
    
    
    0.3Selling and administrative expenses
    
    
    
    
    
    
    
    
    
    
    (0.9
    )$
    18.4
 Three months ended March 31, 2007 versus March 31, 2006
    25




---



##### 



BOWATER INCORPORATED AND SUBSIDIARIES
 Market Pulp Third Party Data:
 Lumber
 Three Months Ended March 31,2007
    
    
    2006
    
    
    2007 vs. 2006Average price (per mbf)
    
    $
    273
    
    
    $
    351
    
    
    $
    (78
    )Shipments (millions of mbf)
    
    
    229.8
    
    
    
    275.0
    
    
    
    (45.2
    )Downtime (millions of mbf)
    
    
    25.0
    
    
    
    57.9
    
    
    
    (32.9
    )Inventory at end of the quarter (millions of mbf)
    
    
    50.2
    
    
    
    62.0
    
    
    
    (11.8
    )(In millions)Sales
    
    $
    62.8
    
    
    $
    96.5
    
    
    $
    (33.7
    )Segment (loss) income
    
    
    (13.6
    )
    
    
    1.3
    
    
    
    (14.9
    )Significant items that improved (lowered) segment (loss) income:Product pricing
    
    
    
    
    
    
    
    
    
    $
    18.3
    )Shipment volume
    
    
    
    
    
    
    
    
    
    
    (15.4
    )Change in total sales
    
    
    
    
    
    
    
    
    
    
    (33.7
    )Manufacturing costs
    
    
    
    
    
    
    
    
    
    
    13.0Distribution costs
    
    
    
    
    
    
    
    
    
    
    5.4Selling and administrative expenses
    
    
    
    
    
    
    
    
    
    
    0.4$
    (14.9
    )
 Three months ended March 31, 2007 versus March 31, 2006
   Lumber Third Party Data:
 26




---



##### 



BOWATER INCORPORATED AND SUBSIDIARIES
 Corporate and Other
  Three Months Ended March 31,(In millions)
    
    2007
    
    
    2006
    
    
    ChangeCorporate and Other:Sales
    
    $
    3.1
    
    
    $
    10.0
    
    
    $
    (6.9
    )Operating (loss) income:Net gain on disposition of assets
    
    $
    57.9
    
    
    $
    28.8
    
    
    $
    29.1Employee termination costs
    
    
    (7.2
    )
    
    
    (4.4
    )
    
    
    (2.8
    )Corporate and other
    
    
    (26.5
    )
    
    
    (17.5
    )
    
    
    (9.0
    )
 Net gain on disposition of assets:
 Employee termination costs:
 Corporate and other:
 Interest Expense
  Income Taxes
   27




---



##### 



BOWATER INCORPORATED AND SUBSIDIARIES
   Liquidity and Capital Resources
  Cash (Used for) Provided by Operations
   Cash Provided by (Used for) Investing Activities
  Cash Used for Financing Activities
  28




---



##### 



BOWATER INCORPORATED AND SUBSIDIARIES
 Short-term Financing
  WeightedAverageAmount
    
    Commitment
    
    Termination
    
    InterestShort-Term Bank Debt
    
    Commitment
    
    Outstanding
    
    Available (1)
    
    Date
    
    Rate (2)(in millions except for dates and interest rates)U.S. Credit Agreement
    
    $
    415.0
    
    
    $
    
    
    
    $
    347.5
    
    
    
    05/11
    
    
    
    8.75
    %Canadian Credit Agreement
    
    
    165.0
    
    
    
    
    
    
    
    132.1
    
    
    
    05/08
    
    
    
    n/a$
    580.0
    
    
    $
    
    
    
    $
    479.6
 (1)
    
    The commitment available under each of the revolving credit facilities is subject to
collateral requirements and covenant restrictions as described below and is reduced by outstanding
letters of credit of $67.5 million for the U.S. and $32.9 million for Canada. Commitment fees for
unused portions of the U.S. and Canadian facilities are 50 basis points and 25 basis points,
respectively.(2)
    
    Borrowings under the revolving credit facilities incur interest based, at our option, on
specified market interest rates plus a margin. We had borrowings under our U.S. credit agreement
during the first quarter of 2007. These borrowings were fully repaid during the quarter. We had no
outstanding borrowings under our Canadian credit agreement during the first quarter of 2007.  i.
    
    a maximum ratio of senior secured indebtedness (including all advances and letters of credit
under the U.S. and Canadian facilities, and any other indebtedness secured by assets of Bowater and its subsidiaries)
to EBITDA (generally defined as net income, excluding extraordinary, non-recurring or non-cash
items and gains (or losses) on asset dispositions, plus income taxes plus depreciation plus
interest expense) of 1.25 to 1; andii.
    
    a minimum ratio of EBITDA (defined as EBITDA, plus gains
(or minus losses) from asset dispositions) to interest expense of 2.00 to 1.
  Employees
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BOWATER INCORPORATED AND SUBSIDIARIES
  Exchange Rate Fluctuation Effect on Earnings
 Canadian Dollar
  British Pound Sterling
  Exchange Rate Hedging Programs
 Canadian Dollars Forward Contracts
   British Pound Sterling Forward Contracts
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BOWATER INCORPORATED AND SUBSIDIARIES
   Commodity Hedging Program
 Natural Gas Swap Agreements
  Recent Accounting Pronouncements
 Fair Value Measurements
   31




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BOWATER INCORPORATED AND SUBSIDIARIES
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Foreign Exchange Risk
  Interest Rate Risk
  Commodity Price Risk
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BOWATER INCORPORATED AND SUBSIDIARIES
  Item 4. Controls and Procedures.
 (a)
    
    Evaluation of Disclosure Controls and Procedures:
  (b)
    
    Changes in Internal Control over Financial Reporting:
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BOWATER INCORPORATED AND SUBSIDIARIES
 PART II  OTHER INFORMATION
 Item 1. Legal Proceedings.
 a.
    
    Bowater is involved in various legal proceedings relating to contracts, commercial
disputes, taxes, environmental issues, employment and workers compensation claims and other
matters. We periodically review the status of these proceedings with both inside and outside
counsel. We believe that the ultimate disposition of these matters will not have a material adverse
effect on our financial condition, but it could have a material adverse effect on the results of
operations in a given quarter or the year.b.
    
    On September 30, 2005, the Ministry of Justice of the Province of Quebec (MOJ) cited
one of our subsidiaries, Bowater Canadian Forest Products, Inc. (BCFPI), in connection with
effluent water quality of the Dolbeau mill. BCFPI settled this citation on March 29, 2007, by
agreeing to pay a fine and costs totaling CDN $158,000 (approximately
US $136,000). The Dolbeau mill has taken steps to improve
its effluent quality and has experienced only two other exceedences since January 1, 2005.c.
    
    There have been no other material developments to the legal proceedings described in
our annual report on Form
10-K filed on March 1, 2007.
 Item 1A. Risk Factors.
 The
following risk factors are intended to update the risk
factors set forth in our Annual Report on Form 10-K for the year
ended December 31, 2006.
 We face intense competition in the forest products industry and the failure to compete
effectively would have a material adverse effect on our business, financial condition and results
of operations.
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BOWATER INCORPORATED AND SUBSIDIARIES
 Our
substantial indebtedness could adversely affect our financial health, and our efforts to
reduce this indebtedness may not be successful.
  
    
    limit our ability to obtain additional financing, if needed, for
working capital, capital expenditures, acquisitions, debt service requirements or
other purposes;
    
    increase our vulnerability to adverse economic and industry conditions;
    
    require us to dedicate a substantial portion of our cash flows from operations to
make payments on our debt;
    
    reduce funds available for operations, future business opportunities or other purposes;
    
    limit our flexibility in planning for, or reacting to, changes in our business
and our industry; and
    
    place us at a competitive disadvantage compared to our competitors that have less
debt.
  Developments in alternative media could continue to adversely affect the demand for our
products.
   The forest product industry is highly cyclical. Fluctuations in the prices of and the demand
for our products could result in smaller profit margins and lower sales volumes.
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BOWATER INCORPORATED AND SUBSIDIARIES
 Our manufacturing businesses may have difficulty obtaining fiber at favorable prices, or at all.
   An increase in the cost of our purchased energy, chemicals and other raw materials would lead
to higher manufacturing costs, thereby reducing our margins.
   Currency fluctuations may adversely affect our results of operations and financial condition
and changes in foreign currency exchange rates can affect our competitive position, selling prices
and manufacturing costs.
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BOWATER INCORPORATED AND SUBSIDIARIES
   We could experience disruptions in operations and/or increased labor costs due to labor
disputes.
  Our operations require substantial capital and we may not have adequate capital resources to
provide for all of our capital requirements.
  We
are exposed to changes in banking and capital markets and changes in interest rates.
  Our proposed combination with Abitibi may not be consummated or may be delayed, which may
adversely affect our anticipated results of operations and financial condition, or both.
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BOWATER INCORPORATED AND SUBSIDIARIES
   We may fail to realize the anticipated synergies and other benefits expected from our proposed
combination with Abitibi, which could adversely affect the value of shares in the combined company
after the transaction.
  Changes in laws and regulations could adversely affect our results of operations.
  Changes in the political or economic conditions in Canada, the United States or other countries in
which our products are manufactured or sold could adversely affect our results of operations.
  We may be subject to environmental liabilities.
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BOWATER INCORPORATED AND SUBSIDIARIES
 We have net liabilities with respect to our pension plans and the actual cost of our pension plan
obligations could exceed current provisions.
  Item 5. Other Information.
   Item 6. Exhibits
  Exhibit No.
    
    Description10.1
    
    First Amendment, dated as of
May 7, 2007, to the Combination Agreement and Agreement and Plan of Merger
dated as of January 29, 2007 among AbitibiBowater Inc., Abitibi-Consolidated Inc., Bowater
Incorporated, Alpha-Bravo Merger Sub Inc. and Bowater Canada Inc. (the First Amendment).12.1
    
    Statement regarding Computation of Ratio of Earnings to Fixed Charges.31.1
    
    Certification of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of CEO Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of CFO Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.99.1
    
    Press Release, issued May 8, 2007, announcing the execution of the First Amendment.
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BOWATER INCORPORATED AND SUBSIDIARIES
   BOWATER INCORPORATEDBy
    
    /s/ William G. HarveyWilliam G. HarveyExecutive Vice President and ChiefFinancial OfficerBy
    
    /s/ Joseph B. JohnsonJoseph B. JohnsonVice President and Controller
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BOWATER INCORPORATED AND SUBSIDIARIES
 INDEX TO EXHIBITS
 Exhibit No.
    
    Description10.1
    
    First Amendment, dated as of
May 7, 2007, to the Combination Agreement and Agreement and Plan of Merger
dated as of January 29, 2007 among AbitibiBowater Inc., Abitibi-Consolidated Inc., Bowater
Incorporated, Alpha-Bravo Merger Sub Inc. and Bowater Canada Inc. (the First Amendment).12.1
    
    Statement regarding Computation of Ratio of Earnings to Fixed Charges.31.1
    
    Certification of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of CEO Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of CFO Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.99.1
    
    Press Release, issued May 8, 2007, announcing the execution of the First Amendment.