UNITED STATES SECURITIES AND EXCHANGE COMMISSION

(Mark One)

For the quarterly period ended September 30, 2004

OR

For the transition period from      to

Commission file number     1-8712

BOWATER INCORPORATED

(864) 271-7733

     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 [X]  No  [  ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).  Yes [X]  No  [  ]

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of November 01, 2004.

BOWATER INCORPORATED

BOWATER INCORPORATED

See accompanying notes to consolidated financial statements

3

BOWATER INCORPORATED

See accompanying notes to consolidated financial statements

4

BOWATER INCORPORATED

See accompanying notes to consolidated financial statements

5

BOWATER INCORPORATED

See accompanying notes to consolidated financial statements

6

BOWATER INCORPORATED

1.		Summary of Significant Accounting Policies
		Basis of Presentation
		The accompanying consolidated financial statements include the accounts of Bowater Incorporated and subsidiaries (“Bowater”). The consolidated balance sheet as of September 30, 2004 and the related statements of operations, capital accounts and cash flows for the periods ended September 30, 2004 and 2003 are unaudited. In our opinion, all adjustments (consisting of normal recurring adjustments) necessary for fair presentation of the interim financial statements have been made. The results of the interim period ended September 30, 2004 are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the consolidated financial statements, critical accounting policies, significant accounting policies and the notes to the consolidated financial statements included in our most recent Annual Report on Form 10-K. Certain prior-year amounts in the financial statements and the notes have been reclassified to conform to the 2004 presentation. The reclassifications had no effect on total shareholders’ equity or net loss.
		Timber and Timberlands
		The acquisition cost of land and timber, property taxes, lease payments, site preparation and other costs related to the planting and growing of timber are capitalized. Capitalization policies are consistent prior to and during harvesting. These costs, excluding land, are charged against revenue at the time the timber is harvested, based on annually determined depletion rates, and are included in the line titled “Depreciation, amortization and cost of timber harvested” in the Consolidated Statement of Operations. Growth and yield models are used to estimate timber volume on our land from year to year. These volumes affect the depletion rates, which is calculated annually based on the capitalized costs and the total timber volume based on the current stage of the growth cycle.
		Revenue Recognition
		Bowater ships all products directly from its manufacturing sites to a customer’s location or to a customer-designated site. In accordance with Securities and Exchange Commission’s Staff Accounting Bulletin (“SAB”) No. 104, regarding revenue recognition, we recognize revenue only when all of the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred; the seller’s price to the buyer is fixed or determinable; and collectibility is reasonably assured.
2.		Asset Retirement Obligations
		Effective January 1, 2003, Bowater adopted Statement of Financial Accounting Standards (“SFAS”) No. 143, “Accounting for Asset Retirement Obligations.” This Statement requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred and for which a reasonable estimate of a fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the related long-lived asset. Subsequently, the asset retirement costs are to be allocated to expense using a systematic and rational method and the liability is to be accreted to its face amount.
		In connection with the adoption of SFAS No. 143, we recorded a cumulative effect charge, net of taxes, of $2.1 million (or $0.04 per share) to our consolidated statement of operations for the first quarter of 2003. The adoption adjustment also included a net increase to fixed assets of $0.9 million, long-term obligations of $4.3 million and deferred tax assets of $1.3 million. Asset retirement obligations were recorded for those obligations where a legally enforceable obligation exists, the life is determinable and a reasonable estimate of fair value can be made. Asset retirement obligations recorded in connection with the adoption of SFAS No. 143 were primarily for industrial waste landfills, bark piles and sludge basins where we have a legally enforceable obligation to perform capping and post closure monitoring procedures upon closing of these assets. Prior to SFAS No. 143, Bowater had not recorded an obligation for these asset retirement obligations. Bowater has not had to legally restrict these assets for purposes of settling its asset retirement obligations.

7

BOWATER INCORPORATED
Notes to Consolidated Financial Statements - Unaudited

		Additionally, we have certain asset retirement obligations that have indeterminate useful lives and thereby have an indeterminate settlement date for the related asset retirement obligation. As a result, no asset retirement obligation has been recorded for these assets. These assets include, for example, wastewater and effluent ponds that will be required to be drained once the related operating facility is closed and removal of chemicals and other related materials from storage sites on owned facilities once the related operating facility is closed. Once the life of these assets becomes determinable and an estimate of fair value can be made, an asset retirement obligation will be recorded.
		The following table describes changes to Bowater’s asset retirement obligation liability for the periods ended September 30, 2004 and 2003:

3.		Off-Balance Sheet Arrangement – FIN 46, Consolidation of Variable Interest Entities
		In January 2003, the Financial Accounting Standards Board (“FASB”) issued Financial Interpretation (“FIN”) No. 46, “Consolidation of Variable Interest Entities.” Many variable interest entities (“VIEs”) have commonly been referred to as special-purpose entities or off-balance sheet structures. In general, a VIE is a corporation, partnership, trust, or any other legal structure used for business purposes that either (a) does not have equity investors with voting rights or (b) has equity investors that do not provide sufficient financial resources for the entity to support its activities. FIN 46 requires a VIE to be consolidated by a company if that company is subject to a majority of the risk of loss from the VIE’s activities or entitled to receive a majority of the entity’s residual returns or both. The consolidation requirements of FIN 46 apply immediately to VIEs created after January 31, 2003. The consolidation requirements apply to older entities in the first fiscal year or interim period beginning after June 15, 2003. Certain of the disclosure requirements apply in all financial statements issued after January 31, 2003, regardless of when the VIE was established.
		In October 2003, the FASB issued FASB Staff Position FIN 46-6 which (i) deferred the implementation of FIN 46 for VIEs created before February 1, 2003, for periods ending after December 15, 2003, and (ii) permitted early adoption of FIN 46 before the end of the deferral period for some or all VIEs in which an entity holds an interest. Effective July 1, 2003, Bowater early adopted FIN 46 specific to the Covington, Tennessee paper coating facility (referred to as “Nuway”) which had been financed through a special purpose entity (“SPE”). This SPE was determined to be a VIE and required to be consolidated by Bowater in accordance with FIN 46. As such, in the third quarter of 2003, Bowater consolidated assets of approximately $49.4 million and debt of approximately $51.8 million and recorded a non-cash, after tax cumulative effect charge, of $2.4 million (or $0.04 per share). On August 11, 2003, Bowater terminated the lease agreement with the SPE and paid approximately $51.8 million to pay off the debt.

8

BOWATER INCORPORATED
Notes to Consolidated Financial Statements - Unaudited

The pro forma effects of the application of FIN 46, as if the statement had been adopted on January 1, 2003 (rather than July 1, 2003) are presented below:

In December 2003, the FASB issued a revision to FIN 46 (“FIN 46R”). Under the new FIN 46R guidance, application of FIN 46R is required in financial statements of entities that have interests in structures that are commonly referred to as special-purpose entities for periods ending after December 15, 2003. Application for all other types of variable interest entities is required in financial statements for periods ending after March 15, 2004. Bowater completed its adoption of FIN 46R in the first quarter of 2004. Adoption of FIN 46R had no impact on Bowater’s Consolidated Financial Statements.

4.		Stock Based Compensation
		Bowater accounts for stock-based compensation utilizing the intrinsic value method in accordance with Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees.” Under APB No. 25, compensation expense for employee stock options is generally not recognized if the exercise price of the option equals or exceeds the fair value of the underlying stock on the date of grant.
		The following table represents the pro forma effect on net loss and loss per share if we had applied the fair value-based method and recognition provisions of SFAS No. 123 “Accounting for Stock-Based Compensation.” The estimated fair value of the option is amortized to expense over the vesting period of the option award, in accordance with the provisions of SFAS No. 123.

9

BOWATER INCORPORATED
Notes to Consolidated Financial Statements - Unaudited

The fair value of each option granted in the nine months ended September 30, 2004 and 2003, was estimated on the date of grant using the Black-Scholes option-pricing model with the weighted average assumptions below. There were no options granted during the three-months ended September 30, 2004 and 2003.

		In January 2004, Bowater granted 862,000 options pursuant to its 2002 stock option plan at an exercise price of approximately $45 per share. The options generally become exercisable over a period of two years and expire 10 years from date of grant.
		On January 28, 2003, Bowater granted 82,510 restricted stock awards to certain officers under the 2002 stock option plan. In accordance with APB No. 25, Bowater is recognizing a compensation charge over the vesting periods equal to the fair market value of these shares on the date of the grant. The expense measured under SFAS No. 123 does not differ from that under APB No. 25. Shares of restricted stock awarded under the 2002 plan vest over a two-year period and are subject to forfeiture in the event of termination of employment prior to the vesting dates. Prior to vesting, the participants may vote and receive dividends. The market value of the restricted shares granted on January 28, 2003 was approximately $3.3 million and was recorded in the first quarter of 2003 as unearned compensation, which is a separate component of shareholders’ equity. Bowater recorded compensation expense related to the amortization of unearned compensation of approximately $0.2 million and $0.7 million for the three and nine-month periods ended September 30, 2004, respectively and approximately $0.6 million and $1.6 million for the three and nine-month periods ended September 30, 2003, respectively.
5.		Net Gain (Loss) on Fixed Assets and Land Sales
		During the three and nine months ended September 30, 2004, Bowater recorded a net pre-tax gain of $1.7 million, or $0.01 per diluted share after tax and $5.9 million, or $0.07 per diluted share after tax, respectively, related to land sales and gains or losses on fixed assets.
		During the three and nine months ended September 30, 2003, Bowater recorded a net pre-tax gain of $4.1 million, or $0.04 per diluted share after tax, and $119.2 million, or $1.3 per diluted share after tax, respectively, related to land sales and gains or losses on fixed assets. In the second quarter of 2003, Bowater completed the sale of 81,768 acres of owned and leased timberlands for aggregate consideration of $121.8 million. This transaction resulted in a pre-tax gain of approximately $97.5 million.
6.		Other (Income) Expense
		“Other, net” in the Consolidated Statement of Operations includes the following:

10

BOWATER INCORPORATED
Notes to Consolidated Financial Statements - Unaudited

7.		Accumulated Other Comprehensive Loss
		The components of “Accumulated other comprehensive loss” in the Consolidated Balance Sheet are as follows:

(1)		Net of deferred tax benefit of $88.7 million and $88.2 million, respectively.
(2)		No tax effect is recorded for foreign currency translation since the foreign net assets translated are deemed permanently invested.
(3)		Net of deferred tax expense of $41.6 million and $65.5 million, respectively.

8.		Loss Per Share
		Basic and diluted loss per share are based on net loss and do not include any impact from “Other comprehensive loss.” The calculation of basic and diluted loss per share after cumulative effect of accounting changes is as follows:

The dilutive effect of options outstanding is calculated using the treasury stock method. Options for approximately 4.7 million shares and 4.1 million shares outstanding at September 30, 2004 and 2003, respectively, were excluded from the calculation of diluted loss per share as the impact would have been antidilutive.

11

BOWATER INCORPORATED
Notes to Consolidated Financial Statements - Unaudited

9.		Severance Related Liabilities
		COST REDUCTION PROGRAM:
		In connection with a multifaceted cost reduction initiative announced in the fourth quarter of 2002 and completed in the fourth quarter of 2003, Bowater reduced its salaried and hourly workforce at certain locations by approximately 600 people. The majority of the 600 terminations were part of either a voluntary or involuntary workforce reduction that included termination charges for severance, medical, pension, and other benefits. Total costs associated with the initiative were $47.9 million ($34.5 million in 2003 and $13.4 million in 2002), including $11.8 million of pension related costs ($5.3 million for pension and other postretirement plan curtailments and $6.5 million of other pension plan benefits related to accelerated pension years of service). The termination costs are classified as either cost of sales (manufacturing personnel) or selling and administrative expense (administrative personnel) in the Consolidated Statement of Operations. Termination costs under the above initiative for the three and nine-month periods ended September 30, 2003, totaled approximately $4.7 million and $29.6 million, respectively. Included in the employee termination costs of $4.7 million for the third quarter of 2003 are pension plan benefits of approximately $1.1 million. Payments relating to the cost reduction initiative for the nine months ended September 30, 2004 totaled approximately $8.6 million. The remaining accrual at September 30, 2004, of $1.5 million, which excludes the pension related charges, is expected to be paid over the remainder of 2004 and is included in “Accounts payable and accrued liabilities” in the Consolidated Balance Sheet.
		The following table summarizes the activity of our cost reduction initiative, by reportable segment, expensed to our Consolidated Statement of Operations:

The following table summarizes the activity for the liabilities described above, excluding the pension related costs:

10.		Long-Term and Short-Term Debt and Off-Balance Sheet Debt Guarantees
		On March 17, 2004, Bowater sold, in a registered offering, $250 million of notes due March 15, 2010. Interest on the notes accrue at a rate based on LIBOR plus 3% and is payable quarterly beginning on June 15, 2004. On or after March 15, 2006, Bowater may redeem all or a portion of the notes at any time. The redemption price will be 102% of the principal amount if redeemed from March 15, 2006 to March 14, 2007; 101% if redeemed from March 15, 2007 to March 14, 2008; and 100% if redeemed on or after March 15, 2008. We received net proceeds from the sale of the notes of $246.2 million, which were net of underwriting fees of $3.8 million. These fees are being amortized over the life of the notes. The proceeds were used to pay amounts outstanding under the short-term bank debt credit facilities ($146.2 million) and the associated term loan ($100.0 million).

12

BOWATER INCORPORATED
Notes to Consolidated Financial Statements - Unaudited

On April 22, 2004, Bowater closed on a new three-year revolving credit facility due April 2007. The new facility provides $400 million of revolving credit in the United States and $35 million in Canada. This new facility replaces the previous $500 million three-year credit facility in the United States and the $100 million 364-day credit facility in Canada. Borrowings under the new facility incur interest based, at our option, on specified market interest rates plus a margin tied to the credit rating of our long-term debt. The facility contains various covenants, including requirements to maintain a minimum consolidated net worth (generally defined as common shareholders’ equity, plus any outstanding preferred stock plus minimum pension liability amounts) of $1.5 billion, a maximum 62.5% ratio of total debt to total capital (defined as total debt less revaluation of debt assumed through acquisitions, plus net worth including minority interest, plus minimum pension liability amounts), and to maintain an annual minimum EBITDA (generally defined as net income, excluding extraordinary, non-recurring or non-cash items, plus income taxes plus depreciation plus net interest expense) of $250.0 million measured quarterly, beginning March 31, 2005, through December 31, 2005, and $400.0 million at the end of each quarter thereafter. If Bowater generates net income, the minimum net worth requirement increases by half of Bowater’s consolidated net income for each fiscal quarter (excluding gains from cash flow hedges in place as of December 31, 2003).

As of September 30, 2004 there was an outstanding amount of $3.0 million on the revolving credit facility in the United States and no outstanding amounts on the Canadian revolving credit facility. Additionally, there was an outstanding amount of $60 million on the 364-day Accounts Receivable Securitization Arrangement.

Bowater has off-balance sheet debt guarantees of approximately $42.4 million at September 30, 2004, with $32.4 million related to Ponderay Newsprint Company (“Ponderay”) and $10.0 million related to Timber Note Holdings LLC, a Qualified Special Purpose Entity.

Bowater has a 40% interest in Ponderay, an unconsolidated partnership. Ponderay has a credit facility with several banks that is made up of two separate tranches. The first tranche is a $25.0 million revolving credit facility and the second tranche is a $81.0 million term loan. Bowater and the other partners serve as guarantors on the term loan. Ponderay’s outstanding balance under the term loan at September 30, 2004 was $81.0 million. The revolving credit facility has $10 million reserved for letters of credit. There are no other balances outstanding under the revolving credit facility. Ponderay’s term loan outstanding balance is reduced annually by its excess cash flows as defined in the credit facility and the final balance is due at maturity on April 12, 2006. Bowater guarantees 40% of the outstanding balance under the Ponderay term loan (a guarantee of $32.4 million at September 30, 2004). Bowater’s guarantee is reduced as the outstanding balance of the term loan is reduced. Bowater would be required to perform on the guarantee if Ponderay were to default on its credit facility and Ponderay’s assets, which collateralize the debt, were insufficient to pay off the credit facility.

In 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. Bowater currently guarantees approximately $10.0 million of the investor notes principal balance. 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. Bowater would be required to perform on the guarantee if Timber Note Holdings LLC were to default on the investor notes or if there were a default on the notes receivable.

13

BOWATER INCORPORATED
Notes to Consolidated Financial Statements - Unaudited

11.		Pension and Postretirement Expense
		The components of net periodic benefit costs relating to Bowater’s pension and other postretirement plans are as follows for the three and nine months ended September 30, 2004 and 2003:
		Pension Plans:

Other Postretirement Plans:

In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Act”) was passed. The Act introduced a prescription drug benefit under Medicare Part D as well as a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. Our postretirement benefits include prescription drug benefits for Medicare-eligible retirees. In March 2004, the FASB issued FASB Staff Position (FSP) 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003” (the Act) that provides guidance on the accounting for the effects of the Act for employers that sponsor postretirement health care plans that provide drug benefits. This FSP also requires those employers to provide certain disclosures regarding the effect of the federal subsidy provided by the Act.

Bowater adopted FSP 106-2 effective July 1, 2004 and applied the prospective transition method. As a result, a remeasurement of the plan’s assets and accumulated postretirement benefit obligation (APBO), including the effects

14

BOWATER INCORPORATED
Notes to Consolidated Financial Statements - Unaudited

of the subsidy was made. The remeasurement resulted in a reduction of our net periodic benefit cost for 2004 of $2.5 million, of which $1.25 million will be recorded each in the third and fourth quarters of 2004. The $2.5 million reduction consisted of $0.3 million for the reduction of current period service costs, $1.3 million for the reduction of amortization of actuarial experience loss and $0.9 million for reduction in interest costs on our APBO. The remeasurement changed the prior service cost component of our APBO by approximately $36.9 million.

12.		Commitments and Contingencies
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.		There have been no material developments to the legal proceedings described in our annual report on Form 10-K filed on March 10, 2004.
13.		Financial Instruments
		Bowater utilizes certain derivative instruments to enhance its ability to manage risk relating to cash flow exposure. Derivative instruments are entered into for periods consistent with related underlying cash flow exposures and do not constitute positions independent of those positions. We do not enter into contracts for speculative purposes; however, we do, from time to time enter into commodity and certain forward contracts that are not accounted for as accounting hedges. On the date into which the derivative contract is entered we designate the derivative as a cash flow hedge.
		We pay a significant portion of the operating expenses of our Canadian mill sites in Canadian dollars. To reduce our exposure to United States and Canadian dollar exchange rate fluctuations, we enter into and designate Canadian dollar forward contracts to hedge certain of our forecasted Canadian dollar cash outflows at the Canadian mill operations.
		The components of the net gain related to cash flow hedges and included in “Accumulated other comprehensive loss” for the three and nine months ended September 30, 2004 and 2003 are as follows:

We formally document all relationships between hedging instruments and hedged items, as well as our risk-management objectives and strategies for undertaking various hedge transactions. We link all hedges that are designated as cash flow hedges to forecasted transactions. The maximum time period we have hedged transactions is two years. We also assess, both at the inception of the hedge and on an on-going basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items. When it is determined that a derivative is not highly effective as a hedge, we discontinue hedge accounting prospectively.

15

BOWATER INCORPORATED
Notes to Consolidated Financial Statements - Unaudited

Information regarding our Canadian dollar contracts’ notional amount, carrying value, fair market value, and range of exchange rates of the contracts is summarized in the table below. The notional amount of these contracts represents the amount of foreign currencies to be purchased or sold at maturity and does not represent our exposure on these contracts.

		In order to reduce our exposure to exchange rate fluctuations on our Canadian dollar denominated long-term debt, we enter into Canadian dollar forward contracts with notional amounts of approximately $100 million. These economic hedge contracts are marked to market through earnings. The contracts are settled quarterly and gains or losses are included in “Other, net” in our Consolidated Statement of Operations. At September 30, 2004, our outstanding Canadian dollar forward contracts had notional amounts of $100 million due on December 30, 2004. The fair value of the Canadian dollar forward contracts outstanding at September 30, 2004 was a liability of $0.1 million. We recorded gains of $5.9 million and $3.3 million for the three and nine months ended September 30, 2004, respectively, and gains of $0.1 million and $17.3 million for the three and nine months ended September 30, 2003, respectively, in the Consolidated Statement of Operations as a result of these economic hedge contracts.
		The counterparties to our derivative financial instruments are substantial and creditworthy multi-national financial institutions and no one financial institution has more than 17% of our derivative financial instruments. Therefore, the risk of counterparty nonperformance is considered to be remote.
14.		Segment Information
		Below is a description of the types of products and services from which each reportable segment derives its revenues:
		Bowater is organized into five divisions: the Newsprint Division, the Coated and Specialty Papers Division, the Canadian Forest Products Division, the Forest Products Division and the Pulp Division. Except for the Pulp Division, each division is responsible for the sales and marketing of distinct product lines and the operation of certain manufacturing sites. The Pulp Division is primarily a marketing and distribution division whose administrative expenses are included in “Corporate & Other Eliminations.” Therefore, the other four divisions are our reportable segments. Certain segment information for the three and nine-month periods ended September 30, 2003 has been reclassified to conform to the September 30, 2004 presentation.
		NEWSPRINT DIVISION
		The Newsprint Division operates seven manufacturing sites (including Ponderay Newsprint Company, an unconsolidated partnership) in the United States, Canada and South Korea. The principal product at these manufacturing sites is newsprint, but several of the sites also produce market pulp and uncoated specialty papers. This division has primary responsibility for the domestic and international marketing and sales of newsprint.

16

BOWATER INCORPORATED
Notes to Consolidated Financial Statements - Unaudited

COATED AND SPECIALTY PAPERS DIVISION

The Coated and Specialty Papers Division operates a manufacturing site that produces coated paper, market pulp and uncoated specialty papers, and two Nuway coating facilities, both located in the United States. This division has primary responsibility for the marketing and sales of the full spectrum of coated and uncoated specialty papers manufactured by Bowater.

CANADIAN FOREST PRODUCTS DIVISION

The Canadian Forest Products Division operates four paper manufacturing sites in Canada. The division manages 0.4 million acres of owned or leased timberland and over 23.5 million acres of Crown-owned land in the Canadian provinces of Quebec and New Brunswick on which we have cutting rights. The division also operates eight sawmills and one wood treatment plant, supplies wood to four paper mills and eight sawmills, and is responsible for the marketing and sales of its timber and lumber production.

FOREST PRODUCTS DIVISION

The Forest Products Division manages 1.0 million acres of timberland owned or leased in the United States and the Canadian provinces of Ontario and Nova Scotia and over 8.3 million acres of Crown-owned land in the province of Ontario on which we have cutting rights. The division also operates five softwood sawmills, supplies wood fiber to our pulp and paper production sites and markets and sells timber and southern yellow pine lumber in North America.

PULP DIVISION

The Pulp Division markets and distributes market pulp produced by other divisions. Financial results for the production and sale of market pulp are included in the Newsprint Division or the Coated and Specialty Papers Division, depending upon which site manufactures the product. The Pulp Division’s selling and administrative expenses are included in “Corporate and Other Eliminations.” Accordingly, no separate results are reported for this division.

Factors management used to identify our segments:

Bowater’s reportable segments are business units responsible for the marketing and sales of different products. They are managed separately because of the different products they are responsible for manufacturing and distributing.

The line entitled “Segment income (loss)” in the following tables is equal to “Operating income (loss)” as presented in our Consolidated Statement of Operations. In addition, none of the income or loss items following “Operating income (loss)” in our Consolidated Statement of Operations are allocated to our segments, since they are reviewed separately by Bowater’s management.

17

BOWATER INCORPORATED
Notes to Consolidated Financial Statements - Unaudited

The following tables summarize information about segment profit and loss for the three and nine-month periods ended September 30, 2004 and 2003 and segment assets as of September 30, 2004 and 2003: