Cascades concludes the year 2008 on a positive note



    KINGSEY FALLS, QC, Feb. 27 /CNW Telbec/ - Cascades Inc. ("Cascades") (CAS
on the Toronto stock exchange) announces its unaudited financial results for
the three months and fiscal year ended December 31, 2008. Operating income
before depreciation (OIBD or EBITDA) and net earnings excluding specific items
increased respectively to $96 million and $17 million ($0.17 per share) in the
fourth quarter of 2008 compared to $82 million and $1 million ($0.01 per
share) in the same period last year. With these better results in the last
quarter, Cascades' 2008 operating income before depreciation and net earnings
reached $306 million and $3 million respectively.

    
    Fourth quarter and annual highlights
    ------------------------------------

    - Fourth quarter unaudited EBITDA, cash flow from operations and net
      earnings excluding specific items(1) all increased compared to the same
      period last year and the previous quarter.
    - Fourth quarter EBITDA represents the highest quarterly EBITDA since
      2002.
    - Cascades is benefiting from its diversified business mix as lower
      annual results in boxboard and containerboard operations were partially
      offset by the better profitability in specialty products and tissue
      papers.
    - Cascades proactively improved its financial flexibility:
        - In the fourth quarter, early settlement of forward exchange
          contracts on its US$ denominated debt for net cash proceeds of
          approximately $150 million;
        - In February 2009, amendment of financial covenants.
    - Cascades continued to promote environmentally-sound manufacturing and
      products as three of its boxboard mills received FSC certification.

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Financial Highlights
    --------------------

    Selected consolidated
     information
     (unaudited)
    (in millions
     of Canadian
     dollars, except    -----------------------------------------------------
     amounts per share) 2008        2007     Q4/2008     Q4/2007     Q3/2008
    -------------------------------------------------------------------------
    Sales              4,017       3,929       1,020         937       1,039
    Excluding
     specific items(1)
      Operating
       income before
       depreciation
       and
       amortization
       (OIBD or
       EBITDA)           306         350          96          82          88
      Operating
       income from
       continuing
       operations         92         142          40          33          34
      Net earnings         3          22          17           1           6
        per common
         share        $ 0.03      $ 0.22      $ 0.17      $ 0.01      $ 0.06
      Cash flow
       from
       operations
       (adjusted)
       from
       continuing
       operations        183         202          68          49          47
        per common
         share        $ 1.85      $ 2.03      $ 0.69      $ 0.49      $ 0.47
    As reported
    Operating
     income before
     depreciation
     and
     amortization
     (OIBD or
     EBITDA)(1)          229         352          52          68          71
    Operating
     income (loss)
     from continuing
     operations           15         144          (4)         19          17
    Net earnings
     (loss)              (55)         95         (19)         12          (7)
      per common
       share          $(0.56)     $ 0.95      $(0.20)     $ 0.12      $(0.07)
    Cash flow from
     operations
     (adjusted)
     from continuing
     operations(1)       155         178          59          36          43
      per common
       share(1)       $ 1.57      $ 1.79      $ 0.60      $ 0.36      $ 0.43
    -------------------------------------------------------------------------
    Note 1 - see the supplemental information on non-GAAP measures note.

    In the fourth quarter ended December 31, 2008, net loss including specific
items amounted to $19 million ($0.20 per share) compared to net earnings of
$12 million ($0.12 per share) for the same quarter in 2007 and a net loss of
$7 million ($0.07per share) in the previous quarter.
    For the fiscal year ended December 31, 2008, the net loss including
specific items amounted to $55 million ($0.56 per share) compared to net
earnings of $95 million ($0.95 per share) in 2007.
    Commenting on the annual results, Mr. Alain Lemaire, President and Chief
Executive Officer stated: "In 2008, we were confronted with very challenging
business conditions throughout the year including in particular, a severe
economic downturn in latter half of the fourth quarter. However, despite of
all these factors, we reported positive annual net earnings and relatively
stable cash flow from operations excluding specific items. During the second
half of the year we benefited from restructuring initiatives in our boxboard
segment, the depreciation of the Canadian dollar and a more favourable
variable cost environment which more than offset the weakness in demand in
certain of our sectors.
    We are also fortunate that our balanced portfolio of assets helps to
mitigate the impact of a cyclical slowdown as demonstrated in the fourth
quarter where the drop of volumes in our packaging operations was offset by
record quarterly results in our Tissue Papers Group due in part, to strong
demand for recycled products."

    Three-month period ended December 31, 2008
    ------------------------------------------

    In comparison with the same period last year, sales increased $83 million
or 9% to $1 billion reflecting generally higher prices and the depreciation of
the Canadian dollar.
    Operating loss from continuing operations amounted to $4 million compared
to an operating income of $19 million achieved for the same period last year.
When excluding specific items, operating income from continuing operations
increased 21% to $40 million in comparison to $33 million for the same quarter
in 2007.
    Despite lower sales volumes, operating results improved in the quarter
compared to last year resulting from higher selling prices, lower raw material
and energy costs and the depreciation of the Canadian dollar.
    The fourth quarter net earnings excluding specific items of $17 million
reflect a $5 million recovery of income tax resulting mainly from provision
adjustments for prior years.

    Fiscal year ended December 31, 2008
    -----------------------------------

    In 2008, sales increased by $88 million to $4.0 billion due to improved
average selling prices.
    Operating income from continued operations amounted to $15 million
compared to $144 million achieved last year. Operating income from continuing
operations excluding specific items was $92 million compares to $142 million
achieved in 2007.
    Operating results were lower in 2007 as the first six months of the year
were impacted by sharp increases in our input costs such as raw materials,
energy and freight. Improved selling prices during the second part of the year
were not sufficient to offset the increase in our input costs and the weak
performance of our North American boxboard sector in the first six months of
2008.

    Near term outlook
    -----------------

    Mr. Alain Lemaire, President and Chief Executive Officer added: "From a
business standpoint, we remain cautiously optimistic despite recent and
ongoing selling price and demand erosion for certain of our products. In fact,
we expect to continue benefiting from relatively stable recycled fibre and
energy costs, from the lower Canadian dollar, and from our significant
position in consumer markets such as tissue papers and food packaging which
are proving to be more recession resistant. Also, following a weak month of
December for our packaging operations, business conditions improved slightly
in January.
    On the financial front, notwithstanding our increased liquidity and the
recently announced amendment of our credit agreement, we will continue to
carefully manage our cash flows to preserve financial flexibility in the face
of economic uncertainty."

    Dividend on Common Shares and normal course issuer bid
    ------------------------------------------------------

    The Board of Cascades declared a quarterly dividend of $0.04 per share to
be paid March 23, 2009 to shareholders of record at the close of business on
March 10, 2009. This dividend paid by Cascades is an "eligible dividend" as
per the Income Tax Act (Bill C-28, Canada). In addition, in 2008, in
accordance with its normal course issuer bid, Cascades has purchased for
cancellation 595,500 common shares at an average price of $6.77 per share
representing an aggregate amount of approximately $4.0 million.

    Supplemental information on non-GAAP measures

    Operating income before depreciation and amortization, earnings before
interests, taxes, depreciation and amortization, operating income, cash flow
from operations and cash flow from operations per share are not measures of
performance under Canadian GAAP. The Company includes operating income before
depreciation and amortization, earnings before interests, taxes, depreciation
and amortization, operating income, cash flow from operations and cash flow
from operations per share because they are measures used by management to
assess the operating and financial performance of the Company's operating
segments. Additionally, the Company believes that these items provide
additional measures often used by investors to assess a company's operating
performance and its ability to meet debt service requirements. However,
operating income before depreciation and amortization, earnings before
interests, taxes, depreciation and amortization, operating income, cash flow
from operations and cash flow from operations per share does not represent,
and should not be used as a substitute for net earnings or cash flows from
operating activities as determined in accordance with Canadian GAAP, and they
are not necessarily an indication of whether cash flow will be sufficient to
fund our cash requirements. In addition, our definition of operating income
before depreciation and amortization, earnings before interests, taxes,
depreciation and amortization, operating income, cash flow from operations and
cash flow from operations per share may differ from those of other companies.
Cash flow from operations is defined as cash flow from operating activities as
determined in accordance with Canadian GAAP excluding the change in working
capital components and cash flow from operations per share is determined by
dividing cash flow from operations by the weighted average number of common
shares of the period.
    Operating income before depreciation and amortization excluding specific
items, earnings before interests, taxes, depreciation and amortization
excluding specific items, operating income excluding specific items, net
earnings excluding specific items, net earnings per common share excluding
specific items, cash flow from operations excluding specific items and cash
flow from operations per share excluding specific items are non-GAAP measures.
The Company believes that it is useful for investors to be aware of specific
items that have adversely or positively affected its GAAP measures, and that
the above mentioned non-GAAP measures provide investors with a measure of
performance with which to compare its results between periods without regard
to these specific items. The Company's measures excluding specific items have
no standardized meaning prescribed by GAAP and are not necessarily comparable
to similar measures presented by other companies and therefore should not be
considered in isolation.
    Specific items are defined to include charges for impairment of assets,
charges for facility or machine closures, debt restructuring charges, gains or
losses on sale of business unit, unrealized gains or losses on derivative
financial instruments that do not qualify for hedge accounting, foreign
exchange gains or losses on long-term debt and other significant items of an
unusual or non-recurring nature.
    Net earnings (loss), which is a performance measure defined by Canadian
GAAP is reconciled below to operating income (loss), operating income
excluding specific items and operating income before depreciation excluding
specific items or earnings before interests, taxes, depreciation and
amortization excluding specific items:

    (in millions of     -----------------    --------------------------------
     Canadian dollars)  2008        2007     Q4/2008     Q4/2007     Q3/2008
    -------------------------------------    --------------------------------

    Net earnings
     (loss)              (55)         95         (19)         12          (7)
    Net loss
     (earnings) from
     discontinued
     operations          (18)         19           -          11           -
    Non-controlling
     interest              2           3           -           1           1
    Share of results
     of significantly
     influenced
     companies            (8)        (27)         (2)         (4)         (2)
    Provision for
     (recovery of)
     income taxes        (32)         11         (12)         (9)         (2)
    Foreign exchange
     loss (gain) on
     long-term debt       24         (59)          4         (16)          -
    Interest expense     102         102          25          24          27
    -------------------------------------    --------------------------------

    Operating income
     (loss)               15         144          (4)         19          17
    Specific items :
    Inventory
     adjustment
     resulting from
     business
     acquisition           2           6           -           -           -
    Loss (gain) on
     disposals and other   5         (17)          -           7           -
    Impairment loss       16           3          13           2           -
    Closure and
     restructuring costs  27           6          10           3           4
    Unrealized loss on
     financial
     instruments          27           -          21           2          13
    -------------------------------------    --------------------------------
                          77          (2)         44          14          17
    -------------------------------------    --------------------------------

    Operating income -
     excluding specific
     items                92         142          40          33          34

    Depreciation and
     amortization        214         208          56          49          54
    -------------------------------------    --------------------------------

    Operating income
     before
     depreciation and
     amortization (OIBD)
     - excluding
     specific items(1)   306         350          96          82          88
    -------------------------------------    --------------------------------
    -------------------------------------    --------------------------------
    Note 1 - also refers to earnings before interests, taxes, depreciation
    and amortization (EBITDA).

    The following table reconciles net earnings and net earnings per share to
net earnings excluding specific items and net earnings per share excluding
specific items

    (in millions of
     Canadian dollars,
     except amounts    ------------------------------------------------------
     per share)                          Net earnings (loss)
    -------------------------------------------------------------------------
                        2008        2007     Q4/2008     Q4/2007     Q3/2008
                       ------------------   ---------------------------------
    As per GAAP          (55)         95         (19)         12          (7)
    Specific items :
    Inventory
     adjustment
     resulting from
     business
     acquisition           2           6           -           -           -
    Loss (gain) on
     disposals and
     other                 5         (17)          -           7           -
    Impairment loss       16           3          13           2           -
    Closure and
     restructuring
     costs                27           6          10           3           4
    Unrealized loss
     on financial
     instruments          27           -          21           2          13
    Foreign exchange
     loss (gain) on
     long-term debt       24         (59)          4         (16)          -
    Share of results
     of significantly
     influenced
     companies             -         (15)          -           -           -
    Loss (gain)
     included in
     discontinued
     operations          (23)          9           -           7           -
    Adjustment of
     statutory tax
     rate                  -         (16)          -         (10)          -
    Tax effect on
     specific items      (20)         10         (12)         (6)         (4)
                       ------------------   ---------------------------------
                          58         (73)         36         (11)         13
                       ------------------   ---------------------------------
    Excluding
     specific items        3          22          17           1           6
    --------------------------------------  ---------------------------------

    (in millions of
     Canadian dollars,
     except amounts    ------------------------------------------------------
     per share)                    Net earnings (loss) per share(1)
    -------------------------------------------------------------------------
                        2008        2007     Q4/2008     Q4/2007     Q3/2008
                       ------------------   ---------------------------------

    As per GAAP
    Specific items :  $(0.56)     $ 0.95      $(0.20)     $ 0.12      $(0.07)
    Inventory
     adjustment
     resulting from
     business
     acquisition      $ 0.01      $ 0.04      $    -      $    -      $    -
    Loss (gain) on
     disposals and
     other            $ 0.05      $(0.09)     $    -      $ 0.05      $    -
    Impairment loss   $ 0.13      $ 0.02      $ 0.11      $ 0.01      $    -
    Closure and
     restructuring
     costs            $ 0.19      $ 0.04      $ 0.07      $ 0.02      $ 0.03
    Unrealized loss
     on financial
     instruments      $ 0.19      $    -      $ 0.15      $ 0.01      $ 0.10
    Foreign exchange
     loss (gain) on
     long-term debt   $ 0.21      $(0.49)     $ 0.04      $(0.14)     $    -
    Share of results
     of significantly
     influenced
     companies        $    -      $(0.15)     $    -      $    -      $    -
    Loss (gain)
     included in
     discontinued
     operations       $(0.19)     $ 0.06      $    -      $ 0.04      $    -
    Adjustment of
     statutory tax
     rate             $    -      $(0.16)     $    -      $(0.10)     $    -
    Tax effect on
     specific items
                       ------------------   ---------------------------------
                      $ 0.59      $(0.73)     $ 0.37      $(0.11)     $ 0.13
                       ------------------   ---------------------------------
    Excluding
     specific items   $ 0.03      $ 0.22      $ 0.17      $ 0.01      $ 0.06
    --------------------------------------  ---------------------------------
    Note 1 - specific amounts per share are calculated on an after-tax basis.


    The following table reconciles cash flow from operations and cash flow
from operations per share to cash flow from operations excluding specific
items and cash flow from operations per share excluding specific items:


    -------------------------------------------------------------------------
    (in millions of
     Canadian dollars,              Cash flow from operations
     except amounts    ------------------------------------------------------
     per share)         2008        2007     Q4/2008     Q4/2007     Q3/2008
                       ------------------   ---------------------------------

    Cash flow
     provided by
     operating
     activities          124          89          85          98          22
    Changes in
     non-cash
     working
     capital
     components           31          89         (26)        (62)         21
                       ------------------   ---------------------------------
    Cash flow
     (adjusted)
     from
     operations          155         178          59          36          43
    Specific items :
    Inventory
     adjustment
     resulting from
     business
     acquisition           2           6           -           -           -
    Loss on disposals
     and other             -          12           -          10           -
    Closure and
     restructuring
     costs, net of
     current income
     tax                  26           6           9           3           4
                       ------------------   ---------------------------------

    Excluding
     specific items      183         202          68          49          47
    --------------------------------------  ---------------------------------

    -------------------------------------------------------------------------
    (in millions of
     Canadian dollars,            Cash flow from operations per share
     except amounts    ------------------------------------------------------
     per share)         2008        2007     Q4/2008     Q4/2007     Q3/2008
                       ------------------   ---------------------------------

    Cash flow
     provided by
     operating
     activities
    Changes in
     non-cash
     working
     capital
     components
                       ------------------   ---------------------------------
    Cash flow
    (adjusted)from
     operations       $ 1.57      $ 1.79      $ 0.60      $ 0.36      $ 0.43
    Specific items :
    Inventory
     adjustment
     resulting from
     business
     acquisition      $ 0.02      $ 0.06           -           -           -
    Loss on disposals
     and other             -      $ 0.12           -      $ 0.10           -
    Closure and
     restructuring
     costs, net of
     current income
     tax              $ 0.26      $ 0.06      $ 0.09      $ 0.03      $ 0.04
                       ------------------   ---------------------------------

    Excluding
     specific items   $ 1.85      $ 2.03      $ 0.69      $ 0.49      $ 0.47
    --------------------------------------  ---------------------------------

    Founded in 1964, Cascades produces, converts and markets packaging and
tissue products composed mainly of recycled fibres. Cascades employs close to
13,000 employees who work in more than 100 modern and flexible production
units located in North America and Europe. Cascades' management philosophy,
its 45 years of experience in recycling, its continued efforts in research and
development are strengths which enable the company to create new products for
its customers. The Cascades shares trade on the Toronto stock exchange under
the ticker symbol CAS.

    Certain statements in this release, including statements regarding future
results and performance, are forward-looking statements (as such term is
defined under the Private Securities Litigation Reform Act of 1995) based on
current expectations. The accuracy of such statements is subject to a number
of risks, uncertainties and assumptions that may cause actual results to
differ materially from those projected, including, but not limited to, the
effect of general economic conditions, decreases in demand for the Company's
products, increases in raw material costs, fluctuations in selling prices and
adverse changes in general market and industry conditions and other factors
listed in the Company's Securities and Exchange Commission filings.


    Consolidated Balance Sheets
    (in millions of Canadian dollars)

                                                       As at           As at
                                                 December 31,    December 31,
                                                        2008            2007
                                               ------------------------------
    Assets                                        (unaudited)

    Current assets
    Cash and cash equivalents                             11              25
    Accounts receivable                                  657             624
    Inventories                                          580             555
    -------------------------------------------------------------------------
                                                       1,248           1,204
    Property, plant and equipment                      2,037           1,886
    Intangible assets                                    142             130
    Other assets                                         267             237
    Goodwill                                             321             312
    -------------------------------------------------------------------------
                                                       4,015           3,769
                                               ------------------------------
                                               ------------------------------

    Liabilities and Shareholders' Equity

    Current liabilities
    Bank loans and advances                              104              47
    Accounts payable and accrued liabilities             586             572
    Current portion of long-term debt                     36               4
    -------------------------------------------------------------------------
                                                         726             623
    Long-term debt                                     1,672           1,570
    Other liabilities                                    361             377
                                               ------------------------------
                                                       2,759           2,570
    -------------------------------------------------------------------------

    Shareholders' Equity
    Capital stock                                        515             517
    Retained earnings                                    656             725
    Accumulated other comprehensive income (loss)         85             (43)
                                               ------------------------------
                                                       1,256           1,199
    -------------------------------------------------------------------------
                                                       4,015           3,769
                                               ------------------------------
                                               ------------------------------


    Consolidated Statements of Earnings (Loss)
    (in millions of Canadian dollars,
     except per share amounts)
    (unaudited)

                             For the 3-month periods     For the years ended
                                   ended December 31,            December 31,
                                    2008        2007        2008        2007
                           --------------------------------------------------

    Sales                          1,020         937       4,017       3,929
    Cost of sales and expenses
    Cost of sales                    821         764       3,323       3,201
    Depreciation and
     amortization                     56          49         214         208
    Selling and administrative
     expenses                        102          92         389         390
    Losses (gains) on disposal         -           7           5         (17)
    Impairment and other
     restructuring costs              23           5          43           9
    Loss (gain) on financial
     instruments                      22           1          28          (6)
    -------------------------------------------------------------------------
                                   1,024         918       4,002       3,785
    -------------------------------------------------------------------------
    Operating income (loss)
    from continuing operations        (4)         19          15         144

    Interest expense                  25          24         102         102
    Foreign exchange loss
     (gain) on long-term debt          4         (16)         24         (59)
    -------------------------------------------------------------------------
                                     (33)         11        (111)        101
    Provision for (recovery
     of) income taxes                (12)         (9)        (32)         11
    Share of earnings of
     significantly influenced
     companies and dilution
     gain                             (2)         (4)         (8)        (27)
    Non-controlling interest           -           1           2           3
    -------------------------------------------------------------------------
    Net earnings (loss) from
     continuing operations           (19)         23         (73)        114

    Net earnings (loss) from
     discontinued operations           -         (11)         18         (19)
    -------------------------------------------------------------------------
    Net earnings (loss) for
     the period                      (19)         12         (55)         95
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic and diluted net
     earnings (loss) from
     continuing operations
     per common share             ($0.20)      $0.23      ($0.74)      $1.14
                           --------------------------------------------------
                           --------------------------------------------------
    Basic and diluted net
     earnings (loss) per
     common share                 ($0.20)      $0.12      ($0.56)      $0.95
                           --------------------------------------------------
                           --------------------------------------------------
    Weighted average number
     of common shares
     outstanding              98,600,556  99,231,665  98,804,536  99,329,472
                           --------------------------------------------------
                           --------------------------------------------------


    Consolidated Statements of Shareholders' Equity
    (in millions of Canadian dollars)
    (unaudited)

                                              For the year ended December 31,
                                                                        2008
                           --------------------------------------------------
                                                     Accumulated
                                                       other com-
                                                      prehensive       Share-
                                            Retained      income     holders'
                           Capital stock    earnings       (loss)     Equity
                           --------------------------------------------------

    Balance - Beginning
     of period                       517         725         (43)      1,199
    Cumulative impact of
     accounting changes                -           3           -           3
                           --------------------------------------------------
    Restated balance -
     Beginning of period             517         728         (43)      1,202
    Comprehensive income:
      Net loss for
       the period                      -         (55)          -         (55)
      Change in foreign
       currency translation
       of self-sustaining
       foreign subsidiaries,
       net of related hedging
       activities                      -           -         190         190
      Change in fair value
       of foreign exchange
       forward contracts
       designated as cash
       flow hedges                     -           -         (61)        (61)
      Change in fair value
       of interest rate
       swap agreements
       designated as cash
       flow hedges                     -           -          (2)         (2)
      Change in fair value
       of commodity derivative
       financial instruments
       designated as cash
       flow hedges                     -           -           1           1
                                                                  -----------
    Comprehensive income for
     the period                                                           73
                                                                  -----------

    Dividends                          -         (16)          -         (16)
    Adjustment related to
     stock options                     1           -           -           1
    Redemption of common
     shares                           (3)         (1)          -          (4)
                           --------------------------------------------------
    Balance - End of period          515         656          85       1,256
                           --------------------------------------------------
                           --------------------------------------------------


                                              For the year ended December 31,
                                                                        2007
                           --------------------------------------------------
                                                     Accumulated
                                                       other com-
                                                      prehensive       Share-
                                            Retained      income     holders'
                           Capital stock    earnings       (loss)     Equity
                           --------------------------------------------------

    Balance - Beginning
     of period                       517         649          (9)      1,157
    Cumulative impact
     of accounting changes             -           -           1           1
                           --------------------------------------------------
    Restated balance,
     beginning of period             517         649          (8)      1,158
    Comprehensive income:
      Net earnings for the
       period                          -          95           -          95
      Change in foreign
       currency translation
       of self-sustaining
       foreign subsidiaries,
       net of related
       hedging activities              -           -         (41)        (41)
      Change in fair value
       of foreign exchange
       forward contracts
       designated as cash
       flow hedges                     -           -           4           4
      Change in fair value
       of commodity derivative
       financial instruments
       designated as cash
       flow hedges                     -           -           2           2
                                                                  -----------
    Comprehensive income for
     the period                                                           60
                                                                  -----------

    Dividends                          -         (16)          -         (16)
    Adjustment related to
     stock options                     2           -           -           2
    Redemption of common
     shares                           (2)         (3)          -          (5)
                           --------------------------------------------------
    Balance - End of period          517         725         (43)      1,199
                           --------------------------------------------------
                           --------------------------------------------------


    Consolidated Statements of Cash Flows
    (in millions of Canadian dollars)
    (unaudited)

                             For the 3-month periods     For the years ended
                                   ended December 31,            December 31,
                                    2008        2007        2008        2007
                           --------------------------------------------------

    OPERATING ACTIVITIES FROM
     CONTINUING OPERATIONS
    Net earnings (loss) from
     continuing operations           (19)         23         (73)        114
    Adjustments for:
      Depreciation and
       amortization                   56          49         214         208
      Losses (gains) on
       disposal                        -          (3)          5         (29)
      Impairment and other
       restructuring costs            13           2          16           3
      Unrealized loss on
       financial instruments          21           2          27           -
      Foreign exchange loss
       (gain) on long-term debt        4         (16)         24         (59)
      Future income taxes            (10)        (13)        (52)        (22)
      Share of earnings of
       significantly influenced
       companies and dilution
       gain                           (2)         (4)         (8)        (27)
      Non-controlling interest         -           1           2           3
      Others                          (2)         (5)        (11)        (13)
      Early settlement of
       natural gaz contracts          (2)          -          11           -
    -------------------------------------------------------------------------
                                      59          36         155         178
    Change in non-cash working
     capital components               26          62         (31)        (89)
    -------------------------------------------------------------------------
                                      85          98         124          89
    -------------------------------------------------------------------------
    INVESTING ACTIVITIES FROM
     CONTINUING OPERATIONS
    Purchases of property,
     plant and equipment             (63)        (60)       (191)       (167)
    Proceeds from disposal of
     property, plant and equipment     -           -           5           7
    Decrease (increase) in
     other assets                      1           -           3          (3)
    Cash of a joint venture and
     business acquisitions             -           -           5         (10)
    Business disposal, net of
     cash disposed                     -           -           -          37
    -------------------------------------------------------------------------
                                     (62)        (60)       (178)       (136)
    -------------------------------------------------------------------------
    FINANCING ACTIVITIES FROM
     CONTINUING OPERATIONS
    Bank loans and advances            7          (4)         20           7
    Change in revolving
     credit facilities              (171)        (25)       (149)        100
    Increase in other
     long-term debt                    1           -           2           -
    Payments of other
     long-term debt                    -          (1)         (7)         (8)
    Early settlement of
     foreign exchange contracts      150           -         150           -
    Net proceeds from issuance
     of common shares                  -           -           -           1
    Redemption of common shares       (1)         (1)         (4)         (5)
    Dividend paid to a non-
     controlling interest             (5)          -          (5)          -
    Dividends                         (4)         (4)        (16)        (16)
    -------------------------------------------------------------------------
                                     (23)        (35)         (9)         79
    -------------------------------------------------------------------------
    Change in cash and cash
     equivalents during the
     period from continuing
     operations                        -           3         (63)         32
    Change in cash and cash
     equivalents from
     discontinued operations,
     including proceeds on
     disposal                          1          (7)         50         (40)
    -------------------------------------------------------------------------

    Net change in cash and
     cash equivalents during
     the period                        1          (4)        (13)         (8)
    Translation adjustments
     on cash and cash
     equivalents                       1           3          (1)         (1)
    Cash and cash equivalents
     - Beginning of period             9          26          25          34
    -------------------------------------------------------------------------

    Cash and cash equivalents
     - End of period                  11          25          11          25
                           --------------------------------------------------
                           --------------------------------------------------


    Selected Segmented Information
    (in millions of Canadian dollars)
    (unaudited)

                             For the 3-month periods     For the years ended
                                   ended December 31,            December 31,
                                    2008        2007        2008        2007
                           --------------------------------------------------
    Sales
    Packaging products
      Boxboard
        Manufacturing                175         178         743         780
        Converting                   179         164         677         691
        Intersegment sales           (23)        (27)        (97)       (128)
                           --------------------------------------------------
                                     331         315       1,323       1,343
      Containerboard
        Manufacturing                154         143         615         599
        Converting                   232         237         962         984
        Intersegment sales           (93)        (98)       (374)       (390)
                           --------------------------------------------------
                                     293         282       1,203       1,193
      Specialty products
        Manufacturing                 83          73         315         318
        Converting                    70          58         267         232
        Recovery and deinked
         pulp                         81          96         376         374
        Intersegment sales           (25)        (25)        (98)        (90)
                           --------------------------------------------------
                                     209         202         860         834

        Intersegment sales           (19)        (26)       (100)       (108)
                           --------------------------------------------------
                                     814         773       3,286       3,262
    Tissue papers
      Manufacturing and
       converting                    228         171         787         713

    Intersegment sales               (22)         (7)        (56)        (46)
    -------------------------------------------------------------------------
    Consolidated total             1,020         937       4,017       3,929
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Selected Segmented Information
    (in millions of Canadian dollars)
    (unaudited)

                             For the 3-month periods     For the years ended
                                   ended December 31,            December 31,
                                    2008        2007        2008        2007
                           --------------------------------------------------
    Operating income (loss)
     before depreciation and
     amortization from
     continuing operations
    Packaging products
      Boxboard
        Manufacturing                (16)         (2)        (40)         (3)
        Converting                    11          13          50          76
        Others                        (2)         (2)        (13)         (4)
                           --------------------------------------------------
                                      (7)          9          (3)         69
      Containerboard
        Manufacturing                 17           5          57          59
        Converting                     7          19          53          76
        Others                        (5)          6          (7)         17
                           --------------------------------------------------
                                      19          30         103         152

      Specialty products
        Manufacturing                  6           -          10           6
        Converting                     9           8          30          26
        Recovery and deinked
         pulp                          6           6          24          25
        Others                        (1)          1           -           2
                           --------------------------------------------------
                                      20          15          64          59

                           --------------------------------------------------
                                      32          54         164         280
    Tissue papers
      Manufacturing and
       converting                     41          15          89          66

    Corporate                        (21)         (1)        (24)          6
    -------------------------------------------------------------------------
    Operating income before
     depreciation and
     amortization from
     continuing operations            52          68         229         352
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Depreciation and amortization
      Boxboard                       (20)        (18)        (72)        (68)
      Containerboard                 (16)        (18)        (63)        (68)
      Specialty products              (8)         (7)        (33)        (31)
      Tissue papers                  (10)         (8)        (36)        (35)
      Corporate and eliminations      (2)          2         (10)         (6)
                           --------------------------------------------------
                                     (56)        (49)       (214)       (208)
                           --------------------------------------------------
    Operating income (loss)
     from continuing operations       (4)         19          15         144
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Selected Segmented Information
    (in millions of Canadian dollars)
    (unaudited)

                             For the 3-month periods     For the years ended
                                   ended December 31,            December 31,
                                    2008        2007        2008        2007
                           --------------------------------------------------

    Purchases of property,
     plant and equipment
    Packaging products
      Boxboard
        Manufacturing                 10          10          24          23
        Converting                    13          10          36          36
                           --------------------------------------------------
                                      23          20          60          59
      Containerboard
        Manufacturing                  8           9          18          16
        Converting                     6           7          21          14
                           --------------------------------------------------
                                      14          16          39          30
      Specialty products
        Manufacturing                  4           3           9           9
        Converting                     1           4           4          10
        Recovery and deinked
         pulp                          9           5          28           7
                           --------------------------------------------------
                                      14          12          41          26

                           --------------------------------------------------
                                      51          48         140         115
    Tissue papers
      Manufacturing and
       converting                     13          17          38          52

    Corporate                          5           2          10           7
    -------------------------------------------------------------------------
    Consolidated total                69          67         188         174
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Purchases of property,
     plant and equipment
     included in accounts
     payable
      Beginning of period              8           9          17          10
      End of period                  (14)        (17)        (14)        (17)
    -------------------------------------------------------------------------
    Total investing activities        63          59         191         167
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Additional information
    (in millions of Canadian dollars,
     except shipments and share information)
    (unaudited)

                             For the 3-month periods     For the years ended
                                   ended December 31,            December 31,
                                    2008        2007        2008        2007
                           --------------------------------------------------

    Common shares -
     Toronto Stock
     Exchange
                       High        $6.43      $10.04       $8.90      $15.80
                        Low        $3.00       $7.46       $3.00       $7.46
                     Volume   13,398,000  11,876,000  39,810,000  63,226,000
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Shipments of manufacturing
     and converting products
      (in thousands of short tons)
    Packaging products
      Boxboard                       246         292       1,093       1,202
      Containerboard                 336         338       1,389       1,412
      Specialty products             109         110         458         450
    Tissue papers                    119         115         471         451
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Supplemental information on non-GAAP measure

    Operating income before depreciation and amortization and operating income
are not measures of performance under Canadian generally accepted accounting
principles ("GAAP"). The Company includes operating income before depreciation
and amortization and operating income because they are the measures used by
management to assess the operating and financial performance of the Company's
operating segments. As well, the Company believes that operating income before
depreciation and amortization and operating income provides an additional
measure often used by investors to assess a company's operating performance
and its ability to meet debt service requirements. However, operating income
before depreciation and amortization and operating income do not represent,
and should not be used as a substitute for net earnings or cash flows from
operations as determined in accordance with Canadian GAAP and operating income
before depreciation and amortization and operating income are not necessarily
an indication of whether cash flow will be sufficient to fund our cash
requirements. In addition, our definition of operating income before
depreciation and amortization and operating income may differ from that of
other companies.

    Net earnings (loss), which is a performance measure defined by Canadian
GAAP is reconcilied below to operating income (loss) and to operating income
before depreciation and amortization:


                             For the 3-month periods     For the years ended
                                   ended December 31,            December 31,
                                    2008        2007        2008        2007
                           --------------------------------------------------

    Net earnings (loss) for
     the period                      (19)         12         (55)         95
    Net earnings (loss) from
     discontinued operations           -          11         (18)         19
    Non-controlling interest           -           1           2           3
    Share of earnings of
     significantly influenced
     companies and dilution
     gain                             (2)         (4)         (8)        (27)
    Provision for (recovery
     of) income taxes                (12)         (9)        (32)         11
    Foreign exchange loss
     (gain) on long-term debt          4         (16)         24         (59)
    Interest expense                  25          24         102         102
                           --------------------------------------------------
    Operating income (loss)
     from continuing operations       (4)         19          15         144

    Depreciation and
     amortization                     56          49         214         208
                           --------------------------------------------------
    Operating income before
     depreciation and
     amortization                     52          68         229         352
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    




For further information:

For further information: Media: Hubert Bolduc, Vice-President,
Communications and Public Affairs, (514) 912-3790; Investors: Didier Filion,
Director, Investor relations, (514) 282-2697; Source: Christian Dubé,
Vice-President and Chief Financial Officer


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