Cascades Increases Annual Net Earnings and Announces Fourth Quarter 2016 Results

KINGSEY FALLS, QC, March 2, 2017 /CNW Telbec/ - Cascades Inc. (TSX: CAS) reports its unaudited financial results for the three-month period and the fiscal year ended December 31, 2016.

Q4 2016 Highlights

  • Sales of $979 million (compared to $1,021 million in Q3 2016 (-4%) and $975 million in Q4 2015 (stable))
  • Adjusted (excluding specific items)
    • OIBD of $82 million (compared to $103 million in Q3 2016 (-20%) and $104 million in Q4 2015 (-21%))
    • Net earnings per common share of $0.16 (compared to $0.32 in Q3 2016 and $0.23 in Q4 2015)

As reported (including specific items)

  • OIBD of $83 million (compared to $98 million in Q3 2016 (-15%) and $44 million in Q4 2015 (+89%))
  • Net earnings per common share of $0.04 (compared to $0.21 in Q3 2016 and a net loss of $0.81 in Q4 2015)

      2016 Annual Highlights

      • Sales of $4,001 million (compared to $3,861 million in 2015 (+4%))
      • Adjusted (excluding specific items)
        • OIBD of $403 million (compared to $426 million in 2015 (-5%))
        • Net earnings per common share of $1.21 (compared to $1.18 in 2015)

      As reported (including specific items)

      • OIBD of $413 million (compared to $343 million in 2015 (+20%))
      • Net earnings per common share of $1.42 (compared to a net loss of $0.69 in 2015)

        Net debt of $1,532 million as at December 31, 2016 (compared to $1,721 million as at December 31, 2015 (-11%)) and net debt to adjusted OIBD ratio at 3.8x, down from 4.0x at year-end 2015.

          For further details, please see the IFRS and non-IFRS measures reconciliation tables, included herewith.

          Mr. Mario Plourde, President and Chief Executive Officer, commented: "We finished our financial year with positive results, in spite of a fourth quarter that was below our expectations. Among the factors that impacted Q4 results on a sequential basis, the most notable was longer market related and maintenance downtime in our tissue and containerboard segments, which hindered both volume and operating cost levels of these divisions. On a year-over-year basis, sales remained stable, driven by increased sales from recovery and recycling activities and better volumes in our Containerboard Packaging and Specialty Products groups, which counterbalanced the continued weakness in Europe and softer containerboard pricing following the onset of pricing weakness at the beginning of 2016.

          On an annual basis, our North American operations executed well in 2016, delivering a 6% year-over-year sales increase that more than counterbalanced the 4% sales decline in Europe. While adjusted operating income decreased compared to 2015, this largely reflects continued weakness in Europe, and the higher level of investments we are making to implement our ERP platform across our facilities and adapt many of our business processes.

          Lastly, we are pleased to note that we continued to deliver on our commitment to lower our debt levels. Despite fluctuations in foreign exchange rates, which increased net debt by $24 million during the period, we successfully reduced our total net debt by an additional 6%, or $93 million during the fourth quarter. This brought full year debt reduction to $189 million, which represents a notable 11% decrease from year-end 2015 levels, and resulted in our leverage ratio decreasing to 3.8x from 4.0x at the end of last year. We remain committed to continuing our efforts to deleverage our balance sheet going forward in order to bolster our operational flexibility, and improve our overall financial profile."

          Financial Summary

           

          Segmented adjusted OIBD 1












          (in millions of Canadian dollars) (unaudited)

          2016

          2015

          Q4 2016

          Q3 2016

          Q4 2015












          Packaging Products












          Containerboard


          216


          231


          43


          58


          56


          Boxboard Europe


          53


          63


          11


          9


          13


          Specialty Products


          65


          58


          17


          18


          16












          Tissue Papers


          150


          119


          30


          47


          38












          Corporate Activities


          (81)


          (45)


          (19)


          (29)


          (19)

          Adjusted OIBD


          403


          426


          82


          103


          104

          1 - Refer to the "Supplemental Information on Non-IFRS Measures" section.






















          Selected consolidated information






















          (in millions of Canadian dollars, except amounts per share) (unaudited)

          2016

          2015

          Q4 2016

          Q3 2016

          Q4 2015

          Sales


          4,001


          3,861


          979


          1,021


          975

          Adjusted1












          Operating income before depreciation and amortization (OIBD)


          403


          426


          82


          103


          104


          Operating income


          211


          236


          32


          55


          47


          Net earnings


          114


          112


          15


          30


          22



          per common share

          $

          1.21

          $

          1.18

          $

          0.16

          $

          0.32

          $

          0.23


          Margin (OIBD)


          10.1%


          11%


          8.4%


          10.1%


          10.7%

          As reported












          Operating income before depreciation and amortization (OIBD)


          413


          343


          83


          98


          44


          Operating income (loss)


          221


          153


          33


          50


          (13)


          Net earnings (loss)


          135


          (65)


          4


          20


          (76)



          per common share

          $

          1.42

          $

          (0.69)

          $

          0.04

          $

          0.21

          $

          (0.81)

          1 - Refer to the "Supplemental Information on Non-IFRS Measures" section.

           

          Analysis of results for the three-month period ended December 31, 2016 (compared to the same period last year)

          Sales of $979 million increased by $4 million compared to the same period last year. This reflects higher year-over-year sales volumes in Containerboard and Specialty Products, and a $13 million sales increase generated by recovery and recycling activities. Offsetting these were a $2 million currency-related negative impact, and a $15 million decrease attributable to lower average sales prices, most notably in the European Boxboard and Containerboard Packaging segments, related to mix and market pricing conditions. On the strategic front, benefits accruing to the containerboard business from the acquisition of a plant in the second quarter more than offset the negative impact from the Specialty Products segment's closure of its de-inked pulp mill in Maine.

          On an adjusted basis, fourth quarter 2016 operating income stood at $32 million compared to $47 million in 2015. The decrease reflects the impacts on sales as described above, combined with higher raw material and maintenance and logistics costs, which negatively impacted the contribution from our containerboard and tissue activities. Additionally, we incurred higher marketing costs in our Tissue Group related to the repositioning and rebranding of the group's Away-from-Home and retail product lines.

          The main specific items, before income taxes, that impacted our fourth quarter 2016 operating income and/or net earnings were:

          • a $2 million impairment reversal related to a building sold after the closure of our de-inked pulp mill located in Auburn, Maine
          • a $1 million unrealized loss on derivative financial instruments
          • a $13 million foreign exchange loss on long-term debt and financial instruments

                              Adjusted net earnings amounted to $15 million ($0.16 per share) in the fourth quarter of 2016 compared to $22 million ($0.23 per share) for the comparable period in 2015. Prior-year adjusted net earnings exclude $98 million of specific items, the most notable being $73 million of impairment charges and tax reversals incurred in the European Boxboard segment. As reported, net earnings amounted to $4 million ($0.04 per share) in the fourth quarter of 2016 compared to a net loss of $76 million ($0.81 per share) in the same period in 2015.

                              Analysis of results for the three-month period ended December 31, 2016 (compared to the previous quarter)

                              On a sequential basis, sales declined by 4% to $979 million. This decrease is largely attributable to the lower seasonal volumes common during the period, primarily in the Tissue and Containerboard Packaging groups, and additional downtime taken during December. Partially offsetting these impacts were a favourable foreign exchange rate for our North American operations.

                              Adjusted operating income decreased from $55 million in the third quarter of 2016 to $32 million to in the fourth quarter of 2016. This is attributable to the sales variances explained above, higher production costs due to extended downtime periods and additional marketing costs in the Tissue Group. At the corporate level, a $2 million insurance refund related to the fire at the Mississauga, Ontario, plant was received during the current period. These funds partially reimburse a total of $4 million of costs related to this fire that were recorded during the third quarter.

                              Near-Term Outlook

                              Commenting on the outlook for Cascades, Mr. Plourde added: "Looking ahead, we expect near-term financial performance to reflect recent increases in raw material costs and the usual seasonal trends in our business segments. In Europe, favourable order inflow trends at the beginning of 2017, and the recently announced €60 April price increase suggest early signs of improvement in market dynamics compared to the softness seen in 2016. On a segmented basis, we expect the fall 2016 price increase announcement to benefit our Containerboard Packaging division in the first quarter, and to be fully implemented as of the end of the second quarter. However, recent raw material price increases will counterbalance the benefit. We recently announced a second price increase in Containerboard, which should start to take effect in the second quarter, and be fully realized during the second half of the year. In our Tissue Group, the combination of lower marketing costs, recent product repositioning efforts and the beneficial impact of price increases announced in 2016 are expected to support performance going forward. On a positive note, our new Tissue converting facility in Scappoose, Oregon, began operating its first line last month, as planned. The facility will continue ramping up, and will add two new converting lines through the second quarter. Finally, we anticipate our Specialty Products Group to maintain its positive momentum built over the past two years. On the cost side, tight market dynamics, including strong demand, are expected to continue putting pressure on the price of our input materials in the near-term. 

                              Corporate investments are expected to remain elevated through the end of this year. However, we look forward to completing the implementation of our ERP platform and other initiatives undertaken to modernize our internal processes in 2017. In addition, we will continue our efforts to deleverage our balance sheet, and to analyze our strategic options with the view of creating additional value for our shareholders. As always, our strategic efforts will be guided by our commitment to increase operational efficiency, execution and flexibility through targeted investments and growth initiatives."

                              Dividend on common shares and normal course issuer bid

                              The Board of Directors of Cascades declared a quarterly dividend of $0.04 per share to be paid on April 3, 2017, to shareholders of record at the close of business on March 24, 2017. This dividend is an "eligible dividend" as per the Income Tax Act (R.C.S. (1985), Canada). For the year 2016, 1,047,243 common shares were repurchased for cancellation at an average price of $8.61, representing an aggregate amount of approximately $9.0 million.

                              2016 Fourth Quarter and Annual Financial Results Conference Call Details

                              Management will discuss the 2016 fourth quarter and annual financial results during a conference call today at 10:00 a.m. EST. The call can be accessed by dialing 1-888-231-8191. The conference call, including the investor presentation, will be broadcast live on the Cascades website (www.cascades.com) under the "Investors" section. A replay of the call will be available on the Cascades website and may also be accessed by phone until April 2, 2017 by dialing 1-855-859-2056, access code 50805795.

                              Founded in 1964, Cascades produces, converts and markets packaging and tissue products that are composed mainly of recycled fibres. The Corporation employs 11,000 employees, who work in close to 90 units located in North America and Europe. With its management philosophy, half a century of experience in recycling, and continuous efforts in research and development as driving forces, Cascades continues to serve its clients with innovative products. 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 Corporation'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 Corporation's Securities and Exchange Commission filings.

                               

                              CONSOLIDATED BALANCE SHEETS






                              (in millions of Canadian dollars) (unaudited)

                              December 31,
                              2016

                              December 31,
                              2015

                              Assets



                              Current assets



                              Cash and cash equivalents

                              62

                              60

                              Accounts receivable

                              524

                              540

                              Current income tax assets

                              12

                              30

                              Inventories

                              477

                              494

                              Financial assets

                              3

                              1


                              1,078

                              1,125

                              Long-term assets



                              Investments in associates and joint ventures

                              335

                              322

                              Property, plant and equipment

                              1,618

                              1,608

                              Intangible assets with finite useful life

                              171

                              174

                              Financial assets

                              10

                              12

                              Other assets

                              72

                              80

                              Deferred income tax assets

                              179

                              181

                              Goodwill and other intangible assets with indefinite useful life

                              350

                              346


                              3,813

                              3,848

                              Liabilities and Equity



                              Current liabilities



                              Bank loans and advances

                              28

                              37

                              Trade and other payables

                              661

                              613

                              Current income tax liabilities

                              1

                              1

                              Current portion of long-term debt

                              36

                              34

                              Current portion of provisions for contingencies and charges

                              9

                              5

                              Current portion of financial liabilities and other liabilities

                              27

                              37


                              762

                              727

                              Long-term liabilities



                              Long-term debt

                              1,530

                              1,710

                              Provisions for contingencies and charges

                              34

                              34

                              Financial liabilities

                              16

                              47

                              Other liabilities

                              178

                              178

                              Deferred income tax liabilities

                              219

                              189


                              2,739

                              2,885

                              Equity attributable to Shareholders



                              Capital stock

                              487

                              490

                              Contributed surplus

                              16

                              17

                              Retained earnings

                              512

                              387

                              Accumulated other comprehensive loss

                              (31)

                              (27)


                              984

                              867

                              Non-controlling interests

                              90

                              96

                              Total equity

                              1,074

                              963


                              3,813

                              3,848

                               

                              CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)







                              For the 3-month periods ended December 31,

                              For years ended December 31,

                              (in millions of Canadian dollars, except per-common share amounts and number of common shares) (unaudited)

                              2016

                              2015

                              2016

                              2015

                              Sales

                              979

                              975

                              4,001

                              3,861

                              Cost of sales and expenses





                              Cost of sales (including depreciation and amortization of $192 million ($50 million in the fourth quarter); 2015 — $190 million ($57 million in the fourth quarter))

                              841

                              826

                              3,380

                              3,261

                              Selling and administrative expenses

                              106

                              98

                              402

                              360

                              Gain on acquisitions, disposals and others

                              (4)

                              (1)

                              Impairment charges (reversal) and restructuring costs

                              (2)

                              56

                              12

                              66

                              Foreign exchange gain

                              (4)

                              (1)

                              (4)

                              (6)

                              Loss (gain) on derivative financial instruments

                              5

                              9

                              (6)

                              28


                              946

                              988

                              3,780

                              3,708

                              Operating income (loss)

                              33

                              (13)

                              221

                              153

                              Financing expense

                              21

                              22

                              88

                              91

                              Interest expense on employee future benefits

                              1

                              1

                              5

                              6

                              Loss on refinancing of long-term debt

                              19

                              Foreign exchange loss (gain) on long-term debt and financial instruments

                              13

                              23

                              (22)

                              91

                              Share of results of associates and joint ventures

                              (7)

                              (6)

                              (32)

                              (37)

                              Earnings (loss) before income taxes

                              5

                              (53)

                              182

                              (17)

                              Provision for income taxes

                              2

                              23

                              45

                              40

                              Net earnings (loss) from continuing operations including non-controlling interests for the period

                              3

                              (76)

                              137

                              (57)

                              Net earnings from discontinued operations

                              1

                              1

                              Net earnings (loss) including non-controlling interests for the period

                              3

                              (75)

                              137

                              (56)

                              Net earnings (loss) attributable to non-controlling interests

                              (1)

                              1

                              2

                              9

                              Net earnings (loss) attributable to Shareholders for the period

                              4

                              (76)

                              135

                              (65)

                              Net earnings (loss) from continuing operations per common share






                              Basic

                              $

                              0.04

                              $

                              (0.82)

                              $

                              1.42

                              $

                              (0.70)


                              Diluted

                              $

                              0.04

                              $

                              (0.82)

                              $

                              1.39

                              $

                              (0.70)

                              Net earnings (loss) per common share






                              Basic

                              $

                              0.04

                              $

                              (0.81)

                              $

                              1.42

                              $

                              (0.69)


                              Diluted

                              $

                              0.04

                              $

                              (0.81)

                              $

                              1.39

                              $

                              (0.69)

                              Weighted average basic number of common shares outstanding

                              94,487,211

                              94,690,092

                              94,709,048

                              94,384,308

                              Weighted average number of diluted common shares

                              96,992,787

                              97,117,947

                              96,877,848

                              96,261,484






                              Net earnings (loss) attributable to Shareholders:






                              Continuing operations

                              4

                              (77)

                              135

                              (66)


                              Discontinued operations

                              1

                              1

                              Net earnings (loss)

                              4

                              (76)

                              135

                              (65)

                               

                              CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)







                              For the 3-month periods ended
                              December 31,

                              For the years ended
                              December 31,

                              (in millions of Canadian dollars) (unaudited)

                              2016

                              2015

                              2016

                              2015

                              Net earnings (loss) including non-controlling interests for the period

                              3

                              (75)

                              137

                              (56)

                              Other comprehensive income (loss)






                              Items that may be reclassified subsequently to earnings







                              Translation adjustments








                              Change in foreign currency translation of foreign subsidiaries

                              4

                              29

                              (33)

                              115




                              Change in foreign currency translation related to net investment hedging activities

                              (13)

                              (23)

                              21

                              (101)



                              Cash flow hedges








                              Change in fair value of foreign exchange forward contracts

                              2




                              Change in fair value of commodity derivative financial instruments

                              4

                              1

                              10

                              2



                              Available-for-sale financial assets

                              1

                              (2)

                              2



                              Share of other comprehensive income of associates

                              9

                              3

                              14



                              Income taxes

                              (3)

                              2

                              (6)

                              8


                              2

                              12

                              (10)

                              42


                              Items that are reclassified to retained earnings







                              Actuarial gain on post-employment benefit obligations

                              42

                              16

                              11

                              25



                              Income taxes

                              (11)

                              (4)

                              (3)

                              (7)


                              31

                              12

                              8

                              18

                              Other comprehensive income (loss)

                              33

                              24

                              (2)

                              60

                              Comprehensive income (loss) including non-controlling interests for the period

                              36

                              (51)

                              135

                              4

                              Comprehensive income (loss) attributable to non-controlling interests for the period

                              (4)

                              2

                              (4)

                              16

                              Comprehensive income (loss) attributable to Shareholders for the period

                              40

                              (53)

                              139

                              (12)

                              Comprehensive income (loss) attributable to Shareholders:






                              Continuing operations

                              40

                              (54)

                              139

                              (13)


                              Discontinued operations

                              1

                              1

                              Comprehensive income (loss)

                              40

                              (53)

                              139

                              (12)

                               

                              CONSOLIDATED STATEMENTS OF EQUITY






                              For the year ended December 31, 2016

                              (in millions of Canadian dollars) (unaudited)

                              CAPITAL
                              STOCK


                              CONTRIBUTED
                              SURPLUS


                              RETAINED
                              EARNINGS


                              ACCUMULATED
                              OTHER
                              COMPREHENSIVE
                              LOSS


                              TOTAL EQUITY
                              ATTRIBUTABLE TO
                              SHAREHOLDERS


                              NON-
                              CONTROLLING
                              INTERESTS


                              TOTAL
                              EQUITY

                              Balance - Beginning of year

                              490


                              17


                              387


                              (27)


                              867


                              96


                              963

                              Comprehensive income (loss)















                              Net earnings



                              135



                              135


                              2


                              137


                              Other comprehensive income (loss)



                              8


                              (4)


                              4


                              (6)


                              (2)





                              143


                              (4)


                              139


                              (4)


                              135

                              Dividends



                              (15)



                              (15)



                              (15)

                              Stock options

                              1





                              1



                              1

                              Issuance of common shares

                              1





                              1



                              1

                              Redemption of common shares

                              (5)


                              (1)


                              (3)



                              (9)



                              (9)

                              Dividends paid to non-controlling interests and acquisition of non-controlling interests






                              (2)


                              (2)

                              Balance - End of year

                              487


                              16


                              512


                              (31)


                              984


                              90


                              1,074












                              For the year ended December 31, 2015

                              (in millions of Canadian dollars) (unaudited)

                              CAPITAL
                              STOCK


                              CONTRIBUTED
                              SURPLUS


                              RETAINED
                              EARNINGS


                              ACCUMULATED
                              OTHER
                              COMPREHENSIVE
                              LOSS


                              TOTAL EQUITY
                              ATTRIBUTABLE TO
                              SHAREHOLDERS


                              NON-
                              CONTROLLING
                              INTERESTS


                              TOTAL
                              EQUITY

                              Balance - Beginning of year

                              483


                              18


                              454


                              (62)


                              893


                              110


                              1,003

                              Comprehensive income (loss)









                              Net earnings (loss)



                              (65)



                              (65)


                              9


                              (56)


                              Other comprehensive income



                              18


                              35


                              53


                              7


                              60





                              (47)


                              35


                              (12)


                              16


                              4

                              Dividends



                              (15)



                              (15)



                              (15)

                              Stock options

                              2


                              (1)




                              1



                              1

                              Issuance of common shares

                              5





                              5



                              5

                              Acquisition of non-controlling interests



                              (5)



                              (5)


                              (30)


                              (35)

                              Balance - End of year

                              490


                              17


                              387


                              (27)


                              867


                              96


                              963


                               

                              CONSOLIDATED STATEMENTS OF CASH FLOWS











                              For the 3-month periods ended
                              December 31,


                              For the years ended
                              December 31,

                              (in millions of Canadian dollars) (unaudited)

                              2016


                              2015


                              2016


                              2015

                              Operating activities from continuing operations








                              Net earnings (loss) attributable to Shareholders for the period

                              4


                              (76)


                              135


                              (65)

                              Net earnings from discontinued operations


                              (1)



                              (1)

                              Net earnings (loss) from continuing operations

                              4


                              (77)


                              135


                              (66)

                              Adjustments for:






                              Financing expense and interest expense on employee future benefits

                              22


                              23


                              93


                              97


                              Loss on refinancing of long-term debt




                              19


                              Depreciation and amortization

                              50


                              57


                              192


                              190


                              Loss (gain) on acquisitions, disposals and others

                              1



                              (4)


                              (1)


                              Impairment (reversal) charges and restructuring costs

                              (2)


                              57


                              4


                              64


                              Unrealized loss (gain) on derivative financial instruments

                              1


                              4


                              (18)


                              18


                              Foreign exchange loss (gain) on long-term debt and financial instruments

                              13


                              23


                              (22)


                              91


                              Provision for income taxes

                              2


                              23


                              45


                              40


                              Share of results of associates and joint ventures

                              (7)


                              (6)


                              (32)


                              (37)


                              Net earnings (loss) attributable to non-controlling interests

                              (1)


                              1


                              2


                              9


                              Net financing expense paid

                              (4)


                              (4)


                              (89)


                              (89)


                              Premium paid on long-term debt refinancing




                              (13)


                              Net income taxes received (paid)


                              (4)


                              10


                              (14)


                              Dividend received

                              6


                              6


                              18


                              17


                              Employee future benefits and others


                              4


                              (18)


                              (3)



                              85


                              107


                              316


                              322

                              Changes in non-cash working capital components

                              93


                              30


                              56


                              (38)



                              178


                              137


                              372


                              284

                              Investing activities from continuing operations





                              Investments in associates and joint ventures

                              (4)


                              (2)


                              (6)


                              (2)

                              Payments for property, plant and equipment

                              (57)


                              (50)


                              (182)


                              (163)

                              Proceeds on disposals of property, plant and equipment

                              2


                              1


                              5


                              4

                              Change in intangible and other assets

                              (2)


                              13


                              14


                              8

                              Business acquisition

                              (1)



                              (16)




                              (62)


                              (38)


                              (185)


                              (153)

                              Financing activities from continuing operations





                              Bank loans and advances

                              (4)


                              4


                              (8)


                              (14)

                              Change in revolving credit facilities

                              (99)


                              (91)


                              (146)


                              (120)

                              Issuance of senior notes, net of related expenses




                              300

                              Repayment of senior notes




                              (305)

                              Increase in other long-term debt

                              29


                              30


                              40


                              73

                              Payments of other long-term debt

                              (16)


                              (10)


                              (47)


                              (48)

                              Settlement of derivative financial instruments

                              3



                              3


                              Issuance of common shares

                              1


                              4


                              1


                              5

                              Redemption of common shares

                              (1)



                              (9)


                              Dividends paid to non-controlling interests and acquisition of non-controlling interests


                              (3)


                              (1)


                              (5)

                              Dividends paid to the Corporation's Shareholders

                              (3)


                              (4)


                              (15)


                              (15)



                              (90)


                              (70)


                              (182)


                              (129)

                              Change in cash and cash equivalents during the period from continuing operations

                              26


                              29


                              5


                              2

                              Change in cash and cash equivalents during the period from discontinued operations


                              (3)



                              30

                              Net change in cash and cash equivalents during the period

                              26


                              26


                              5


                              32

                              Currency translation on cash and cash equivalents

                              (1)



                              (3)


                              (1)

                              Cash and cash equivalents - Beginning of period

                              37


                              34


                              60


                              29

                              Cash and cash equivalents - End of period

                              62


                              60


                              62


                              60

                               

                              SEGMENTED INFORMATION

                              The Corporation analyzes the performance of its operating segments based on their operating income before depreciation and amortization, which is not a measure of performance under International Financial Reporting Standards ("IFRS"); however, the chief operating decision-maker ("CODM") uses this performance measure to assess the operating performance of each reportable segment. Earnings for each segment are prepared on the same basis as those of the Corporation. Intersegment operations are recorded on the same basis as sales to third parties, which are at fair market value. The accounting policies of the reportable segments are the same as the Corporation's accounting policies described in its most recent audited consolidated financial statements for the year ended December 31, 2015.

                              The Corporation's operating segments are reported in a manner consistent with the internal reporting provided to the CODM. The Chief Executive Officer has authority for resource allocation and assessment of the Corporation's performance, and is therefore the CODM.

                              The Corporation's operations are managed in four segments: Containerboard, Boxboard Europe, Specialty Products (which constitute the Corporation's Packaging Products) and Tissue Papers.

                               






                              SALES




                              For the 3-month periods ended
                              December 31,


                              For the years ended
                              December 31,

                              (in millions of Canadian dollars) (unaudited)

                              2016


                              2015


                              2016


                              2015

                              Packaging Products









                              Containerboard

                              336


                              326


                              1,370


                              1,301


                              Boxboard Europe

                              191


                              202


                              796


                              825


                              Specialty Products

                              156


                              147


                              620


                              579


                              Intersegment sales

                              (16)


                              (15)


                              (61)


                              (55)



                              667


                              660


                              2,725


                              2,650

                              Tissue Papers

                              319


                              322


                              1,305


                              1,236

                              Intersegment sales and Corporate activities

                              (7)


                              (7)


                              (29)


                              (25)



                              979


                              975


                              4,001


                              3,861









                              OPERATING INCOME (LOSS)
                              BEFORE DEPRECIATION AND AMORTIZATION (OIBD)



                              For the 3-month periods ended
                              December 31,


                              For the years ended
                              December 31,

                              (in millions of Canadian dollars) (unaudited)

                              2016


                              2015


                              2016


                              2015

                              Packaging Products









                              Containerboard

                              42


                              55


                              214


                              233


                              Boxboard Europe

                              11


                              (42)


                              51


                              6


                              Specialty Products

                              19


                              16


                              71


                              52



                              72


                              29


                              336


                              291

                              Tissue Papers

                              30


                              38


                              139


                              119

                              Corporate

                              (19)


                              (23)


                              (62)


                              (67)

                              Operating income before depreciation and amortization

                              83


                              44


                              413


                              343

                              Depreciation and amortization

                              (50)


                              (57)


                              (192)


                              (190)

                              Financing expense and interest expense on employee future benefits

                              (22)


                              (23)


                              (93)


                              (97)

                              Loss on refinancing of long-term debt




                              (19)

                              Foreign exchange gain (loss) on long-term debt and financial instruments

                              (13)


                              (23)


                              22


                              (91)

                              Share of results of associates and joint ventures

                              7


                              6


                              32


                              37

                              Earnings (loss) before income taxes

                              5


                              (53)


                              182


                              (17)









                              PAYMENTS FOR PROPERTY, PLANT AND EQUIPMENT



                              For the 3-month periods ended
                              December 31,


                              For the years ended
                              December 31,

                              (in millions of Canadian dollars) (unaudited)

                              2016


                              2015


                              2016


                              2015

                              Packaging Products









                              Containerboard

                              25


                              34


                              51


                              64


                              Boxboard Europe

                              6


                              11


                              26


                              23


                              Specialty Products

                              7


                              5


                              26


                              14



                              38


                              50


                              103


                              101

                              Tissue Papers

                              30


                              10


                              77


                              57

                              Corporate

                              5


                              3


                              26


                              7

                              Total acquisitions

                              73


                              63


                              206


                              165

                              Proceeds on disposals of property, plant and equipment

                              (2)


                              (1)


                              (5)


                              (4)

                              Capital-lease acquisitions and included in other debts

                              (1)


                              (2)


                              (18)


                              (3)



                              70


                              60


                              183


                              158

                              Acquisitions of property, plant and equipment included in "Trade and other payables"









                              Beginning of period

                              10


                              8


                              19


                              20


                              End of period

                              (25)


                              (19)


                              (25)


                              (19)

                              Payments for property, plant and equipment net of proceeds on disposals

                              55


                              49


                              177


                              159

                               

                              SUPPLEMENTAL INFORMATION ON NON-IFRS MEASURES

                              Operating income before depreciation and amortization, adjusted operating income before depreciation and amortization (excluding specific items), earnings before interest, income taxes, depreciation and amortization and operating income are not measures of performance under IFRS. The Corporation includes operating income before depreciation and amortization, adjusted operating income before depreciation and amortization, earnings before interest, taxes, depreciation and amortization and operating income because they are measures used by management to assess the operating and financial performance of the Corporation's operating segments. The Corporation 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, adjusted operating income before depreciation and amortization, earnings before interest, taxes, depreciation and amortization and operating income do not represent, and should not be used as a substitute for, net earnings or cash flows from operating activities as determined in accordance with IFRS, 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 interest, taxes, depreciation and amortization and operating income may differ from those of other companies.

                              Adjusted operating income before depreciation and amortization, adjusted earnings before interest, income taxes, depreciation and amortization, adjusted operating income, adjusted net earnings and adjusted net earnings per common share are non-IFRS measures. The Corporation believes that it is useful for investors to be aware of specific items that have adversely or positively affected its IFRS measures, and that the above mentioned non-IFRS measures provide investors with a measure of performance with which to compare its results between periods without regard to these specific items. The Corporation's adjusted measures have no standardized meaning prescribed by IFRS and are not necessarily comparable to similar measures presented by other companies and therefore should not be considered in isolation.

                              The specific items excluded from OIBD, operating income, financing expense, net earnings and cash flow from operations mainly include  charges for (reversals of) impairment of assets, restructuring gains or costs, loss on refinancing of long-term debt, deferred tax assets provisions or reversals, premiums paid on long-term debt refinancing, gains or losses on the acquisition or sale of a business unit, gains or losses on the share of results of associates and joint ventures, unrealized gains or losses on derivative financial instruments that do not qualify for hedge accounting, unrealized gains or losses on interest rate swaps, foreign exchange gains or losses on long-term debt, specific items of discontinued operations and other significant items of an unusual or non-recurring nature. Although we consider these items to be non-recurring and less relevant to evaluating our performance, some of them may take place in the future and will reduce the cash available to us.

                              The following table reconciles net earnings (loss) and net earnings (loss) per common share with adjusted net earnings and adjusted net earnings per share:

                               





                              (in millions of Canadian dollars, except amounts per share) (unaudited)

                              Net earnings


                              Net earnings per share 1


                              2016


                              2015


                              Q4 2016


                              Q3 2016


                              Q4 2015



                              2016



                              2015



                              Q4 2016



                              Q3 2016



                              Q4 2015

                              As per IFRS

                              135


                              (65)


                              4


                              20


                              (76)


                              $

                              1.42


                              $

                              (0.69)


                              $

                              0.04


                              $

                              0.21


                              $

                              (0.81)

                              Specific items:












                              Gain on acquisitions, disposals and others

                              (4)


                              (1)





                              $

                              (0.03)


                              $

                              (0.01)




                              Impairment charges (reversal)

                              3


                              69


                              (2)


                              2


                              57


                              $

                              0.03


                              $

                              0.67


                              $

                              (0.01)


                              $

                              0.02


                              $

                              0.59

                              Restructuring costs (gain)

                              9


                              (3)



                              3


                              (1)


                              $

                              0.06


                              $

                              (0.03)



                              $

                              0.02


                              $

                              (0.01)

                              Unrealized loss (gain) on derivative financial instruments

                              (18)


                              18


                              1



                              4


                              $

                              (0.14)


                              $

                              0.14


                              $

                              0.01



                              $

                              0.03

                              Loss on refinancing of long-term debt


                              19






                              $

                              0.15




                              Unrealized loss (gain) on interest rates swaps

                              (1)


                              1


                              (1)




                              $

                              (0.01)


                              $

                              0.01


                              $

                              (0.01)



                              Foreign exchange loss (gain) on long-term debt and financial instruments

                              (22)


                              91


                              13


                              7


                              23


                              $

                              (0.19)


                              $

                              0.83


                              $

                              0.12


                              $

                              0.07


                              $

                              0.20

                              Share of results of associates and joint ventures

                              7


                              (9)


                              1



                              3


                              $

                              0.05


                              $

                              (0.07)


                              $

                              0.01



                              $

                              0.03

                              Included in discontinued operations, net of tax


                              (2)






                              $

                              (0.02)




                              Tax effect on specific items, other tax adjustments and attributable to non-controlling interest 1

                              5


                              (6)


                              (1)


                              (2)


                              12


                              $

                              0.02


                              $

                              0.20




                              $

                              0.20


                              (21)


                              177


                              11


                              10


                              98


                              $

                              (0.21)


                              $

                              1.87


                              $

                              0.12


                              0.11


                              $

                              1.04

                              Adjusted

                              114


                              112


                              15


                              30


                              22


                              $

                              1.21


                              $

                              1.18


                              $

                              0.16


                              $

                              0.32


                              $

                              0.23

                              Note 1 : Specific amounts per common share are calculated on an after-tax basis and are net of the portion attributable to non-controlling interest. Per share amounts in line item ''Tax effect on specific items, other tax adjustments and attributable to non-controlling interest'' only include the effect of tax adjustments. The $0.02 impact in 2016 is related to an income tax provision adjustment on past years sale of assets. The $0.20 impact in 2015 is related to the $18 million deferred tax assets reversal following the revaluation of our virgin boxboard mill in France.



                               

                              Net earnings (loss), which is a performance measure defined by IFRS, is reconciled below with operating income (loss), adjusted operating income and adjusted operating income before depreciation or adjusted earnings before interest, income taxes, depreciation and amortization:

                               











                              (in millions of Canadian dollars) (unaudited)

                              2016


                              2015


                              Q4 2016


                              Q3 2016


                              Q4 2015

                              Net earnings (loss) attributable to Shareholders for the period

                              135


                              (65)


                              4


                              20


                              (76)

                              Net earnings (loss) attributable to non-controlling interest

                              2


                              9


                              (1)



                              1

                              Net loss from discontinued operations


                              (1)




                              (1)

                              Provision for income taxes

                              45


                              40


                              2


                              9


                              23

                              Share of results of associates and joint ventures

                              (32)


                              (37)


                              (7)


                              (10)


                              (6)

                              Foreign exchange loss (gain) on long-term debt and financial instruments

                              (22)


                              91


                              13


                              7


                              23

                              Financing expense and interest on future employee benefits

                              93


                              116


                              22


                              24


                              23

                              Operating income

                              221


                              153


                              33


                              50


                              (13)

                              Specific items:







                              Gain on acquisitions, disposals and others

                              (4)


                              (1)





                              Impairment charges (reversal)

                              3


                              69


                              (2)


                              2


                              57


                              Restructuring costs (gain)

                              9


                              (3)



                              3


                              (1)


                              Unrealized loss (gain) on derivative financial instruments

                              (18)


                              18


                              1



                              4



                              (10)


                              83


                              (1)


                              5


                              60

                              Adjusted operating income

                              211


                              236


                              32


                              55


                              47

                              Depreciation and amortization

                              192


                              190


                              50


                              48


                              57

                              Adjusted operating income before depreciation and amortization

                              403


                              426


                              82


                              103


                              104

                               

                              The following table reconciles the total debt and the net debt with the net debt on adjusted operating income before depreciation and amortization (adjusted OIBD) ratio:

                               




                              (in millions of Canadian dollars) (unaudited)

                              December 31, 2016


                              December 31, 2015

                              Long-term debt

                              1,530


                              1,710

                              Current portion of long-term debt

                              36


                              34

                              Bank loans and advances

                              28


                              37

                              Total debt

                              1,594


                              1,781

                              Less: Cash and cash equivalents

                              62


                              60

                              Net debt

                              1,532


                              1,721

                              Adjusted OIBD on a last twelve months basis

                              403


                              426

                              Net debt / Adjusted OIBD ratio

                              3.8


                              4.0







                               

                              SOURCE Cascades Inc.

                              For further information: Media: Hugo D'Amours, Vice-President, Communications and Public Affairs, 819-363-5184; Investors: Jennifer Aitken, MBA, Director, Investor Relations, 514-282-2697; Source: Allan Hogg, Vice-President and Chief Financial Officer; Follow us on social media: Website: www.cascades.com, Twitter: twitter.com/@CascadesInvest, Facebook: facebook.com/Cascades, YouTube: youtube.com/Cascades

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