Cascades Announces Second Quarter 2017 Results; Continues to Execute on Strategic Fronts

KINGSEY FALLS, QC, Aug. 10, 2017 /CNW Telbec/ - Cascades Inc. (TSX: CAS) reports its unaudited financial results for the three-month period ended June 30, 2017.

Q2 2017 Highlights

  • Sales of $1,130 million
    (compared to $1,006 million in Q1 2017 (+12%) and $998 million in Q2 2016 (+13%))
  • As reported (including specific items)
    • Operating income of $48 million
      (compared to $31 million in Q1 2017 (+55%) and $65 million in Q2 2016 (-26%))
    • OIBD1 of $104 million
      (compared to $78 million in Q1 2017 (+33%) and $112 million in Q2 2016 (-7%))
    • Net earnings per common share of $3.41
      (compared to net earnings of $1.70 in Q1 2017 and net earnings of $0.38 in Q2 2016)
  • Adjusted (excluding specific items)2
    • Operating income of $51 million
      (compared to $28 million in Q1 2017 (+82%) and $65 million in Q2 2016 (-22%))
    • OIBD1 of $107 million
      (compared to $75 million in Q1 2017 (+43%) and $112 million in Q2 2016 (-4%))
    • Net earnings per common share of $0.25
      (compared to net earnings of $0.13 in Q1 2017 and net earnings of $0.38 in Q2 2016)
  • Greenpac results fully consolidated with those of the Corporation effective April 4, 2017.
  • Cascades added to the S&P/TSX Composite Index and to the S&P/TSX Composite Dividend Index effective June 19, 2017.
  • Net debt2 of $1,780 million as at June 30, 2017 (compared to $1,617 million as at March 31, 2017) and net debt to adjusted OIBD ratio2 at 4.2x on a pro-forma basis3.
  • On July 27, 2017, the Corporation announced the sale of it's 17.3% equity ownership in Boralex for an amount of $287.5 million.

 

1

OIBD = Operating income before depreciation and amortization.

2

For further details, please refer to the "Supplemental Information on non-IFRS Measures" section.

3

Pro-forma basis to include Greenpac on a LTM basis.

 

Mr. Mario Plourde, President and Chief Executive Officer, commented: "We have made significant progress on our strategic objectives in recent months with the Greenpac transaction, the inauguration of the new state of the art tissue converting plant in Scappoose, Oregon, the sale of our equity interest in Boralex and, more recently, the announcement of the construction of a new ultra modern containerboard converting plant in Piscataway, New Jersey. To this end, our second quarter results provide a more comprehensive picture of our North American Containerboard business following the consolidation of the results of the Greenpac Mill at the beginning of the quarter. This acquisition resulted in a gain of $281 million on net earnings, and added $219 million to our total net debt levels. However, on a pro-forma basis including Greenpac's results for the last twelve months, our leverage ratio stood at 4.2x as of the end of the second quarter, essentially unchanged from the previous quarter.

That said, our second quarter results fell short of expectations, most notably in our Containerboard segment. On a consolidated basis, the benefits realized year-over-year as a result of Greenpac and implementation of price increases in Containerboard, were limited by higher raw material costs, slightly lower volumes in Tissue, and higher operational costs primarily in Containerboard and Corporate activities.

Looking more specifically at our Containerboard business, the addition of Greenpac increased quarterly sales and operating income both sequentially and year-over-year. On a year-over-year basis, results were impacted by higher raw material costs, most notably OCC, which exceeded the benefits being realized from recent price increases which have yet to be fully implemented. Sequentially, the increases in price that have already been realized and a favourable product mix offset the incremental higher raw material cost during the second quarter. Higher operational, logistics and some unusual costs also tempered Containerboard operating income performance during the current period.

Second quarter results in our Tissue business decreased year-over-year as the benefits of higher realized average selling prices and favourable sales mix were more than offset by lower sales of jumbo rolls in the current period, as well as costs related to brand repositioning and the start-up of the new Oregon converting plant. On a sequential basis, Tissue results increased as a result of better seasonal volumes and improvements in average selling price, the benefits of which were partially offset by higher raw material costs.

As was the case in the first quarter, higher recycled fibre prices benefited results in our Specialty Products business in the second quarter. In addition, higher selling prices in the Industrial and Consumer Products packaging sectors similarly contributed to the improved results. Our Boxboard Europe segment improved results both sequentially and on a year-over-year basis. This reflects improved pricing, and strong order intake levels, which are attributable to a continued strengthening of market fundamentals. These improvements, along with lower energy prices, mitigated the impact of higher raw material prices on both a sequential and year-over-year basis.

Finally, the sale of our equity position in Boralex announced on July 27th will provide us with the means to improve our positioning within our core markets and strengthen our balance sheet. Proceeds from this transaction were used to repay the borrowings under our credit facility and to reduce our net debt leverage ratio, which, including this transaction, now stands at 3.5x on a pro-forma basis.

We are similarly pleased that Cascades was added to the S&P/TSX Composite Index effective June 19, 2017, as this provides increased exposure to a wider base of investors, and supports our efforts to deliver on our commitments to shareholders."

Financial Summary

 

Selected consolidated information








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

Q2 2017


Q1 2017


Q2 2016









Sales

1,130


1,006


998


As Reported








Operating income before depreciation and amortization (OIBD)1

104


78


112



Operating income

48


31


65



Net earnings

323


161


36




per common share

$

3.41


$

1.70


$

0.38


Adjusted1







Operating income before depreciation and amortization (OIBD)1

107


75


112



Operating income

51


28


65



Net earnings

24


12


35




per common share

$

0.25


$

0.13


$

0.38



Margin (OIBD)1

9.5

%

7.5

%

11.2

%

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


 

Segmented Operating Income as reported





(in millions of Canadian dollars)

Q2 2017

Q1 2017

Q2 2016





Packaging Products





Containerboard

30

33

46


Boxboard Europe

13

5

7


Specialty Products

14

13

16





Tissue Papers

17

8

18





Corporate Activities

(26)

(28)

(22)

Operating income as reported

48

31

65

 

Segmented adjusted OIBD1





(in millions of Canadian dollars) (unaudited)

Q2 2017

Q1 2017

Q2 2016





Packaging Products





Containerboard

56

45

60


Boxboard Europe

21

14

17


Specialty Products

20

18

16





Tissue Papers

35

23

39





Corporate Activities

(25)

(25)

(20)

Adjusted OIBD1

107

75

112

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

 

Analysis of results for the three-month period ended June 30, 2017 (compared to the same period last year)

Sales of $1,130 million increased by $132 million or 13% compared to the same period last year, reflecting growth and favourable exchange rates in all four of the Corporation's business segments. Sales in the Containerboard business increased by 25% compared to the prior year, driven by the inclusion of the Greenpac Mill sales in the current period, in addition to an improved sales mix and higher average selling price when excluding Greenpac. Specialty Products generated a 20% sales increase, driven primarily by additional sales from our recovery and recycling activities due to higher recycled fibre pricing. In Boxboard Europe, better volumes and selling prices in Canadian dollars generated an 8% increase in sales. Finally, in Tissue, a 2.5% increase in sales reflected improvements in sales mix and selling prices, the benefits of which were partially offset by lower jumbo roll sales volumes.

Second quarter operating income stood at $48 million, down from $65 million last year. Despite the inclusion of Greenpac in this quarter, the decrease reflects higher raw material costs, which were partially offset by price increases in Containerboard, Tissue and Boxboard Europe. Higher production costs in Containerboard, Tissue and in Corporate activities related to the continuing business transformation, also negatively impacted operating income. Specific items recorded in the current period (please refer to the ''Supplemental Information on Non-IFRS Measures'' section for more details) decreased operating income by $3 million. On an adjusted basis, first quarter operating income stood at $51 million, down from $65 million in the prior year period.

The main specific items, before income taxes, that impacted our second quarter 2017 operating income and/or net earnings were:

  • a $219 million gain on fair-value revaluation of investment and income tax recovery of $70 million related to the consolidation of Greenpac (net earnings)
  • a $7 million gain related to the sale of real estate (operating income, net earnings)
  • an $11 million decrease of value of assets following the consolidation of Greenpac (operating income, net earnings)
  • a $4 million unrealized gain on derivative financial instruments (operating income, net earnings)
  • an $11 million gain on foreign exchange on long-term debt and financial instruments (net earnings)

For the second quarter of 2017, the Corporation posted net earnings of $323 million, or $3.41 per common share, compared to net earnings of $36 million, or $0.38 per common share in the same period of 2016. On an adjusted basis, the Corporation generated net earnings of $24 million during the second quarter of 2017, or $0.25 per common share, compared to net earnings of $35 million or $0.38 per common share in the same period of 2016. Please see the "Supplemental Information on Non-IFRS Measures" section for reconciliation of the amounts detailed above.

Near-Term Outlook

Discussing the outlook for Cascades, Mr. Plourde commented: "Looking ahead, we remain cautiously optimistic. While raw material pricing fluctuations will persist, we believe that the embedded cost increases will be offset by the continued implementation of the announced price increases, thereby easing pressure on margins going forward. That said, we expect our average OCC cost in the third quarter to be stable to slightly above second quarter levels, as both domestic and export-related demand remain robust.

On a segmented basis, near-term performance from our Containerboard activities should benefit from the favourable North American industry demand trends, the seasonally strong summer season, the addition of Greenpac results, and the full roll-out of the price increases throughout our customer base. More specifically, with the Fall 2016 US$40 s.t. price increase fully implemented as of the end of the second quarter, additional benefits will be realized as the February 2017 US$50 s.t. increase is rolled-out and fully implemented as of the end of the third quarter. In addition, fulfillment of the additional US$20/s.t. increase in medium prices is expected to be positive for results as of the end of the third quarter. In Boxboard Europe, results are expected to continue to reflect the more favourable market dynamics including stronger order inflow and backlog trends, and the continued implementation of the announced €20 per ton price increase and subsequently announced €40 per ton price increase, the latter of which is effective in September. Performance in the Specialty Products segment is expected to include variances in its recovery and recycling activities that mirror changes in market pricing, and continued positive momentum in its other activities. Finally, near-term results from our Tissue activities are expected to reflect a combination of the seasonally stronger summer season, benefits from the ramp up of the new converting facility in Oregon, offset by higher raw material prices and continued pricing pressure in the jumbo roll segment.

Going forward, we remain committed to our stated objectives. In the near-term, we are focused on completing the implementation of the announced price increases in our Containerboard segment to offset the recent raw material cost inflation. In addition, we are intent on finalizing our ERP implementations and our internal business process reorganization by the end of 2017, after which efforts will be refocused on optimization. While these transformation initiatives are expected to remain demanding at the operational level through the end of 2017, the resulting internal transformation will contribute to our efforts to strengthen our market positioning and increase our operational flexibility. In the mid to longer-term, we remain committed to continuing to reduce our debt levels to increase our financial flexibility and enhance our ability to pro-actively deliver on our strategic objectives and create long-term value."

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 September 1, 2017, to shareholders of record at the close of business on August 23, 2017. This dividend is an "eligible dividend" as per the Income Tax Act (R.C.S. (1985), Canada).

Cascades did not purchase any common shares for cancellation during the second quarter of 2017.

2017 Second Quarter Results Conference Call Details

Management will discuss the 2017 second quarter financial results during a conference call at 10:00 a.m. ET. The call can be accessed by dialing 1-888-231-8191 (international: 1-647-427-7450). 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 September 9, 2017 by dialing 1-855-859-2056, access code 56081710.

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)

June 30, 2017

December 31, 2016

Assets



Current assets



Cash and cash equivalents

67

62

Accounts receivable

611

524

Current income tax assets

12

12

Inventories

570

477

Current portion of financial assets

7

3


1,267

1,078

Long-term assets



Investments in associates and joint ventures

78

335

Property, plant and equipment

2,079

1,618

Intangible assets with finite useful life

210

171

Financial assets

27

10

Other assets

355

72

Deferred income tax assets

159

179

Goodwill and other intangible assets with indefinite useful life

594

350


4,769

3,813

Liabilities and Equity



Current liabilities



Bank loans and advances

26

28

Trade and other payables

701

661

Current income tax liabilities

2

1

Current portion of long-term debt

52

36

Current portion of provisions for contingencies and charges

8

9

Current portion of financial liabilities and other liabilities

102

27


891

762

Long-term liabilities



Long-term debt

1,769

1,530

Provisions for contingencies and charges

36

34

Financial liabilities

25

16

Other liabilities

185

178

Deferred income tax liabilities

239

219


3,145

2,739

Equity attributable to Shareholders



Capital stock

489

487

Contributed surplus

16

16

Retained earnings

983

512

Accumulated other comprehensive loss

(18)

(31)


1,470

984

Non-controlling interests

154

90

Total equity

1,624

1,074


4,769

3,813

 

CONSOLIDATED STATEMENTS OF EARNINGS





For the 3-month periods ended
June 30,

For the 6-month periods ended
June 30,

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

2017

2016

2017

2016

Sales

1,130

998

2,136

2,001

Cost of sales and expenses





Cost of sales (including depreciation and amortization of $56 million for 3-month period (2016 — $47 million) and $103 million for 6-month period (2016 — $94 million))

965

834

1,835

1,680

Selling and administrative expenses

118

98

224

191

Gain on acquisitions, disposals and others

(8)

(4)

(8)

(4)

Impairment charges and restructuring costs

13

9

14

9

Foreign exchange gain

(2)

(1)

(1)

Gain on derivative financial instruments

(4)

(3)

(7)

(13)


1,082

933

2,057

1,863

Operating income

48

65

79

138

Financing expense

24

20

45

44

Interest expense on employee future benefits

1

2

2

3

Foreign exchange gain on long-term debt and financial instruments

(11

(6)

(19)

(42)

Fair value revaluation gain on investments

(219)

(364)

Share of results of associates and joint ventures

(5)

(1)

(33)

(15)

Earnings before income taxes

258

50

448

148

Provision for (recovery of) income taxes

(70)

13

(43)

34

Net earnings including non-controlling interests for the period

328

37

491

114

Net earnings attributable to non-controlling interests

5

1

7

3

Net earnings attributable to Shareholders for the period

323

36

484

111

Net earnings per common share





Basic

$

3.41

$

0.38

$

5.11

$

1.17


Diluted

$

3.30

$

0.37

$

4.96

$

1.14

Weighted average basic number of common shares outstanding

94,702,041

94,596,934

94,628,481

94,969,656

Weighted average number of diluted common shares

97,732,263

96,463,392

97,452,425

96,985,595

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



For the 3-month periods ended
June 30,

For the 6-month periods ended
June 30,

(in millions of Canadian dollars) (unaudited)

2017

2016

2017

2016

Net earnings including non-controlling interests for the period

328

37

491

114

Other comprehensive income (loss)






Items that may be reclassified subsequently to earnings







Translation adjustments








Change in foreign currency translation of foreign subsidiaries

(19)

(9)

(25)

(53)




Change in foreign currency translation related to net investment hedging activities

9

7

15

45



Cash flow hedges








Change in fair value of commodity derivative financial instruments

(1)

7

(2)

6



Available-for-sale financial assets

7

(1)

19

(2)



Share of other comprehensive income of associates

4

(3)

21

(9)



Provision for income taxes

(4)

(2)

(13)

(5)


(4)

(1)

15

(18)


Items that are reclassified to retained earnings







Actuarial loss on post-employment benefit obligations

(7)

(15)

(5)

(34)



Recovery of income taxes

2

4

1

9


(5)

(11)

(4)

(25)

Other comprehensive income (loss)

(9)

(12)

11

(43)

Comprehensive income including non-controlling interests for the period

319

25

502

71

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

7

(2)

9

(2)

Comprehensive income attributable to Shareholders for the period

312

27

493

73

 

CONSOLIDATED STATEMENTS OF EQUITY





For the 6-month period ended June 30, 2017

 

(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 period

487

16

512

(31)

984

90

1,074

Comprehensive income (loss)









Net earnings

484

484

7

491


Other comprehensive income (loss)

(4)

13

9

2

11



480

13

493

9

502

Business combination

57

57

Dividends

(8)

(8)

(8)

Exercise of stock options

1

1

1

Issuance of common shares

1

1

1

Partial disposal of a subsidiary to non-controlling interest

(1)

(1)

1

Dividends paid to non-controlling interests

(3)

(3)

Balance - End of period

489

16

983

(18)

1,470

154

1,624









For the 6-month period ended June 30, 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 period

490

17

387

(27)

867

96

963

Comprehensive income (loss)









Net earnings

111

111

3

114


Other comprehensive loss

(25)

(13)

(38)

(5)

(43)



86

(13)

73

(2)

71

Dividends

(8)

(8)

(8)

Exercise of stock options

1

1

1

Redemption of common shares

(4)

(2)

(2)

(8)

(8)

Dividends paid to non-controlling interests

(2)

(2)

Balance - End of period

486

16

463

(40)

925

92

1,017

 

CONSOLIDATED STATEMENTS OF CASH FLOWS



For the 3-month periods
ended June 30,

For the 6-month periods
ended June 30,

(in millions of Canadian dollars) (unaudited)

2017

2016

2017

2016

Operating activities





Net earnings attributable to Shareholders for the period

323

36

484

111

Adjustments for:






Financing expense and interest expense on employee future benefits

25

22

47

47


Depreciation and amortization

56

47

103

94


Gain on acquisitions, disposals and others

(8)

(5)

(8)

(5)


Impairment charges and restructuring costs

11

1

11

1


Unrealized gain on derivative financial instruments

(4)

(5)

(8)

(19)


Foreign exchange gain on long-term debt and financial instruments

(11)

(6)

(19)

(42)


Provision for (recovery of) income taxes

(70)

13

(43)

34


Fair value revaluation gain on investments

(219)

(364)


Share of results of associates and joint ventures

(5)

(1)

(33)

(15)


Net earnings attributable to non-controlling interests

5

1

7

3


Net financing expense paid

(10)

(3)

(48)

(47)


Net income taxes received (paid)

(1)

7

(6)

8


Dividend received

3

6

5

9


Employee future benefits and others

(6)

(6)

(6)

(16)


89

107

122

163

Changes in non-cash working capital components

(23)

(26)

(62)

(59)


66

81

60

104

Investing activities





Investments in associates and joint ventures

(2)

(16)

(2)

Payments for property, plant and equipment

(37)

(47)

(98)

(102)

Proceeds on disposals of property, plant and equipment

11

1

14

2

Change in intangible and other assets

(6)

12

(11)

10

Cash acquired in (paid for) a business combination

34

(15)

34

(15)


2

(51)

(77)

(107)

Financing activities





Bank loans and advances

1

(2)

(2)

Change in revolving credit facilities

(50)

(53)

53

4

Increase in other long-term debt

14

6

15

Payments of other long-term debt

(14)

(21)

(19)

(26)

Settlement of derivative financial instruments

(7)

Issuance of common shares

1

Redemption of common shares

(3)

(8)

Dividends paid to non-controlling interests

(3)

(1)

(3)

(1)

Dividends paid to the Corporation's Shareholders

(4)

(4)

(8)

(8)


(70)

(68)

21

(26)

Change in cash and cash equivalents during the period

(2)

(38)

4

(29)

Currency translation on cash and cash equivalents

1

(1)

1

(2)

Cash and cash equivalents - Beginning of period

68

68

62

60

Cash and cash equivalents - End of period

67

29

67

29

 

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, 2016.

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 management 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 constitutes the Corporation's Packaging Products) and Tissue Papers.

 


SALES


For the 3-month periods ended
June 30,

For the 6-month periods ended
June 30,

(in millions of Canadian dollars) (unaudited)

2017

2016

2017

2016

Packaging Products






Containerboard

428

342

774

678


Boxboard Europe

213

197

424

416


Specialty Products

188

157

361

306


Intersegment sales

(27)

(14)

(49)

(29)


802

682

1,510

1,371

Tissue Papers

338

324

644

644

Intersegment sales and Corporate activities

(10)

(8)

(18)

(14)


1,130

998

2,136

2,001






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


For the 3-month periods ended
June 30,

For the 6-month periods ended
June 30,

(in millions of Canadian dollars) (unaudited)

2017

2016

2017

2016

Packaging Products






Containerboard

51

60

96

115


Boxboard Europe

21

15

34

31


Specialty Products

20

20

38

34


92

95

168

180

Tissue Papers

33

33

56

67

Corporate

(21)

(16)

(42)

(15)

Operating income before depreciation and amortization

104

112

182

232

Depreciation and amortization

(56)

(47)

(103)

(94)

Financing expense and interest expense on employee future benefits

(25)

(22)

(47)

(47)

Foreign exchange gain on long-term debt and financial instruments

11

6

19

42

Fair value revaluation gain on investments

219

364

Share of results of associates and joint ventures

5

1

33

15

Earnings before income taxes

258

50

448

148






PAYMENTS FOR PROPERTY, PLANT AND EQUIPMENT


For the 3-month periods ended
June 30,

For the 6-month periods ended
June 30,

(in millions of Canadian dollars) (unaudited)

2017

2016

2017

2016

Packaging Products






Containerboard

9

9

15

25


Boxboard Europe

4

9

12

13


Specialty Products

6

4

9

12


19

22

36

50

Tissue Papers

17

22

44

33

Corporate

5

6

8

17

Total acquisitions

41

50

88

100

Proceeds on disposals of property, plant and equipment

(11)

(1)

(14)

(2)

Capital-lease acquisitions

(4)

(4)

(7)

(11)


26

45

67

87

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






Beginning of period

8

7

25

19


End of period

(8)

(6)

(8)

(6)

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

26

46

84

100

 

SUPPLEMENTAL INFORMATION ON NON-IFRS MEASURES

SPECIFIC ITEMS

The Corporation incurs some specific items that adversely or positively affected its operating results. We believe it is useful for readers to be aware of these items, as they provide additional information to measure the performance, compare the Corporation's results between periods and to assess operating results and liquidity, notwithstanding these specific items. Management believes these specific items are not necessarily reflective of the Corporation underlying business operations in measuring and comparing its performance and analyzing future trends. Our definition of specific items may differ from those of other corporations and some of them may arise in the future and may reduce the cash available to us.

They include, but are not limited to, charges for (reversals of) impairment of assets, restructuring gains or costs, loss on refinancing of long-term debt, some 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, non-cash or non-recurring nature.

RECONCILIATION OF NON-IFRS MEASURES

To provide more information for evaluating the Corporation's performance, the financial information included in this analysis contains certain data that are not performance measures under IFRS ("non-IFRS measures") which are also calculated on an adjusted basis to exclude specific items. We believe that providing certain key performance measures and non-IFRS measures is useful to both management and investors as they provide additional information to measure the performance and financial position of the Corporation. It also increases the transparency and clarity of the financial information. The following non-IFRS measures are used in our financial disclosures:

  • Operating income before depreciation and amortization (OIBD): Used to assess operating performance and contribution of each segment when excluding depreciation & amortization. OIBD is widely used by investors as a measure of a corporation ability to incur and service debt and as an evaluation metric.
  • Adjusted OIBD: Used to assess operating performance and contribution of each segment on a comparable basis.
  • Adjusted operating income: Used to assess operating performance of each segment on a comparable basis.
  • Adjusted net earnings: Used to assess the Corporation's consolidated financial performance on a comparable basis.
  • Adjusted free cash flow: Used to assess the Corporation's capacity to generate cash flows to meet financial obligation and/or discretionary items such as share repurchase, dividend increase and strategic investments.
  • Net debt to adjusted OIBD ratio: Used to measure the Corporation's credit performance and evaluate the financial leverage.
  • Net debt to adjusted OIBD ratio on a pro forma basis: Used to measure the Corporation's credit performance and evaluate the financial leverage on a comparable basis including significant business acquisitions and excluding significant business disposals, if any.

Non-IFRS measures are mainly derived from the consolidated financial statements but do not have meanings prescribed by IFRS. These measures have limitations as an analytical tool, and should not be considered on their own or as a substitute for an analysis of our results as reported under IFRS. In addition, our definitions of non-IFRS measures may differ from those of other corporations. Any such modification or reformulation may be significant.

The reconciliation of operating income (loss) to OIBD, to adjusted operating income (loss) and to adjusted OIBD by business segment is as follows:

 


Q2 2017

(in millions of Canadian dollars)

Containerboard

Boxboard
Europe

Specialty
Products

Tissue
Papers

Corporate
Activities

Consolidated

Operating income (loss)

30

13

14

17

(26)

48

Depreciation and amortization

21

8

6

16

5

56

Operating income (loss) before depreciation and amortization

51

21

20

33

(21)

104

Specific items:








Gain on acquisitions, disposals and others

(7)

(1)

(8)


Inventory adjustment resulting from business combination

2

2


Impairment charges

11

11


Restructuring costs

2

2


Unrealized gain on derivative financial instruments

(1)

(3)

(4)


5

2

(4)

3

Adjusted operating income (loss) before depreciation and amortization

56

21

20

35

(25)

107

Adjusted operating income (loss)

35

13

14

19

(30)

51






Q1 2017

(in millions of Canadian dollars)

Containerboard

Boxboard
Europe

Specialty
Products

Tissue
Papers

Corporate
Activities

Consolidated

Operating income (loss)

33

5

13

8

(28)

31

Depreciation and amortization

12

8

5

15

7

47

Operating income (loss) before depreciation and amortization

45

13

18

23

(21)

78

Specific items :








Restructuring costs

1

1


Unrealized gain on derivative financial instruments

(4)

(4)


1

(4)

(3)

Adjusted operating income (loss) before depreciation and amortization

45

14

18

23

(25)

75

Adjusted operating income (loss)

33

6

13

8

(32)

28






Q2 2016

(in millions of Canadian dollars)

Containerboard

Boxboard
Europe

Specialty
Products

Tissue
Papers

Corporate

Activities

Consolidated

Operating income (loss)

46

7

16

18

(22)

65

Depreciation and amortization

14

8

4

15

6

47

Operating income (loss) before depreciation and amortization

60

15

20

33

(16)

112

Specific items :








Gain on acquisitions, disposals and others

(4)

(4)


Impairment charges (reversals)

2

(1)

2

3


Restructuring costs (gains)

(1)

2

1

4

6


Unrealized gain on derivative financial instruments

(1)

(4)

(5)


2

(4)

6

(4)

Adjusted operating income (loss) before depreciation and amortization

60

17

16

39

(20)

112

Adjusted operating income (loss)

46

9

12

24

(26)

65

 

Net earnings, a performance measure defined by IFRS, is reconciled below with operating income, adjusted operating income and adjusted operating income before depreciation and amortization:

 





(in millions of Canadian dollars)

Q2 2017

Q1 2017

Q2 2016

Net earnings attributable to Shareholders for the period

323

161

36

Net earnings attributable to non-controlling interests

5

2

1

Provision for (recovery of) income taxes

(70)

27

13

Fair value revaluation gain of investments

(219)

(145)

Share of results of associates and joint ventures

(5)

(28)

(1)

Foreign exchange gain on long-term debt and financial instruments

(11)

(8)

(6)

Financing expense and interest expense on employee future benefits

25

22

22

Operating income

48

31

65

Specific items:





Gain on acquisitions, disposals and others

(8)

(4)


Inventory adjustment resulting from business combination

2


Impairment charges

11

3


Restructuring costs

2

1

6


Unrealized gain on derivative financial instruments

(4)

(4)

(5)


3

(3)

Adjusted operating income

51

28

65

Depreciation and amortization

56

47

47

Adjusted operating income before depreciation and amortization

107

75

112

 

The following table reconciles net earnings and net earnings per common share, as per IFRS, with adjusted net earnings and adjusted net earnings per common share:

 





NET EARNINGS

NET EARNINGS PER COMMON SHARE1

(in millions of Canadian dollars, except amount per common share)

Q2 2017

Q1 2017

Q2 2016

Q2 2017

Q1 2017

Q2 2016

As per IFRS

323

161

36

$

3.41

$

1.70

$

0.38

Specific items:








Gain on acquisitions, disposals and others

(8)

(4)

$

(0.06)

$

(0.03)


Inventory adjustment resulting from business combination

2

$

0.01


Impairment charges

11

3

$

0.07

$

0.02


Restructuring costs

2

1

6

$

0.02

$

0.01

$

0.04


Unrealized gain on derivative financial instruments

(4)

(4)

(5)

$

(0.04)

$

(0.03)

$

(0.04)


Foreign exchange gain on long-term debt and financial instruments

(11)

(8)

(6)

$

(0.09)

$

(0.08)

$

(0.05)


Fair value revaluation gain of investments

(219)

(145)

$

(3.06)

$

(1.33)


Share of results of associates and joint ventures

(2)

(16)

6

$

(0.01)

$

(0.14)

$

0.04


Tax effect on specific items, other tax adjustments and attributable to non-controlling interests1

(70)

23

(1)

$

0.02


(299)

(149)

(1)

$

(3.16)

$

(1.57)

Adjusted

24

12

35

$

0.25

$

0.13

$

0.38


1 Specific amounts per common share are calculated on an after-tax basis and are net of the portion attributable to non-controlling interests. Per share amounts in line item ''Tax effect on specific items, other tax adjustments and attributable to non-controlling interests'' only include the effect of tax adjustments.

 

The following table reconciles cash flow from operating activities with operating income and operating income before depreciation and amortization:

 





(in millions of Canadian dollars)

Q2 2017

Q1 2017

Q2 2016

Cash flow from operating activities

66

(6)

81

Changes in non-cash working capital components

23

39

26

Depreciation and amortization

(56)

(47)

(47)

Net income taxes paid (received)

1

5

(7)

Net financing expense paid

10

38

3

Gain on acquisitions, disposals and others

8

5

Impairment charges and restructuring costs

(11)

(1)

Unrealized gain on derivative financial instruments

4

4

5

Dividend received, employee future benefits and others

3

(2)

Operating income

48

31

65

Depreciation and amortization

56

47

47

Operating income before depreciation and amortization

104

78

112

 

The following table reconciles cash flow from operating activities with cash flow from operating activities (excluding changes in non-cash working capital components) and adjusted cash flow from operating activities. It also reconciles adjusted cash flow from operating activities to adjusted free cash flow which is also calculated on a per share basis:

 





(in millions of Canadian dollars, except amount per common share or otherwise mentioned)

Q2 2017

Q1 2017

Q2 2016

Cash flow from operating activities

66

(6)

81

Changes in non-cash working capital components

23

39

26

Cash flow from operating activities (excluding changes in non-cash working capital components)

89

33

107

Specific items, net of current income taxes if applicable:





Restructuring costs

2

1

9

Adjusted cash flow from operating activities

91

34

116

Capital expenditures & other assets1 and capital lease payments, net of disposals

(32)

(64)

(53)

Dividends

(4)

(4)

(4)

Adjusted free cash flow

55

(34)

59

Adjusted free cash flow per share

$

0.58

$

(0.36)

$

0.62

Weighted average basic number of common shares outstanding

94,702,041

94,554,104

94,596,934





1 Excluding increase in investments

 

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

 





(in millions of Canadian dollars)

June 30,
2017

December 31,
2016

June 30,
2016

Long-term debt

1,769

1,530

1,625

Current portion of long-term debt

52

36

34

Bank loans and advances

26

28

34

Total debt

1,847

1,594

1,693

Less: Cash and cash equivalents

67

62

29

Net debt

1,780

1,532

1,664

Adjusted OIBD (last twelve months)

367

403

456

Net debt / Adjusted OIBD ratio

4.9

3.8

3.6

Net debt / Adjusted OIBD ratio on a pro forma basis1

4.2

NA

NA


1 Pro forma basis to add Greenpac adjusted OIBD from Q3-2016 to Q1-2017 for the LTM period ended June 30, 2017.


 

Follow us on social media:

Website: www.cascades.com
Twitter: twitter.com/@CascadesInvest
Facebook: facebook.com/Cascades
YouTube: youtube.com/Cascades

 

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

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