March 1st, 2018

KINGSEY FALLS, QC , March 1, 2018 /CNW Telbec/ - Cascades Inc. (TSX: CAS) reports its unaudited financial results for the three-month period and the fiscal year ended December 31, 2017 .

Q4 2017 Highlights

  • Sales of $1,082 million (compared to $1,103 million in Q3 2017 (-2%) and $979 million in Q4 2016 (+11%))
  • As reported (including specific items)
    • Operating income of $45 million (compared to $51 million in Q3 2017 (-12%) and $33 million in Q4 2016 (+36%))
    • OIBD 1 of $104 million (compared to $104 million in Q3 2017 and $83 million in Q4 2016 (+25%))
    • Net earnings per common share of $0.60 (compared to net earnings of $0.35 in Q3 2017 and net earnings of $0.04 in Q4 2016)
  • Adjusted 2 (excluding specific items)
    • Operating income of $46 million (compared to $53 million in Q3 2017 (-13%) and $32 million in Q4 2016 (+44%))
    • OIBD of $105 million (compared to $106 million in Q3 2017 (-1%) and $82 million in Q4 2016 (+28%))
    • Net earnings per common share of $0.14 (compared to net earnings of $0.20 in Q3 2017 and net earnings of $0.16 in Q4 2016)
  • US 2017 tax reform reduces future tax liabilities by $57 million

2017 Annual Highlights

  • Sales of $4,321 million (compared to $4,001 million in 2016 (+11%))
  • As reported (including specific items)
    • Operating income of $175 million (compared to $221 million in 2016 (-21%))
    • OIBD of $390 million (compared to $413 million in 2016 (-6%))
    • Net earnings per common share of $5.35 (compared to net earnings of $1.42 in 2016)
  • Adjusted 2 (excluding specific items)
    • Operating income of $178 million (compared to $211 million in 2016 (-16%))
    • OIBD of $393 million (compared to $403 million in 2016 (-2%))
    • Net earnings per common share of $0.72 (compared to net earnings of $1.21 in 2016)
  • Net debt of $1,522 million as at December 31, 2017 (compared to $1,532 million as at December 31, 2016 ) and net debt to adjusted OIBD ratio 3 of 3.6x, down from 3.8x at year-end 2016.

 

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 2017 business combinations on a LTM basis.

 

Mr. Mario Plourde , President and Chief Executive Officer, commented: "Our fourth quarter results reflect year-over-year improvements in shipments, sales, and operating income on a consolidated basis. This was driven by solid performances from our containerboard division and European subsidiary Reno de Medici, where more favourable pricing and mix outweighed the impact of higher average raw material costs. In the case of containerboard, results also benefited from the consolidation of the Greenpac Mill results beginning in the second quarter of 2017. The specialty products segment delivered results that were below prior year levels due to a lower contribution from recovery and recycling activities. Our tissue division continued to face challenging market conditions in the fourth quarter, which resulted in production downtime to manage inventory. These factors, combined with a less favourable sales price and product mix, higher raw material prices and costs related to the ramp up of the new Oregon converting facility, impacted sales and profitability levels in this segment.

Sequentially, consolidated fourth quarter results reflected a less pronounced seasonal contraction than in prior years. This was primarily driven by results in our containerboard division, which generated increases in sales and operating income compared to the previous quarter, reflecting lower raw material prices and healthy demand. European boxboard operations also performed well, highlighting stronger business conditions, while results in our specialty products division remained relatively stable. Finally, our tissue segment performance was negatively impacted by lower volumes related to both seasonal demand variations and difficult market conditions, and a less favourable sales price and product mix.

We continued to make progress on strategic initiatives in 2017. At the corporate level, our internal business process transformation and ERP system initiatives progressed well, with implementations now largely completed. In the containerboard group, we finalized the sale of the Maspeth, NY , converting facility in January 2018 for US$72 million , increased our ownership position in the Greenpac Mill to 66.1%, began the construction of a new state-of-the-art containerboard converting facility in New Jersey , and strengthened our position in Canada with the acquisition of three converting plants and purchase of an interest in Tencorr Holdings Corporation. The European boxboard segment also acquired the Italian boxboard processing company Pac Service S.p.A, by purchasing the 66.67% of shares that it did not already own. Finally, we continued to deliver on our commitment to lower our debt. To this end, our leverage ratio 1 stood at 3.6x as of the end of 2017, down from 3.8x in 2016, and we successfully redeemed US$200 million of our US-denominated debt, which reduces our interest expense and exposure to currency fluctuations."

 

1

Pro-forma basis to include 2017 business combinations on a LTM basis.

 

Financial Summary

 

Selected consolidated information

                     

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

2017

 

2016

 

Q4 2017

 

Q3 2017

 

Q4 2016

 
           

Sales

4,321

 

4,001

 

1,082

 

1,103

 

979

 

As Reported

         
 

Operating income before depreciation and amortization (OIBD) 1

390

 

413

 

104

 

104

 

83

 
 

Operating income

175

 

221

 

45

 

51

 

33

 
 

Net earnings

507

 

135

 

57

 

33

 

4

 
   

per common share

$

5.35

 

$

1.42

 

$

0.60

 

$

0.35

 

$

0.04

 

Adjusted 1

         
 

Operating income before depreciation and amortization (OIBD)

393

 

403

 

105

 

106

 

82

 
 

Operating income

178

 

211

 

46

 

53

 

32

 
 

Net earnings

68

 

114

 

13

 

19

 

15

 
   

per common share

$

0.72

 

$

1.21

 

$

0.14

 

$

0.20

 

$

0.16

 
 

Margin (OIBD)

9.1

%

10.1

%

9.7

%

9.6

%

8.4

%

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

 
 

Segmented Operating Income (loss) as reported

   

(in millions of Canadian dollars) (unaudited)

2017

 

2016

 

Q4 2017

 

Q3 2017

 

Q4 2016

 
 

Packaging Products

 

Containerboard

164

 

158

 

51

 

50

 

28

 
 

Boxboard Europe

34

 

19

 

11

 

5

 

3

 
 

Specialty Products

46

 

51

 

9

 

10

 

14

 
 

Tissue Papers

28

 

75

 

(6)

 

9

 

12

 
 

Corporate Activities

(97)

 

(82)

 

(20)

 

(23)

 

(24)

 

Operating income as reported

175

 

221

 

45

 

51

 

33

 
 
 

Segmented adjusted OIBD 1

   

(in millions of Canadian dollars) (unaudited)

2017

 

2016

 

Q4 2017

 

Q3 2017

 

Q4 2016

 
 

Packaging Products

 
 

Containerboard

247

 

216

 

74

 

72

 

43

 
 

Boxboard Europe

68

 

53

 

19

 

14

 

11

 
 

Specialty Products

67

 

65

 

14

 

15

 

17

 
 

Tissue Papers

94

 

150

 

12

 

24

 

30

 
 

Corporate Activities

(83)

 

(81)

 

(14)

 

(19)

 

(19)

 

Adjusted OIBD

393

 

403

 

105

 

106

 

82

 

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

 

Analysis of results for the three-month period ended December 31, 2017 (compared to the same period last year)

Sales of $1,082 million increased by $103 million or 11% compared to the same period last year. This was driven by the consolidation of results from the Greenpac Mill beginning in the second quarter, improvements realized in pricing and sales mix in all of the Corporation's business segments with the exception of tissue, and improved volumes in the European boxboard and tissue segments. These benefits were partially offset by a less favourable sales and pricing mix in the tissue segment, and less advantageous foreign exchange rates. 

Fourth quarter operating income stood at $45 million , a notable improvement from the $33 million generated last year. This increase is largely attributable to the consolidation of Greenpac and a more favourable pricing and sales mix in the containerboard segment. Partially offsetting these benefits were higher raw material costs in all business segments, and higher amortization and depreciation expense as a result of business combinations. On an adjusted basis, fourth quarter operating income stood at $46 million , versus $32 million in the prior year.

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

  • $2 million reversal of impairment (operating income and net earnings).   
  • $1 million restructuring costs associated with the closure of a sales unit (operating income and net earnings).   
  • $2 million unrealized loss on financial instruments (operating income and net earnings).   
  • $4 million foreign exchange loss on long-term debt and financial instruments (net earnings).   
  • $14 million loss related to the early repurchase of long-term debt (net earnings).    
  • $59 million income tax gain resulting mainly from the U.S. tax reform announced at the end of 2017 (net earnings).  

The Corporation generated net earnings of $57 million , or $0.60 per common share in the fourth quarter of 2017, versus net earnings of $4 million , or $0.04 per common share in the comparable period of 2016. On an adjusted basis, the Corporation generated net earnings of $13 million , or $0.14 per common share, during the last three months of 2017. This compares to net earnings of $15 million or $0.16 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 and Strategic Outlook

Discussing the outlook for Cascades, Mr. Plourde commented: "We expect several external factors to support results in the near term. The first of these is the combined beneficial impact on our operational performance of the current lower average price for OCC, which accounts for a large portion of the raw materials we use across our operations, and the price increases in linerboard, medium and corrugated products announced for March 5, 2018 in our containerboard segment. The second is the recent corporate tax reform in the US, which will reduce our US corporate tax rate to approximately 25% for 2018, from 38% previously. In addition, underlying industry fundamentals remain positive for both the containerboard business in North America and boxboard operations in Europe . Our tissue division, however, continues to face difficult market conditions, new industry capacity additions, and a slower than anticipated ramp-up of the new Oregon converting facility. On this last point, we are pleased to report that our increased sales and marketing efforts on the West Coast are making inroads in this new end market, and we are confident that this facility will evolve into a solid contributor to our tissue division performance.

As we move forward, we will continue to focus on optimizing our new business platform, and harvesting the gains in productivity, efficiency and cost savings generated through our more customer-centric and efficient processes. On a broader scale, we will continue to advance our strategic plan to position Cascades for the long-term. To this end, in the coming year we intend to invest $250 to $300 million , which will include strategic projects focused on increasing integration, improving operational performance through investments in modern equipment, and optimizing our geographic footprint. Furthermore, we are planning additional investments in tissue over the next several years that will modernize the retail and away-from-home business platforms, and equip this segment with an asset base that is competitively positioned for long-term growth. Each and every investment decision will be made with the goal of delivering quality, innovative and competitive products to our customers within a framework focused on optimal capital allocation, long-term market leadership and return while remaining fully committed to our objective of reducing leverage."

Dividend on common shares and normal course issuer bid

The Board of Directors of Cascades declared a quarterly dividend of $0.04 per common share to be paid on March 28, 2018 , to shareholders of record at the close of business on March 14, 2018 . 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 fourth quarter of 2017.

2017 Fourth Quarter and Annual Financial Results Conference Call Details

Management will discuss the 2017 fourth quarter and annual financial results during a conference call today at 9:00 a.m. EST . The call can be accessed by dialing 1-888-231-8191 (international dial-in 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 April 1, 2018 by dialing 1-855-859-2056, access code 1999496.

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 more than 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,
2017

 

December 31,
2016

Assets

     

Current assets

     

Cash and cash equivalents

89

 

62

Accounts receivable

563

 

524

Current income tax assets

18

 

12

Inventories

523

 

460

Current portion of financial assets

9

 

3

Assets held for sale

13

 

 

1,215

 

1,061

Long-term assets

     

Investments in associates and joint ventures

78

 

335

Property, plant and equipment

2,104

 

1,635

Intangible assets with finite useful life

212

 

171

Financial assets

22

 

10

Other assets

74

 

72

Deferred income tax assets

149

 

179

Goodwill and other intangible assets with indefinite useful life

528

 

350

 

4,382

 

3,813

Liabilities and Equity

     

Current liabilities

     

Bank loans and advances

35

 

28

Trade and other payables

638

 

661

Current income tax liabilities

6

 

1

Current portion of long-term debt

59

 

36

Current portion of provisions for contingencies and charges

7

 

9

Current portion of financial liabilities and other liabilities

101

 

27

 

846

 

762

Long-term liabilities

     

Long-term debt

1,517

 

1,530

Provisions for contingencies and charges

36

 

34

Financial liabilities

18

 

16

Other liabilities

178

 

178

Deferred income tax liabilities

186

 

219

 

2,781

 

2,739

Equity attributable to Shareholders

     

Capital stock

492

 

487

Contributed surplus

16

 

16

Retained earnings

982

 

512

Accumulated other comprehensive loss

(35)

 

(31)

 

1,455

 

984

Non-controlling interests

146

 

90

Total equity

1,601

 

1,074

 

4,382

 

3,813

 

CONSOLIDATED STATEMENTS OF EARNINGS

       
 

For the 3-month periods ended
December 31,

 

For the years ended
December 31,

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

2017

 

2016

 

2017

 

2016

Sales

1,082

 

979

 

4,321

 

4,001

Cost of sales and expenses

         

Cost of sales (including depreciation and amortization of $215 million ($59 million in the fourth quarter); 2016 — $192 million ($50 million in the fourth quarter))

933

 

841

 

3,708

 

3,380

Selling and administrative expenses

110

 

106

 

440

 

402

Gain on acquisitions, disposals and others

 

 

(8)

 

(4)

Impairment charges (reversals) and restructuring costs

(1)

 

(2)

 

17

 

12

Foreign exchange gain

(7)

 

(4)

 

(5)

 

(4)

Loss (gain) on derivative financial instruments

2

 

5

 

(6)

 

(6)

 

1,037

 

946

 

4,146

 

3,780

Operating income

45

 

33

 

175

 

221

Financing expense

22

 

21

 

92

 

88

Interest expense on employee future benefits

2

 

1

 

5

 

5

Loss on repurchase of long-term debt

14

 

 

14

 

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

4

 

13

 

(23)

 

(22)

Fair value revaluation gain on investments

 

 

(315)

 

Share of results of associates and joint ventures

(3)

 

(7)

 

(39)

 

(32)

Earnings before income taxes

6

 

5

 

441

 

182

Provision for (recovery of) income taxes

(57)

 

2

 

(81)

 

45

Net earnings including non-controlling interests for the period

63

 

3

 

522

 

137

Net earnings (loss) attributable to non-controlling interests

6

 

(1)

 

15

 

2

Net earnings attributable to Shareholders for the period

57

 

4

 

507

 

135

Net earnings per common share

       

Basic

$

0.60

 

$

0.04

 

$

5.35

 

$

1.42

Diluted

$

0.58

 

$

0.04

 

$

5.19

 

$

1.39

Weighted average basic number of common shares outstanding

94,744,841

 

94,487,211

 

94,680,598

 

94,709,048

Weighted average number of diluted common shares

97,569,209

 

97,058,154

 

97,598,900

 

96,933,338

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

       
 

For the 3-month periods ended
December 31,

 

For the years ended
December 31,

(in millions of Canadian dollars) (unaudited)

2017

 

2016

 

2017

 

2016

Net earnings including non-controlling interests for the period

63

 

3

 

522

 

137

Other comprehensive income (loss)

       
 

Items that may be reclassified subsequently to earnings

       
   

Translation adjustments

       
     

Change in foreign currency translation of foreign subsidiaries

13

 

4

 

(43)

 

(33)

     

Change in foreign currency translation related to net investment hedging activities

(12)

 

(13)

 

33

 

21

   

Cash flow hedges

       
     

Change in fair value of foreign exchange forward contracts

 

 

1

 

     

Change in fair value of commodity derivative financial instruments

2

 

4

 

1

 

10

   

Available-for-sale financial assets

(1)

 

1

 

(1)

 

(2)

   

Share of other comprehensive income of associates

 

9

 

21

 

   

Provision for (recovery of) income taxes

2

 

(3)

 

(13)

 

(6)

 

4

 

2

 

(1)

 

(10)

 

Items that are reclassified to retained earnings

       
   

Actuarial gain (loss) on employee future benefits

(16)

 

42

 

(13)

 

11

   

Provision for (recovery of) income taxes

4

 

(11)

 

3

 

(3)

 

(12)

 

31

 

(10)

 

8

Other comprehensive income (loss)

(8)

 

33

 

(11)

 

(2)

Comprehensive income including non-controlling interests for the period

55

 

36

 

511

 

135

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

9

 

(4)

 

18

 

(4)

Comprehensive income attributable to Shareholders for the period

46

 

40

 

493

 

139

 

CONSOLIDATED STATEMENTS OF EQUITY

   
 

For the year ended December 31, 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

 

 

507

 

 

507

 

15

 

522

 

Other comprehensive income (loss)

 

 

(10)

 

(4)

 

(14)

 

3

 

(11)

 

 

 

497

 

(4)

 

493

 

18

 

511

Business combination

 

 

 

 

 

57

 

57

Dividends

 

 

(15)

 

 

(15)

 

 

(15)

Stock options expense

 

1

 

 

 

1

 

 

1

Issuance of common share upon exercise of stock options

5

 

(1)

 

 

 

4

 

 

4

Partial disposal of a subsidiary to non-controlling interests

 

 

(1)

 

 

(1)

 

1

 

Acquisition of non-controlling interests

 

 

(11)

 

 

(11)

 

(15)

 

(26)

Dividends paid to non-controlling interests

 

 

 

 

 

(5)

 

(5)

Balance - End of period

492

 

16

 

982

 

(35)

 

1,455

 

146

 

1,601

               
   
 

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 period

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 expense

 

1

 

 

 

1

 

 

1

Issuance of common share upon exercise of stock options

2

 

(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 period

487

 

16

 

512

 

(31)

 

984

 

90

 

1,074

 

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)

2017

2016

 

2017

2016

Operating activities

       

Net earnings attributable to Shareholders for the period

57

4

 

507

135

Adjustments for:

       
 

Financing expense and interest expense on employee future benefits

24

22

 

97

93

 

Loss on repurchase of long-term debt

14

 

14

 

Depreciation and amortization

59

50

 

215

192

 

Gain on acquisitions, disposals and others

1

 

(8)

(4)

 

Impairment charges (reversals) and restructuring costs (gains)

(2)

(2)

 

11

4

 

Unrealized loss (gain) on derivative financial instruments

2

1

 

(8)

(18)

 

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

4

13

 

(23)

(22)

 

Provision for (recovery of) income taxes

(57)

2

 

(81)

45

 

Fair value revaluation gain on investments

 

(315)

 

Share of results of associates and joint ventures

(3)

(7)

 

(39)

(32)

 

Net earnings (loss) attributable to non-controlling interests

6

(1)

 

15

2

 

Net financing expense paid

(11)

(4)

 

(99)

(89)

 

Premium paid on long-term debt repurchase

(11)

 

(11)

 

Net income taxes received (paid)

(4)

 

(10)

10

 

Dividends received

4

6

 

12

18

 

Employee future benefits and others

(5)

 

(17)

(18)

 

77

85

 

260

316

Changes in non-cash working capital components

18

93

 

(87)

56

 

95

178

 

173

372

Investing activities

       

Investments in associates and joint ventures

(1)

(4)

 

(17)

(6)

Payments for property, plant and equipment

(57)

(57)

 

(193)

(182)

Proceeds from disposals of property, plant and equipment

1

2

 

15

5

Change in intangible and other assets

(16)

(2)

 

256

14

Cash acquired in (paid for) a business combination

(25)

(1)

 

9

(16)

 

(98)

(62)

 

70

(185)

Financing activities

       

Bank loans and advances

3

(4)

 

8

(8)

Change in revolving credit facilities

194

(99)

 

114

(146)

Repurchase of senior notes

(257)

 

(257)

Increase in other long-term debt

29

 

11

40

Payments of other long-term debt

(18)

(16)

 

(47)

(47)

Settlement of derivative financial instruments

(3)

3

 

(12)

3

Issuance of common shares

3

1

 

4

1

Redemption of common shares

(1)

 

(9)

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

(19)

 

(24)

(1)

Dividends paid to the Corporation's Shareholders

(4)

(3)

 

(15)

(15)

 

(101)

(90)

 

(218)

(182)

Change in cash and cash equivalents during the period

(104)

26

 

25

5

Currency translation on cash and cash equivalents

1

(1)

 

2

(3)

Cash and cash equivalents - Beginning of period

192

37

 

62

60

Cash and cash equivalents - End of period

89

62

 

89

62

 

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
December 31,

 

For the years ended
December 31,

(in millions of Canadian dollars) (unaudited)

2017

 

2016

 

2017

 

2016

Packaging Products

       
 

Containerboard

440

 

336

 

1,652

 

1,370

 

Boxboard Europe

212

 

191

 

838

 

796

 

Specialty Products

161

 

156

 

703

 

620

 

Intersegment sales

(24)

 

(16)

 

(105)

 

(61)

 

789

 

667

 

3,088

 

2,725

Tissue Papers

301

 

319

 

1,268

 

1,305

Intersegment sales and Corporate activities

(8)

 

(7)

 

(35)

 

(29)

 

1,082

 

979

 

4,321

 

4,001

   
 

OPERATING INCOME (LOSS) BEFORE DEPRECIATION AND AMORTIZATION

 

For the 3-month periods ended
December 31,

 

For the years ended
December 31,

(in millions of Canadian dollars) (unaudited)

2017

 

2016

 

2017

 

2016

Packaging Products

       
 

Containerboard

73

 

42

 

238

 

214

 

Boxboard Europe

19

 

11

 

67

 

51

 

Specialty Products

14

 

19

 

67

 

71

 

106

 

72

 

372

 

336

Tissue Papers

12

 

30

 

90

 

139

Corporate

(14)

 

(19)

 

(72)

 

(62)

Operating income before depreciation and amortization

104

 

83

 

390

 

413

Depreciation and amortization

(59)

 

(50)

 

(215)

 

(192)

Financing expense and interest expense on employee future benefits

(24)

 

(22)

 

(97)

 

(93)

Loss on repurchase of long-term debt

(14)

 

 

(14)

 

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

(4)

 

(13)

 

23

 

22

Fair value revaluation gain on investments

 

 

315

 

Share of results of associates and joint ventures

3

 

7

 

39

 

32

Earnings before income taxes

6

 

5

 

441

 

182

   
 

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)

2017

 

2016

 

2017

 

2016

Packaging Products

       
 

Containerboard

37

 

25

 

65

 

51

 

Boxboard Europe

7

 

6

 

27

 

26

 

Specialty Products

15

 

7

 

32

 

26

 

59

 

38

 

124

 

103

Tissue Papers

11

 

30

 

64

 

77

Corporate

8

 

5

 

19

 

26

Total acquisitions

78

 

73

 

207

 

206

Proceeds from disposals of property, plant and equipment

(1)

 

(2)

 

(15)

 

(5)

Capital-lease acquisitions

(4)

 

(1)

 

(11)

 

(18)

 

73

 

70

 

181

 

183

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

       
 

Beginning of period

11

 

10

 

25

 

19

 

End of period

(28)

 

(25)

 

(28)

 

(25)

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

56

 

55

 

178

 

177

  

SUPPLEMENTAL INFORMATION ON NON-IFRS MEASURES

SPECIFIC ITEMS

The Corporation incurs some specific items that adversely or positively affect its operating results. We believe it is useful for readers to be aware of these items, as they provide additional information to measure performance, compare the Corporation's results between periods and assess operating results and liquidity, notwithstanding these specific items. Management believes these specific items are not necessarily reflective of the Corporation's 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 Corporation's available cash.

They include, but are not limited to, charges for (reversals of) impairment of assets, restructuring gains or costs, loss on refinancing and repurchase of long-term debt, some deferred tax asset 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's 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:

 

 

Q4 2017

(in millions of Canadian dollars)

Containerboard

Boxboard
Europe

Specialty
Products

Tissue
Papers

Corporate
Activities

Consolidated

Operating income

51

11

9

(6)

(20)

45

Depreciation and amortization

22

8

5

18

6

59

Operating income (loss) before depreciation and amortization

73

19

14

12

(14)

104

Specific items:

           
 

Impairment reversal

(2)

(2)

 

Restructuring costs

1

1

 

Unrealized loss on financial instruments

1

1

2

 

1

1

Adjusted operating income (loss) before depreciation and amortization

74

19

14

12

(14)

105

Adjusted operating income (loss)

52

11

9

(6)

(20)

46

   
 

Q3 2017

(in millions of Canadian dollars)

Containerboard

Boxboard
Europe

Specialty
Products

Tissue
Papers

Corporate
Activities

Consolidated

Operating income (loss)

50

5

10

9

(23)

51

Depreciation and amortization

19

9

5

13

7

53

Operating income (loss) before depreciation and amortization

69

14

15

22

(16)

104

Specific items :

           
 

Impairment charges

2

2

 

Restructuring costs

2

2

 

Unrealized loss (gain) on derivative financial instruments

1

(3)

(2)

 

3

2

(3)

2

Adjusted operating income (loss) before depreciation and amortization

72

14

15

24

(19)

106

Adjusted operating income (loss)

53

5

10

11

(26)

53

   
 

Q4 2016

(in millions of Canadian dollars)

Containerboard

Boxboard
Europe

Specialty
Products

Tissue
Papers

Corporate
Activities

Consolidated

Operating income

28

3

14

12

(24)

33

Depreciation and amortization

14

8

5

18

5

50

Operating income (loss) before depreciation and amortization

42

11

19

30

(19)

83

Specific items:

           
 

Impairment reversal

(2)

(2)

 

Unrealized loss on financial instruments

1

1

 

1

(2)

(1)

Adjusted operating income (loss) before depreciation and amortization

43

11

17

30

(19)

82

Adjusted operating income (loss)

29

3

12

12

(24)

32

 

Net earnings, as per IFRS, is reconciled below with operating income, adjusted operating income and adjusted operating income before depreciation and amortization:

 

                   

(in millions of Canadian dollars) (unaudited)

2017

 

2016

 

Q4 2017

 

Q3 2017

 

Q4 2016

           

Net earnings attributable to Shareholders for the year

507

 

135

 

57

 

33

 

4

Net earnings (loss) attributable to non-controlling interests

15

 

2

 

6

 

2

 

(1)

Provision for (recovery of) income taxes

(81)

 

45

 

(57)

 

19

 

2

Fair value revaluation gain on investments

(315)

 

 

 

(18)

 

Share of results of associates and joint ventures

(39)

 

(32)

 

(3)

 

(3)

 

(7)

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

(23)

 

(22)

 

4

 

(8)

 

13

Financing expense, interest expense on employee future benefits and loss on repurchase of long-term debt

111

 

93

 

38

 

26

 

22

Operating income

175

 

221

 

45

 

51

 

33

Specific items:

         
 

Gain on acquisitions, disposals and others

(8)

 

(4)

 

 

 

 

Inventory adjustment resulting from business acquisition

2

 

 

 

 

 

Impairment charges (reversals)

11

 

3

 

(2)

 

2

 

(2)

 

Restructuring costs

6

 

9

 

1

 

2

 

 

Unrealized loss (gain) on derivative financial instruments

(8)

 

(18)

 

2

 

(2)

 

1

 

3

 

(10)

 

1

 

2

 

(1)

Adjusted operating income

178

 

211

 

46

 

53

 

32

Depreciation and amortization

215

 

192

 

59

 

53

 

50

Adjusted operating income before depreciation and amortization

393

 

403

 

105

 

106

 

82

 

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:

 

       

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

NET EARNINGS

 

NET EARNINGS PER COMMON SHARE 1

 

2017

 

2016

 

Q4 2017

 

Q3 2017

 

Q4 2016

 

2017

 

2016

 

Q4 2017

 

Q3 2017

 

Q4 2016

                       

As per IFRS

507

 

135

 

57

 

33

 

4

 

$

5.35

 

$

1.42

 

$

0.60

 

$

0.35

 

$

0.04

Specific items:

                     

Gain on acquisitions, disposals and others

(8)

 

(4)

 

 

 

 

$

(0.06)

 

$

(0.03)

 

 

 

Inventory adjustment resulting from business acquisition

2

 

 

 

 

 

$

0.01

 

 

 

 

Impairment charges (reversals)

11

 

3

 

(2)

 

2

 

(2)

 

$

0.08

 

$

0.03

 

$

(0.01)

 

$

0.02

 

$

(0.01)

Restructuring costs

6

 

9

 

1

 

2

 

 

$

0.05

 

$

0.06

 

$

0.01

 

$

0.01

 

Unrealized loss (gain) on derivative financial instruments

(8)

 

(18)

 

2

 

(2)

 

1

 

$

(0.07)

 

$

(0.14)

 

$

0.01

 

$

(0.01)

 

$

0.01

Loss on repurchase of long-term debt

14

 

 

14

 

 

 

$

0.10

 

 

$

0.10

 

 

Unrealized gain on interest rate swaps

(2)

 

(1)

 

(2)

 

 

(1)

 

$

(0.01)

 

$

(0.01)

 

$

(0.01)

 

 

$

(0.01)

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

(23)

 

(22)

 

4

 

(8)

 

13

 

$

(0.21)

 

$

(0.19)

 

$

0.04

 

$

(0.08)

 

$

0.12

Fair value revaluation gain on investments

(315)

 

 

 

(18)

 

 

$

(3.85)

 

 

 

$

(0.17)

 

Share of results of associates and joint ventures

(18)

 

7

 

 

 

1

 

$

(0.15)

 

$

0.05

 

 

 

$

0.01

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

(98)

 

5

 

(61)

 

10

 

(1)

 

$

(0.52)

 

$

0.02

 

$

(0.60)

 

$

0.08

 

 

(439)

 

(21)

 

(44)

 

(14)

 

11

 

$

(4.63)

 

$

(0.21)

 

$

(0.46)

 

$

(0.15)

 

$

0.12

Adjusted

68

 

114

 

13

 

19

 

15

 

$

0.72

 

$

1.21

 

$

0.14

 

$

0.20

 

$

0.16

   

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 common 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)

2017

 

2016

 

Q4 2017

 

Q3 2017

 

Q4 2016

Cash flow from operating activities

173

 

372

 

95

 

18

 

178

Changes in non-cash working capital components

87

 

(56)

 

(18)

 

43

 

(93)

Depreciation and amortization

(215)

 

(192)

 

(59)

 

(53)

 

(50)

Net income taxes paid (received)

10

 

(10)

 

4

 

 

Net financing expense paid

99

 

89

 

11

 

40

 

4

Premium paid on long-term debt repurchase

11

 

 

11

 

 

Gain (loss) on acquisitions, disposals and others

8

 

4

 

 

 

(1)

Impairment reversals (charges) and restructuring costs

(11)

 

(4)

 

2

 

(2)

 

2

Unrealized gain (loss) on derivative financial instruments

8

 

18

 

(2)

 

2

 

(1)

Dividend received, employee future benefits and others

5

 

 

1

 

3

 

(6)

Operating income

175

 

221

 

45

 

51

 

33

Depreciation and amortization

215

 

192

 

59

 

53

 

50

Operating income before depreciation and amortization

390

 

413

 

104

 

104

 

83

 

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)

2017

 

2016

 

Q4 2017

 

Q3 2017

 

Q4 2016

Cash flow from operating activities

173

 

372

 

95

 

18

 

178

Changes in non-cash working capital components

87

 

(56)

 

(18)

 

43

 

(93)

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

260

 

316

 

77

 

61

 

85

Specific items, net of current income taxes if applicable:

         
 

Restructuring costs

6

 

8

 

1

 

2

 

(1)

 

Premium paid on long-term debt repurchase

11

 

 

11

 

 

Adjusted cash flow from operating activities

277

 

324

 

89

 

63

 

84

Capital expenditures & other assets 1 and capital lease payments, net of disposals

(205)

 

(196)

 

(63)

 

(46)

 

(59)

Dividends paid

(20)

 

(16)

 

(4)

 

(5)

 

(3)

Adjusted free cash flow

52

 

112

 

22

 

12

 

22

Adjusted free cash flow per common share

$

0.55

 

$

1.18

 

$

0.23

 

$

0.13

 

$

0.23

Weighted average basic number of common shares outstanding

 

94,680,598

   

94,709,048

   

94,744,841

   

94,718,891

   

94,487,211

                             

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)

December 31,
2017

 

September 30,
2017

 

December 31,
2016

Long-term debt

1,517

 

1,575

 

1,530

Current portion of long-term debt

59

 

53

 

36

Bank loans and advances

35

 

33

 

28

Total debt

1,611

 

1,661

 

1,594

Less: Cash and cash equivalents

89

 

192

 

62

Net debt

1,522

 

1,469

 

1,532

Adjusted OIBD (last twelve months)

393

 

370

 

403

Net debt / Adjusted OIBD ratio

3.9

 

4.0

 

3.8

Net debt / Adjusted OIBD ratio on a pro forma basis 1

3.6

 

3.6

 

N/A

   

1

Pro forma basis to add Greenpac adjusted OIBD for Q1 2017 and other business combinations completed for the LTM period ended December 31, 2017.

SOURCE Cascades Inc.

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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