November 8th, 2018

  • Strong quarterly performance driven by record containerboard results
  • Solid Containerboard fundamentals support favourable near-term outlook

KINGSEY FALLS, QC , Nov. 8, 2018 /CNW Telbec/ - Cascades Inc. (TSX: CAS) reports its unaudited financial results for the three-month period ended September 30, 2018 .

Q3 2018 Highlights

  • Sales of $1,172 million
    (compared to $1,179 million in Q2 2018 (-1%) and $1,103 million in Q3 2017 (+6%))
  • As reported (including specific items)
    • Operating income of $78 million
      (compared to $73 million in Q2 2018 (+7%) and $51 million in Q3 2017 (+53%))
    • OIBD 1 of $139 million
      (compared to $131 million in Q2 2018 (+6%) and $104 million in Q3 2017 (+34%))
    • Net earnings per common share of $0.38
      (compared to net earnings of $0.28 in Q2 2018 and net earnings of $0.35 in Q3 2017)
  • Adjusted (excluding specific items) 2
    • Operating income of $76 million
      (compared to $76 million in Q2 2018 (stable) and $53 million in Q3 2017 (+43%))
    • OIBD of $137 million
      (compared to $134 million in Q2 2018 (+2%) and $106 million in Q3 2017 (+29%))
    • Net earnings per common share of $0.40
      (compared to net earnings of $0.30 in Q2 2018 and net earnings of $0.20 in Q3 2017)
  • European Boxboard subsidiary, via equity position in Reno De Medici S.p.A., closed the acquisition of Barcelona Cartonboard on October 31, 2018
  • Net debt 2 of $1,573 million as at September 30, 2018 (compared to $1,586 million as at June 30, 2018 ) and net debt to adjusted OIBD ratio 2 at 3.2x on a pro-forma basis 3

 

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 and 2018 business combinations on a LTM basis.

 

 

Mr. Mario Plourde , President and Chief Executive Officer, commented: "Strong fundamentals in Containerboard Packaging were the driving factor behind our solid third quarter performance. This was reinforced by successful margin realignment in Recovery activities, which contributed to improved quarterly earnings in Specialty Products. Results in the Tissue division continued to be impacted by rising raw material and logistics costs, in addition to the capacity-driven competitive reality. While margins in this division were below expectations as a result of these factors and weather-related events, the solid quarterly sales performance highlights the underlying strength of our tissue platform, and supports the strategic investments being made to propel long-term competitive positioning. Finally, the European Boxboard segment, via our 57.8% equity position in Reno de Medici S.p.A., announced solid results in the seasonally softer third quarter that delivered a marked improvement in profitability year-over-year.

On the strategic front, ramp-up of the new containerboard converting facility in Piscataway, NJ progressed very well, and production from the Maspeth, NY has been transferred to the new facility earlier than expected. Engineering work and project analysis continue to be advanced for the Bear Island project in Virginia , with scope and plans expected to be finalized in the first half of 2019. Reno de Medici S.p.A. announced that it had received the necessary approval from the Spanish Antitrust Authority and closed the acquisition of Barcelona Cartonboard SAU on October 31, 2018 ."

Financial Summary

 

Selected consolidated information

             

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

Q3 2018

 

Q2 2018

 

Q3 2017

 
       

Sales

1,172

 

1,179

 

1,103

 

As Reported

     

Operating income before depreciation and amortization (OIBD) 1

139

 

131

 

104

 

Operating income

78

 

73

 

51

 

Net earnings

36

 

27

 

33

 

per common share

$

0.38

 

$

0.28

 

$

0.35

 

Adjusted 1

     

Operating income before depreciation and amortization (OIBD)

137

 

134

 

106

 

Operating income

76

 

76

 

53

 

Net earnings

38

 

29

 

19

 

per common share

$

0.40

 

$

0.30

 

$

0.20

 

Margin (OIBD)

11.7

%

11.4

%

9.6

%

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

 

Segmented Operating Income (loss) as reported

           

(in millions of Canadian dollars) (unaudited)

Q3 2018

 

Q2 2018

 

Q3 2017

       

Packaging Products

     

Containerboard

94

 

82

 

50

Boxboard Europe

10

 

22

 

5

Specialty Products

9

 

4

 

10

       

Tissue Papers

(11)

 

(9)

 

9

       

Corporate Activities

(24)

 

(26)

 

(23)

Operating income as reported

78

 

73

 

51

 

Segmented adjusted OIBD 1

           

(in millions of Canadian dollars) (unaudited)

Q3 2018

 

Q2 2018

 

Q3 2017

       

Packaging Products

     

Containerboard

117

 

105

 

72

Boxboard Europe

19

 

30

 

14

Specialty Products

14

 

9

 

15

       

Tissue Papers

5

 

7

 

24

       

Corporate Activities

(18)

 

(17)

 

(19)

Adjusted OIBD

137

 

134

 

106

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

 

Analysis of results for the three-month period ended September 30, 2018 (compared to the same period last year)

Sales of $1,172 million increased by $69 million or 6% compared to the same period last year. This was driven by a 12% increase in the Tissue segment, reflecting volume improvements, a more favourable sales mix, exchange rate and higher average sales prices during the period. An 8% increase in the Containerboard Packaging division similarly benefited sales, and was driven by higher sales prices and the acquisition of Ontario converting facilities at the end of 2017. Sales generated by the European Boxboard segment were up marginally compared to the prior year, as lower shipments were offset by improvements in both pricing and sales mix, and a favourable Canadian dollar - euro exchange rate. Finally, third quarter sales in the Specialty Products division were below prior year levels, reflecting the lower sales in recovery activities following the significant decrease in year-over-year prices of brown recycle fibres.

Third quarter operating income stood at $78 million , a notable improvement from the $51 million generated last year. This increase was driven primarily by the Containerboard Packaging segment, where strong results reflect the improved raw material pricing environment and implementation of the industry-wide US$50 /st price increase. Operating income similarly benefited from improved results generated by the European Boxboard segment, reflecting lower raw material pricing and higher average selling prices. As was the case in the second quarter, the contribution from the Specialty Products division decreased slightly compared to last year as a result of the impact of lower raw material prices on recovery activities. Lastly, results in the Tissue division reflected higher raw material and transportation costs, the effects of which mitigated the benefits derived from a more favourable pricing and sales mix, and higher volumes.

On an adjusted basis 1 , third quarter operating income stood at $76 million , versus $53 million in the prior year.

The specific items, before income taxes, that impacted our third quarter 2018 operating income and/or net earnings were:

  • a $2 million unrealized gain on financial instruments (operating income and net earnings)
  • a $1 million restructuring charge related to the forthcoming closure of two sheets plants in Ontario (operating income and net earnings)
  • a $1 million gain related to a plant closed in a previous year (operating income and net earnings)
  • a $3 million foreign exchange gain on long-term debt and financial instruments (net earnings)

For the three-month period ended September 30, 2018 , the Corporation posted net earnings of $36 million , or $0.38 per common share, compared to net earnings of $33 million , or $0.35 per common share in the same period of 2017. On an adjusted basis 1 , the Corporation generated net earnings of $38 million in the third quarter of 2018, or $0.40 per common share, compared to net earnings of $19 million , or $0.20 per common share, in the same period of 2017.

 

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

 

Near-Term and Strategic Outlook

Discussing short-term expectations, Mr. Plourde commented: "We expect solid market conditions to continue to drive results in the Containerboard business within the framework of the softer seasonal demand typical of the fourth quarter. While recent announcements regarding future capacity additions have led to some concern about longer-term demand-supply balance in the containerboard market, current data suggests that the market will remain well balanced over the medium-term. Given this, the containerboard division is expected to continue to be an important contributor to our business performance over this timeframe. Turning to Tissue, capacity additions and elevated raw material costs will continue to impact the performance of this segment in the near-term. As such, we remain focused on realizing recently announced price increases, maximizing efficiency, optimizing our operational performance, and we remain committed to strategically investing in the modernization of our asset base to reinforce our market positioning.

Strategically, we are focused on successfully carrying out our 2018 investment program, ramping up production at our recently opened containerboard converting facility, broadening our tissue sales penetration in Oregon , and completing engineering analysis for the Bear Island project in Virginia . On a broader scale, our daily operational focus and our longer-term strategic plans continue to be driven by our commitment to be meticulous with our capital allocation practices, to diligently manage our leverage, and to successfully position our asset base for long term success."

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 December 5, 2018 , to shareholders of record at the close of business on November 21, 2018 . This dividend is an "eligible dividend" as per the Income Tax Act (R.C.S. (1985), Canada ). During the third quarter of 2018, Cascades purchased 488,900 common shares for cancellation at a weighted average price of $13.27 .

2018 Third Quarter Results Conference Call Details

Management will discuss the 2018 third quarter financial results during a conference call today at 10:00 a.m. EDT . 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 December 8, 2018 by dialing 1-855-859-2056, access code 1998599.

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)

September 30,
2018

 

December 31,
2017

Assets

   

Current assets

   

Cash and cash equivalents

139

 

89

Accounts receivable

643

 

608

Current income tax assets

19

 

18

Inventories

528

 

523

Current portion of financial assets

11

 

9

Assets held for sale

 

13

 

1,340

 

1,260

Long-term assets

   

Investments in associates and joint ventures

79

 

78

Property, plant and equipment

2,351

 

2,104

Intangible assets with finite useful life

203

 

212

Financial assets

19

 

23

Other assets

63

 

73

Deferred income tax assets

145

 

149

Goodwill and other intangible assets with indefinite useful life

540

 

528

 

4,740

 

4,427

Liabilities and Equity

   

Current liabilities

   

Bank loans and advances

20

 

35

Trade and other payables

705

 

683

Current income tax liabilities

20

 

6

Current portion of long-term debt

44

 

59

Current portion of provisions for contingencies and charges

7

 

7

Current portion of financial liabilities and other liabilities

81

 

101

 

877

 

891

Long-term liabilities

   

Long-term debt

1,648

 

1,517

Provisions for contingencies and charges

38

 

36

Financial liabilities

21

 

18

Other liabilities

195

 

178

Deferred income tax liabilities

219

 

186

 

2,998

 

2,826

Equity attributable to Shareholders

   

Capital stock

490

 

492

Contributed surplus

16

 

16

Retained earnings

1,091

 

982

Accumulated other comprehensive loss

(18)

 

(35)

 

1,579

 

1,455

Non-controlling interests

163

 

146

Total equity

1,742

 

1,601

 

4,740

 

4,427

 

CONSOLIDATED STATEMENTS OF EARNINGS

       
 

For the 3-month periods ended
September 30,

 

For the 9-month periods ended
September 30,

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

2018

 

2017

 

2018

 

2017

Sales

1,172

 

1,103

 

3,449

 

3,239

Cost of sales and expenses

       

Cost of sales (including depreciation and amortization of $61 million for 3-month period (2017 — $53 million) and $174 million for 9-month period (2017 — $156 million))

1,001

 

955

 

2,949

 

2,820

Selling and administrative expenses

96

 

91

 

301

 

285

Gain on acquisitions, disposals and others

 

 

(66)

 

(8)

Impairment charges and restructuring costs

 

4

 

 

18

Foreign exchange loss (gain)

(1)

 

3

 

(2)

 

2

Loss (gain) on derivative financial instruments

(2)

 

(1)

 

4

 

(8)

 

1,094

 

1,052

 

3,186

 

3,109

Operating income

78

 

51

 

263

 

130

Financing expense

23

 

25

 

66

 

70

Interest expense on employee future benefits

1

 

1

 

4

 

3

Foreign exchange gain on long-term debt and financial instruments

(3)

 

(8)

 

(4)

 

(27)

Fair value revaluation gain on investments

 

(18)

 

(5)

 

(315)

Share of results of associates and joint ventures

(3)

 

(3)

 

(7)

 

(36)

Earnings before income taxes

60

 

54

 

209

 

435

Provision for (recovery of) income taxes

17

 

19

 

57

 

(24)

Net earnings including non-controlling interests for the period

43

 

35

 

152

 

459

Net earnings attributable to non-controlling interests

7

 

2

 

28

 

9

Net earnings attributable to Shareholders for the period

36

 

33

 

124

 

450

Net earnings per common share

       

Basic

$

0.38

 

$

0.35

 

$

1.31

 

$

4.75

Diluted

$

0.37

 

$

0.34

 

$

1.27

 

$

4.61

Weighted average basic number of common shares outstanding

 

94,469,465

   

94,718,891

   

94,704,999

   

94,658,949

Weighted average number of diluted common shares

 

96,780,412

   

97,773,147

   

97,194,029

   

97,609,266

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

       
 

For the 3-month periods ended
September 30,

 

For the 9-month periods ended
September 30,

(in millions of Canadian dollars) (unaudited)

2018

 

2017

 

2018

 

2017

Net earnings including non-controlling interests for the period

43

 

35

 

152

 

459

Other comprehensive income (loss)

       

Items that may be reclassified subsequently to earnings

       

Translation adjustments

       

Change in foreign currency translation of foreign subsidiaries

(26)

 

(34)

 

24

 

(56)

Change in foreign currency translation related to net investment hedging activities

15

 

30

 

(15)

 

45

Cash flow hedges

       

Change in fair value of foreign exchange forward contracts

 

1

 

(1)

 

1

Change in fair value of interest rate swaps

 

 

1

 

Change in fair value of commodity derivative financial instruments

2

 

1

 

5

 

(1)

Equity investment

 

(19)

 

 

Share of other comprehensive income of associates

 

 

 

21

Recovery of (provision for) income taxes

(2)

 

(2)

 

1

 

(15)

 

(11)

 

(23)

 

15

 

(5)

Items that are reclassified to retained earnings

       

Actuarial gain on employee future benefits

8

 

8

 

13

 

3

Provision for income taxes

(2)

 

(2)

 

(3)

 

(1)

 

6

 

6

 

10

 

2

Other comprehensive income (loss)

(5)

 

(17)

 

25

 

(3)

Comprehensive income including non-controlling interests for the period

38

 

18

 

177

 

456

Comprehensive income attributable to non-controlling interests for the period

3

 

 

28

 

9

Comprehensive income attributable to Shareholders for the period

35

 

18

 

149

 

447

 

CONSOLIDATED STATEMENTS OF EQUITY

   
 

For the 9-month period ended September 30, 2018

(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

492

 

16

 

982

 

(35)

 

1,455

 

146

 

1,601

New IFRS adoption

 

 

(2)

 

2

 

 

 

Adjusted Balance - Beginning of period

492

 

16

 

980

 

(33)

 

1,455

 

146

 

1,601

Comprehensive income

             

Net earnings

 

 

124

 

 

124

 

28

 

152

Other comprehensive income

 

 

10

 

15

 

25

 

 

25

 

 

 

134

 

15

 

149

 

28

 

177

Dividends

 

 

(11)

 

 

(11)

 

 

(11)

Stock options expense

 

1

 

 

 

1

 

 

1

Issuance of common shares upon exercise of stock options

5

 

(1)

 

 

 

4

 

 

4

Redemption of common shares

(7)

 

 

(12)

 

 

(19)

 

 

(19)

Capital contribution from a non-controlling interest

 

 

 

 

 

1

 

1

Dividends paid to non-controlling interests

 

 

 

 

 

(12)

 

(12)

Balance - End of period

490

 

16

 

1,091

 

(18)

 

1,579

 

163

 

1,742

               
 

For the 9-month period ended September 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

 

 

450

 

 

450

 

9

 

459

Other comprehensive income (loss)

 

 

2

 

(5)

 

(3)

 

 

(3)

 

 

 

452

 

(5)

 

447

 

9

 

456

Business combinations

 

 

 

 

 

57

 

57

Dividends

 

 

(11)

 

 

(11)

 

 

(11)

Stock options expense

 

1

 

 

 

1

 

 

1

Issuance of common shares upon exercise of stock options

2

 

(1)

 

 

 

1

 

 

1

Partial disposal of a subsidiary to non-controlling interests

 

 

(1)

 

 

(1)

 

1

 

Dividends paid to non-controlling interests

 

 

 

 

 

(5)

 

(5)

Balance - End of period

489

 

16

 

952

 

(36)

 

1,421

 

152

 

1,573

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

       
 

For the 3-month periods ended
September 30,

 

For the 9-month periods ended
September 30,

(in millions of Canadian dollars) (unaudited)

2018

 

2017

 

2018

 

2017

Operating activities

         

Net earnings attributable to Shareholders for the period

36

 

33

 

124

 

450

Adjustments for:

       

Financing expense and interest expense on employee future benefits

24

 

26

 

70

 

73

Depreciation and amortization

61

 

53

 

174

 

156

Gain on acquisitions, disposals and others

 

 

(66)

 

(8)

Impairment charges and restructuring costs

 

2

 

 

13

Unrealized loss (gain) on derivative financial instruments

(2)

 

(2)

 

5

 

(10)

Foreign exchange gain on long-term debt and financial instruments

(3)

 

(8)

 

(4)

 

(27)

Provision for (recovery of) income taxes

17

 

19

 

57

 

(24)

Fair value revaluation gain on investments

 

(18)

 

(5)

 

(315)

Share of results of associates and joint ventures

(3)

 

(3)

 

(7)

 

(36)

Net earnings attributable to non-controlling interests

7

 

2

 

28

 

9

Net financing expense paid

(39)

 

(40)

 

(94)

 

(88)

Net income taxes paid

(6)

 

 

(4)

 

(6)

Dividends received

3

 

3

 

4

 

8

Employee future benefits and others

(3)

 

(6)

 

(10)

 

(12)

 

92

 

61

 

272

 

183

Changes in non-cash working capital components

42

 

(43)

 

16

 

(105)

 

134

 

18

 

288

 

78

Investing activities

       

Investments in associates and joint ventures

 

 

(2)

 

(16)

Payments for property, plant and equipment

(124)

 

(38)

 

(274)

 

(136)

Proceeds from disposals of property, plant and equipment

 

 

82

 

14

Change in intangible and other assets

(4)

 

283

 

(11)

 

272

Net cash acquired in business combinations

 

 

3

 

34

 

(128)

 

245

 

(202)

 

168

Financing activities

       

Bank loans and advances

(1)

 

7

 

(16)

 

5

Change in revolving credit facilities

5

 

(133)

 

15

 

(80)

Increase in other long-term debt

54

 

5

 

65

 

11

Payments of other long-term debt

(7)

 

(10)

 

(62)

 

(29)

Settlement of derivative financial instruments

 

(2)

 

(1)

 

(9)

Issuance of common shares upon exercise of stock options

 

 

4

 

1

Redemption of common shares

(7)

 

 

(19)

 

Dividends paid to non-controlling interests

(2)

 

(2)

 

(12)

 

(5)

Capital contribution from non-controlling interests

 

 

1

 

Dividends paid to the Corporation's Shareholders

(3)

 

(3)

 

(11)

 

(11)

 

39

 

(138)

 

(36)

 

(117)

Change in cash and cash equivalents during the period

45

 

125

 

50

 

129

Currency translation on cash and cash equivalents

(3)

 

 

 

1

Cash and cash equivalents - Beginning of period

97

 

67

 

89

 

62

Cash and cash equivalents - End of period

139

 

192

 

139

 

192

 

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, 2017 .

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 and Specialty Products (which constitutes the Corporation's Packaging Products), and Tissue Papers.

 

 

SALES

 

For the 3-month periods ended
September 30,

 

For the 9-month periods ended
September 30,

(in millions of Canadian dollars) (unaudited)

2018

 

2017

 

2018

 

2017

Packaging Products

         

Containerboard

472

 

438

 

1,368

 

1,212

Boxboard Europe

210

 

202

 

688

 

626

Specialty Products

164

 

181

 

487

 

542

Intersegment sales

(21)

 

(32)

 

(68)

 

(81)

 

825

 

789

 

2,475

 

2,299

Tissue Papers

361

 

323

 

1,008

 

967

Intersegment sales and Corporate Activities

(14)

 

(9)

 

(34)

 

(27)

 

1,172

 

1,103

 

3,449

 

3,239

   
 

OPERATING INCOME (LOSS) BEFORE DEPRECIATION AND AMORTIZATION

 

For the 3-month periods ended
September 30,

 

For the 9-month periods ended
September 30,

(in millions of Canadian dollars) (unaudited)

2018

 

2017

 

2018

 

2017

Packaging Products

       

Containerboard

116

 

69

 

359

 

165

Boxboard Europe

19

 

14

 

77

 

48

Specialty Products

15

 

15

 

31

 

53

 

150

 

98

 

467

 

266

Tissue Papers

5

 

22

 

25

 

78

Corporate Activities

(16)

 

(16)

 

(55)

 

(58)

Operating income before depreciation and amortization

139

 

104

 

437

 

286

Depreciation and amortization

(61)

 

(53)

 

(174)

 

(156)

Financing expense and interest expense on employee future benefits

(24)

 

(26)

 

(70)

 

(73)

Foreign exchange gain on long-term debt and financial instruments

3

 

8

 

4

 

27

Fair value revaluation gain on investments

 

18

 

5

 

315

Share of results of associates and joint ventures

3

 

3

 

7

 

36

Earnings before income taxes

60

 

54

 

209

 

435

   
 

PAYMENTS FOR PROPERTY, PLANT AND EQUIPMENT

 

For the 3-month periods ended
September 30,

 

For the 9-month periods ended
September 30,

(in millions of Canadian dollars) (unaudited)

2018

 

2017

 

2018

 

2017

Packaging Products

       

Containerboard

107

 

13

 

247

 

28

Boxboard Europe

15

 

8

 

23

 

20

Specialty Products

8

 

8

 

25

 

17

 

130

 

29

 

295

 

65

Tissue Papers

29

 

9

 

57

 

53

Corporate Activities

4

 

3

 

13

 

11

Total acquisitions

163

 

41

 

365

 

129

Proceeds from disposals of property, plant and equipment

 

 

(82)

 

(14)

Capital lease acquisitions and included in other debts

(33)

 

 

(99)

 

(7)

 

130

 

41

 

184

 

108

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

       

Beginning of period

14

 

8

 

28

 

25

End of period

(20)

 

(11)

 

(20)

 

(11)

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

124

 

38

 

192

 

122

 

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:

 

 

Q3 2018

(in millions of Canadian dollars)

Containerboard

Boxboard
Europe

Specialty
Products

Tissue
Papers

Corporate
Activities

Consolidated

Operating income (loss)

94

10

9

(11)

(24)

78

Depreciation and amortization

22

9

6

16

8

61

Operating income (loss) before depreciation and amortization

116

19

15

5

(16)

139

Specific items:

           

Restructuring costs

1

(1)

Unrealized gain on financial instruments

(2)

(2)

 

1

(1)

(2)

(2)

Adjusted operating income (loss) before depreciation and amortization

117

19

14

5

(18)

137

Adjusted operating income (loss)

95

10

8

(11)

(26)

76

   
 

Q2 2018

(in millions of Canadian dollars)

Containerboard

Boxboard
Europe

Specialty

Products

Tissue

Papers

Corporate

Activities

Consolidated

Operating income (loss)

82

22

4

(9)

(26)

73

Depreciation and amortization

20

8

5

16

9

58

Operating income (loss) before depreciation and amortization

102

30

9

7

(17)

131

Specific items :

           

Unrealized loss on derivative financial instruments

3

3

 

3

3

Adjusted operating income (loss) before depreciation and amortization

105

30

9

7

(17)

134

Adjusted operating income (loss)

85

22

4

(9)

(26)

76

   
 

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 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

 

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)

Q3 2018

 

Q2 2018

 

Q3 2017

       

Net earnings attributable to Shareholders for the year

36

 

27

 

33

Net earnings attributable to non-controlling interests

7

 

10

 

2

Provision for income taxes

17

 

16

 

19

Fair value revaluation gain on investments

 

 

(18)

Share of results of associates and joint ventures

(3)

 

(3)

 

(3)

Foreign exchange gain on long-term debt and financial instruments

(3)

 

 

(8)

Financing expense and interest expense on employee future benefits

24

 

23

 

26

Operating income

78

 

73

 

51

Specific items:

     

Impairment charges

 

 

2

Restructuring costs

 

 

2

Unrealized loss (gain) on derivative financial instruments

(2)

 

3

 

(2)

 

(2)

 

3

 

2

Adjusted operating income

76

 

76

 

53

Depreciation and amortization

61

 

58

 

53

Adjusted operating income before depreciation and amortization

137

 

134

 

106

 

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 SHARE 1

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

Q3 2018

 

Q2 2018

 

Q3 2017

 

Q3 2018

 

Q2 2018

 

Q3 2017

               

As per IFRS

36

 

27

 

33

 

$

0.38

 

$

0.28

 

$

0.35

Specific items:

             

Impairment charges

 

 

2

 

 

 

$

0.02

Restructuring costs

 

 

2

 

 

 

$

0.01

Unrealized loss (gain) on derivative financial instruments

(2)

 

3

 

(2)

 

$

(0.02)

 

$

0.03

 

$

(0.01)

Unrealized gain on interest rate swaps

 

(1)

 

 

 

$

(0.01)

 

Foreign exchange gain on long-term debt and financial instruments

(3)

 

 

(8)

 

$

(0.02)

 

 

$

(0.08)

Fair value revaluation gain on investments

 

 

(18)

 

 

 

$

(0.17)

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

7

 

 

10

 

$

0.06

 

 

$

0.08

 

2

 

2

 

(14)

 

$

0.02

 

$

0.02

 

$

(0.15)

Adjusted

38

 

29

 

19

 

$

0.40

 

$

0.30

 

$

0.20

   

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)

Q3 2018

 

Q2 2018

 

Q3 2017

Cash flow from operating activities

134

 

116

 

18

Changes in non-cash working capital components

(42)

 

(5)

 

43

Depreciation and amortization

(61)

 

(58)

 

(53)

Net income taxes paid

6

 

1

 

Net financing expense paid

39

 

18

 

40

Impairment charges and restructuring costs

 

 

(2)

Unrealized gain (loss) on derivative financial instruments

2

 

(3)

 

2

Dividend received, employee future benefits and others

 

4

 

3

Operating income

78

 

73

 

51

Depreciation and amortization

61

 

58

 

53

Operating income before depreciation and amortization

139

 

131

 

104

 

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 common share basis:

 

           

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

Q3 2018

 

Q2 2018

 

Q3 2017

Cash flow from operating activities

134

 

116

 

18

Changes in non-cash working capital components

(42)

 

(5)

 

43

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

92

 

111

 

61

Specific items, net of current income taxes if applicable:

     

Restructuring costs

 

 

2

Adjusted cash flow from operating activities

92

 

111

 

63

Capital expenditures & other assets 1 and capital lease payments

(129)

 

(72)

 

(46)

Dividends paid to the Corporation's Shareholders and to non-controlling interests

(5)

 

(12)

 

(5)

Adjusted free cash flow

(42)

 

27

 

12

Adjusted free cash flow per common share

$

(0.44)

 

$

0.29

 

$

0.13

Weighted average basic number of common shares outstanding

 

94,469,465

   

94,638,464

   

94,718,891

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)

September 30,
2018

 

June 30,
2018

 

September 30,
2017

Long-term debt

1,648

 

1,616

 

1,575

Current portion of long-term debt

44

 

46

 

53

Bank loans and advances

20

 

21

 

33

Total debt

1,712

 

1,683

 

1,661

Less: Cash and cash equivalents (including $26 million of restricted cash in June 30, 2018)

139

 

97

 

192

Net debt

1,573

 

1,586

 

1,469

Adjusted OIBD (last twelve months)

481

 

450

 

370

Net debt / Adjusted OIBD ratio

3.3

 

3.5

 

4.0

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

3.2

 

3.5

 

3.6

1 Pro-forma to include adjusted OIBD of 2017 and 2018 business acquisitions on a last twelve months basis.

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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