August 9th, 2019

KINGSEY FALLS, QC , Aug. 9, 2019 /CNW Telbec/ - Cascades Inc. (TSX: CAS) reports its unaudited financial results for the three-month period ended June 30, 2019 .

Q2 2019 Highlights

  • Sales of $1,275 million
    (compared to $1,230 million in Q1 2019 (+4%) and $1,180 million in Q2 2018 (+8%))
  • As reported (including specific items)
    • Operating income of $82 million
      (compared to $72 million in Q1 2019 (+14%) and $73 million in Q2 2018 (+12%))
    • Operating income before depreciation and amortization (OIBD) 1 of $154 million
      (compared to $139 million in Q1 2019 (+11%) and $131 million in Q2 2018 (+18%))
    • Net earnings per share of $0.33
      (compared to $0.26 in Q1 2019 and $0.28 in Q2 2018)
  • Adjusted (excluding specific items) 1
    • Operating income of $84 million
      (compared to $68 million in Q1 2019 (+24%) and $76 million in Q2 2018 (+11%))
    • OIBD of $156 million
      (compared to $135 million in Q1 2019 (+16%) and $134 million in Q2 2018 (+16%))
    • Net earnings per share of $0.28
      (compared to $0.14 in Q1 2019 and $0.30 in Q2 2018)
  • Net debt 1 of $1,861 million as at June 30, 2019 (compared to $1,878 million as at March 31, 2019 ) and net debt to adjusted OIBD ratio 1 at 3.3x on a pro-forma basis 2 .

               

1

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

2

Pro-forma basis to include 2018 business combinations on a LTM basis and IFRS 16 Leases impact on an annualized basis as at June 30, 2019.

   

 

Mr. Mario Plourde , President and Chief Executive Officer, commented: "Cascades delivered record quarterly sales and adjusted OIBD that were in line with expectations in the second quarter. All our segments executed well. Tissue results were supported by favourable input costs and selling prices and better operational performance, notably at the St. Helens mill in Oregon , Containerboard Packaging performance reflected lower OCC prices and good operational flexibility within a context of softer demand and pricing pressure, while European Boxboard and Specialty Products results benefited from recent business acquisitions.

On the strategic front, we announced the acquisition of substantially all of the Orchids Paper Products assets in early July. This move provides compelling optimization opportunities for our Tissue platform while reinforcing the operational foundation of this segment's U.S. consumer product business. Furthermore, the addition of these assets accelerates our ongoing Tissue modernization plan, is aligned with our efforts to enhance the quality of the products we manufacture, and reinforces our initiatives to support the growth of our customers and the segment. On the Containerboard side, analysis of the Bear Island conversion project in Virginia is advancing, with added time being taken to determine the optimal structure to successfully execute the project and to minimize risk. We expect to provide additional information by the end of the year.

 

Finally, we are pleased to announce that we are increasing our quarterly dividend from $0.04 to $0.08 per share. This step reflects our strong asset base and financial fundamentals. We continue to prioritize capital investments and debt reduction in our capital allocation, and believe that this dividend increase, amounting to approximately $15 million annually, will not impact our financial flexibility to continue to focus on these priorities for creation of shareholder value. At the same time, we will provide our shareholders with a higher cash return on their investment that is better aligned with the industry."

 

 

Financial Summary

 

Selected consolidated information

             

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

Q2 2019

Q1 2019

Q2 2018

Sales

 

1,275

   

1,230

   

1,180

 

As reported

                 

Operating income before depreciation and amortization (OIBD) 1

 

154

   

139

   

131

 

Operating income

 

82

   

72

   

73

 

Net earnings

 

31

   

24

   

27

 

per share

$

0.33

 

$

0.26

 

$

0.28

 

Adjusted 1

                 

Operating income before depreciation and amortization (OIBD)

 

156

   

135

   

134

 

Operating income

 

84

   

68

   

76

 

Net earnings

 

26

   

13

   

29

 

per share

$

0.28

 

$

0.14

 

$

0.30

 

Margin (OIBD)

 

12.2

%

 

11.0

%

 

11.4

%

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

           

 

Segmented OIBD as reported

       

(in millions of Canadian dollars) (unaudited)

Q2 2019

Q1 2019

Q2 2018

Packaging Products

     

Containerboard

114

111

102

Boxboard Europe

30

29

30

Specialty Products

13

11

9

       

Tissue Papers

17

4

7

       

Corporate Activities

(20)

(16)

(17)

OIBD as reported

154

139

131

 

Segmented adjusted OIBD 1

       

(in millions of Canadian dollars) (unaudited)

Q2 2019

Q1 2019

Q2 2018

Packaging Products

     

Containerboard

113

104

105

Boxboard Europe

30

29

30

Specialty Products

13

12

9

       

Tissue Papers

18

9

7

       

Corporate Activities

(18)

(19)

(17)

Adjusted OIBD

156

135

134

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

 

Analysis of results for the three-month period ended June 30, 2019 (compared to the same period last year)

Sales of $1,275 million increased by $95 million , or 8%, compared to the same period last year, attaining a record level for the second quarter. Specifically, Tissue sales increased by $34 million or 10%, reflecting a higher average selling price, a more favourable sales mix and exchange rate, partially offset by slightly lower volume following the previously announced closure of 2 paper machines in Ontario . European Boxboard sales increased by $38 million , or 16%, compared to the prior year. This was largely driven by the business acquisition in Spain at the end of 2018, which served to more than offset less favourable selling price and mix and Canadian dollar - euro exchange rate. The Specialty Products segment generated an 18% or $29 million sales improvement year-over-year, reflecting 2018 acquisitions and improved pricing, sales mix and volumes on the packaging side. Combined, these benefits more than offset lower results from the Recovery & Recycling sub-segment due to price erosion of recycled material. Finally, sales in the Containerboard Packaging group decreased by $13 million or 3% year-over-year. This was entirely driven by lower volume, which more than mitigated the benefits of a more favourable exchange rate and sales mix, while average selling prices were stable year-over-year.

The Corporation generated an operating income before depreciation and amortization (OIBD) of $154 million in the second quarter of 2019. This compares to the $131 million generated in the same period last year. This reflects higher average selling prices, a more favourable sales mix and lower raw material prices in the Tissue and Containerboard segments. In the case of both segments, these benefits were partially offset by lower volumes during the period. Tissue results also benefited from ongoing efforts to realign the financial performance by reducing costs and improving execution. This segment also recorded $4 million of prior year U.S. tax credits during the second quarter.  Business acquisitions completed in the last twelve months contributed to the year-over-year improvements generated by Specialty Products and European Boxboard. Results in the Specialty Products segment also benefited from volume and selling price improvements in packaging sub-segments compared to the prior year, the benefits of which offset lower Recovery results attributable to raw material pricing erosion. 2019 operating results also include the beneficial impact of IFRS 16 accounting for leases, which increased second quarter 2019 OIBD by approximately $7 million .

On an adjusted basis 1 , second quarter 2019 OIBD stood at $156 million , versus $134 million in the prior year.

The main specific items, before income taxes, that impacted our second quarter 2019 OIBD and/or net earnings were:

  • $4 million charge in Corporate Activities related to an environmental provision (OIBD and net earnings)
  • $5 million gain in Corporate Activities related to an insurance settlement from a prior year event (OIBD and net earnings)
  • $4 million charge in Corporate Activities associated with transaction fees paid for the Orchids' assets acquisition (OIBD and net earnings)
  • $6 million unrealized gain on the fair value revaluation of an option granted in the Bear Island project (net earnings)

For the 3-month period ended June 30, 2019 , the Corporation posted net earnings of $31 million , or $0.33 per share, compared to net earnings of $27 million , or $0.28 per share, in the same period of 2018. On an adjusted basis 1 , the Corporation generated net earnings of $26 million in the second quarter of 2019, or $0.28 per share, compared to net earnings of $29 million , or $0.30 per share, in the same period of 2018.

 

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

 

Near-Term and Strategic Outlook

Discussing the outlook for Cascades, Mr. Plourde commented: "Near-term results in the Containerboard business segment are expected to improve both sequentially and year-over-year, following usual seasonal trends and current market dynamics, while Tissue performance is expected to continue its positive trend in the third quarter. European Boxboard performance is expected to benefit from its recent acquisition on a year-over-year basis, while sequential performance is expected to moderate as a result of lower seasonal demand following holiday-related closures in the third quarter, and lower pricing. We anticipate stable near-term results in the Specialty Products segment both year-over-year and sequentially, as the impact of ongoing lower recycled fibre pricing on the recovery operations is expected to be offset by stable pricing and volumes in packaging. On a consolidated basis, third quarter performance is expected to improve year-over-year and be moderately higher on a sequential basis."

Dividend on common shares and normal course issuer bid

The Board of Directors of Cascades declared a quarterly dividend of $0.08 per share to be paid on September 6, 2019 to shareholders of record at the close of business on August 21, 2019 . This dividend is an "eligible dividend" as per the Income Tax Act (R.C.S. (1985), Canada ). During the second quarter of 2019, Cascades did not purchase any shares.

2019 Second Quarter Results Conference Call Details

Management will discuss the 2019 second quarter financial results during a conference call today at 9:00 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 September 9, 2019 by dialing 1-855-859-2056, access code 8885738.

Founded in 1964, Cascades offers sustainable, innovative and value-added packaging, hygiene and recovery solutions. The company employs 11,000 women and men across a network of over 90 facilities in North America and Europe . Driven by its participative management, half a century of experience in recycling, and continuous research and development efforts, Cascades continues to provide innovative products that customers have come to rely on, while contributing to the well-being of people, communities and the entire planet. 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,
2019

December 31,
2018

Assets

   

Current assets

   

Cash and cash equivalents

98

123

Accounts receivable

690

635

Current income tax assets

29

29

Inventories

605

606

Current portion of financial assets

8

10

Assets held for sale

3

 

1,433

1,403

Long-term assets

   

Investments in associates and joint ventures

81

81

Property, plant and equipment

2,532

2,505

Intangible assets with finite useful life

189

204

Financial assets

18

20

Other assets

53

42

Deferred income tax assets

144

134

Goodwill and other intangible assets with indefinite useful life

545

556

 

4,995

4,945

Liabilities and Equity

   

Current liabilities

   

Bank loans and advances

16

16

Trade and other payables

768

781

Current income tax liabilities

32

23

Current portion of long-term debt

77

55

Current portion of provisions for contingencies and charges

8

6

Current portion of financial liabilities and other liabilities

104

101

 

1,005

982

Long-term liabilities

   

Long-term debt

1,866

1,821

Provisions for contingencies and charges

44

42

Financial liabilities

7

14

Other liabilities

190

202

Deferred income tax liabilities

194

200

 

3,306

3,261

Equity

   

Capital stock

487

490

Contributed surplus

16

16

Retained earnings

1,022

997

Accumulated other comprehensive income (loss)

(14)

2

Equity attributable to Shareholders

1,511

1,505

Non-controlling interests

178

179

Total equity

1,689

1,684

 

4,995

4,945

 

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 share amounts and number of shares) (unaudited)

2019

2018

2019

 

2018

Sales

 

1,275

 

1,180

 

2,505

 

2,278

Cost of sales and expenses

               

Cost of sales (including depreciation and amortization of $72 million for 3-month period (2018 — $58 million) and $139 million for 6-month period (2018 — $113 million))

 

1,081

 

1,003

 

2,139

 

1,949

Selling and administrative expenses

 

111

 

102

 

215

 

205

Loss (gain) on acquisitions, disposals and others

 

3

 

 

(7)

 

(66)

Impairment charges and restructuring costs

 

1

 

 

10

 

Foreign exchange gain

 

(1)

 

 

(1)

 

(1)

Loss (gain) on derivative financial instruments

 

(2)

 

2

 

(5)

 

6

   

1,193

 

1,107

 

2,351

 

2,093

Operating income

 

82

 

73

 

154

 

185

Financing expense

 

25

 

19

 

50

 

39

Interest expense on employee future benefits and other liabilities

 

10

 

4

 

24

 

7

Foreign exchange gain on long-term debt and financial instruments

 

(1)

 

 

(7)

 

(1)

Fair value revaluation gain on investments

 

 

 

 

(5)

Share of results of associates and joint ventures

 

(2)

 

(3)

 

(4)

 

(4)

Earnings before income taxes

 

50

 

53

 

91

 

149

Provision for income taxes

 

10

 

16

 

18

 

40

Net earnings including non-controlling interests for the period

 

40

 

37

 

73

 

109

Net earnings attributable to non-controlling interests

 

9

 

10

 

18

 

21

Net earnings attributable to Shareholders for the period

 

31

 

27

 

55

 

88

Net earnings per share

               

Basic

$

0.33

$

0.28

$

0.59

$

0.93

Diluted

$

0.32

$

0.27

$

0.58

$

0.90

Weighted average basic number of shares outstanding

 

93,636,771

 

94,638,464

 

93,900,400

 

94,824,718

Weighted average number of shares

 

95,058,479

 

97,011,800

 

95,395,585

 

97,404,264

 

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)

2019

2018

2019

2018

Net earnings including non-controlling interests for the period

40

37

73

109

Other comprehensive income (loss)

       

Items that may be reclassified subsequently to earnings

       

Translation adjustments

       

Change in foreign currency translation of foreign subsidiaries

(21)

10

(58)

50

Change in foreign currency translation related to net investment hedging activities

14

(7)

35

(30)

Cash flow hedges

       

Change in fair value of foreign exchange forward contracts

1

(1)

Change in fair value of interest rate swaps

(1)

1

(1)

1

Change in fair value of commodity derivative financial instruments

(1)

2

(2)

3

Recovery of income taxes

3

 

(9)

6

(25)

26

Items that are not released to earnings

       

Actuarial gain (loss) on employee future benefits

(10)

4

(15)

5

Recovery (provision) of income taxes

1

(1)

3

(1)

 

(9)

3

(12)

4

Other comprehensive income (loss)

(18)

9

(37)

30

Comprehensive income including non-controlling interests for the period

22

46

36

139

Comprehensive income attributable to non-controlling interests for the period

7

7

9

25

Comprehensive income attributable to Shareholders for the period

15

39

27

114

 

CONSOLIDATED STATEMENTS OF EQUITY

   
 

For the 6-month period ended June 30, 2019

(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 - End of previous period, as reported

490

16

1,000

2

1,508

180

1,688

Business combination

(3)

(3)

(1)

(4)

Adjusted balance - End of previous period

490

16

997

2

1,505

179

1,684

New IFRS adoption

(9)

(9)

(9)

Adjusted balance - Beginning of period

490

16

988

2

1,496

179

1,675

Comprehensive income

             

Net earnings

55

55

18

73

Other comprehensive loss

(12)

(16)

(28)

(9)

(37)

 

43

(16)

27

9

36

Dividends

(7)

(7)

(7)

Redemption of shares

(3)

(2)

(5)

(5)

Dividends paid to non-controlling interests

(10)

(10)

Balance - End of period

487

16

1,022

(14)

1,511

178

1,689

               
 

For the 6-month period ended June 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

88

88

21

109

Other comprehensive income

4

22

26

4

30

 

92

22

114

25

139

Dividends

(8)

(8)

(8)

Issuance of shares upon exercise of stock options

5

(1)

4

4

Redemption of shares

(5)

(7)

(12)

(12)

Capital contribution from a non-controlling interest

1

1

Dividends paid to non-controlling interests

(10)

(10)

Balance - End of period

492

15

1,057

(11)

1,553

162

1,715

 

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)

2019

2018

2019

2018

Operating activities

       

Net earnings attributable to Shareholders for the period

31

27

55

88

Adjustments for:

       

Financing expense and interest expense on employee future benefits and other liabilities

35

23

74

46

Depreciation and amortization

72

58

139

113

Loss (gain) on acquisitions, disposals and others

3

(6)

(66)

Impairment charges and restructuring costs

5

Unrealized loss (gain) on derivative financial instruments

(2)

3

(5)

7

Foreign exchange gain on long-term debt and financial instruments

(1)

(7)

(1)

Provision for income taxes

10

16

18

40

Fair value revaluation gain on investments

(5)

Share of results of associates and joint ventures

(2)

(3)

(4)

(4)

Net earnings attributable to non-controlling interests

9

10

18

21

Net financing expense paid

(16)

(18)

(59)

(55)

Net income taxes received (paid)

(2)

(1)

(2)

2

Dividends received

2

1

2

1

Employee future benefits and others

(15)

(5)

(22)

(7)

 

124

111

206

180

Changes in non-cash working capital components

(36)

5

(66)

(26)

 

88

116

140

154

Investing activities

       

Investments in associates and joint ventures

1

1

(2)

Payments for property, plant and equipment

(53)

(67)

(119)

(150)

Proceeds from disposals of property, plant and equipment

1

1

2

82

Change in intangible and other assets

(1)

(3)

(2)

(7)

Net cash acquired (paid) in business combinations

(14)

(14)

3

 

(66)

(69)

(132)

(74)

Financing activities

       

Bank loans and advances

(2)

(2)

(15)

Change in credit facilities

1

(26)

65

10

Increase in other long-term debt

7

3

7

11

Payments of other long-term debt

(38)

(46)

(79)

(55)

Settlement of derivative financial instruments

(1)

Issuance of common shares upon exercise of stock options

2

4

Redemption of common shares

(6)

(5)

(12)

Dividends paid to non-controlling interests

(6)

(8)

(10)

(10)

Capital contribution from non-controlling interests

1

Dividends paid to the Corporation's Shareholders

(3)

(4)

(7)

(8)

 

(41)

(87)

(29)

(75)

Change in cash and cash equivalents during the period

(19)

(40)

(21)

5

Currency translation on cash and cash equivalents

(4)

3

Cash and cash equivalents - Beginning of the period

117

137

123

89

Cash and cash equivalents - End of the period

98

97

98

97

 

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, 2018 .

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
June 30,

For the 6-month
periods ended
June 30,

(in millions of Canadian dollars) (unaudited)

2019

2018

2019

2018

Packaging Products

       

Containerboard

462

475

903

896

Boxboard Europe

270

232

549

478

Specialty Products

193

164

389

323

Intersegment sales

(15)

(23)

(37)

(47)

 

910

848

1,804

1,650

Tissue Papers

377

343

725

648

Intersegment sales and Corporate Activities

(12)

(11)

(24)

(20)

 

1,275

1,180

2,505

2,278

   
 

OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION

 

For the 3-month
periods ended
June 30,

For the 6-month
periods ended
June 30,

(in millions of Canadian dollars) (unaudited)

2019

2018

2019

2018

Packaging Products

       

Containerboard

114

102

225

243

Boxboard Europe

30

30

59

58

Specialty Products

13

9

24

16

 

157

141

308

317

Tissue Papers

17

7

21

20

Corporate Activities

(20)

(17)

(36)

(39)

Operating income before depreciation and amortization

154

131

293

298

Depreciation and amortization

(72)

(58)

(139)

(113)

Financing expense and interest expense on employee future benefits and other liabilities

(35)

(23)

(74)

(46)

Foreign exchange gain on long-term debt and financial instruments

1

7

1

Fair value revaluation gain on investments

5

Share of results of associates and joint ventures

2

3

4

4

Earnings before income taxes

50

53

91

149

   
 

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)

2019

2018

2019

2018

Packaging Products

       

Containerboard

14

81

36

140

Boxboard Europe

17

5

28

8

Specialty Products

8

11

14

17

 

39

97

78

165

Tissue Papers

18

19

47

28

Corporate Activities

6

6

14

9

Total acquisitions

63

122

139

202

Proceeds from disposals of property, plant and equipment

(1)

(1)

(2)

(82)

Lease acquisitions

(18)

(63)

(33)

(66)

 

44

58

104

54

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

       

Beginning of period

32

22

37

28

End of period

(24)

(14)

(24)

(14)

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

52

66

117

68

 

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 and financial instruments, 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 and 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 obligations 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 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 2019

(in millions of Canadian dollars) (unaudited)

Containerboard

Boxboard Europe

Specialty Products

Tissue Papers

Corporate Activities

Consolidated

Operating income (loss)

84

19

6

1

(28)

82

Depreciation and amortization

30

11

7

16

8

72

Operating income (loss) before depreciation and amortization

114

30

13

17

(20)

154

Specific items:

           

Loss on acquisitions, disposals and others

3

3

Restructuring costs

1

1

Unrealized gain on financial instruments

(1)

(1)

(2)

 

(1)

1

2

2

Adjusted operating income (loss) before depreciation and amortization

113

30

13

18

(18)

156

Adjusted operating income (loss)

83

19

6

2

(26)

84

   
 

Q1 2019

(in millions of Canadian dollars) (unaudited)

Containerboard

Boxboard Europe

Specialty Products

Tissue Papers

Corporate Activities

Consolidated

Operating income (loss)

84

18

3

(8)

(25)

72

Depreciation and amortization

27

11

8

12

9

67

Operating income (loss) before depreciation and amortization

111

29

11

4

(16)

139

Specific items :

           

Gain on acquisitions, disposals and others

(10)

(10)

Impairment charges

3

1

4

Restructuring costs

1

4

5

Unrealized gain on derivative financial instruments

(3)

(3)

 

(7)

1

5

(3)

(4)

Adjusted operating income (loss) before depreciation and amortization

104

29

12

9

(19)

135

Adjusted operating income (loss)

77

18

4

(3)

(28)

68

   
 

Q2 2018

(in millions of Canadian dollars) (unaudited)

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 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

 

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)

Q2 2019

Q1 2019

Q2 2018

Net earnings attributable to Shareholders

31

24

27

Net earnings attributable to non-controlling interests

9

9

10

Provision for income taxes

10

8

16

Share of results of associates and joint ventures

(2)

(2)

(3)

Foreign exchange gain on long-term debt and financial instruments

(1)

(6)

Financing expense, interest expense on employee future benefits and other liabilities

35

39

23

Operating income

82

72

73

Specific items:

     

Loss (gain) on acquisitions, disposals and others

3

(10)

Impairment charges

4

Restructuring costs

1

5

Unrealized loss (gain) on derivative financial instruments

(2)

(3)

3

 

2

(4)

3

Adjusted operating income

84

68

76

Depreciation and amortization

72

67

58

Adjusted operating income before depreciation and amortization

156

135

134

 

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

 

         

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

NET EARNINGS

   

NET EARNINGS PER SHARE 1

 

Q2 2019

Q1 2019

Q2 2018

   

Q2 2019

Q1 2019

Q2 2018

                 

As per IFRS

31

24

27

   

$

0.33

$

0.26

$

0.28

Specific items:

               

Loss (gain) on acquisitions, disposals and others

3

(10)

   

$

0.03

$

(0.11)

Impairment charges

4

   

$

0.03

Restructuring costs

1

5

   

$

0.01

$

0.04

Unrealized loss (gain) on derivative financial instruments

(2)

(3)

3

   

$

(0.02)

$

(0.02)

$

0.03

Unrealized gain on interest rate swaps and option fair value

(6)

(1)

   

$

(0.06)

$

(0.01)

Foreign exchange gain on long-term debt and financial instruments

(1)

(6)

   

$

(0.01)

$

(0.06)

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

(1)

   

 

(5)

(11)

2

   

$

(0.05)

$

(0.12)

$

0.02

Adjusted

26

13

29

   

$

0.28

$

0.14

$

0.30

   

1

Specific amounts per 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 2019

Q1 2019

Q2 2018

Cash flow from operating activities

88

52

116

Changes in non-cash working capital components

36

30

(5)

Depreciation and amortization

(72)

(67)

(58)

Net income taxes paid

2

1

Net financing expense paid

16

43

18

Gain (loss) on acquisitions, disposals and others

(3)

9

Impairment charges and restructuring costs

(5)

Unrealized gain (loss) on derivative financial instruments

2

3

(3)

Dividend received, employee future benefits and others

13

7

4

Operating income

82

72

73

Depreciation and amortization

72

67

58

Operating income before depreciation and amortization

154

139

131

 

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 2019

Q1 2019

Q2 2018

Cash flow from operating activities

88

52

116

Changes in non-cash working capital components

36

30

(5)

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

124

82

111

Specific items, net of current income taxes if applicable:

     

Restructuring costs

1

3

Adjusted cash flow from operating activities

125

85

111

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

(64)

(76)

(72)

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

(9)

(8)

(12)

Adjusted free cash flow

52

1

27

Adjusted free cash flow per share

$

0.56

$

0.01

$

0.29

Weighted average basic number of shares outstanding

93,636,771

94,166,959

94,638,464

   

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,  2019

December 31, 2018

June 30, 2018

Long-term debt

1,866

1,821

1,616

Current portion of long-term debt

77

55

46

Bank loans and advances

16

16

21

Total debt

1,959

1,892

1,683

Less: Cash and cash equivalents

98

123

97

Net debt

1,861

1,769

1,586

Adjusted OIBD (last twelve months)

541

489

450

Net debt / Adjusted OIBD ratio

3.4

3.6

3.5

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

3.3

3.5

3.5

   

1

Pro-forma to include adjusted OIBD of 2017 and 2018 business acquisitions on a last twelve months basis and IFRS 16 Leases impact on an annualized basis as at June 30, 2019.

 

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SOURCE Cascades Inc.

Media: Hugo D'Amours, Vice-President, Communications and Public Affairs, 819-363-5184; Source: Allan Hogg, Vice-President and Chief Financial Officer; Investors: Jennifer Aitken, MBA, Director, Investor Relations, 514-282-2697

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