Cascades Announces Results for the Fourth Quarter and Full Year 2018

Record Adjusted OIBD for the Year

KINGSEY FALLS, QC, Feb. 28, 2019 /CNW Telbec/ - Cascades Inc. (TSX: CAS) reports its unaudited financial results for the three-month period and the fiscal year ended December 31, 2018.

Q4 2018 Highlights

  • Sales of $1,196 million (compared to $1,175 million in Q3 2018 (+2%) and $1,082 million in Q4 2017 (+11%))
  • As reported (including specific items)
    • Operating loss of $33 million (compared to operating income of $78 million in Q3 2018 (-142%) and $45 million in Q4 2017 (-173%))
    • OIBD1 of $37 million (compared to $139 million in Q3 2018 (-73%) and $104 million in Q4 2017 (-64%))
    • Net loss per share of $0.69 (compared to net earnings of $0.38 in Q3 2018 and net earnings of $0.60 in Q4 2017)
  • Adjusted2 (excluding specific items)
    • Operating income of $43 million (compared to $76 million in Q3 2018 (-43%) and $46 million in Q4 2017 (-7%))
    • OIBD of $113 million (compared to $137 million in Q3 2018 (-18%) and $105 million in Q4 2017 (+8%))
    • Net earnings per share of $0.00 (compared to net earnings of $0.40 in Q3 2018 and net earnings of $0.14 in Q4 2017)
  • Impairment charge of $75 million ($0.60 per share net of income taxes) recorded on certain fixed assets in the Tissue Papers segment
  • Business acquisitions completed in European Boxboard and Specialty Products segments

2018 Annual Highlights

  • Sales of $4,649 million (compared to $4,321 million in 2017 (+8%))
  • As reported (including specific items)
    • Operating income of $230 million (compared to $175 million in 2017 (+31%))
    • OIBD of $474 million (compared to $390 million in 2017 (+22%))
    • Net earnings per share of $0.62 (compared to net earnings of $5.35 in 2017)
  • Adjusted2 (excluding specific items)
    • Operating income of $245 million (compared to $178 million in 2017 (+38%))
    • OIBD of $489 million (compared to $393 million in 2017 (+24%))
    • Net earnings per share of $0.83 (compared to net earnings of $0.72 in 2017)
  • Authorized credit facility increased to incorporate a US$175 million seven-year term loan with no additional assets required as security
  • Net debt of $1,769 million as at December 31, 2018 (compared to $1,522 million as at December 31, 2017) and net debt to adjusted OIBD ratio3 of 3.5x, down from 3.6x at year-end 2017.

 

1 OIBD = Operating income (loss) 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 2018 and 2017 business combinations on a LTM basis.

 

 

Mr. Mario Plourde, President and Chief Executive Officer, commented: "Before commenting on the results, I would like to highlight the fact that Cascades is delivering record annual performance in terms of adjusted OIBD and Health & Safety. I also would like to take this opportunity to thank all of our employees, customers, business partners and stakeholders for their ongoing contribution and support.

Containerboard Packaging results point to continued solid fundamentals in the fourth quarter, with sequential performance reflecting customary seasonal changes in sales mix and volumes in the last three months of the year, in addition to scheduled downtime for maintenance and to complete capital projects. European Boxboard, via our equity position in Reno de Medici S.p.A., generated good results during the period driven by a higher average selling price, lower raw material prices, and the acquisition of Barcelona Cartonboard SAU at the end of October. The Specialty Products segment generated lower results in the last three months of the year, reflecting a lower contribution from the recovery sub-segment.

 

As previously disclosed, fourth quarter performance of the Tissue operations were well below expectations. The results of this segment were negatively impacted by the continued challenging industry and operational conditions, in addition to several non-recurring events that led to higher logistics costs within the platform and higher gas costs for operations on the West Coast. Operational difficulties at the St. Helens tissue mill in Oregon also negatively affected performance during the last three months of the year, with these issues leading to inefficiencies at the Scappoose converting facility that it supplies. The Corporation reviewed the recoverable value of its assets and recorded an impairment charge of $75 million on certain U.S. assets. Management has developed an action plan that it is implementing to successfully redress profitability in this group.

On the strategic front, we completed several important investments during the fourth quarter. In late October, the European Boxboard segment finalized the acquisition of Barcelona Cartonboard SAU. Subsequently, in late November, we communicated details about an important investment in the Wagram, N.C. tissue converting facility as part of our capital expenditure plan. The project involves the installation of new state-of-the-art converting lines and the modernization of several existing lines, with commissioning expected to begin in the second quarter of 2019 and finalized in the first half of 2020. In early December, we announced the acquisition of U.S. moulded pulp assets, which will double production capacity of ecological packaging manufactured in moulded pulp in the Specialty Products segment and support the ongoing development of the Consumer Products sub-segment. Strategically, this acquisition improves our positioning in the fresh protein and food service packaging markets, and given that these products are recycled, recyclable, compostable and biodegradable, it is fully aligned with our circular economy market approach. Finally, the Company increased its authorized credit facility to incorporate a seven-year term loan at the end of December. The facility increases financial flexibility, reduces interest costs, and provides access to available funding over a longer timeframe."

Financial Summary

 

Selected consolidated information

      

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

 

2018

  

2017

  

Q4 2018

  

Q3 2018

  

Q4 2017

 
                

Sales

 

4,649

  

4,321

  

1,196

  

1,175

  

1,082

 

As Reported

               

Operating income before depreciation and amortization (OIBD)1

 

474

  

390

  

37

  

139

  

104

 

Operating income (loss)

 

230

  

175

  

(33)

  

78

  

45

 

Net earnings (loss)

 

59

  

507

  

(65)

  

36

  

57

 

per share

$

0.62

 

$

5.35

 

$

(0.69)

 

$

0.38

 

$

0.60

 

Adjusted1

               

Operating income before depreciation and amortization (OIBD)

 

489

  

393

  

113

  

137

  

105

 

Operating income

 

245

  

178

  

43

  

76

  

46

 

Net earnings

 

79

  

68

  

  

38

  

13

 

per share

$

0.83

 

$

0.72

  

 

$

0.40

 

$

0.14

 

Margin (OIBD)

 

10.5

%

 

9.1

%

 

9.4

%

 

11.7

%

 

9.7

%

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

 

Segmented OIBD as reported

      

(in millions of Canadian dollars) (unaudited)

2018

2017

Q4 2018

Q3 2018

Q4 2017

      

Packaging Products

     

Containerboard

470

238

111

116

73

Boxboard Europe

97

67

20

19

19

Specialty Products

46

67

15

15

14

      

Tissue Papers

(58)

90

(83)

5

12

      

Corporate Activities

(81)

(72)

(26)

(16)

(14)

Operating income (loss) as reported

474

390

37

139

104

 

Segmented adjusted OIBD1

      

(in millions of Canadian dollars) (unaudited)

2018

2017

Q4 2018

Q3 2018

Q4 2017

      

Packaging Products

     

Containerboard

410

247

111

117

74

Boxboard Europe

97

68

20

19

19

Specialty Products

40

67

10

14

14

      

Tissue Papers

17

94

(8)

5

12

      

Corporate Activities

(75)

(83)

(20)

(18)

(14)

Adjusted OIBD

489

393

113

137

105

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

     

 

Analysis of results for the three-month period ended December 31, 2018 (compared to the same period last year)

Sales of $1,196 million increased by $114 million, or 11%, compared to the same period last year. This was driven by a 13% increase in the Tissue segment reflecting volume improvements, and a more favourable sales mix, exchange rate and average selling price during the period. A 7% increase in the Containerboard Packaging group similarly benefited sales, and was driven by higher selling prices and the acquisition of converting facilities in Ontario at the end of 2017. Sales generated by the European Boxboard segment were up by 16% compared to the prior year, reflecting higher shipments, acquisitions in the last twelve months, and a more favourable Canadian dollar - euro exchange rate. Finally, fourth quarter sales in the Specialty Products segment improved 7% from prior year levels, as the benefits of the recent acquisition and slight improvements in selling price and sales mix were slightly offset by lower sales in recovery activities following the year-over-year decrease in brown recycled fibres prices.

The Corporation generated an operating income before depreciation and amortization (OIBD) of $37 million in the fourth quarter of 2018. This compared to the $104 million generated in the comparable period last year. In addition to the $75 million impairment charge recorded in the Tissue segment during the period, the variance reflects higher production costs in all segments, higher energy costs in European Boxboard and Tissue, slightly lower volume in both Containerboard and Boxboard Europe (excluding acquisitions), and a lower contribution from recovery operations within the Specialty Products segment related to changes in raw material pricing. These were offset by improvements generated from higher selling prices and more favourable sales mix in all business segments, and business acquisitions in the last twelve months. Operating income before depreciation and amortization similarly benefited from favourable raw material prices on a net basis, as the beneficial impact of lower OCC pricing on Containerboard results outweighed the significant consequence of higher year-over-year white recycled fibre and pulp pricing on Tissue segment results.

On an adjusted basis1, fourth quarter OIBD stood at $113 million, versus $105 million in the prior year.

The specific items, before income taxes, that impacted our fourth quarter 2018 OIBD were:

  • a $75 million impairment charge related to revaluation of certain assets in our Tissue papers segment (OIBD and net loss)
  • a $8 million foreign exchange loss on long-term debt and financial instruments (net loss)
  • a $4 million unrealized loss on financial instruments (OIBD and net loss)
  • a $3 million gain on other items (OIBD and net loss)

For the three-month period ended December 31, 2018, the Corporation posted a net loss of $65 million, or $0.69 per share, compared to net earnings of $57 million, or $0.60 per share in the same period of 2017. On an adjusted basis1, the Corporation generated break even net earnings in the fourth quarter of 2018, or $0.00 per share, compared to net earnings of $13 million, or $0.14 per 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

Commenting short-term expectations, Mr. Plourde commented: "We expect stable near-term performance from the Containerboard segment, with lower raw material pricing providing some counterbalance to seasonally softer demand levels and a slight decrease in medium selling prices. Given the sound economic metrics in North America, our near-term outlook for this segment remains positive. The outlook for Tissue is not as robust in the near-term. While recent decreases in raw material pricing and the continued implementation of announced price increases in some product sub-segments are positive for this business, any resulting benefits are being counterbalanced by difficult industry-wide market dynamics and operational challenges at our St-Helens mill, in Oregon. As such, we expect financial performance will remain under pressure. Management is focused on the resolution of these issues and is currently implementing the actions required - in addition to the modernization efforts already underway - to successfully realign the tissue segment's operational performance with targeted profitability levels. In Europe, in addition to acquisitions completed in 2018, macro-economic and political factors support a moderately positive near term outlook. Specifically, demand softness is expected to be counterbalanced by favourable raw material pricing, expectations of slightly lower energy costs, and the implementation of price increases in virgin boxboard, offset by pricing pressure in the recycled boxboard business.  

On a broader company-wide scale, focus is centered on implementing the 2019 investment program, currently estimated to be $330 million to $400 million contingent on economic conditions, optimizing operational performance across all segments, and completing analysis of the Bear Island containerboard project in Virginia. Cascades' longer-term goals remain grounded on maximizing the financial and strategic returns generated by capital allocation decisions, diligently managing balance sheet and leverage, and positioning business platforms for long term success and sustainable value creation."

Dividend on shares and normal course issuer bid

The Board of Directors of Cascades declared a quarterly dividend of $0.04 per share to be paid on March 28, 2019, to shareholders of record at the close of business on March 13, 2019. This dividend is an "eligible dividend" as per the Income Tax Act (R.C.S. (1985), Canada). During the fourth quarter of 2018, Cascades purchased 110,400 shares for cancellation at a weighted average price of $11.00.

2018 Fourth Quarter and Annual Financial Results Conference Call Details

Management will discuss the 2018 fourth quarter and annual financial results during a conference call today at 8:30 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 March 28, 2019 by dialing 1-855-859-2056, access code 8236267.

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)

December 31,
2018

December 31,
2017

Assets

  

Current assets

  

Cash and cash equivalents

123

89

Accounts receivable

635

608

Current income tax assets

29

18

Inventories

605

523

Current portion of financial assets

10

9

Assets held for sale

13

 

1,402

1,260

Long-term assets

  

Investments in associates and joint ventures

81

78

Property, plant and equipment

2,506

2,104

Intangible assets with finite useful life

211

212

Financial assets

20

23

Other assets

42

73

Deferred income tax assets

134

149

Goodwill and other intangible assets with indefinite useful life

555

528

 

4,951

4,427

Liabilities and Equity

  

Current liabilities

  

Bank loans and advances

16

35

Trade and other payables

782

683

Current income tax liabilities

23

6

Current portion of long-term debt

55

59

Current portion of provisions for contingencies and charges

6

7

Current portion of financial liabilities and other liabilities

101

101

 

983

891

Long-term liabilities

  

Long-term debt

1,821

1,517

Provisions for contingencies and charges

42

36

Financial liabilities

14

18

Other liabilities

202

178

Deferred income tax liabilities

201

186

 

3,263

2,826

Equity attributable to Shareholders

  

Capital stock

490

492

Contributed surplus

16

16

Retained earnings

1,000

982

Accumulated other comprehensive income (loss)

2

(35)

 

1,508

1,455

Non-controlling interests

180

146

Total equity

1,688

1,601

 

4,951

4,427

 

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 share amounts and number of shares) (unaudited)

 

2018

 

2017

 

2018

 

2017

Sales

 

1,196

 

1,082

 

4,649

 

4,321

Cost of sales and expenses

        

Cost of sales (including depreciation and amortization of $244 million ($70 million in the fourth quarter); 2017 — $215 million ($59 million in the fourth quarter))

 

1,044

 

950

 

3,997

 

3,770

Selling and administrative expenses

 

109

 

93

 

410

 

378

Gain on acquisitions, disposals and others

 

(5)

 

 

(71)

 

(8)

Impairment charges and restructuring costs

 

77

 

(1)

 

77

 

17

Foreign exchange gain

 

 

(7)

 

(2)

 

(5)

Loss (gain) on derivative financial instruments

 

4

 

2

 

8

 

(6)

  

1,229

 

1,037

 

4,419

 

4,146

Operating income (loss)

 

(33)

 

45

 

230

 

175

Financing expense

 

24

 

20

 

84

 

86

Interest expense on employee future benefits and other liabilities

 

5

 

4

 

15

 

11

Loss on repurchase of long-term debt

 

 

14

 

 

14

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

 

8

 

4

 

4

 

(23)

Fair value revaluation gain on investments

 

 

 

(5)

 

(315)

Share of results of associates and joint ventures

 

(4)

 

(3)

 

(11)

 

(39)

Earnings (loss) before income taxes

 

(66)

 

6

 

143

 

441

Provision for (recovery of) income taxes

 

(8)

 

(57)

 

49

 

(81)

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

 

(58)

 

63

 

94

 

522

Net earnings attributable to non-controlling interests

 

7

 

6

 

35

 

15

Net earnings (loss) attributable to Shareholders for the year

 

(65)

 

57

 

59

 

507

Net earnings (loss) per share

        

Basic

$

(0.69)

$

0.60

$

0.62

$

5.35

Diluted

$

(0.69)

$

0.58

$

0.58

$

5.19

Weighted average basic number of common shares outstanding

 

94,173,071

 

94,744,841

 

94,570,924

 

94,680,598

Weighted average number of diluted common shares

 

96,161,127

 

97,569,209

 

96,933,681

 

97,598,900

 

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)

2018

2017

2018

2017

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

(58)

63

94

522

Other comprehensive income (loss)

    

Items that may be reclassified subsequently to earnings

    

Translation adjustments

    

Change in foreign currency translation of foreign subsidiaries

72

13

96

(43)

Change in foreign currency translation related to net investment hedging activities

(43)

(12)

(58)

33

Cash flow hedges

    

Change in fair value of foreign exchange forward contracts

(1)

(2)

1

Change in fair value of interest rate swaps

1

Change in fair value of commodity derivative financial instruments

1

2

6

1

Equity investment

(1)

(1)

Share of other comprehensive income of associates

21

Recovery of (provision for) income taxes

1

2

2

(13)

 

30

4

45

(1)

Items that are not released to earnings

    

Actuarial loss on employee future benefits

(29)

(16)

(16)

(13)

Recovery of income taxes

7

4

4

3

 

(22)

(12)

(12)

(10)

Other comprehensive income (loss)

8

(8)

33

(11)

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

(50)

55

127

511

Comprehensive income attributable to non-controlling interests for the year

17

9

45

18

Comprehensive income (loss) attributable to Shareholders for the period

(67)

46

82

493

 

CONSOLIDATED STATEMENTS OF EQUITY

  
 

For the year ended December 31, 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

59

59

35

94

Other comprehensive income

(12)

35

23

10

33

 

47

35

82

45

127

Business combinations

5

5

Dividends

(15)

(15)

(15)

Stock options expense

1

1

1

Issuance of common shares upon exercise of stock options

6

(1)

5

5

Redemption of common shares

(8)

(12)

(20)

(20)

Capital contribution from a non-controlling interest

(1)

(1)

Dividends paid to non-controlling interests

(16)

(16)

Balance - End of period

490

16

1,000

2

1,508

180

1,688

  
 

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 combinations

57

57

Dividends

(15)

(15)

(15)

Stock options expense

1

1

1

Issuance of common shares 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

 

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)

2018

2017

2018

2017

Operating activities

    

Net earnings (loss) attributable to Shareholders for the period

(65)

57

59

507

Adjustments for:

    

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

29

24

99

97

Loss on repurchase of long-term debt

14

14

Depreciation and amortization

70

59

244

215

Gain on acquisitions, disposals and others

(5)

(71)

(8)

Impairment charges and restructuring costs

77

(2)

77

11

Unrealized loss (gain) on derivative financial instruments

4

2

9

(8)

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

8

4

4

(23)

Provision for (recovery of) income taxes

(8)

(57)

49

(81)

Fair value revaluation gain on investments

(5)

(315)

Share of results of associates and joint ventures

(4)

(3)

(11)

(39)

Net earnings attributable to non-controlling interests

7

6

35

15

Net financing expense paid

(13)

(11)

(107)

(99)

Premium paid on long-term debt repurchase

(11)

(11)

Net income taxes paid

(7)

(4)

(11)

(10)

Dividends received

2

4

6

12

Employee future benefits and others

(6)

(5)

(16)

(17)

 

89

77

361

260

Changes in non-cash working capital components

(4)

18

12

(87)

 

85

95

373

173

Investing activities

    

Investments in associates and joint ventures

(1)

(2)

(17)

Payments for property, plant and equipment

(64)

(57)

(338)

(193)

Proceeds from disposals of property, plant and equipment

3

1

85

15

Change in intangible and other assets

(4)

(16)

(15)

256

Net cash acquired (paid) in business combinations

(103)

(25)

(100)

9

 

(168)

(98)

(370)

70

Financing activities

    

Bank loans and advances

(6)

3

(22)

8

Change in credit facilities

94

194

109

114

Repurchase of unsecured senior notes

(257)

(257)

Increase in other long-term debt

1

66

11

Payments of other long-term debt

(19)

(18)

(81)

(47)

Settlement of derivative financial instruments

(3)

(1)

(12)

Issuance of common shares upon exercise of stock options

1

3

5

4

Redemption of common shares

(1)

(20)

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

(5)

(19)

(17)

(24)

Capital contribution from non-controlling interests

1

Dividends paid to the Corporation's Shareholders

(4)

(4)

(15)

(15)

 

61

(101)

25

(218)

Change in cash and cash equivalents during the year

(22)

(104)

28

25

Currency translation on cash and cash equivalents

6

1

6

2

Cash and cash equivalents - Beginning of year

139

192

89

62

Cash and cash equivalents - End of year

123

89

123

89

 

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
December 31,

For the years ended
December 31,

(in millions of Canadian dollars) (unaudited)

2018

2017

2018

2017

Packaging Products

    

Containerboard

472

440

1,840

1,652

Boxboard Europe

245

212

933

838

Specialty Products

172

161

659

703

Intersegment sales

(21)

(24)

(89)

(105)

 

868

789

3,343

3,088

Tissue Papers

340

301

1,352

1,268

Intersegment sales and Corporate Activities

(12)

(8)

(46)

(35)

 

1,196

1,082

4,649

4,321

  
  
 

OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION

 

For the 3-month periods ended
December 31,

For the years ended
December 31,

(in millions of Canadian dollars) (unaudited)

2018

2017

2018

2017

Packaging Products

    

Containerboard

111

73

470

238

Boxboard Europe

20

19

97

67

Specialty Products

15

14

46

67

 

146

106

613

372

Tissue Papers

(83)

12

(58)

90

Corporate Activities

(26)

(14)

(81)

(72)

Operating income before depreciation and amortization

37

104

474

390

Depreciation and amortization

(70)

(59)

(244)

(215)

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

(29)

(24)

(99)

(97)

Loss on repurchase of long-term debt

(14)

(14)

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

(8)

(4)

(4)

23

Fair value revaluation gain on investments

5

315

Share of results of associates and joint ventures

4

3

11

39

Earnings before income taxes

(66)

6

143

441

  
  
 

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)

2018

2017

2018

2017

Packaging Products

    

Containerboard

27

37

243

65

Boxboard Europe

12

7

35

27

Specialty Products

9

15

34

32

 

48

59

312

124

Tissue Papers

31

11

88

64

Corporate Activities

4

8

17

19

Total acquisitions

83

78

417

207

Proceeds from disposals of property, plant and equipment

(3)

(1)

(85)

(15)

Capital lease acquisitions and included in other debts and liabilities

(2)

(4)

(70)

(11)

 

78

73

262

181

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

    

Beginning of period

20

11

28

25

End of period

(37)

(28)

(37)

(28)

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

61

56

253

178

 

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 2018

(in millions of Canadian dollars)

Containerboard

Boxboard
Europe

Specialty
Products

Tissue Papers

Corporate
Activities

Consolidated

Operating income (loss)

84

9

9

(100)

(35)

(33)

Depreciation and amortization

27

11

6

17

9

70

Operating income (loss) before depreciation and amortization

111

20

15

(83)

(26)

37

Specific items:

      

Gain on acquisitions, disposals and others

(1)

(4)

(5)

Impairment charges

75

75

Restructuring costs (gain)

3

(1)

2

Unrealized loss (gain) on financial instruments

(2)

6

4

 

(5)

75

6

76

Adjusted operating income (loss) before depreciation and amortization

111

20

10

(8)

(20)

113

Adjusted operating income (loss)

84

9

4

(25)

(29)

43

  
  
 

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 (gain)

1

(1)

Unrealized gain on derivative 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

  
  
 

Q4 2017

(in millions of Canadian dollars)

Containerboard

Boxboard
Europe

Specialty
Products

Tissue Papers

Corporate
Activities

Consolidated

Operating income (loss)

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 reversals

(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)

51

11

9

(6)

(20)

45

 

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

 

      

(in millions of Canadian dollars) (unaudited)

2018

2017

Q4 2018

Q3 2018

Q4 2017

      

Net earnings (loss) attributable to Shareholders for the period

59

507

(65)

36

57

Net earnings attributable to non-controlling interests

35

15

7

7

6

Provision for (recovery of) income taxes

49

(81)

(8)

17

(57)

Fair value revaluation gain on investments

(5)

(315)

Share of results of associates and joint ventures

(11)

(39)

(4)

(3)

(3)

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

4

(23)

8

(3)

4

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

99

111

29

24

38

Operating income (loss)

230

175

(33)

78

45

Specific items:

     

Gain on acquisitions, disposals and others

(71)

(8)

(5)

Inventory adjustment resulting from business acquisition

2

Impairment charges (reversals)

75

11

75

(2)

Restructuring costs

2

6

2

1

Unrealized loss (gain) on derivative financial instruments

9

(8)

4

(2)

2

 

15

3

76

(2)

1

Adjusted operating income

245

178

43

76

46

Depreciation and amortization

244

215

70

61

59

Adjusted operating income before depreciation and amortization

489

393

113

137

105

 

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

 

    

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

NET EARNINGS (LOSS)

 

NET EARNINGS (LOSS) PER SHARE 1

 

2018

2017

Q4 2018

Q3 2018

Q4 2017

  

2018

 

2017

 

Q4 2018

 

Q3 2018

 

Q4 2017

                 

As per IFRS

59

507

(65)

36

57

 

$

0.62

$

5.35

$

(0.69)

$

0.38

$

0.60

Specific items:

                

Gain on acquisitions, disposals and others

(71)

(8)

(5)

 

$

(0.55)

$

(0.06)

$

(0.04)

 

 

Inventory adjustment resulting from business acquisition

2

  

$

0.01

 

 

 

Impairment charges (reversals)

75

11

75

(2)

 

$

0.60

$

0.08

$

0.60

 

$

(0.01)

Restructuring costs

2

6

2

1

 

$

0.02

$

0.05

$

0.02

 

$

0.01

Unrealized loss (gain) on derivative financial instruments

9

(8)

4

(2)

2

 

$

0.07

$

(0.07)

$

0.03

$

(0.02)

$

0.01

Loss on repurchase of long-term debt

14

14

 

$

0.10

 

 

$

0.10

Unrealized gain on interest rate swaps

(1)

(2)

(2)

 

$

(0.01)

$

(0.01)

 

 

$

(0.01)

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

4

(23)

8

(3)

4

 

$

0.03

$

(0.21)

$

0.06

$

(0.02)

$

0.04

Fair value revaluation gain on investments

(5)

(315)

 

$

(0.03)

$

(3.85)

 

 

 

Share of results of associates and joint ventures

(18)

  

$

(0.15)

 

 

 

Tax effect on specific items, other tax adjustments and attributable to non-controlling interest1

7

(98)

(19)

7

(61)

 

$

0.08

$

(0.52)

$

0.02

$

0.06

$

(0.60)

 

20

(439)

65

2

(44)

 

$

0.21

$

(4.63)

$

0.69

$

0.02

$

(0.46)

Adjusted

79

68

38

13

 

$

0.83

$

0.72

 

$

0.40

$

0.14

  

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 (loss) and operating income before depreciation and amortization:

 

      

(in millions of Canadian dollars) (unaudited)

2018

2017

Q4 2018

Q3 2018

Q4 2017

Cash flow from operating activities

373

173

85

134

95

Changes in non-cash working capital components

(12)

87

4

(42)

(18)

Depreciation and amortization

(244)

(215)

(70)

(61)

(59)

Net income taxes paid

11

10

7

6

4

Net financing expense paid

107

99

13

39

11

Premium paid on long-term debt repurchase

11

11

Gain on acquisitions, disposals and others

71

8

5

Impairment reversals (charges) and restructuring costs

(77)

(11)

(77)

2

Unrealized gain (loss) on derivative financial instruments

(9)

8

(4)

2

(2)

Dividend received, employee future benefits and others

10

5

4

1

Operating income (loss)

230

175

(33)

78

45

Depreciation and amortization

244

215

70

61

59

Operating income before depreciation and amortization

474

390

37

139

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 share basis:

 

           

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

 

2018

 

2017

 

Q4 2018

 

Q3 2018

 

Q4 2017

Cash flow from operating activities

 

373

 

173

 

85

 

134

 

95

Changes in non-cash working capital components

 

(12)

 

87

 

4

 

(42)

 

(18)

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

 

361

 

260

 

89

 

92

 

77

Specific items, net of current income taxes if applicable:

          

Restructuring costs

 

 

6

 

 

 

1

Premium paid on long-term debt repurchase

 

 

11

 

 

 

11

Adjusted cash flow from operating activities

 

361

 

277

 

89

 

92

 

89

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

 

(276)

 

(205)

 

(66)

 

(129)

 

(63)

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

 

(32)

 

(20)

 

(9)

 

(5)

 

(4)

Adjusted free cash flow

 

54

 

52

 

15

 

(42)

 

22

Adjusted free cash flow per share

$

0.57

$

0.56

$

0.16

$

(0.44)

$

0.24

Weighted average basic number of shares outstanding

 

94,570,924

 

94,680,598

 

94,173,071

 

94,469,465

 

94,744,841

           

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,
2018

September 30,
2018

December 31,
2017

Long-term debt

1,821

1,648

1,517

Current portion of long-term debt

55

44

59

Bank loans and advances

16

20

35

Total debt

1,892

1,712

1,611

Less: Cash and cash equivalents

123

139

89

Net debt

1,769

1,573

1,522

Adjusted OIBD (last twelve months)

489

481

393

Net debt / Adjusted OIBD ratio

3.6

3.3

3.9

Net debt / Adjusted OIBD ratio on a pro forma basis1

3.5

3.2

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