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Cascades Announces Strong Results for the Second Quarter of 2018

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Cascades Announces Strong Results for the Second Quarter of 2018

PR Newswire

  • Solid containerboard fundamentals and improved operating efficiencies supporting positive outlook for 2018
  • Strategic investments improving competitiveness of core businesses

KINGSEY FALLS, QC, Aug. 9, 2018 /PRNewswire/ - Cascades Inc. (TSX:CAS) reports its unaudited financial results for the three-month period ended June 30, 2018.

Q2 2018 Highlights

  • Record sales of $1,179 million
    (compared to $1,098 million in Q1 2018 (+7%) and $1,130 million in Q2 2017 (+4%))
  • As reported (including specific items)
    • Operating income of $73 million
      (compared to $112 million in Q1 2018 (-35%) and $48 million in Q2 2017 (+52%))
    • Operating income before depreciation and amortization (OIBD)1 of $131 million
      (compared to $167 million in Q1 2018 (-22%) and $104 million in Q2 2017 (+26%))
    • Net earnings per common share of $0.28
      (compared to net earnings of $0.65 in Q1 2018 and net earnings of $2.70 in Q2 2017)
  • Adjusted (excluding specific items)2
    • Operating income of $76 million
      (compared to $50 million in Q1 2018 (+52%) and $51 million in Q2 2017 (+49%))
    • OIBD of $134 million
      (compared to $105 million in Q1 2018 (+28%) and $107 million in Q2 2017 (+25%))
    • Net earnings per common share of $0.30
      (compared to net earnings of $0.13 in Q1 2018 and net earnings of $0.25 in Q2 2017)
  • Net debt2 of $1,586 million as at June 30, 2018 (compared to $1,534 million as at March 31, 2018) and net debt to adjusted OIBD ratio2 at 3.5x on a pro-forma basis3.

 

 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: "We are pleased with our consolidated second quarter financial and operating performance. The Containerboard Packaging and European Boxboard divisions benefited from solid market and pricing conditions and delivered strong results that were in line with expectations. The Specialty Products division also met expectations in spite of the continued pressure on results from the recovery operations due to lower raw material prices. Results from our Tissue segment were down, reflecting the competitive marketplace and higher virgin pulp and white recycled fibre costs. This was in line with our updated outlook of stronger sales and shipment levels during the period. Transportation costs and availability also presented challenges for our North American operations.

On the strategic front, production began ramping up in May at the new containerboard converting facility in NJ, on schedule. Existing volumes will continue to be transferred to the site from other facilities, most notably the NY converting asset that will cease production by year-end. In late July, we announced the acquisition of the Bear Island facility in Virginia, and our intention to convert the asset into a state-of-the-art containerboard machine capable of producing lightweight recycled liner and medium. The scope and project plans are expected to be finalized in 2019, subject to Board approval, with a targeted production start up in 2021. While the project will involve important capital expenditures, it is directly in line with our strategy to modernize our platforms and optimize and grow our geographic footprint. The European Boxboard division, via our 57.8% equity position in Reno de Medici S.p.A., announced the acquisition of Barcelona Cartonboard SAU, an important European producer of coated cartonboard based in Spain, that is expected to close by the end of 2018. Finally, our leverage ratio stood at 3.5x1 at the end of the second quarter, a slight improvement from the end of 2017."


 1 Pro-forma basis to include 2017 and 2018 business combinations on a LTM basis.

 

Financial Summary

 

Selected consolidated information








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

Q2 2018


Q1 2018


Q2 2017






Sales

1,179


1,098


1,130


As Reported





Operating income before depreciation and amortization (OIBD)1

131


167


104



Operating income

73


112


48



Net earnings

27


61


256




per common share

$

0.28


$

0.65


$

2.70


Adjusted1





Operating income before depreciation and amortization (OIBD)

134


105


107



Operating income

76


50


51



Net earnings

29


12


24




per common share

$

0.30


$

0.13


$

0.25



Margin (OIBD)

11.4

%

9.6

%

9.5

%


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

 

Segmented Operating Income (loss) as reported







(in millions of Canadian dollars) (unaudited)

Q2 2018


Q1 2018


Q2 2017





Packaging Products





Containerboard

82


121


30


Boxboard Europe

22


19


13


Specialty Products

4


2


14





Tissue Papers

(9)


(2)


17





Corporate Activities

(26)


(28)


(26)

Operating income as reported

73


112


48

 

Segmented adjusted OIBD1







(in millions of Canadian dollars) (unaudited)

Q2 2018


Q1 2018


Q2 2017





Packaging Products





Containerboard

105


77


56


Boxboard Europe

30


28


21


Specialty Products

9


7


20





Tissue Papers

7


13


35





Corporate Activities

(17)


(20)


(25)

Adjusted OIBD

134


105


107


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

 

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

Sales of $1,179 million increased by $49 million or 4% compared to the same period last year. This was driven by an 11% increase in the Containerboard division, reflecting higher sales prices, the acquisition of Ontario converting facilities at the end of 2017, and higher volume during the period. The European boxboard segment also contributed to the improved results, with the 9% year-over-year increase in sales attributable to the January 2018 acquisition of PAC Service, improved pricing and sales mix, and a favorable Canadian dollar - euro exchange rate. These increases were partially offset by a 13% decrease in the Specialty Product division's sales levels, as a result of lower sales in recovery activities following the significant decrease in raw material prices, and slightly lower volume. Sales in the Tissue segment increased marginally compared to prior year levels, as the benefit of higher volumes was offset by a less favourable product mix and Canadian dollar - US dollar exchange rate.

Second quarter operating income stood at $73 million, a notable improvement from the $48 million generated last year. This increase was largely driven by the Containerboard and European boxboard segments, where strong results reflected the improved end product and raw material pricing as discussed above. In the case of Containerboard, this was partially offset by higher production costs, while the European boxboard segment results were partially offset by higher energy costs. The Specialty Products division contribution decreased compared to prior year levels, reflecting the impact of lower raw material prices on the recovery sub-segment. Finally, higher raw material prices, and a less favourable pricing and sales mix contributed to the weaker Tissue performance in the quarter, and more than offset the beneficial impact of higher sales volumes in this segment. Higher transportation costs negatively impacted the results of all of the Company's North American business divisions. On an adjusted basis1, second quarter operating income stood at $76 million, versus $51 million in the prior year.

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

  • a $3 million unrealized loss on financial instruments (operating income and net earnings).
  • a $1 million gain on interest rates swaps (net earnings).

The Corporation generated net earnings of $27 million, or $0.28 per common share in the second quarter of 2018, versus net earnings of $256 million, or $2.70 per common share in the comparable period of 2017. On an adjusted basis1, net earnings were $29 million, or $0.30 per common share, during the second quarter of 2018, compared to net earnings of $24 million or $0.25 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 are optimistic for the third quarter. Central to this positive outlook is continued strength in the Containerboard business, where solid market fundamentals, ongoing roll-out of the US$50/st price increase and stable raw material prices continue to drive results. The lower seasonal volumes common in the third quarter in Europe suggest a softer quarter for the European boxboard division, notwithstanding the underlying support provided by good industry fundamentals. The Specialty Products division is expected to generate stronger results sequentially, largely due to improvements in pricing, and more stable results from the recovery sub-segment. Finally, we expect sequentially flat results from the Tissue segment, as benefits from anticipated volume growth continue to be muted by higher raw material pricing and more competitive market dynamics. Finally, we anticipate that elevated transportation costs will continue to impact results for our North American operations. We continue to analyze and implement strategies to optimize our logistic strategies in light of this new higher pricing reality.

From a broader and more strategic standpoint, we will continue to optimize our business platform, and increase the depth of productivity and efficiency benefits. We are similarly focused on the successful execution of our planned 2018 investment program, ramping up operations at the new containerboard converting facility in NJ, and accelerating market penetration of our converted Tissue products in Oregon. Following our recently announced acquisition of the Bear Island asset in Virginia, our project team will also be putting significant effort toward completing the final project analysis for the planned conversion of the machine to lightweight recycled containerboard. Finally, given our capital expenditure plans, we believe it is important to reemphasize our commitment to diligently manage our capital allocation to create sustainable value for our shareholders. We are confident that we can be successful in this regard, all the while executing our strategy of modernizing our equipment base, optimizing the geographic footprint of our platforms, increasing our integration rate, delivering innovative solutions to our customers, and managing our leverage."

Dividend on common shares and normal course issuer bid

The Board of Directors of Cascades declared a quarterly dividend of $0.04 per common share to be paid on September 6, 2018, to shareholders of record at the close of business on August 22, 2018. This dividend is an "eligible dividend" as per the Income Tax Act (R.C.S. (1985), Canada). During the second quarter of 2018, Cascades purchased 504,500 common shares for cancellation at a weighted average price of $12.51.

2018 Second Quarter Results Conference Call Details

Management will discuss the 2018 second 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 September 7, 2018 by dialing 1-855-859-2056, access code 5399416.

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)

June 30,
2018

December 31,
2017

Assets



Current assets



Cash and cash equivalents (including $26 million of restricted cash in 2018)

97

89

Accounts receivable

668

608

Current income tax assets

19

18

Inventories

539

523

Current portion of financial assets

9

9

Assets held for sale

13


1,332

1,260

Long-term assets


Investments in associates and joint ventures

79

78

Property, plant and equipment

2,267

2,104

Intangible assets with finite useful life

208

212

Financial assets

22

23

Other assets

59

73

Deferred income tax assets

153

149

Goodwill and other intangible assets with indefinite useful life

545

528


4,665

4,427

Liabilities and Equity



Current liabilities



Bank loans and advances

21

35

Trade and other payables

699

683

Current income tax liabilities

21

6

Current portion of long-term debt

46

59

Current portion of provisions for contingencies and charges

8

7

Current portion of financial liabilities and other liabilities

84

101


879

891

Long-term liabilities


Long-term debt

1,616

1,517

Provisions for contingencies and charges

33

36

Financial liabilities

28

18

Other liabilities

177

178

Deferred income tax liabilities

217

186


2,950

2,826

Equity attributable to Shareholders


Capital stock

492

492

Contributed surplus

15

16

Retained earnings

1,057

982

Accumulated other comprehensive loss

(11)

(35)


1,553

1,455

Non-controlling interests

162

146

Total equity

1,715

1,601


4,665

4,427

 

CONSOLIDATED STATEMENTS OF EARNINGS





For the 3-month periods ended
June 30,

For the 6-month periods ended
June 30,

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

2018

2017

2018

2017

Sales

1,179

1,130

2,277

2,136

Cost of sales and expenses





Cost of sales (including depreciation and amortization of $58 million for 3-month period (2017 — $56 million) and $113 million for 6-month period (2017 — $103 million))

1,002

982

1,948

1,865

Selling and administrative expenses

102

101

205

194

Gain on acquisitions, disposals and others

(8)

(66)

(8)

Impairment charges and restructuring costs

13

14

Foreign exchange gain

(2)

(1)

(1)

Loss (gain) on derivative financial instruments

2

(4)

6

(7)


1,106

1,082

2,092

2,057

Operating income

73

48

185

79

Financing expense

21

24

43

45

Interest expense on employee future benefits

2

1

3

2

Foreign exchange gain on long-term debt and financial instruments

(11)

(1)

(19)

Fair value revaluation gain on investments

(152)

(5)

(297)

Share of results of associates and joint ventures

(3)

(5)

(4)

(33)

Earnings before income taxes

53

191

149

381

Provision for (recovery of) income taxes

16

(70)

40

(43)

Net earnings including non-controlling interests for the period

37

261

109

424

Net earnings attributable to non-controlling interests

10

5

21

7

Net earnings attributable to Shareholders for the period

27

256

88

417

Net earnings per common share





Basic

$

0.28

$

2.70

$

0.93

$

4.40

Diluted

$

0.27

$

2.61

$

0.90

$

4.27

Weighted average basic number of common shares outstanding


94,638,464


94,702,041


94,824,718


94,628,481

Weighted average number of diluted common shares


97,011,800


97,810,799


97,404,264


97,525,968

 

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)

2018

2017

2018

2017

Net earnings including non-controlling interests for the period

37

261

109

424

Other comprehensive income (loss)






Items that may be reclassified subsequently to earnings







Translation adjustments








Change in foreign currency translation of foreign subsidiaries

10

(16)

50

(22)




Change in foreign currency translation related to net investment hedging activities

(7)

9

(30)

15



Cash flow hedges







Change in fair value of foreign exchange forward contracts

(1)




Change in fair value of interest rate swaps

1

1




Change in fair value of commodity derivative financial instruments

2

(1)

3

(2)



Equity investment

7

19



Share of other comprehensive income of associates

4

21



Recovery of (provision for) income taxes

(4)

3

(13)


6

(1)

26

18


Items that are reclassified to retained earnings







Actuarial gain (loss) on employee future benefits

4

(7)

5

(5)



Recovery of (provision for) income taxes

(1)

2

(1)

1


3

(5)

4

(4)

Other comprehensive income (loss)

9

(6)

30

14

Comprehensive income including non-controlling interests for the period

46

255

139

438

Comprehensive income attributable to non-controlling interests for the period

7

7

25

9

Comprehensive income attributable to Shareholders for the period

39

248

114

429

 

CONSOLIDATED STATEMENTS OF EQUITY




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 common shares upon exercise of stock options

5

(1)

4

4

Redemption of common 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




For the 6-month period ended June 30, 2017

(in millions of Canadian dollars) (unaudited)

CAPITAL

 STOCK

CONTRIBUTED
SURPLUS

RETAINED
EARNINGS

ACCUMULATED
OTHER
COMPREHENSIVE
LOSS

TOTAL EQUITY
ATTRIBUTABLE
 TO
SHAREHOLDERS

NON-
CONTROLLING
INTERESTS

TOTAL
EQUITY

Balance - Beginning of period

487

16

512

(31)

984

90

1,074

Comprehensive income (loss)









Net earnings

417

417

7

424


Other comprehensive income (loss)

(4)

16

12

2

14


413

16

429

9

438

Business combinations

57

57

Dividends

(8)

(8)

(8)

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

(3)

(3)

Balance - End of period

489

16

916

(15)

1,406

154

1,560

 

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)

2018

2017

2018

2017

Operating activities





Net earnings attributable to Shareholders for the period

27

256

88

417

Adjustments for:






Financing expense and interest expense on employee future benefits

23

25

46

47


Depreciation and amortization

58

56

113

103


Gain on acquisitions, disposals and others

(8)

(66)

(8)


Impairment charges and restructuring costs

11

11


Unrealized loss (gain) on derivative financial instruments

3

(4)

7

(8)


Foreign exchange gain on long-term debt and financial instruments

(11)

(1)

(19)


Provision for (recovery of) income taxes

16

(70)

40

(43)


Fair value revaluation gain on investments

(152)

(5)

(297)


Share of results of associates and joint ventures

(3)

(5)

(4)

(33)


Net earnings attributable to non-controlling interests

10

5

21

7


Net financing expense paid

(18)

(10)

(55)

(48)


Net income taxes received (paid)

(1)

(1)

2

(6)


Dividends received

1

3

1

5


Employee future benefits and others

(5)

(6)

(7)

(6)


111

89

180

122

Changes in non-cash working capital components

5

(23)

(26)

(62)


116

66

154

60

Investing activities





Investments in associates and joint ventures

(2)

(16)

Payments for property, plant and equipment

(67)

(37)

(150)

(98)

Proceeds from disposals of property, plant and equipment

1

11

82

14

Change in intangible and other assets

(3)

(6)

(7)

(11)

Net cash acquired in business combinations

34

3

34


(69)

2

(74)

(77)

Financing activities





Bank loans and advances

(2)

1

(15)

(2)

Change in revolving credit facilities

(26)

(50)

10

53

Increase in other long-term debt

3

11

6

Payments of other long-term debt

(46)

(14)

(55)

(19)

Settlement of derivative financial instruments

(1)

(7)

Issuance of common shares

2

4

1

Redemption of common shares

(6)

(12)

Dividends paid to non-controlling interests

(8)

(3)

(10)

(3)

Capital contribution from non-controlling interests

1

Dividends paid to the Corporation's Shareholders

(4)

(4)

(8)

(8)


(87)

(70)

(75)

21

Change in cash and cash equivalents during the period

(40)

(2)

5

4

Currency translation on cash and cash equivalents

1

3

1

Cash and cash equivalents - Beginning of period

137

68

89

62

Cash and cash equivalents - End of period

97

67

97

67

 

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
June 30,

For the 6-month periods ended
June 30,

(in millions of Canadian dollars) (unaudited)

2018

2017

2018

2017

Packaging Products






Containerboard

475

428

896

774


Boxboard Europe

232

213

478

424


Specialty Products

164

188

323

361


Intersegment sales

(23)

(27)

(47)

(49)


848

802

1,650

1,510

Tissue Papers

342

338

647

644

Intersegment sales and Corporate Activities

(11)

(10)

(20)

(18)


1,179

1,130

2,277

2,136




OPERATING INCOME (LOSS) 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)

2018

2017

2018

2017

Packaging Products





Containerboard

102

51

243

96


Boxboard Europe

30

21

58

34


Specialty Products

9

20

16

38


141

92

317

168

Tissue Papers

7

33

20

56

Corporate Activities

(17)

(21)

(39)

(42)

Operating income before depreciation and amortization

131

104

298

182

Depreciation and amortization

(58)

(56)

(113)

(103)

Financing expense and interest expense on employee future benefits

(23)

(25)

(46)

(47)

Foreign exchange gain on long-term debt and financial instruments

11

1

19

Fair value revaluation gain on investments

152

5

297

Share of results of associates and joint ventures

3

5

4

33

Earnings before income taxes

53

191

149

381




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)

2018

2017

2018

2017

Packaging Products






Containerboard

81

9

140

15


Boxboard Europe

5

4

8

12


Specialty Products

11

6

17

9


97

19

165

36

Tissue Papers

19

17

28

44

Corporate Activities

6

5

9

8

Total acquisitions

122

41

202

88

Proceeds from disposals of property, plant and equipment

(1)

(11)

(82)

(14)

Capital lease acquisitions and included in other debts

(63)

(4)

(66)

(7)


58

26

54

67

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






Beginning of period

22

8

28

25


End of period

(14)

(8)

(14)

(8)

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

66

26

68

84

 

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:

 


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 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




Q1 2018

(in millions of Canadian dollars)

Containerboard

Boxboard
Europe

Specialty
Products

Tissue
Papers

Corporate
Activities

Consolidated

Operating income (loss)

121

19

2

(2)

(28)

112

Depreciation and amortization

20

9

5

15

6

55

Operating income (loss) before depreciation and amortization

141

28

7

13

(22)

167

Specific items :








Gain on acquisitions, disposals and others

(66)

(66)


Unrealized loss on derivative financial instruments

2

2

4


(64)

2

(62)

Adjusted operating income (loss) before depreciation and amortization

77

28

7

13

(20)

105

Adjusted operating income (loss)

57

19

2

(2)

(26)

50




Q2 2017

(in millions of Canadian dollars)

Containerboard

Boxboard
Europe

Specialty
Products

Tissue
Papers

Corporate
Activities

Consolidated

Operating income (loss)

30

13

14

17

(26)

48

Depreciation and amortization

21

8

6

16

5

56

Operating income (loss) before depreciation and amortization

51

21

20

33

(21)

104

Specific items:








Gain on acquisitions, disposals and others

(7)

(1)

(8)


Inventory adjustment resulting from business combination

2

2


Impairment charges

11

11


Restructuring costs

2

2


Unrealized gain on financial instruments

(1)

(3)

(4)


5

2

(4)

3

Adjusted operating income (loss) before depreciation and amortization

56

21

20

35

(25)

107

Adjusted operating income (loss)

35

13

14

19

(30)

51

 

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 2018

Q1 2018

Q2 2017





Net earnings attributable to Shareholders for the year

27

61

256

Net earnings attributable to non-controlling interests

10

11

5

Provision for (recovery of) income taxes

16

24

(70)

Fair value revaluation gain on investments

(5)

(152)

Share of results of associates and joint ventures

(3)

(1)

(5)

Foreign exchange gain on long-term debt and financial instruments

(1)

(11)

Financing expense and interest expense on employee future benefits

23

23

25

Operating income

73

112

48

Specific items:





Gain on acquisitions, disposals and others

(66)

(8)


Inventory adjustment resulting from business combination

2


Impairment charges

11


Restructuring costs

2


Unrealized loss (gain) on derivative financial instruments

3

4

(4)


3

(62)

3

Adjusted operating income

76

50

51

Depreciation and amortization

58

55

56

Adjusted operating income before depreciation and amortization

134

105

107

 

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)

Q2 2018

Q1 2018

Q2 2017


Q2 2018

Q1 2018

Q2 2017









As per IFRS

27

61

256


$

0.28

$

0.65

$

2.70

Specific items:








Gain on acquisitions, disposals and others

(66)

(8)


$

(0.51)

$

(0.06)

Inventory adjustment resulting from business combination

2


$

0.01

Impairment reversals

11


$

0.07

Restructuring costs

2


$

0.02

Unrealized loss (gain) on derivative financial instruments

3

4

(4)


$

0.03

$

0.03

$

(0.04)

Unrealized gain on interest rate swaps

(1)


$

(0.01)

Foreign exchange gain on long-term debt and financial instruments

(1)

(11)


$

(0.01)

$

(0.09)

Fair value revaluation gain on investments

(5)

(152)


$

(0.03)

$

(2.35)

Share of results of associates and joint ventures

(2)


$

(0.01)

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

19

(70)



2

(49)

(232)


$

0.02

$

(0.52)

$

(2.45)

Adjusted

29

12

24


$

0.30

$

0.13

$

0.25



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)

Q2 2018

Q1 2018

Q2 2017

Cash flow from operating activities

116

38

66

Changes in non-cash working capital components

(5)

31

23

Depreciation and amortization

(58)

(55)

(56)

Net income taxes paid (received)

1

(3)

1

Net financing expense paid

18

37

10

Gain on acquisitions, disposals and others

66

8

Impairment charges and restructuring costs

(11)

Unrealized gain (loss) on derivative financial instruments

(3)

(4)

4

Dividend received, employee future benefits and others

4

2

3

Operating income

73

112

48

Depreciation and amortization

58

55

56

Operating income before depreciation and amortization

131

167

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)

Q2 2018

Q1 2018

Q2 2017

Cash flow from operating activities

116

38

66

Changes in non-cash working capital components

(5)

31

23

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

111

69

89

Specific items, net of current income taxes if applicable:





Restructuring costs

2

Adjusted cash flow from operating activities

111

69

91

Capital expenditures & other assets1 and capital lease payments, net of disposals of $81 million in Q1 2018

(72)

(9)

(32)

Dividends paid to the Corporation's Shareholders

(4)

(4)

(4)

Adjusted free cash flow

27

56

55

Adjusted free cash flow per common share

$

0.29

$

0.59

$

0.58

Weighted average basic number of common shares outstanding


94,638,464


95,013,041


94,702,041








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,
2018

March 31,
2018

June 30,
2017

Long-term debt

1,616

1,582

1,769

Current portion of long-term debt

46

66

52

Bank loans and advances

21

23

26

Total debt

1,683

1,671

1,847

Less: Cash and cash equivalents (including $26 million of restricted cash in June 30, 2018 and $25 million in March 31, 2018)

97

137

67

Net debt

1,586

1,534

1,780

Adjusted OIBD (last twelve months)

450

423

367

Net debt / Adjusted OIBD ratio

3.5

3.6

4.9

Net debt / Adjusted OIBD ratio on a pro forma basis1

3.5

3.6

4.2





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

 

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Cision View original content:http://www.prnewswire.com/news-releases/cascades-announces-strong-results-for-the-second-quarter-of-2018-300694351.html

SOURCE Cascades Inc.

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