Market Overview

Cascades Announces Solid Results for the Fourth Quarter and Full Year 2019

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  • Record Annual Sales and Adjusted OIBD Generated for the Year
  • Outlook is positive for 2020

KINGSEY FALLS, QC, Feb. 27, 2020 /PRNewswire/ - Cascades Inc. (TSX:CAS) reports its unaudited financial results for the three-month period and the fiscal year ended December 31, 2019.

Q4 2019 Highlights

  • Sales of $1,227 million (compared to $1,264 million in Q3 2019 (-3%) and $1,196 million in Q4 2018 (+3%))
  • As reported1,3 (including specific items)
    • Operating loss of $1 million (compared to an operating income of $105 million in Q3 2019 (-101%) and an operating loss of $35 million in Q4 2018 (+97%))
    • Operating income before depreciation and amortization (OIBD)1 of $76 million (compared to $178 million in Q3 2019
      (-57%) and $35 million in Q4 2018 (+117%))
    • Net loss per share of $0.27 (compared to net earnings of $0.42 in Q3 2019 and a net loss of $0.71 in Q4 2018)
  • Adjusted1 (excluding specific items)
    • Operating income of $75 million (compared to $88 million in Q3 2019 (-15%) and $43 million in Q4 2018 (+74%))
    • OIBD of $152 million (compared to $161 million in Q3 2019 (-6%) and $113 million in Q4 2018 (+35%))
    • Net earnings per share of $0.30 (compared to $0.30 in Q3 2019 and $0.00 in Q4 2018)

2019 Annual Highlights

  • Sales of $4,996 million (compared to $4,649 million in 2018 (+7%))
  • As reported1,3 (including specific items)
    • Operating income of $258 million (compared to $228 million in 2018 (+13%))
    • OIBD of $547 million (compared to $472 million in 2018 (+16%))
    • Net earnings per share of $0.74 (compared to $0.60 in 2018)
  • Adjusted1 (excluding specific items)
    • Operating income of $315 million (compared to $245 million in 2018 (+16%))
    • OIBD of $604 million (compared to $489 million in 2018 (+24%))
    • Net earnings per share of $1.02 (compared to $0.83 in 2018)
  • Completed the acquisition of Orchids Paper Products2 activities for total cash consideration of US$235 million in September 2019
  • Announced the planned March 2020 closure of two U.S. tissue converting facilities at the end of October 2019
  • Senior Notes successfully refinanced in November 2019 in the amount of $1 billion
  • Exercised option to acquire the Caisse de dépôt et placement du Québec's ("CDPQ") 20.2% interest in the Greenpac Mill, increasing the Company's ownership to 86.3%; Transaction was effective January 3, 2020
  • Net debt of $1,963 million as at December 31, 2019 (compared to $1,769 million as at December 31, 2018) and net debt to adjusted OIBD ratio of 3.25x, down from 3.6x at year-end 2018
  • Impact of IFRS 16 accounting for leases: $99 million debt increase as of January 1, 2019, and approximately $30 million increase in full year OIBD for 2019

 

1

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

2

Also referred to as the Orchids acquisition.

3

2018 fourth quarter and 2019 third quarter results have been adjusted to reflect retrospective adjustments of purchase price allocation. Please refer to Note 5 of the 2019 audited financial statements for more details.



 

Mr. Mario Plourde, President and Chief Executive Officer, commented: "We are very pleased with the annual adjusted OIBD level of $604 million generated in 2019, the second consecutive year of record performance for Cascades. These historic results affirm the solid progress we are making with our growth, optimization and strategic initiatives.

On a sequential basis, fourth quarter results reflect the softer seasonal demand common to the end of the year, and less favourable pricing and sales mix in all business segments. These effects were partially mitigated by lower raw material prices for all of our segments, acquisitions completed throughout the year, and sequentially lower production costs in Tissue and European Boxboard. Year-over-year quarterly performance was similarly aided by lower raw material pricing and recent business acquisitions, in addition to lower energy costs. The resulting benefits outweighed less favourable sales pricing and mix in all segments with the exception of Tissue, and higher production costs in our North American operations in part due to the higher proportion of sales coming from converting activities.

On the strategic front, Cascades purchased the CDPQ's 20.2% interest in our Greenpac Mill on January 3, 2020. Increasing ownership of this state-of-the-art lightweight containerboard facility to 86.3% will improve available cash flow levels and reinforce the competitive positioning of the containerboard platform. In a similar vein, we continued to advance the integration of the Orchids activities during the quarter, and subsequently completed the conversion of the Barnwell paper machine from QRT to conventional paper in mid-January 2020. Finally, we successfully refinanced our senior notes in November, taking advantage of favourable market pricing conditions to proactively manage our debt profile.

Discussing near-term outlook, Mr. Plourde commented, "First quarter performance is projected to improve year-over-year, largely driven by improvements in the Tissue segment as a result of our strategic repositioning and ongoing integration of the Orchids activities. Results in our other three segments are expected to be stable, with pricing headwinds for these businesses expected to be offset by improved volumes and favourable raw material pricing in containerboard and Boxboard Europe.

Our operational outlook is positive for 2020. We are forecasting strong year-over-year improvement in the Tissue segment, moderate year-over-year improved results in Specialty Products and stable annual performance in Boxboard Europe. While pricing headwinds are expected to translate into softer annual Containerboard results, raw material prices continue to be a strong tailwind for this business, as does our focus on improved operational execution. On a consolidated basis, we expect to generate solid cash flow levels in 2020, of which approximately $250 million will be dedicated to capital expenditures. Based on current operational conditions, we expect the remaining cash flow to be in excess of $100 million. These funds will be allocated in part to the Bear Island conversion project, when approved and once the financial and operational structure is finalized, and to the reduction of our debt."

Financial Summary

 


Selected consolidated information












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

2019

20182

Q4 2019

Q3 20192

Q4 20182












Sales


4,996


4,649


1,227


1,264


1,196

As Reported











Operating income before depreciation and amortization (OIBD)1


547


472


76


178


35

Operating income (loss)


258


228


(1)


105


(35)

Net earnings (loss)


69


57


(26)


40


(67)

per share

$

0.74

$

0.60

$

(0.27)

$

0.42

$

(0.71)

Adjusted1











Operating income before depreciation and amortization (OIBD)


604


489


152


161


113

Operating income


315


245


75


88


43

Net earnings


96


79


29


28


per share

$

1.02

$

0.83

$

0.30

$

0.30


Margin (OIBD)


12.1%


10.5%


12.4%


12.7%


9.4%

1 -

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

2 -

2018 fourth quarter and 2019 third quarter results have been adjusted to reflect retrospective adjustments of purchase price allocation. Please refer to Note 5 of the 2019 audited financial statements for more details.



 

Segmented OIBD as reported1,2








(in millions of Canadian dollars) (unaudited)

2019

20182

Q4 2019

Q3 20192

Q4 20182







Packaging Products






Containerboard

443

470

98

120

111

Boxboard Europe

92

99

8

25

22

Specialty Products

52

35

9

14

9







Tissue Papers

64

(58)

(3)

46

(83)







Corporate Activities

(104)

(74)

(36)

(27)

(24)

Operating income (loss) as reported

547

472

76

178

35

1 -

The Recovery activities sales, OIBD and adjusted OIBD figures were reclassified from the Specialty Products segment to Corporate activities. Prior years and quarterly figures were adjusted to reflect the current presentation.

2 -

2018 fourth quarter and 2019 third quarter results have been adjusted to reflect retrospective adjustments of purchase price allocation. Please refer to Note 5 of the 2019 audited financial statements for more details.

 

Segmented adjusted OIBD1,2







(in millions of Canadian dollars) (unaudited)

2019

20182

Q4 2019

Q3 20192

Q4 20182







Packaging Products






Containerboard

441

410

106

118

111

Boxboard Europe

108

97

24

25

20

Specialty Products

55

33

9

16

8







Tissue Papers

86

17

35

24

(8)







Corporate Activities

(86)

(68)

(22)

(22)

(18)

Adjusted OIBD

604

489

152

161

113

1 -

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

2 -

The Recovery activities sales, OIBD and adjusted OIBD figures were reclassified from the Specialty Products segment to Corporate activities. Prior years and quarterly figures were adjusted to reflect the current presentation.

 

Analysis of results for the three-month period ended December 31, 2019 (compared to the same period last year)

Sales of $1,227 million increased by $31 million, or 3%, compared with the same period last year. Specifically, Tissue sales increased by $57 million, or 17%, a reflection of increased volumes, higher average selling price, more favourable sales mix, and the addition of Orchids Paper assets. European Boxboard sales decreased by $2 million, or 1%, compared with the previous year, largely driven by less favourable average selling price and mix and Canadian dollar - euro exchange rate, and slightly lower volumes, the effects of which were largely mitigated by the business acquisition in Spain at the end of 2018. The Specialty Products segment generated an 8% or $8 million sales improvement year-over-year, reflecting 2018 acquisitions and slightly higher volumes, the benefits of which outweighed slightly less favourable pricing and sales mix. Lastly, sales in the Containerboard Packaging group decreased by $21 million year-over-year due to slightly lower volume and less favourable average selling price and sales mix year-over-year.

The Corporation generated an operating income before depreciation and amortization (OIBD) of $76 million in the fourth quarter of 2019. This compares with the $35 million generated in the same period last year. This reflects impairments charges of $75 million and $34 million recorded in the Tissue segment in the fourth quarters of 2018 and 2019, respectively, and additional impairment charges of $14 million related to goodwill that were recorded in our Recovery operations in 2019. On a year-over-year basis, operating results benefited from more favourable raw material prices across all four businesses, lower energy costs in all segments with the exception of Specialty Products, and business acquisitions completed in the last twelve months. Offsetting these benefits were less favourable selling prices and mix in all segments except Tissue, and higher production costs in all segments largely attributable to the higher proportion of sales coming from converting activities. Results generated by Recovery activities, accounted for with Corporate Activities as of the current quarter, negatively impacted results in the current period following year-over-year decreases in recycled fibre pricing. Operating results for 2019 also include the beneficial impact of IFRS 16 accounting for leases, which increased fourth quarter 2019 OIBD by approximately $7 million. On an adjusted basis1, fourth quarter 2019 OIBD stood at $152 million, versus $113 million in the previous year.

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

  • $64 million impairment charge mainly related to certain assets in our Tissue and Boxboard Europe segments and the goodwill in Recovery operations (OIBD and net earnings)
  • $10 million loss related to the sale of certain equipment, restructuring costs and other charges following facility closures and the Orchids acquisition (OIBD and net earnings)
  • $2 million unrealized loss on financial instruments (OIBD and net earnings)
  • $14 million charge on repurchase of long-term debt (net earnings)

For the 3-month period ended December 31, 2019, the Corporation posted a net loss of $26 million, or $0.27 per share, compared with a net loss of $67 million2, or $0.71 per share, for the same period in 2018. On an adjusted basis1, the Corporation generated net earnings of $29 million in the fourth quarter of 2019, or $0.30 per share, compared with a break even net earnings of $0 million, or $0.00 per share, for the same period in 2018.

 

1 -

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

2 -

2018 fourth quarter and 2019 third quarter results have been adjusted to reflect retrospective adjustments of purchase price allocation. Please refer to Note 5 of the 2019 audited financial statements for more details.

 

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 March 26, 2020 to shareholders of record at the close of business on March 12, 2020. This dividend is an "eligible dividend" as per the Income Tax Act (R.C.S. (1985), Canada). During the fourth quarter of 2019, Cascades purchased 135,354 shares for cancellation at a weighted average price of $11.71.

2019 Fourth Quarter and Annual Financial Results Conference Call Details

Management will discuss the 2019 fourth quarter and annual financial results during a conference call today at 9:00 a.m. EST. The call can be accessed by dialing 1-888-231-8191 (international dial-in 1-647-427-7450). The conference call, including the investor presentation, will be broadcast live on the Cascades website (www.cascades.com) under the "Investors" section. A replay of the call will be available on the Cascades website and may also be accessed by phone until March 27, 2020 by dialing 1-855-859-2056, access code 6667977.

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,
2019

December 31,
2018

Assets



Current assets



Cash and cash equivalents

155

123

Accounts receivable

605

635

Current income tax assets

32

29

Inventories

598

606

Current portion of financial assets

10

10


1,400

1,403

Long-term assets



Investments in associates and joint ventures

80

81

Property, plant and equipment

2,767

2,505

Intangible assets with finite useful life

182

208

Financial assets

16

20

Other assets

55

42

Deferred income tax assets

153

134

Goodwill and other intangible assets with indefinite useful life

527

555


5,180

4,948

Liabilities and Equity



Current liabilities



Bank loans and advances

11

16

Trade and other payables

788

781

Current income tax liabilities

17

23

Current portion of long-term debt

85

55

Current portion of provisions for contingencies and charges

5

6

Current portion of financial liabilities and other liabilities

137

101


1,043

982

Long-term liabilities



Long-term debt

2,022

1,821

Provisions for contingencies and charges

49

42

Financial liabilities

5

14

Other liabilities

198

202

Deferred income tax liabilities

197

201


3,514

3,262

Equity



Capital stock

491

490

Contributed surplus

15

16

Retained earnings

1,000

998

Accumulated other comprehensive income (loss)

(17)

2

Equity attributable to Shareholders

1,489

1,506

Non-controlling interests

177

180

Total equity

1,666

1,686


5,180

4,948

 

CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)





For the 3-month periods ended
December 31,

For the years ended
December 31,

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


2019


2018


2019


2018

Sales


1,227


1,196


4,996


4,649

Cost of sales and expenses









Cost of sales (including depreciation and amortization of $289 million ($77 million in the fourth quarter); 2018— $244 million ($70 million in the fourth quarter))


1,022


1,044


4,232


3,997

Selling and administrative expenses


133


109


453


410

Loss (gain) on acquisitions, disposals and others


5


(3)


(21)


(69)

Impairment charges and restructuring costs


67


77


78


77

Foreign exchange gain


(1)



(2)


(2)

Loss (gain) on derivative financial instruments


2


4


(2)


8



1,228


1,231


4,738


4,421

Operating income (loss)


(1)


(35)


258


228

Financing expense


27


24


101


84

Interest expense on employee future benefits and other liabilities


(6)


5


42


15

Loss on repurchase of long-term debt


14



14


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


1


8


(6)


4

Fair value revaluation gain on investments





(5)

Share of results of associates and joint ventures


(3)


(4)


(9)


(11)

Earnings (loss) before income taxes


(34)


(68)


116


141

Provision for (recovery of) income taxes


(11)


(9)


19


48

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


(23)


(59)


97


93

Net earnings attributable to non-controlling interests


3


8


28


36

Net earnings (loss) attributable to Shareholders for the period


(26)


(67)


69


57

Net earnings (loss) per common share









Basic

$

(0.27)

$

(0.71)

$

0.74

$

0.60

Diluted

$

(0.27)

$

(0.71)

$

0.73

$

0.56

Weighted average basic number of common shares outstanding


94,287,895


94,173,071


93,987,980


94,570,924

Weighted average number of diluted common shares


95,748,973


96,161,127


95,515,822


96,933,681

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)





For the 3-month periods ended
December 31,

For the years ended
December 31,

(in millions of Canadian dollars) (unaudited)

2019

2018

2019

2018

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

(23)

(59)

97

93

Other comprehensive income (loss)





Items that may be reclassified subsequently to earnings





Translation adjustments





Change in foreign currency translation of foreign subsidiaries

(18)

72

(75)

96

Change in foreign currency translation related to net investment hedging activities

13

(43)

45

(58)

Cash flow hedges





Change in fair value of foreign exchange forward contracts

(1)

1

(2)

Change in fair value of interest rate swaps

(1)

1

Change in fair value of commodity derivative financial instruments

(1)

1

(2)

6

Recovery of income taxes

1

1

1

2


(5)

30

(31)

45

Items that are not released to earnings





Actuarial gain (loss) on employee future benefits

10

(29)

(3)

(16)

Recovery of (provision for) income taxes

(2)

7

1

4


8

(22)

(2)

(12)

Other comprehensive income (loss)

3

8

(33)

33

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

(20)

(51)

64

126

Comprehensive income attributable to non-controlling interests for the period

1

18

14

46

Comprehensive income (loss) attributable to Shareholders for the period

(21)

(69)

50

80

 

CONSOLIDATED STATEMENTS OF EQUITY




For the year ended December 31, 2019

(in millions of Canadian dollars) (unaudited)

CAPITAL STOCK

CONTRIBUTED SURPLUS

RETAINED EARNINGS

ACCUMULATED
OTHER
COMPREHENSIVE
INCOME (LOSS)

TOTAL EQUITY ATTRIBUTABLE TO SHAREHOLDERS

NON-CONTROLLING INTERESTS

TOTAL EQUITY

Balance - End of previous year, as reported

490

16

1,000

2

1,508

180

1,688

Business combinations

(2)

(2)

(2)

Adjusted balance - End of previous year

490

16

998

2

1,506

180

1,686

New IFRS adoption

(9)

(9)

(9)

Adjusted balance - Beginning of year

490

16

989

2

1,497

180

1,677

Comprehensive income (loss)








Net earnings

69

69

28

97

Other comprehensive loss

(19)

(19)

(14)

(33)


69

(19)

50

14

64

Dividends

(23)

(23)

(17)

(40)

Issuance of common shares upon exercise of stock options

6

(1)

5

5

Redemption of common shares

(5)

(4)

(9)

(9)

Disposal of a subsidiary

(1)

(1)

Acquisition of non-controlling interests

(31)

(31)

1

(30)

Balance - End of year

491

15

1,000

(17)

1,489

177

1,666










For the year ended December 31, 2018

(in millions of Canadian dollars) (unaudited)

CAPITAL STOCK

CONTRIBUTED SURPLUS

RETAINED EARNINGS

ACCUMULATED
OTHER COMPREHENSIVE INCOME (LOSS)

TOTAL EQUITY ATTRIBUTABLE TO SHAREHOLDERS

NON-CONTROLLING INTERESTS

TOTAL EQUITY

Balance - End of previous year, as reported

492

16

982

(35)

1,455

146

1,601

New IFRS adoption

(2)

2

Adjusted Balance - Beginning of year

492

16

980

(33)

1,455

146

1,601

Comprehensive income (loss)








Net earnings

57

57

36

93

Other comprehensive income (loss)

(12)

35

23

10

33


45

35

80

46

126

Business combinations

4

4

Dividends

(15)

(15)

(16)

(31)

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

Acquisition of non-controlling interests

(1)

(1)

Balance - End of year

490

16

998

2

1,506

180

1,686

 

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)

2019

2018

2019

2018

Operating activities





Net earnings (loss)

(26)

(67)

69

57

Adjustments for:





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

21

29

143

99

Loss on repurchase of long-term debt

14

14

Depreciation and amortization

77

70

289

244

Loss (gain) on acquisitions, disposals and others

5

(3)

(24)

(69)

Impairment charges and restructuring costs

62

77

68

77

Unrealized loss (gain) on derivative financial instruments

2

4

(2)

9

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

1

8

(6)

4

Provision for (recovery of) income taxes

(11)

(9)

19

48

Fair value revaluation gain on investments

(5)

Share of results of associates and joint ventures

(3)

(4)

(9)

(11)

Net earnings attributable to non-controlling interests

3

8

28

36

Net financing expense paid

(32)

(13)

(133)

(107)

Premium paid on long-term debt repurchase

(11)

(11)

Net income taxes paid

(13)

(7)

(27)

(11)

Dividends received

6

2

9

6

Employee future benefits and others

(4)

(6)

(26)

(16)


91

89

401

361

Changes in non-cash working capital components

72

(4)

59

12


163

85

460

373

Investing activities





Investments in associates and joint ventures

1

(2)

Payments for property, plant and equipment

(73)

(64)

(258)

(338)

Proceeds from disposals of property, plant and equipment

6

3

27

85

Change in intangible and other assets

(5)

(4)

(8)

(15)

Cash paid for business combinations, net of cash acquired

3

(103)

(311)

(100)

Proceeds on disposals of a subsidiary, net of cash disposed

9


(69)

(168)

(540)

(370)

Financing activities





Bank loans and advances

(3)

(6)

(5)

(22)

Change in credit facilities

(278)

(141)

39

(126)

Increase in term loan

235

235

Issuance of unsecured senior notes, net of related expenses

1,026

1,026

Repurchase of unsecured senior notes

(776)

(776)

Increase in other long-term debt

(1)

1

6

66

Payments of other long-term debt

(31)

(19)

(125)

(81)

Settlement of derivative financial instruments

(1)

Issuance of common shares upon exercise of stock options

1

1

5

5

Redemption of common shares

(1)

(1)

(9)

(20)

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

(3)

(5)

(17)

(17)

Capital contribution from non-controlling interests

1

Dividends paid to the Corporation's Shareholders

(8)

(4)

(23)

(15)


(74)

61

121

25

Net change in cash and cash equivalents during the period

20

(22)

41

28

Currency translation on cash and cash equivalents

(3)

6

(9)

6

Cash and cash equivalents - Beginning of the period

138

139

123

89

Cash and cash equivalents - End of the period

155

123

155

123

 

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. In 2019, the Corporation modified its internal reporting in accordance with CODM requirements and business analysis. As a result, the Corporation modified its segmented information disclosure and restated prior periods. The Corporation's recycling and recovery activities, previously included in the Specialty Products segment, are now included in the Corporate Activities.

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)

2019

2018

2019

2018

Packaging Products





Containerboard

451

472

1,827

1,840

Boxboard Europe

243

245

1,048

933

Specialty Products

105

97

492

358

Intersegment sales

(3)

(3)

(14)

(14)


796

811

3,353

3,117

Tissue Papers

397

340

1,509

1,352

Intersegment sales and Corporate Activities

34

45

134

180


1,227

1,196

4,996

4,649






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)

2019

2018

2019

2018

Packaging Products





Containerboard

98

111

443

470

Boxboard Europe

8

22

92

99

Specialty Products

9

9

52

35


115

142

587

604

Tissue Papers

(3)

(83)

64

(58)

Corporate Activities

(36)

(24)

(104)

(74)

Operating income before depreciation and amortization

76

35

547

472

Depreciation and amortization

(77)

(70)

(289)

(244)

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

(21)

(29)

(143)

(99)

Loss on repurchase of long-term debt

(14)

(14)

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

(1)

(8)

6

(4)

Fair value revaluation gain on investments

5

Share of results of associates and joint ventures

3

4

9

11

Earnings (loss) before income taxes

(34)

(68)

116

141






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)

2019

2018

2019

2018

Packaging Products





Containerboard

28

27

83

243

Boxboard Europe

15

12

56

35

Specialty Products

9

2

20

20


52

41

159

298

Tissue Papers

36

31

110

88

Corporate Activities

8

11

48

31

Total acquisitions

96

83

317

417

Proceeds from disposals of property, plant and equipment

(6)

(3)

(27)

(85)

Right-of-use assets and included in other debts and liabilities

(8)

(2)

(50)

(70)


82

78

240

262

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





Beginning of period

31

20

37

28

End of period

(46)

(37)

(46)

(37)

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

67

61

231

253

 

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. This 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 the 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 the 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:

 


Q4 2019

(in millions of Canadian dollars) (unaudited)

Containerboard

Boxboard Europe

Specialty Products

Tissue Papers

Corporate Activities

Consolidated

Operating income (loss)

69

(6)

5

(21)

(48)

(1)

Depreciation and amortization

29

14

4

18

12

77

Operating income (loss) before depreciation and amortization

98

8

9

(3)

(36)

76

Specific items:







Loss on acquisitions, disposals and others

4

1

5

Inventory adjustment resulting from business acquisition

2

2

Impairment charges

2

14

34

14

64

Restructuring costs

1

2

3

Unrealized loss (gain) on financial instruments

1

2

(1)

2


8

16

38

14

76

Adjusted operating income (loss) before depreciation and amortization

106

24

9

35

(22)

152

Adjusted operating income (loss)

77

10

5

17

(34)

75






Q3 20191

(in millions of Canadian dollars) (unaudited)

Containerboard

Boxboard Europe

Specialty Products

Tissue Papers

Corporate Activities

Consolidated

Operating income (loss)

91

14

10

31

(41)

105

Depreciation and amortization

29

11

4

15

14

73

Operating income (loss) before depreciation and amortization

120

25

14

46

(27)

178

Specific items :







Loss (gain) on acquisitions, disposals and others

(2)

1

(22)

4

(19)

Impairment charges

1

1

Unrealized loss on derivative financial instruments

1

1


(2)

2

(22)

5

(17)

Adjusted operating income (loss) before depreciation and amortization

118

25

16

24

(22)

161

Adjusted operating income (loss)

89

14

12

9

(36)

88



1

2019 third quarter results have been adjusted to reflect retrospective adjustments of purchase price allocation. Please refer to Note 5 of the 2019 audited financial statements for more details.

 






Q4 20181

(in millions of Canadian dollars) (unaudited)

Containerboard

Boxboard Europe

Specialty Products

Tissue Papers

Corporate Activities

Consolidated

Operating income (loss)

84

11

6

(100)

(36)

(35)

Depreciation and amortization

27

11

3

17

12

70

Operating income (loss) before depreciation and amortization

111

22

9

(83)

(24)

35

Specific items:







Gain on acquisitions, disposals and others

(1)

(2)

(3)

Impairment charges

75

75

Restructuring costs (reversals)

3

(1)

2

Unrealized loss (gain) on financial instruments

(2)

6

4


(2)

(1)

75

6

78

Adjusted operating income (loss) before depreciation and amortization

111

20

8

(8)

(18)

113

Adjusted operating income (loss)

84

9

5

(25)

(30)

43

 

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)

2019

20181

Q4 2019

Q3 20191

Q4 20181







Net earnings (loss) attributable to Shareholders for the period

69

57

(26)

40

(67)

Net earnings attributable to non-controlling interests

28

36

3

7

8

Provision for (recovery of) income taxes

19

48

(11)

12

(9)

Fair value revaluation gain on investments

(5)

Share of results of associates and joint ventures

(9)

(11)

(3)

(2)

(4)

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

(6)

4

1

8

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

157

99

35

48

29

Operating income (loss)

258

228

(1)

105

(35)

Specific items:






Loss (gain) on acquisitions, disposals and others

(21)

(69)

5

(19)

(3)

Inventory adjustment resulting from business acquisition

2

2

Impairment charges

69

75

64

1

75

Restructuring costs

9

2

3

2

Unrealized loss (gain) on derivative financial instruments

(2)

9

2

1

4


57

17

76

(17)

78

Adjusted operating income

315

245

75

88

43

Depreciation and amortization

289

244

77

73

70

Adjusted operating income before depreciation and amortization

604

489

152

161

113

 

1

2018 fourth quarter and 2019 third quarter results have been adjusted to reflect retrospective adjustments of purchase price allocation. Please refer to Note 5 of the 2019 audited financial statements for more details.

 

The following table reconciles net earnings (loss) and net earnings (loss) 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 (LOSS)


NET EARNINGS (LOSS) PER SHARE 1


2019

20182

Q4 2019

Q3 20192

Q4 20182


2019

20182

Q4 2019

Q3 20192

Q4 20182












As per IFRS

69

57

(26)

40

(67)


$

0.74

$

0.60

$

(0.27)

$

0.42

$

(0.71)

Specific items:











Loss (gain) on acquisitions, disposals and others

(21)

(69)

5

(19)

(3)


$

(0.25)

$

(0.53)

$

0.04

$

(0.21)

$

(0.02)

Inventory adjustment resulting from business acquisition

2

2


$

0.02

$

0.02

Impairment charges

69

75

64

1

75


$

0.53

$

0.60

$

0.49

$

0.01

$

0.60

Restructuring costs

9

2

3

2


$

0.07

$

0.02

$

0.02

$

0.02

Unrealized loss (gain) on derivative financial instruments

(2)

9

2

1

4


$

(0.02)

$

0.07

$

0.01

$

0.01

$

0.03

Loss on repurchase of long-term debt

14

14


$

0.11

$

0.11

Unrealized loss (gain) on interest rate swaps and option fair value

(1)

(1)

7


$

(0.01)

$

(0.01)

$

0.07

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

(6)

4

1

8


$

(0.06)

$

0.03

$

0.01

$

0.06

Fair value revaluation gain on investments

(5)


$

(0.03)

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

(38)

7

(35)

(2)

(19)


$

(0.12)

$

0.08

$

(0.12)

$

0.02


27

22

55

(12)

67


$

0.28

$

0.23

$

0.57

$

(0.12)

$

0.71

Adjusted

96

79

29

28


$

1.02

$

0.83

$

0.30

$

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) (unaudited)

2019

20182

Q4 2019

Q3 20192

Q4 20182

Cash flow from operating activities

460

373

163

157

85

Changes in non-cash working capital components

(59)

(12)

(72)

(53)

4

Depreciation and amortization

(289)

(244)

(77)

(73)

(70)

Net income taxes paid

27

11

13

12

7

Net financing expense paid

133

107

32

42

13

Premium paid on long-term debt repurchase

11

11

Gain (loss) on acquisitions, disposals and others

24

69

(5)

23

3

Impairment reversals and restructuring costs

(68)

(77)

(62)

(1)

(77)

Unrealized gain (loss) on derivative financial instruments

2

(9)

(2)

(1)

(4)

Dividend received, employee future benefits and others

17

10

(2)

(1)

4

Operating income (loss)

258

228

(1)

105

(35)

Depreciation and amortization

289

244

77

73

70

Operating income before depreciation and amortization

547

472

76

178

35

 

2

2018 fourth quarter and 2019 third quarter results have been adjusted to reflect retrospective adjustments of purchase price allocation. Please refer to Note 5 of the 2019 audited financial statements for more details.

 

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)


2019


2018


Q4 2019


Q3 2019


Q4 2018

Cash flow from operating activities


460


373


163


157


85

Changes in non-cash working capital components


(59)


(12)


(72)


(53)


4

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


401


361


91


104


89

Specific items, net of current income taxes if applicable


24



16


4


Adjusted cash flow from operating activities


425


361


107


108


89

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


(278)


(275)


(80)


(58)


(65)

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


(40)


(32)


(11)


(12)


(9)

Adjusted free cash flow


107


54


16


38


15

Adjusted free cash flow per share

$

1.14

$

0.57

$

0.17

$

0.40

$

0.16

Weighted average basic number of shares outstanding


93,987,980


94,570,924


94,287,895


93,860,367


94,173,071

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,
2019

September 30,
20191

December 31,
2018

Long-term debt

2,022

2,107

1,821

Current portion of long-term debt

85

87

55

Bank loans and advances

11

14

16

Total debt

2,118

2,208

1,892

Less: Cash and cash equivalents

155

138

123

Net debt

1,963

2,070

1,769

Adjusted OIBD (last twelve months)

604

565

491

Net debt / Adjusted OIBD ratio

3.25

3.7

3.6

1

2019 third quarter results have been adjusted to reflect retrospective adjustments of purchase price allocation. Please refer to Note 5 of the 2019 audited financial statements for more details.

Follow us on social media:

Website: www.cascades.com 
Twitter: twitter.com/CascadesInvest
Facebook: facebook.com/Cascades
YouTube: youtube.com/Cascades

Cision View original content:http://www.prnewswire.com/news-releases/cascades-announces-solid-results-for-the-fourth-quarter-and-full-year-2019-301012126.html

SOURCE Cascades Inc.

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