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Cascades Continues its Solid Performance in the Third Quarter of 2019; Positive outlook in Tissue supported by operational improvements and recent strategic initiatives

|PR Newswire

KINGSEY FALLS, QC, Nov. 8, 2019 /PRNewswire/ - Cascades Inc. (CADNF) (TSX: CAS) reports its unaudited financial results for the three-month period ended September 30, 2019.

Q3 2019 Highlights

  • Sales of $1,264 million
    (compared with $1,275 million in Q2 2019 (-1%) and $1,175 million in Q3 2018 (+8%))
  • As reported (including specific items)
    • Operating income of $135 million
      (compared with $82 million in Q2 2019 (+65%) and $78 million in Q3 2018 (+73%))
    • Operating income before depreciation and amortization (OIBD)1 of $208 million
      (compared with $154 million in Q2 2019 (+35%) and $139 million in Q3 2018 (+50%))
    • Net earnings per share of $0.74
      (compared with $0.33 in Q2 2019 and $0.38 in Q3 2018)
  • Adjusted (excluding specific items)1
    • Operating income of $88 million
      (compared with $84 million in Q2 2019 (+5%) and $76 million in Q3 2018 (+16%))
    • OIBD of $161 million
      (compared with $156 million in Q2 2019 (+3%) and $137 million in Q3 2018 (+18%))
    • Net earnings per share of $0.30
      (compared with $0.28 in Q2 2019 and $0.40 in Q3 2018)
  • Completed acquisition of Orchids Paper Products2 for total cash consideration of US$237 million on September 13, 2019.
  • On October 30, 2019, announced planned closure of two tissue converting facilities in the U.S. by March 2020.
  • Net debt1 of $2,077 million as at September 30, 2019 (compared with $1,861 million as at June 30, 2019) and net debt to adjusted OIBD ratio1 at 3.7x. This includes the acquisition of Orchids, detailed above, with no related contribution to adjusted OIBD.

 

1

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

2

Also referred to as Orchids acquisition.



 

Mr. Mario Plourde, President and Chief Executive Officer, commented: "Cascades delivered solid consolidated third quarter 2019 results, as demonstrated by the 24.9% OIBD margin realized by the Containerboard segment. In addition to our improved execution at the operational level, we benefited from favourable raw material pricing and customary seasonal demand levels across our platforms, notwithstanding some softness in Containerboard and European Boxboard end-pricing. The Tissue segment delivered very encouraging year-over-year and sequential financial improvements, with positive raw material costs and selling price levels providing additional support for the benefits being derived from ongoing growth investments and initiatives in this segment.

We concluded the acquisition of the Orchids activities during the third quarter, and subsequently announced, at the end of October, the closure of two tissue converting facilities in the U.S. by March 2020, as part of our strategic repositioning and optimization efforts in the Tissue segment. In a similar vein, we advanced our capital investments and projects across our operations, and continued to align our Specialty Products platform with the Company's longer-term strategic objectives via the sale of our European industrial packaging operations."

Discussing the outlook for Cascades, Mr. Plourde continued "After nine months, the Company is well positioned to generate solid annual adjusted OIBD in 2019, with results after the first three quarters 15% above full year 2017 performance and already equal to 92% of full year 2018 adjusted OIBD performance. On a consolidated basis we expect fourth quarter results to improve year-over-year, with operational enhancements in tissue and favourable raw material pricing mitigating the usual seasonal trends across our business platforms. On a segmented basis, near-term results in Containerboard are expected to decrease sequentially and be stable year-over-year reflecting a combination of usual seasonality and market dynamics. Tissue results are expected to show important year-over-year improvements in the fourth quarter, while sequential performance will be down reflecting the usual seasonal trends. European Boxboard performance is expected to slightly decrease sequentially but improve year-over-year as a result of lower raw material costs and a modest recovery in volume. Lastly, we anticipate stable results in Specialty Products year-over-year and a slight decrease sequentially, as the impact of lower recycled fibre prices on recovery operations and seasonality in packaging are expected to be offset by stable selling prices and beneficial raw material costs in packaging."

Financial Summary

 

Selected consolidated information



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

Q3 2019


Q2 2019


Q3 2018






Sales

1,264


1,275


1,175


As reported




Operating income before depreciation and amortization (OIBD)1

208


154


139


Operating income

135


82


78


Net earnings

70


31


36


per share

$

0.74


$

0.33


$

0.38


Adjusted1




Operating income before depreciation and amortization (OIBD)

161


156


137


Operating income

88


84


76


Net earnings

28


26


38


per share

$

0.30


$

0.28


$

0.40


Margin (OIBD)

12.7

%

12.2

%

11.7

%

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

 

Segmented OIBD as reported



(in millions of Canadian dollars) (unaudited)

Q3 2019


Q2 2019


Q3 2018





Packaging Products




Containerboard

120


114


116

Boxboard Europe

25


30


19

Specialty Products

12


13


15





Tissue Papers

76


17


5





Corporate Activities

(25)


(20)


(16)

OIBD as reported

208


154


139

 

Segmented adjusted OIBD1



(in millions of Canadian dollars) (unaudited)

Q3 2019


Q2 2019


Q3 2018





Packaging Products




Containerboard

118


113


117

Boxboard Europe

25


30


19

Specialty Products

14


13


14





Tissue Papers

24


18


5





Corporate Activities

(20)


(18)


(18)

Adjusted OIBD

161


156


137

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

 

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

Sales of $1,264 million increased by $89 million, or 8%, compared with the same period last year, attaining a record level for the third quarter. Specifically, Tissue sales increased by $23 million, or 6%, reflecting a higher average selling price, the addition of Orchids Paper assets as of mid-September and a more favourable exchange rate. These benefits were partially offset by slightly lower volume following the previously announced closure of two paper machines in Ontario. European Boxboard sales increased by $46 million, or 22%, compared with the previous year, largely driven by the business acquisition in Spain at the end of 2018. Year-over-year results similarly benefited from slightly higher comparable volume, while less favourable selling price and mix and Canadian dollar - euro exchange rate negatively impacted results in the current period. The Specialty Products segment generated a 7% or $12 million sales improvement year-over-year, reflecting 2018 acquisitions and a slight improvement in pricing and sales mix. Combined, these benefits more than offset lower results from the Recovery & Recycling sub-segment due to price erosion of recycled material. Lastly, sales in the Containerboard Packaging group increased by $1 million year-over-year, as improved volume and more favourable exchange rate were largely offset by less favourable average selling price and sales mix year-over-year.

The Corporation generated an operating income before depreciation and amortization (OIBD) of $208 million in the third quarter of 2019. This compares with the $139 million generated in the same period last year. This increase reflects a $52 million gain in the Tissue segment related to the acquisition of Orchids Paper assets, more favourable raw material prices across all four businesses, slightly higher volumes in all segments with the exception of Tissue, and business acquisitions completed in the last twelve months. More favourable selling prices and sales mix in Tissue also contributed to the year-over-year improvement, the benefits of which were partially offset by adverse average selling price trends in Containerboard and European Boxboard during the period. Operating results for 2019 also include the beneficial impact of IFRS 16 accounting for leases, which increased third quarter 2019 OIBD by approximately $7 million. On an adjusted basis1, third quarter 2019 OIBD stood at $161 million, versus $137 million in the previous year.

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

  • $52 million gain in Tissue Papers related to the acquisition of Orchids (OIBD and net earnings)
  • $4 million charge in Corporate Activities associated with transaction fees paid for the Orchids' asset acquisition (OIBD and net earnings)
  • $2 million gain in Containerboard Packaging related to the sale of a building and land (OIBD and net earnings)
  • $2 million loss following the conclusion of the sale of the Specialty Products operations in France and the closure of a facility in the second quarter (OIBD and net earnings)
  • $7 million unrealized loss on the fair value revaluation of an option granted in the Bear Island project (net earnings)

For the 3-month period ended September 30, 2019, the Corporation posted net earnings of $70 million, or $0.74 per share, compared with net earnings of $36 million, or $0.38 per share, for the same period in 2018. On an adjusted basis1, the Corporation generated net earnings of $28 million in the third quarter of 2019, or $0.30 per share, compared with net earnings of $38 million, or $0.40 per share, for the same period in 2018.

 

1

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

 

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 December 5, 2019 to shareholders of record at the close of business on November 21, 2019. This dividend is an "eligible dividend" as per the Income Tax Act (R.C.S. (1985), Canada). During the third quarter of 2019, Cascades purchased 203,000 shares for cancellation at a weighted average price of $11.46.

2019 Third Quarter Results Conference Call Details

Management will discuss the 2019 third quarter financial results during a conference call today at 9:00 a.m. ET. The call can be accessed by dialing 1-888-231-8191 (international dial-in 1-647-427-7450). The conference call, including the investor presentation, will be broadcast live on the Cascades website (www.cascades.com under the "Investors" section). A replay of the call will be available on the Cascades website and may also be accessed by phone until December 8, 2019 by dialing 1-855-859-2056, access code 6979777.

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)

September 30,
2019

December 31,
2018

Assets



Current assets



Cash and cash equivalents

138

123

Accounts receivable

714

635

Current income tax assets

32

29

Inventories

578

606

Current portion of financial assets

12

10


1,474

1,403

Long-term assets



Investments in associates and joint ventures

82

81

Property, plant and equipment

2,879

2,505

Intangible assets with finite useful life

184

204

Financial assets

18

20

Other assets

40

42

Deferred income tax assets

145

134

Goodwill and other intangible assets with indefinite useful life

547

556


5,369

4,945

Liabilities and Equity



Current liabilities



Bank loans and advances

14

16

Trade and other payables

788

781

Current income tax liabilities

26

23

Current portion of long-term debt

87

55

Current portion of provisions for contingencies and charges

6

6

Current portion of financial liabilities and other liabilities

114

101


1,035

982

Long-term liabilities



Long-term debt

2,114

1,821

Provisions for contingencies and charges

44

42

Financial liabilities

7

14

Other liabilities

197

202

Deferred income tax liabilities

220

200


3,617

3,261

Equity



Capital stock

490

490

Contributed surplus

15

16

Retained earnings

1,085

997

Accumulated other comprehensive income (loss)

(12)

2

Equity attributable to Shareholders

1,578

1,505

Non-controlling interests

174

179

Total equity

1,752

1,684


5,369

4,945

 

CONSOLIDATED STATEMENTS OF EARNINGS



For the 3-month periods ended
September 30,

For the 9-month periods ended
September 30,

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

2019

2018

2019

2018

Sales

1,264

1,175

3,769

3,453

Cost of sales and expenses





Cost of sales (including depreciation and amortization of $73 million for 3-month period (2018 — $61 million) and $212 million for 9-month period (2018 — $174 million))

1,071

1,004

3,210

2,953

Selling and administrative expenses

105

96

320

301

Gain on acquisitions, disposals and others

(49)

(56)

(66)

Impairment charges and restructuring costs

1

11

Foreign exchange gain

(1)

(1)

(2)

Loss (gain) on derivative financial instruments

1

(2)

(4)

4


1,129

1,097

3,480

3,190

Operating income

135

78

289

263

Financing expense

24

21

74

60

Interest expense on employee future benefits and other liabilities

24

3

48

10

Foreign exchange gain on long-term debt and financial instruments

(3)

(7)

(4)

Fair value revaluation gain on investments

(5)

Share of results of associates and joint ventures

(2)

(3)

(6)

(7)

Earnings before income taxes

89

60

180

209

Provision for income taxes

12

17

30

57

Net earnings including non-controlling interests for the period

77

43

150

152

Net earnings attributable to non-controlling interests

7

7

25

28

Net earnings attributable to Shareholders for the period

70

36

125

124

Net earnings per common share





Basic

$

0.74

$

0.38

$

1.33

$

1.31

Diluted

$

0.73

$

0.37

$

1.31

$

1.27

Weighted average basic number of common shares outstanding

93,860,367

94,469,465

93,886,909

94,704,999

Weighted average number of diluted common shares

95,519,226

96,780,412

95,437,252

97,194,029

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME





For the 3-month periods ended
September 30,

For the 9-month periods ended
September 30,

(in millions of Canadian dollars) (unaudited)

2019

2018

2019

2018

Net earnings including non-controlling interests for the period

77

43

150

152

Other comprehensive income (loss)





Items that may be reclassified subsequently to earnings





Translation adjustments





Change in foreign currency translation of foreign subsidiaries

1

(26)

(57)

24

Change in foreign currency translation related to net investment hedging activities

(3)

15

32

(15)

Cash flow hedges





Change in fair value of foreign exchange forward contracts

1

(1)

Change in fair value of interest rate swaps

(1)

1

Change in fair value of commodity derivative financial instruments

1

2

(1)

5

Recovery of (provision for) income taxes

(2)

1


(1)

(11)

(26)

15

Items that are not released to earnings





Actuarial gain (loss) on employee future benefits

2

8

(13)

13

Recovery (provision) of income taxes

(2)

3

(3)


2

6

(10)

10

Other comprehensive income (loss)

1

(5)

(36)

25

Comprehensive income including non-controlling interests for the period

78

38

114

177

Comprehensive income attributable to non-controlling interests for the period

4

3

13

28

Comprehensive income attributable to Shareholders for the period

74

35

101

149

 

CONSOLIDATED STATEMENTS OF EQUITY




For the 9-month period ended September 30, 2019

(in millions of Canadian dollars) (unaudited)

CAPITAL
STOCK

CONTRIBUTED
SURPLUS

RETAINED

EARNINGS

ACCUMULATED
OTHER
COMPREHENSIVE
LOSS

TOTAL EQUITY
ATTRIBUTABLE TO
SHAREHOLDERS

NON-CONTROLLING
INTERESTS

TOTAL
EQUITY

Balance - Beginning of period

490

16

1,000

2

1,508

180

1,688

Business combination

(3)

(3)

(4)

(7)

Adjusted Balance - Beginning of period

490

16

997

2

1,505

176

1,681

New IFRS adoption

(9)

(9)

(9)

Adjusted balance - Beginning of period

490

16

988

2

1,496

176

1,672

Comprehensive income








Net earnings

125

125

25

150

Other comprehensive loss

(10)

(14)

(24)

(12)

(36)


115

(14)

101

13

114

Dividends

(15)

(15)

(14)

(29)

Issuance of common shares upon exercise of stock options

5

(1)

4

4

Redemption of common shares

(5)

(3)

(8)

(8)

Disposal of a subsidiary

(1)

(1)

Balance - End of period

490

15

1,085

(12)

1,578

174

1,752


















For the 9-month period ended September 30, 2018

(in millions of Canadian dollars) (unaudited)

CAPITAL
STOCK

CONTRIBUTED
SURPLUS

RETAINED
EARNINGS

ACCUMULATED
OTHER
COMPREHENSIVE
LOSS

TOTAL EQUITY
ATTRIBUTABLE TO
SHAREHOLDERS

NON-
CONTROLLING
INTERESTS

TOTAL
EQUITY

Balance - Beginning of period

492

16

982

(35)

1,455

146

1,601

New IFRS adoption

(2)

2

Adjusted Balance - Beginning of period

492

16

980

(33)

1,455

146

1,601

Comprehensive income








Net earnings

124

124

28

152

Other comprehensive income

10

15

25

25


134

15

149

28

177

Dividends

(11)

(11)

(12)

(23)

Stock options expense

1

1

1

Issuance of common shares upon exercise of stock options

5

(1)

4

4

Redemption of common shares

(7)

(12)

(19)

(19)

Capital contribution from a non-controlling interest

1

1

Balance - End of period

490

16

1,091

(18)

1,579

163

1,742

 

CONSOLIDATED STATEMENTS OF CASH FLOWS





For the 3-month periods ended
September 30,

For the 9-month periods ended
September 30,

(in millions of Canadian dollars) (unaudited)

2019

2018

2019

2018

Operating activities





Net earnings attributable to Shareholders for the period

70

36

125

124

Adjustments for:





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

48

24

122

70

Depreciation and amortization

73

61

212

174

Gain on acquisitions, disposals and others

(53)

(59)

(66)

Impairment charges and restructuring costs

1

6

Unrealized loss (gain) on derivative financial instruments

1

(2)

(4)

5

Foreign exchange gain on long-term debt and financial instruments

(3)

(7)

(4)

Provision for income taxes

12

17

30

57

Fair value revaluation gain on investments

(5)

Share of results of associates and joint ventures

(2)

(3)

(6)

(7)

Net earnings attributable to non-controlling interests

7

7

25

28

Net financing expense paid

(42)

(39)

(101)

(94)

Net income taxes paid

(12)

(6)

(14)

(4)

Dividends received

1

3

3

4

Employee future benefits and others

(3)

(22)

(10)


104

92

310

272

Changes in non-cash working capital components

53

42

(13)

16


157

134

297

288

Investing activities





Investments in associates and joint ventures

1

(2)

Payments for property, plant and equipment

(66)

(124)

(185)

(274)

Proceeds from disposals of property, plant and equipment

19

21

82

Change in intangible and other assets

(1)

(4)

(3)

(11)

Net cash acquired (paid) in business combinations

(300)

(314)

3

Proceeds on disposals of a subsidiary, net of cash disposed

9

9


(339)

(128)

(471)

(202)

Financing activities





Bank loans and advances

(2)

(1)

(2)

(16)

Change in credit facilities

252

5

317

15

Increase in other long-term debt

54

7

65

Payments of other long-term debt

(15)

(7)

(94)

(62)

Settlement of derivative financial instruments

(1)

Issuance of common shares upon exercise of stock options

4

4

4

Redemption of common shares

(3)

(7)

(8)

(19)

Dividends paid to non-controlling interests

(4)

(2)

(14)

(12)

Capital contribution from non-controlling interests

1

Dividends paid to the Corporation's Shareholders

(8)

(3)

(15)

(11)


224

39

195

(36)

Change in cash and cash equivalents during the period

42

45

21

50

Currency translation on cash and cash equivalents

(2)

(3)

(6)

Cash and cash equivalents - Beginning of the period

98

97

123

89

Cash and cash equivalents - End of the period

138

139

138

139


 

SEGMENTED INFORMATION

The Corporation analyzes the performance of its operating segments based on their operating income before depreciation and amortization, which is not a measure of performance under International Financial Reporting Standards (IFRS); however, the chief operating decision-maker (CODM) uses this performance measure to assess the operating performance of each reportable segment. Earnings for each segment are prepared on the same basis as those of the Corporation. Intersegment operations are recorded on the same basis as sales to third parties, which are at fair market value. The accounting policies of the reportable segments are the same as the Corporation's accounting policies described in its most recent audited consolidated financial statements for the year ended December 31, 2018.

The Corporation's operating segments are reported in a manner consistent with the internal reporting provided to the CODM. The Chief Executive Officer has authority for resource allocation and management of the Corporation's performance, and is therefore the CODM.

The Corporation's operations are managed in four segments: Containerboard, Boxboard Europe and Specialty Products (which constitutes the Corporation's Packaging Products), and Tissue Papers.

 


SALES


For the 3-month
periods ended
September 30,

For the 9-month
periods ended
September 30,

(in millions of Canadian dollars) (unaudited)

2019

2018

2019

2018

Packaging Products





Containerboard

473

472

1,376

1,368

Boxboard Europe

256

210

805

688

Specialty Products

176

164

565

487

Intersegment sales

(16)

(21)

(53)

(68)


889

825

2,693

2,475

Tissue Papers

387

364

1,112

1,012

Intersegment sales and Corporate Activities

(12)

(14)

(36)

(34)


1,264

1,175

3,769

3,453




OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION


For the 3-month
periods ended
September 30,

For the 9-month
periods ended
September 30,

(in millions of Canadian dollars) (unaudited)

2019

2018

2019

2018

Packaging Products





Containerboard

120

116

345

359

Boxboard Europe

25

19

84

77

Specialty Products

12

15

36

31


157

150

465

467

Tissue Papers

76

5

97

25

Corporate Activities

(25)

(16)

(61)

(55)

Operating income before depreciation and amortization

208

139

501

437

Depreciation and amortization

(73)

(61)

(212)

(174)

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

(48)

(24)

(122)

(70)

Foreign exchange gain on long-term debt and financial instruments

3

7

4

Fair value revaluation gain on investments

5

Share of results of associates and joint ventures

2

3

6

7

Earnings before income taxes

89

60

180

209







PAYMENTS FOR PROPERTY, PLANT AND EQUIPMENT


For the 3-month
periods ended
September 30,

For the 9-month
periods ended
September 30,

(in millions of Canadian dollars) (unaudited)

2019

2018

2019

2018

Packaging Products





Containerboard

19

76

55

216

Boxboard Europe

13

15

41

23

Specialty Products

12

8

26

25


44

99

122

264

Tissue Papers

27

29

74

57

Corporate Activities

11

4

25

13

Total acquisitions

82

132

221

334

Proceeds from disposals of property, plant and equipment

(19)

(21)

(82)

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

(9)

(2)

(42)

(68)


54

130

158

184

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





Beginning of period

24

14

37

28

End of period

(31)

(20)

(31)

(20)

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

47

124

164

192


 

SUPPLEMENTAL INFORMATION ON NON-IFRS MEASURES

SPECIFIC ITEMS

The Corporation incurs some specific items that adversely or positively affect its operating results. We believe it is useful for readers to be aware of these items, as they provide additional information to measure performance, compare the Corporation's results between periods, and assess operating results and liquidity, notwithstanding these specific items. Management believes these specific items are not necessarily reflective of the Corporation's underlying business operations in measuring and comparing its performance and analyzing future trends. Our definition of specific items may differ from those of other corporations, and some of them may arise in the future and may reduce the Corporation's available cash.

They include, but are not limited to, charges for (reversals of) impairment of assets, restructuring gains or costs, loss on refinancing and repurchase of long-term debt, some deferred tax asset provisions or reversals, premiums paid on long-term debt refinancing, gains or losses on the acquisition or sale of a business unit, gains or losses on the share of results of associates and joint ventures, unrealized gains or losses on derivative financial instruments that do not qualify for hedge accounting, unrealized gains or losses on interest rate swaps, foreign exchange gains or losses on long-term debt and financial instruments, specific items of discontinued operations and other significant items of an unusual, non-cash or non-recurring nature.

RECONCILIATION OF NON-IFRS MEASURES

To provide more information for evaluating the Corporation's performance, the financial information included in this analysis contains certain data that are not performance measures under IFRS ("non-IFRS measures"), which are also calculated on an adjusted basis to exclude specific items. We believe that providing certain key performance measures and non-IFRS measures is useful to both management and investors, as they provide additional information to measure the performance and financial position of the Corporation. It also increases the transparency and clarity of the financial information. The following non-IFRS measures are used in our financial disclosures:

  • Operating income before depreciation and amortization (OIBD): Used to assess operating performance and contribution of each segment when excluding depreciation and amortization. OIBD is widely used by investors as a measure of a corporation's ability to incur and service debt and as an evaluation metric.
  • Adjusted OIBD: Used to assess operating performance and contribution of each segment on a comparable basis.
  • Adjusted operating income: Used to assess operating performance of each segment on a comparable basis.
  • Adjusted net earnings: Used to assess the Corporation's consolidated financial performance on a comparable basis.
  • Adjusted free cash flow: Used to assess the Corporation's capacity to generate cash flows to meet financial obligations and/or discretionary items such as share repurchase, dividend increase and strategic investments.
  • Net debt to adjusted OIBD ratio: Used to measure the Corporation's credit performance and evaluate financial leverage.
  • Net debt to adjusted OIBD ratio on a pro-forma basis: Used to measure the Corporation's credit performance and evaluate the financial leverage on a comparable basis, including significant business acquisitions and excluding significant business disposals, if any.

Non-IFRS measures are mainly derived from the consolidated financial statements, but do not have meanings prescribed by IFRS. These measures have limitations as an analytical tool and should not be considered on their own or as a substitute for an analysis of our results as reported under IFRS. In addition, our definitions of non-IFRS measures may differ from those of other corporations. Any such modification or reformulation may be significant.

The reconciliation of operating income (loss) to OIBD, to adjusted operating income (loss) and to adjusted OIBD by business segment is as follows:

 


Q3 2019

(in millions of Canadian dollars) (unaudited)

Containerboard

Boxboard
Europe

Specialty
Products

Tissue
Papers

Corporate
Activities

Consolidated

Operating income (loss)

91

14

4

61

(35)

135

Depreciation and amortization

29

11

8

15

10

73

Operating income (loss) before depreciation and amortization

120

25

12

76

(25)

208

Specific items:







Loss (gain) on acquisitions, disposals and others

(2)

1

(52)

4

(49)

Impairment charges

1

1

Unrealized loss on financial instruments

1

1


(2)

2

(52)

5

(47)

Adjusted operating income (loss) before depreciation and amortization

118

25

14

24

(20)

161

Adjusted operating income (loss)

89

14

6

9

(30)

88









Q2 2019

(in millions of Canadian dollars) (unaudited)

Containerboard

Boxboard
Europe

Specialty
Products

Tissue
Papers

Corporate
Activities

Consolidated

Operating income (loss)

84

19

6

1

(28)

82

Depreciation and amortization

30

11

7

16

8

72

Operating income (loss) before depreciation and amortization

114

30

13

17

(20)

154

Specific items :







Loss on acquisitions, disposals and others

3

3

Restructuring costs

1

1

Unrealized gain on derivative financial instruments

(1)

(1)

(2)


(1)

1

2

2

Adjusted operating income (loss) before depreciation and amortization

113

30

13

18

(18)

156

Adjusted operating income (loss)

83

19

6

2

(26)

84




Q3 2018

(in millions of Canadian dollars) (unaudited)

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 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

 

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

 





(in millions of Canadian dollars) (unaudited)

Q3 2019

Q2 2019

Q3 2018





Net earnings attributable to Shareholders

70

31

36

Net earnings attributable to non-controlling interests

7

9

7

Provision for income taxes

12

10

17

Share of results of associates and joint ventures

(2)

(2)

(3)

Foreign exchange gain on long-term debt and financial instruments

(1)

(3)

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

48

35

24

Operating income

135

82

78

Specific items:




Loss (gain) on acquisitions, disposals and others

(49)

3

Impairment charges

1

Restructuring costs

1

Unrealized loss (gain) on derivative financial instruments

1

(2)

(2)


(47)

2

(2)

Adjusted operating income

88

84

76

Depreciation and amortization

73

72

61

Adjusted operating income before depreciation and amortization

161

156

137

 

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

 





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

NET EARNINGS


NET EARNINGS PER SHARE 1


Q3 2019

Q2 2019

Q3 2018


Q3 2019

Q2 2019

Q3 2018









As per IFRS

70

31

36


$

0.74

$

0.33

$

0.38

Specific items:








Loss (gain) on acquisitions, disposals and others

(49)

3


$

(0.53)

$

0.03

Impairment charges

1


$

0.01

Restructuring costs

1


$

0.01

Unrealized loss (gain) on derivative financial instruments

1

(2)

(2)


$

0.01

$

(0.02)

$

(0.02)

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

7

(6)


$

0.07

$

(0.06)

Foreign exchange gain on long-term debt and financial instruments

(1)

(3)


$

(0.01)

$

(0.02)

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

(2)

7


$

0.06


(42)

(5)

2


$

(0.44)

$

(0.05)

$

0.02

Adjusted

28

26

38


$

0.30

$

0.28

$

0.40



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)

Q3 2019

Q2 2019

Q3 2018

Cash flow from operating activities

157

88

134

Changes in non-cash working capital components

(53)

36

(42)

Depreciation and amortization

(73)

(72)

(61)

Net income taxes paid

12

2

6

Net financing expense paid

42

16

39

Gain (loss) on acquisitions, disposals and others

53

(3)

Impairment charges and restructuring costs

(1)

Unrealized gain (loss) on derivative financial instruments

(1)

2

2

Dividend received, employee future benefits and others

(1)

13

Operating income

135

82

78

Depreciation and amortization

73

72

61

Operating income before depreciation and amortization

208

154

139

 

The following table reconciles cash flow from operating activities with cash flow from operating activities (excluding changes in non-cash working capital components) and adjusted cash flow from operating activities. It also reconciles adjusted cash flow from operating activities to adjusted free cash flow, which is also calculated on a per share basis:

 





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

Q3 2019

Q2 2019

Q3 2018

Cash flow from operating activities

157

88

134

Changes in non-cash working capital components

(53)

36

(42)

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

104

124

92

Specific items, net of current income taxes if applicable:

4

1

Adjusted cash flow from operating activities

108

125

92

Capital expenditures & other assets1 and right-of-use assets payments, net of disposals

(58)

(64)

(129)

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

(12)

(9)

(5)

Adjusted free cash flow

38

52

(42)

Adjusted free cash flow per share

$

0.40

$

0.56

$

(0.44)

Weighted average basic number of shares outstanding

93,860,367

93,636,771

94,469,465

1 Excluding increase in investments

 

The following table reconciles total debt and net debt with the ratio of net debt to adjusted operating income before depreciation and amortization (adjusted OIBD):

 





(in millions of Canadian dollars)

September 30,
2019

June 30,
2019

September 30,
2018

Long-term debt

2,114

1,866

1,648

Current portion of long-term debt

87

77

44

Bank loans and advances

14

16

20

Total debt

2,215

1,959

1,712

Less: Cash and cash equivalents

138

98

139

Net debt

2,077

1,861

1,573

Adjusted OIBD (last twelve months)

565

541

481

Net debt / Adjusted OIBD ratio

3.7

3.4

3.3

 

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SOURCE Cascades Inc.