Chronicle Journal: Finance

Cascades Reports Strong Results for the Second Quarter of 2020

Record quarterly adjusted OIBD highlights resiliency of our business model

KINGSEY FALLS, QC, Aug. 6, 2020 /PRNewswire/ - Cascades Inc. (TSX: CAS) reports its unaudited financial results for the three-month period ended June 30, 2020.

Q2 2020 Highlights

  • Sales of $1,285 million
    (compared with $1,313 million in Q1 2020 (-2%) and $1,275 million in Q2 2019 (+1%))
  • As reported (including specific items)
    • Operating income of $94 million
      (compared with of $90 million in Q1 2020 (+4%) and an operating income of $82 million in Q2 2019 (+15%))
    • Operating income before depreciation and amortization (OIBD)1 of $169 million
      (compared with $161 million in Q1 2020 (+5%) and $154 million in Q2 2019 (+10%))
    • Net earnings per share of $0.57
      (compared with $0.24 in Q1 2020 and $0.33 in Q2 2019)
  • Adjusted (excluding specific items)1
    • Operating income of $111 million
      (compared with $90 million in Q1 2020 (+23%) and $84 million in Q2 2019 (+32%))
    • OIBD of $186 million
      (compared with $161 million in Q1 2020 (+16%) and $156 million in Q2 2019 (+19%))
    • Net earnings per share of $0.61
      (compared with $0.42 in Q1 2020 and $0.28 in Q2 2019)
  • Net debt1 of $2,077 million as at June 30, 2020 (compared with $2,212 million as at March 31, 2020) reflecting favourable foreign exchange variance and solid cash flow from operations and including acquisition of CDPQ's interest in Greenpac Mill ($121 million) realized in the first quarter; Net debt to adjusted OIBD ratio1 of 3.1x as at June 30, 2020, down from 3.5x at March 31, 2020.

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

 

Mario Plourde, President and CEO, commented: "Our operations executed and adapted well during the second quarter, delivering improved consolidated results on both a sequential and year-over-year basis. This strong performance resulted in a record quarterly adjusted OIBD for the Corporation, highlighting the resiliency of our business model focused on providing customers with essential, sustainable quality packaging and tissue solutions. The ability of our business segments to successfully navigate through the challenging second quarter business environment is a testament to the commitment and hard work of our dedicated employees, and a measurable indication of the operational improvements and cost reduction initiatives being generated by our strategic investments of the past few years.

Sales in the second quarter decreased by 2% sequentially as the elevated Covid-19 related demand levels present in the first quarter eased. As expected, this resulted in lower volumes in all segments with the exception of Specialty Products. Sales increased modestly when compared to the comparable period last year, supported by a 12.5% growth in Tissue.

Second quarter adjusted OIBD of $186 million, representing a 14.5% margin, was a quarterly record for the Corporation, and was 16% above the prior quarter and 19% over the prior year period. The sequential performance was driven by improved results in all segments except Containerboard. Results of both the Tissue and Containerboard segments were negatively impacted by slightly lower volumes and higher raw material costs compared to the prior quarter. As mentioned at the end of the first quarter, the Corporation viewed the sharp increases in prices of recycled fibers as temporary. Pricing has since decreased and is expected to remain within these more normalized levels. The year-over-year adjusted OIBD increase of $30 million was largely driven by the Tissue segment and, to a lesser extent, Boxboard Europe. Specialty Products results were stable year-over-year, while those of Containerboard decreased mainly due to higher raw material costs and less favourable selling price and mix."

Discussing near-term outlook, Mr. Plourde commented, "Looking ahead, we are cautiously optimistic regarding our operational performance given the weighting of our production that falls within essential tissue and packaging segments, and the adaptability demonstrated by our business segments within the challenging business environment. In the near-term, this is counterbalanced by the ongoing potential economic impact related to Covid-19, and evolving consumption trends in end markets that have resulted from the pandemic. With this in mind, we are expecting consolidated results to decrease sequentially, as benefits from favourable raw materials pricing are anticipated to be offset by lower expected volumes, notably in the Away-from-Home Tissue business and the usual lower seasonal third quarter volumes in Europe. Given continued uncertainty around Covid-19, we are focused on the health and safety of our employees and maintaining flexibility in our operations to meet the evolving product needs of our customers. We are committed in our support of community initiatives helping people navigate the current environment, and continue to work closely with our suppliers and customers being impacted. As always, management of our cash flow remains a priority along with reducing operational and SG&A costs. We continue to expect our projected available liquidity levels to meet future requirements including management of our debt level, and will readjust our investment plans should the need become apparent. At this time, we do not have any update on our Bear Island conversion project, for which analysis has continued at a slower pace given current circumstances."

Financial Summary

Selected consolidated information





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

Q2 2020

Q1 2020

Q2 2019





Sales

1,285

1,313

1,275

As Reported




Operating income before depreciation and amortization (OIBD)1

169

161

154

Operating income

94

90

82

Net earnings

54

22

31

per share

$

0.57

$

0.24

$

0.33

Adjusted1




Operating income before depreciation and amortization (OIBD)

186

161

156

Operating income

111

90

84

Net earnings

58

39

26

per share

$

0.61

$

0.42

0.28

Margin (OIBD)

14.5%

12.3%

12.2%

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




Segmented OIBD as reported





(in millions of Canadian dollars) (unaudited)

Q2 2020

Q1 2020

Q2 2019





Packaging Products




Containerboard

83

102

114

Boxboard Europe

42

31

30

Specialty Products

16

11

16





Tissue Papers

48

45

17





Corporate Activities

(20)

(28)

(23)

OIBD as reported

169

161

154

Segmented adjusted OIBD1





(in millions of Canadian dollars) (unaudited)

Q2 2020

Q1 2020

Q2 2019





Packaging Products




Containerboard

94

99

113

Boxboard Europe

43

30

30

Specialty Products

17

12

16





Tissue Papers

54

45

18





Corporate Activities

(22)

(25)

(21)

Adjusted OIBD

186

161

156

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




Analysis of results for the three-month period ended June 30, 2020 (compared to the same period last year)

Sales of $1,285 million grew by $10 million, or 1%, compared with the same period last year. This was largely a reflection of the volume-driven 12.5% increase in the Tissue segment, favourable foreign exchange impacts for all business segments and a positive contribution from recovery operations as a result of higher raw material prices. These benefits were partially offset by lower average selling prices and/or less favourable sales mix in all business segments except Specialty Products, in which year-over-year sales performance levels were nonetheless negatively impacted as a result of the mill closure and business divestiture completed in 2019.

The Corporation generated an operating income before depreciation and amortization (OIBD) of $169 million in the second quarter of 2020, down from $154 million in the second quarter of 2019. On an adjusted basis, second quarter OIBD totaled $186 million in the current period, a new quarterly record for the Corporation. This compares with the $156 million generated in the same period last year, an increase of $30 million, or 19%. The annual improvement in adjusted OIBD reflects increases of $36 million from Tissue and $13 million from Boxboard Europe and stable results in the Specialty Products segment. These benefits were partially offset by a decrease of $19 million from the Containerboard segment, largely due to higher raw material costs and a less favourable selling price and sales mix year-over-year. On a consolidated basis, higher raw material costs, a less favourable average selling price and sales mix negatively impacted adjusted OIBD performance compared to the prior year period. These effects were more than offset by lower production costs, lower energy costs, beneficial foreign exchange impact and a favourable contribution from recovery operations as a result of higher raw material pricing. Research and development tax credits of $9 million were recorded in the current quarter.

On an adjusted basis1, second quarter 2020 OIBD stood at $186 million, versus $156 million in the previous year.  The main specific items, before income taxes, that impacted our second quarter 2020 OIBD and/or net earnings were:

  • $13 million of impairment charges and $2 million of restructuring charges were recorded by the Containerboard and Tissue segments as part of network optimization and profitability improvement initiatives (OIBD and net earnings)

  • $4 million environmental provision was recorded in the Specialty Products segment related to plants in Canada that were closed in the past (OIBD and net earnings)

  • $3 million gain in the Specialty Products segment related to the sale of a non-core equity investment (OIBD and net earnings)

  • $1 million unrealized loss on financial instruments (OIBD and net earnings)

  • $9 million foreign exchange gain on long-term debt and financial instruments (net earnings)

For the 3-month periods ended June 30, 2020, the Corporation posted net earnings of $54 million, or $0.57 per share, compared to net earnings of $31 million, or $0.33 per share, in the same period of 2019. On an adjusted basis1, the Corporation generated net earnings of $58 million in the second quarter of 2020, or $0.61 per share, compared to net earnings of $26 million, or $0.28 per share, in the same period of 2019.

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 September 3, 2020 to shareholders of record at the close of business on August 20, 2020. This dividend is an "eligible dividend" as per the Income Tax Act (R.C.S. (1985), Canada). Cascades did not purchase any shares for cancellation during the second quarter of 2020.

2020 Second Quarter Results Conference Call Details

Management will discuss the 2020 second quarter financial results during a conference call today at 9:00 a.m. EDT. The call can be accessed by dialing 1-888-231-8191 (international dial-in 1-647-427-7450). The conference call, including the investor presentation, will be broadcast live on the Cascades website (www.cascades.com under the "Investors" section). A replay of the call will be available on the Cascades website and may also be accessed by phone until September 6, 2020 by dialing 1-855-859-2056 (international dial-in 1-416-849-0833), access code 5819259.

Founded in 1964, Cascades offers sustainable, innovative and value-added packaging, hygiene and recovery solutions. The company employs 12,000 women and men across a network of 90 facilities in North America and Europe. Driven by its participative management, half a century of experience in recycling, and continuous research and development efforts, Cascades continues to provide innovative products that customers have come to rely on, while contributing to the well-being of people, communities and the entire planet. Cascades' shares trade on the Toronto Stock Exchange under the ticker symbol CAS. Certain statements in this release, including statements regarding future results and performance, are forward-looking statements (as such term is defined under the Private Securities Litigation Reform Act of 1995) based on current expectations. The accuracy of such statements is subject to a number of risks, uncertainties and assumptions that may cause actual results to differ materially from those projected, including, but not limited to, the effect of general economic conditions, decreases in demand for the Corporation's products, increases in raw material costs, fluctuations in selling prices and adverse changes in general market and industry conditions and other factors listed in the Corporation's Securities and Exchange Commission filings.

CONSOLIDATED BALANCE SHEETS

(in millions of Canadian dollars) (unaudited)

June 30,
2020


December 31,
2019

Assets



Current assets



Cash and cash equivalents

162


155

Accounts receivable

677


606

Current income tax assets

22


32

Inventories

657


598

Current portion of financial assets

7


10


1,525


1,401

Long-term assets



Investments in associates and joint ventures

88


80

Property, plant and equipment

2,806


2,770

Intangible assets with finite useful life

171


182

Financial assets

24


16

Other assets

51


55

Deferred income tax assets

163


153

Goodwill and other intangible assets with indefinite useful life

539


527


5,367


5,184

Liabilities and Equity



Current liabilities



Bank loans and advances

9


11

Trade and other payables

837


788

Current income tax liabilities

19


17

Current portion of other debt without recourse to the Corporation to be refinanced

165


Current portion of long-term debt

90


85

Current portion of provisions for contingencies and charges

5


5

Current portion of financial liabilities and other liabilities

26


137


1,151


1,043

Long-term liabilities



Long-term debt

1,975


2,022

Provisions for contingencies and charges

54


49

Financial liabilities

8


5

Other liabilities

209


198

Deferred income tax liabilities

212


198


3,609


3,515

Equity



Capital stock

498


491

Contributed surplus

13


15

Retained earnings

1,050


1,003

Accumulated other comprehensive loss

(2)


(17)

Equity attributable to Shareholders

1,559


1,492

Non-controlling interests

199


177

Total equity

1,758


1,669


5,367


5,184

 

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)

2020

2019

2020

2019

Sales

1,285

1,275

2,598

2,505

Cost of sales and expenses





Cost of sales (including depreciation and amortization of $75 million
for 3-month period (2019 — $72 million) and $146 million 
for 6-month period (2019 — $139 million))

1,065

1,081

2,157

2,139

Selling and administrative expenses

110

111

241

215

Loss (gain) on acquisitions, disposals and others

1

3

2

(7)

Impairment charges and restructuring costs

15

1

15

10

Foreign exchange gain

(1)

(1)

(1)

(1)

Loss (gain) on derivative financial instruments

1

(2)

(5)


1,191

1,193

2,414

2,351

Operating income

94

82

184

154

Financing expense

27

25

54

50

Interest expense on employee future benefits and other liabilities

1

10

2

24

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

(9)

(1)

8

(7)

Share of results of associates and joint ventures

(3)

(2)

(6)

(4)

Earnings before income taxes

78

50

126

91

Provision for income taxes

12

10

27

18

Net earnings from continuing operations including non-controlling interests for
the period

66

40

99

73

Net earnings attributable to non-controlling interests

12

9

23

18

Net earnings attributable to Shareholders for the period

54

31

76

55

Net earnings per common share





Basic

$

0.57

$

0.33

$

0.81

$

0.59

Diluted

$

0.57

$

0.32

$

0.80

$

0.58

Weighted average basic number of common shares outstanding

94,459,257

93,636,771

94,354,030

93,900,400

Weighted average number of diluted common shares

95,600,602

95,058,479

95,562,296

95,395,585


 

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)

2020

2019

2020

2019

Net earnings including non-controlling interests for the period

66

40

99

73

Other comprehensive income (loss)





Items that may be reclassified subsequently to earnings





Translation adjustments





Change in foreign currency translation of foreign subsidiaries

(45)

(21)

57

(58)

Change in foreign currency translation related to net investment hedging activities

25

14

(34)

35

Cash flow hedges





Change in fair value of foreign exchange forward contracts

1

Change in fair value of interest rate swaps

1

(1)

(1)

Change in fair value of commodity derivative financial instruments

(1)

(2)


(19)

(9)

23

(25)

Items that are not released to earnings





Actuarial loss on employee future benefits

(25)

(10)

(15)

(15)

Recovery of income taxes

7

1

4

3


(18)

(9)

(11)

(12)

Other comprehensive income (loss)

(37)

(18)

12

(37)

Comprehensive income including non-controlling interests for the period

29

22

111

36

Comprehensive income attributable to non-controlling interests for the period

8

7

31

9

Comprehensive income attributable to Shareholders for the period

21

15

80

27

 

CONSOLIDATED STATEMENTS OF EQUITY


For the 6-month period ended June 30, 2020

(in millions of Canadian dollars)
  (unaudited)

CAPITAL
STOCK

CONTRIBUTED
SURPLUS

RETAINED
EARNINGS

ACCUMULATED
OTHER
COMPREHENSIVE
LOSS

TOTAL EQUITY
ATTRIBUTABLE TO
SHAREHOLDERS

NON-
CONTROLLING
INTERESTS

TOTAL
EQUITY

Balance - End of previous
period, as reported

491

15

1,000

(17)

1,489

177

1,666

Business combinations

3

3

3

Adjusted balance - Beginning
of period

491

15

1,003

(17)

1,492

177

1,669

Comprehensive income








Net earnings

76

76

23

99

Other comprehensive
income (loss)

(11)

15

4

8

12


65

15

80

31

111

Dividends

(15)

(15)

(9)

(24)

Issuance of common shares
upon exercise of stock options

9

(2)

7

7

Redemption of common shares

(2)

(3)

(5)

(5)

Balance - End of period

498

13

1,050

(2)

1,559

199

1,758





For the 6-month period ended June 30, 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

Adjusted balance - Beginning
of period

490

16

989

2

1,497

180

1,677

Comprehensive income (loss)








Net earnings

55

55

18

73

Other comprehensive loss

(12)

(16)

(28)

(9)

(37)


43

(16)

27

9

36

Dividends

(7)

(7)

(10)

(17)

Redemption of shares

(3)

(2)

(5)

(5)

Balance - End of period

487

16

1,023

(14)

1,512

179

1,691

 

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)

2020

2019

2020

2019

Operating activities





Net earnings attributable to Shareholders for the period

54

31

76

55

Adjustments for:





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

28

35

56

74

Depreciation and amortization

75

72

146

139

Loss (gain) on acquisitions, disposals and others

1

3

2

(6)

Impairment charges and restructuring costs

15

15

5

Unrealized loss (gain) on derivative financial instruments

1

(2)

(5)

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

(9)

(1)

8

(7)

Provision for income taxes

12

10

27

18

Share of results of associates and joint ventures

(3)

(2)

(6)

(4)

Net earnings attributable to non-controlling interests

12

9

23

18

Net financing expense paid

(7)

(16)

(24)

(59)

Net income taxes received (paid)

(7)

(2)

2

(2)

Dividends received

5

2

5

2

Employee future benefits and others

(15)

(15)

(15)

(22)


162

124

315

206

Changes in non-cash working capital components

(34)

(36)

(68)

(66)


128

88

247

140

Investing activities





Investments in associates and joint ventures

(1)

1

(1)

1

Payments for property, plant and equipment

(39)

(53)

(113)

(119)

Proceeds from disposals of property, plant and equipment

1

1

2

2

Change in intangible and other assets

(3)

(1)

(5)

(2)

Cash paid for business combinations

(14)

(14)


(42)

(66)

(117)

(132)

Financing activities





Bank loans and advances

(2)

(2)

Change in credit facilities

(40)

1

57

65

Increase in other long-term debt

7

7

Payments of other long-term debt

(22)

(38)

(42)

(79)

Settlement of derivative financial instruments

1

1

Issuance of common shares upon exercise of stock options

4

7

Redemption of common shares

(5)

(5)

Payment of other liabilities

(121)

Dividends paid to non-controlling interests

(6)

(6)

(9)

(10)

Dividends paid to the Corporation's Shareholders

(8)

(3)

(15)

(7)


(71)

(41)

(129)

(29)

Change in cash and cash equivalents during the period

15

(19)

1

(21)

Currency translation on cash and cash equivalents

(6)

6

(4)

Cash and cash equivalents - Beginning of period

153

117

155

123

Cash and cash equivalents - End of period

162

98

162

98

 

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, 2019.

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)

2020

2019

2020

2019

Packaging Products





Containerboard

454

462

912

903

Boxboard Europe

265

270

537

549

Specialty Products

120

135

233

264

Intersegment sales

(5)

(3)

(8)

(7)


834

864

1,674

1,709

Tissue Papers

424

377

870

725

Intersegment sales and Corporate Activities

27

34

54

71


1,285

1,275

2,598

2,505

 


OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION


For the 3-month periods ended
June 30,

For the 6-month periods ended
June 30,

(in millions of Canadian dollars) (unaudited)

2020

2019

2020

2019

Packaging Products





Containerboard

83

114

185

225

Boxboard Europe

42

30

73

59

Specialty Products

16

16

27

29


141

160

285

313

Tissue Papers

48

17

93

21

Corporate Activities

(20)

(23)

(48)

(41)

Operating income before depreciation and amortization

169

154

330

293

Depreciation and amortization

(75)

(72)

(146)

(139)

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

(28)

(35)

(56)

(74)

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

9

1

(8)

7

Share of results of associates and joint ventures

3

2

6

4

Earnings before income taxes

78

50

126

91

 


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)

2020

2019

2020

2019

Packaging Products





Containerboard

15

14

31

36

Boxboard Europe

4

17

9

28

Specialty Products

4

4

9

7


23

35

49

71

Tissue Papers

15

18

39

47

Corporate Activities

5

10

11

21

Total acquisitions

43

63

99

139

Proceeds from disposals of property, plant and equipment

(1)

(1)

(2)

(2)

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

(4)

(18)

(13)

(33)


38

44

84

104

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





Beginning of period

19

32

46

37

End of period

(19)

(24)

(19)

(24)

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

38

52

111

117

 

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:


Q2 2020

(in millions of Canadian dollars) (unaudited)

Containerboard

Boxboard
Europe

Specialty
Products

Tissue Papers

Corporate
Activities

Consolidated

Operating income (loss)

54

30

11

31

(32)

94

Depreciation and amortization

29

12

5

17

12

75

Operating income (loss) before depreciation and
amortization

83

42

16

48

(20)

169

Specific items:







Loss on acquisitions, disposals and others

1

1

Impairment charges

8

5

13

Restructuring costs

1

1

2

Unrealized loss (gain) on financial instruments

2

1

(2)

1


11

1

1

6

(2)

17

Adjusted operating income (loss) before depreciation and
amortization

94

43

17

54

(22)

186

Adjusted operating income (loss)

65

31

12

37

(34)

111

 


Q1 2020

(in millions of Canadian dollars) (unaudited)

Containerboard

Boxboard
Europe

Specialty
Products

Tissue
Papers

Corporate
Activities

Consolidated

Operating income (loss)

74

20

8

28

(40)

90

Depreciation and amortization

28

11

3

17

12

71

Operating income (loss) before depreciation and
amortization

102

31

11

45

(28)

161

Specific items :







Loss on acquisitions, disposals and others

1

1

Unrealized loss (gain) on derivative financial instruments

(3)

(1)

3

(1)


(3)

(1)

1

3

Adjusted operating income (loss) before depreciation and
amortization

99

30

12

45

(25)

161

Adjusted operating income (loss)

71

19

9

28

(37)

90

 


Q2 2019

(in millions of Canadian dollars) (unaudited)

Containerboard

Boxboard
Europe

Specialty
Products

Tissue
Papers

Corporate
Activities

Consolidated

Operating income (loss)

84

19

12

1

(34)

82

Depreciation and amortization

30

11

4

16

11

72

Operating income (loss) before depreciation and
amortization

114

30

16

17

(23)

154

Specific items:







Loss on acquisitions, disposals and others

3

3

Restructuring costs

1

1

Unrealized gain on financial instruments

(1)

(1)

(2)


(1)

1

2

2

Adjusted operating income (loss) before depreciation and
amortization

113

30

16

18

(21)

156

Adjusted operating income (loss)

83

19

12

2

(32)

84

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 2020

Q1 2020

Q2 2019





Net earnings attributable to Shareholders for the period

54

22

31

Net earnings attributable to non-controlling interests

12

11

9

Provision for income taxes

12

15

10

Share of results of associates and joint ventures

(3)

(3)

(2)

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

(9)

17

(1)

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

28

28

35

Operating income

94

90

82

Specific items:




Loss on acquisitions, disposals and others

1

1

3

Impairment charges

13

Restructuring costs

2

1

Unrealized loss (gain) on derivative financial instruments

1

(1)

(2)


17

2

Adjusted operating income

111

90

84

Depreciation and amortization

75

71

72

Adjusted operating income before depreciation and amortization

186

161

156

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





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

NET EARNINGS


NET EARNINGS PER SHARE 1


Q2 2020

Q1 2020

Q2 2019


Q2 2020

Q1 2020

Q2 2019









As per IFRS

54

22

31


$

0.57

$

0.24

$

0.33

Specific items:








Loss (gain) on acquisitions, disposals and others

1

1

3


$

0.01

$

0.03

Impairment charges

13


$

0.10

Restructuring costs

2

1


$

0.02

$

0.01

Unrealized loss (gain) on derivative financial instruments

1

(1)

(2)


$

0.01

$

(0.01)

$

(0.02)

Unrealized gain on interest rate swaps and option fair value

(6)


$

(0.06)

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

(9)

17

(1)


$

(0.09)

$

0.18

$

(0.01)

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

(4)



4

17

(5)


$

0.04

$

0.18

$

(0.05)

Adjusted

58

39

26


$

0.61

$

0.42

$

0.28

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)

Q2 2020

Q1 2020

Q2 2019

Cash flow from operating activities

128

119

88

Changes in non-cash working capital components

34

34

36

Depreciation and amortization

(75)

(71)

(72)

Net income taxes paid (received)

7

(9)

2

Net financing expense paid

7

17

16

Loss on acquisitions, disposals and others

(1)

(1)

(3)

Impairment charges and restructuring costs

(15)

Unrealized gain (loss) on derivative financial instruments

(1)

1

2

Dividend received, employee future benefits and others

10

13

Operating income

94

90

82

Depreciation and amortization

75

71

72

Operating income before depreciation and amortization

169

161

154

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)

Q2 2020

Q1 2020

Q2 2019

Cash flow from operating activities

128

119

88

Changes in non-cash working capital components

34

34

36

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

162

153

124

Specific items, net of current income taxes if applicable

1

Adjusted cash flow from operating activities

162

153

125

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

(51)

(84)

(64)

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

(14)

(10)

(9)

Adjusted free cash flow

97

59

52

Adjusted free cash flow per share

$

1.02

$

0.63

$

0.56

Weighted average basic number of shares outstanding

94,459,257

94,248,804

93,636,771

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, 2020

March 31, 2020

June 30, 2020

Long-term debt

1,975

2,264

1,866

Current portion of long-term debt

255

92

77

Bank loans and advances

9

9

16

Total debt

2,239

2,365

1,959

Less: Cash and cash equivalents

162

153

98

Net debt

2,077

2,212

1,861

Adjusted OIBD (last twelve months)

660

630

541

Net debt / Adjusted OIBD ratio

3.1x

3.5x

3.4x

 

Cision View original content:http://www.prnewswire.com/news-releases/cascades-reports-strong-results-for-the-second-quarter-of-2020-301107055.html

SOURCE Cascades Inc.

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