Cascades' OIBD exceeds $100 million during the second quarter of 2015

KINGSEY FALLS, QC, Aug. 7, 2015 /PRNewswire/ - Cascades Inc. (TSX: CAS), a leader in the recovery and manufacturing of green packaging and tissue paper products, announces its unaudited financial results for the three-month period ended June 30, 2015.

Q2 2015 Highlights

• Sales of $950 million(compared to $910 million in Q1 2015 (+4%) and $910 million in Q2 2014 (+4%))
• Excluding specific items
  • OIBD of $103 million(compared to $85 million in Q1 2015 (+21%) and $90 million in Q2 2014 (+14%))
  • Net earnings per share of $0.25(compared to $0.18 in Q1 2015 and $0.08 in Q2 2014)
  • Greenpac contribution to net earnings per share: $0.03(compared to $0.03 in Q1 2015 and a net loss of $0.01 in Q2 2014)
• Including specific items
  • OIBD of $105 million(compared to $72 million in Q1 2015 (+46%) and $80 million in Q2 2014 (+31%))
  • Net earnings per share of $0.25(compared to a net loss of $0.37 in Q1 2015 and a net loss of $0.88 in Q2 2014)
• Refinancing of our 2020 senior notes at favorable terms; net debt outstanding at $1,693 million (compared to $1,691 million as at March 31, 2015), including $86 million of non-recourse net debt.

Mr. Mario Plourde, President and Chief Executive Officer, had the following comments on the second quarter results: "These quarterly results represent our best performance for a second quarter since 2009, excluding discontinued operations. Despite a slight sequential strengthening of the Canadian dollar, all of our groups improved their performance, most notably our Tissue Papers and Specialty Products groups experienced a 53% and 40% OIBD improvement respectively. Benefiting from strategic initiatives undertaken over the last few years, the Containerboard Group continued to improve and was the largest contributor to our results with $55 million of OIBD and an OIBD margin of 17%.

During the second quarter, we completed the debt refinancing initiated last year, significantly reducing borrowing costs. Moreover, with the extension of our revolving credit facility completed in July, our earliest debt maturity is now 2019 and we continue to have sufficient liquidity to pursue our current objectives. Our mid-term objectives to reduce leverage and improve financial flexibility continue to be a priority. With regard to earnings per share, the Greenpac mill continued to perform according to plan contributing $0.03 during the second quarter."

Financial Summary

Results Analysis for the Three-Month Period Ended June 30, 2015 (compared to the same period last year)

In comparison with the same period last year, sales increased by 4% to $950 million due to higher shipments, mainly in the Tissue Papers Group, and the positive impact of the weakening of the Canadian dollar against its U.S. counterpart. These factors more than offset lower average selling prices in the recovered paper segment of the Specialty Products Group, the unfavourable variation of the exchange rate with Europe and an unfavourable product mix in our Tissue Papers Group.

Operating income, excluding specific items, increased from $47 million in the second quarter of 2014 to $59 million in the second quarter of 2015. The above-mentioned factors explain most of the increase in operating income, while raw material costs were higher for our Tissue Papers and Boxboard Europe groups. Lower energy, freight and sub-contracting costs positively contributed to operating income.

When including specific items, operating income amounted to $61 million in comparison to $37 million for the same period of last year. In the second quarter of 2015, the following specific items, before income taxes, impacted our operating income and/or net earnings:

• a $6 million unrealized gain on derivative financial instruments (operating income and net earnings);
• a $1 million loss related to an impairment recorded on certain assets of our Boxboard Europe Group (operating income and net earnings);
• a $3 million loss related to restructuring costs (operating income and net earnings);
• a $19 million loss on refinancing on long-term debt (net earnings);
• a $1 million net gain related to discontinued operations (net earnings);
• a $13 million foreign exchange gain on long-term debt and financial instruments (net earnings).

Net earnings excluding specific items amounted to $24 million ($0.25 per share) in the second quarter of 2015 compared to $7 million ($0.08 per share) for the same period in 2014. Including specific items, net earnings amounted to $24 million ($0.25 per share) in the second quarter of 2015 compared to a net loss of $83 million ($0.88 per share) in the same period in 2014.

Results Analysis for the Three-Month Period Ended June 30, 2015 (compared to the previous quarter)

In comparison to the previous quarter, sales increased by 4% to reach $950 million due to higher shipments in North America and higher average selling prices in the Containerboard Group. These factors were partially offset by unfavourable exchange rates.

Operating income, excluding specific items, increased from $41 million in the first quarter of 2015 to $59 million in the second quarter of 2015. In addition to the above-mentioned factors, the Tissue Papers Group's operational costs were sequentially lower as the first quarter was impacted by downtime and start-ups. Lower energy costs for all our groups also contributed positively to results during the second quarter. These factors more than offset higher raw material costs.

For further details, see the tables on IFRS and non-IFRS measures reconciliation, included herewith.

Near-Term Outlook

In commenting on the outlook, Mr. Plourde added: "These results met our expectations for the second quarter and reflect the strategic initiatives undertaken over the last few years. In the near term, we expect to continue to benefit from positive market conditions, stable recycled fibre costs and the gradual improvement of our tissue paper activities. Finally, due to healthy demand, higher input costs and foreign exchange variations, price increases are being implemented for corrugated boxes in Canada and recycled boxboard in Europe and were announced for some categories of tissue products in North America. All these drivers position us favourably for the remainder of the year."

Dividend on Common Shares and Normal Course Issuer Bid

The Board of Directors of Cascades declared a quarterly dividend of $0.04 per share to be paid September 10, 2015, to shareholders of record at the close of business on August 28, 2015. This dividend paid by Cascades is an "eligible dividend" as per the Income Tax Act (Bill C-28, Canada).

In the second quarter of 2015, Cascades purchased for cancellation 40,700 shares at an average price of $6.79 representing an aggregate amount of approximately $0.3 million.

Conference Call Information

Management will comment on the 2015 second quarter financial results during a conference call to be held today at 10:00 a.m., EDT.

Financial analysts, investors, media and other interested individuals are invited to listen to the conference call by dialling 1-866-229-4144 and using the access code 9334723#. The conference call, including the investor presentation, will also be broadcast live on the Cascades corporate website (www.cascades.com, Investors tab on the Home page). The broadcast replay will be available on the Cascades corporate website and by phone until August 14, 2015, by dialling 1-888-843-7419 and using the access code 9334723#.

Founded in 1964, Cascades produces, converts and markets packaging and tissue products that are composed mainly of recycled fibres. The Corporation employs close to 11,000 employees, who work in more than 90 units located in North America and Europe. With its management philosophy, half a century of experience in recycling, and continuous efforts in research and development as driving forces, Cascades continues to serve its clients with innovative products. Cascades' shares trade on the Toronto Stock Exchange, under the ticker symbol CAS.

Certain statements in this release, including statements regarding future results and performance, are forward-looking statements 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.

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, 2014.

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 assessment of the Corporation's performance, and is therefore the CODM.

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

SUPPLEMENTAL INFORMATION ON NON-IFRS MEASURES

Operating income before depreciation and amortization, earnings before interest, income taxes, depreciation and amortization and operating income are not measures of performance under IFRS. The Corporation includes operating income before depreciation and amortization, earnings before interest, taxes, depreciation and amortization and operating income because they are measures used by management to assess the operating and financial performance of the Corporation's operating segments. Additionally, the Corporation believes that these items provide additional measures often used by investors to assess a company's operating performance and its ability to meet debt service requirements. However, operating income before depreciation and amortization, earnings before interest, taxes, depreciation and amortization and operating income do not represent, and should not be used as a substitute for, net earnings or cash flows from operating activities as determined in accordance with IFRS, and they are not necessarily an indication of whether cash flow will be sufficient to fund our cash requirements. In addition, our definition of operating income before depreciation and amortization, earnings before interest, taxes, depreciation and amortization and operating income may differ from those of other companies.

Operating income before depreciation and amortization excluding specific items, earnings before interest, income taxes, depreciation and amortization excluding specific items, operating income excluding specific items, net earnings excluding specific items and net earnings per common share excluding specific items are non-IFRS measures. The Corporation believes that it is useful for investors to be aware of specific items that have adversely or positively affected its IFRS measures, and that the above mentioned non-IFRS measures provide investors with a measure of performance with which to compare its results between periods without regard to these specific items. The Corporation's measures excluding specific items have no standardized meaning prescribed by IFRS and are not necessarily comparable to similar measures presented by other companies and therefore should not be considered in isolation.

The specific items excluded from OIBD, operating income, financing expense, net earnings and cash flow from operations mainly include charges for (reversals of) impairment of assets, charges for facility or machine closures, accelerated depreciation of assets due to restructuring measures, debt restructuring charges, gains or losses on the acquisition or sale of a business unit, discontinued operations, 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 other significant items of an unusual or non-recurring nature. Although we consider these items to be non-recurring and less relevant to evaluating our performance, some of them are ongoing and will reduce the cash available to us.

The following table reconciles net earnings (loss) and net earnings (loss) per share with net earnings excluding specific items and net earnings per share excluding specific items:

Net earnings (loss), which is a performance measure defined by IFRS, is reconciled below with operating income, operating income excluding specific items and operating income before depreciation excluding specific items or earnings before interest, income taxes, depreciation and amortization excluding specific items:

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SOURCE Cascades Inc.