KINGSEY FALLS, QC, Aug. 5, 2016 /PRNewswire/ - Cascades Inc. (TSX: CAS), a leader in the recovery and manufacturing of green packaging and tissue paper products, is pleased to announce its unaudited financial results for the three-month period ended June 30, 2016.

Q2 2016 Highlights

• Sales of $998 million
  (compared to $1,003 million in Q1 2016 (0%) and $950 million in Q2 2015 (+5%))
• Excluding specific items
  • OIBD of $112 million
    (compared to $106 million in Q1 2016 (+6%) and $103 million in Q2 2015 (+9%))
  • Net earnings per common share of $0.38
    (compared to $0.35 in Q1 2016 and $0.25 in Q2 2015)
  • Greenpac contribution to net earnings per common share: $0.03
    (compared to $0.04 in Q1 2016 and $0.03 in Q2 2015)
• Including specific items
  • OIBD of $112 million
    (compared to $120 million in Q1 2016 (-7%) and $105 million in Q2 2015 (+7%))
  • Net earnings per common share of $0.38
    (compared to $0.79 in Q1 2016 and $0.25 in Q2 2015)
• Net debt of $1,664 million as at June 30, 2016 (compared to $1,684 million as at March 31, 2016) and net debt to OIBD ratio down from 3.8x to 3.6x

Mr. Mario Plourde, President and Chief Executive Officer, commented on the second quarter results: "We are pleased with the overall performance of our operations during the second quarter. Results in North America were in line with expectations, and highlight how our strategic investment in new equipment over the last few years is translating into improved efficiency, and a greater operational capacity to adapt to changing market dynamics.

We made important headway this quarter, and completed several relevant transactions. The first was in our Containerboard Packaging Group, which acquired a corrugated packaging plant in Connecticut. The move strengthens our position in the Northeastern United States by increasing our converting capacity, while also providing us with the platform to execute our longer-term development strategy of upgrading our asset base and growing our presence in this area. Our Tissue Products Group also announced plans to build a new converting plant in Oregon that will house state-of-the-art converting lines, slated to begin operating at the end of the first quarter of next year. In addition to providing us with a new strategically positioned base to service the Western US market, this new facility will be fed by our nearby mill, providing secured off-take for this operation and increasing our overall integration rate in Tissue. 

As for our financial results, the 9% increase in OIBD compared to 2015, was largely driven by the strong performance of our Tissue Papers Group, which increased its OIBD by 70%. In addition, our Containerboard Packaging and Specialty Products Groups also had a strong performance and successfully increased their OIBD by 9% and 14%, respectively. Quarterly sales and OIBD levels in North America benefited from a 5% decrease in the value of the Canadian dollar against the US dollar. The results of our European division were slightly weaker for the quarter, largely due to the ongoing challenging market dynamics, as well as some scheduled downtime at our German mill. On a sequential basis, consolidated OIBD increased 6% as each of our business segments improved their contribution.

Finally, we continue to work on our debt reduction objective. Sequentially, the decrease in our debt was mainly the result of stronger cash flows from operations which were partially utilized to make seasonal investments in working capital and capital investments. Our net debt to OIBD ratio now stands at 3.6x, bringing us closer to our targeted range of 3.0x to 3.5x."

Analysis of results for the three-month period ended June 30, 2016 (compared to the same period last year)

Sales increased by 5% to $998 million compared to the same period last year, reflecting higher average selling prices combined with the positive financial impact of the lower Canadian dollar.

Operating income, excluding specific items, increased from $59 million in the second quarter of 2015 to $65 million in the second quarter of 2016. This improvement is attributable to the above-mentioned factors and favorable energy costs. Partially offsetting these benefits were higher corporate costs as well as production and maintenance costs, in addition to some production downtimes that were taken during the quarter, most notably at our recycled boxboard plant in Germany where we upgraded a section of the machine. When including specific items, operating income amounted to $65 million compared to $61 million for the same period last year.

In the second quarter of 2016, the main specific items, before income taxes, that impacted our operating income and/or net earnings were:

• a $5 million unrealized gain on derivative financial instruments (operating income and net earnings);
• a $9 million impairment and restructuring charge (operating income and net earnings);
• a $4 million gain on the sale of assets following the closure of the Auburn, Maine, plant (operating income and net earnings);
• a $6 million loss on share of results of associated and joint ventures on our portion of the Greenpac refinancing fees (net earnings);
• a $6 million foreign exchange gain on long-term debt and financial instruments (net earnings);
• a $2 million income tax expense related to assets sales in past years (net earnings).

Net earnings excluding specific items amounted to $35 million ($0.38 per share) in the second quarter of 2016 compared to $24 million ($0.25 per share) for the same period in 2015. Including specific items, net earnings amounted to $36 million ($0.38 per share) in the second quarter of 2016 compared to $24 million ($0.25 per share) in the same period in 2015.

Analysis of results for the three-month period ended June 30, 2016 (compared to the previous quarter)

On a sequential basis, sales remained relatively stable at $998 million, as higher shipments in all segments except Boxboard Europe were offset by the strengthening of the Canadian dollar and a decrease in our average selling prices, mainly in our tissue activities.

Operating income, excluding specific items, increased from $59 million in the first quarter of 2016 to $65 million in the second quarter of 2016. This improvement is attributable to a combination of the factors mentioned above and lower energy costs, which were slightly counterbalanced by higher depreciation expense and corporate costs.

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

Near-Term Outlook

Commenting on the near-term outlook for Cascades, Mr. Plourde added: "We are committed to delivering a solid operational performance through the end of 2016. Despite recent North American price decreases in Containerboard and the volatility in regards to fibre costs and the Canadian dollar, we expect that our Containerboard Packaging and Specialty products Groups will perform well through the third quarter, which is a seasonally strong period for these operations. In regards to our Tissue Group, we anticipate that sales and cost reduction initiatives will translate into a solid performance through the seasonally strong third quarter, followed by a cyclically softer fourth quarter. In Europe, we expect market conditions to remain soft, and order intake to continue to lag last year's levels, with additional market and exchange rate uncertainty following recent events in different parts of Europe. While the fourth quarter is a cyclically slower period, the increased generation of waste paper following the end of summer vacations should contribute to positive supply dynamics and our sourcing teams are focused on the strategic management of our input material in order to reduce delivered cost to our mills.                   

In the near-term, we do not expect our third quarter results to match the record performance we achieved during the third quarter of last year, but we will continue to carefully manage our financial situation in order to direct a significant portion of our free cash flow to debt reduction, which is normally the case in the second half of the year. Longer-term, we remain committed to improving the efficiency and competitiveness of our operations through strategic investments, and the successful execution of our strategic action plan. By doing so, we will continue to build on our capacity to adapt to market dynamics, reinforce our operational foundation, and deliver improved productivity and overall performance. "

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 2, 2016, to shareholders of record at the close of business on August 26, 2016. This dividend paid by Cascades is an "eligible dividend" as per the Income Tax Act (Bill C-28, Canada).

In the second quarter of 2016, Cascades purchased for cancellation 315,069 shares at an average price of $8.56 representing an aggregate amount of approximately $2.7 million.

Conference call information

Management will discuss the financial results for the second quarter of 2016 during a conference call to be held today at 10:00 a.m. EST.

The call can be accessed by dialing 1-888-231-8191. 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 September 5, 2016 by dialing 1-855-859-2056 and by using the access code 42826663.

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

Certain statements in this release, including statements regarding future results and performance, are forward-looking statements (as such term is defined under the Private Securities Litigation Reform Act of 1995) based on current expectations. The accuracy of such statements is subject to a number of risks, uncertainties and assumptions that may cause actual results to differ materially from those projected, including, but not limited to, the effect of general economic conditions, decreases in demand for the Corporation's products, increases in raw material costs, fluctuations in selling prices and adverse changes in general market and industry conditions and other factors listed in the Corporation's Securities and Exchange Commission filings.

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, 2015.

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 constitutes 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, restructuring gains or costs, loss on refinancing of long-term debt, deferred tax assets provisions or reversals, premiums paid on long-term debt refinancing, gains or losses on the acquisition or sale of a business unit, gains or losses on the share of results of associates and joint ventures, unrealized gains or losses on derivative financial instruments that do not qualify for hedge accounting, unrealized gains or losses on interest rate swaps, foreign exchange gains or losses on long-term debt, specific items of discontinued operations and other significant items of an unusual or non-recurring nature. Although we consider these items to be non-recurring and less relevant to evaluating our performance, some of them might take place in the future and will reduce the cash available to us.

The following table reconciles net earnings and net earnings per common share with net earnings excluding specific items and net earnings per share excluding specific items: