KINGSEY FALLS, QC, May 13 /PRNewswire-FirstCall/ - Cascades Inc. (CAS on the Toronto stock exchange), a leader in recovery and the manufacturing of green packaging and tissue paper products, announces its financial results for the three months ended March 31, 2010.
(All amounts in this press release are in Canadian dollars unless otherwise indicated.)
First quarter highlights
------------------------
- Strong rebound in shipments, up 12% compared to the first quarter of
2009 (excluding the impact of the acquisition of the tissue assets of
Atlantic Packaging).
- As expected, short-term pressure on profitability in the first
quarter due to the sharp and significant rise of recycled fibre and
pulp costs.
- Net earnings of $0.00 per share compared to net earnings excluding
specific items of $0.22 per share and $0.38 per share including
specific items in the same period of last year.
- Operating income before depreciation and amortization (EBITDA)
excluding specific items of $78 million compared to $107 million in
Q1 2009.
- Cash flow from operations of $41 million compared to $70 million in
the first quarter of last year.
- Net debt down almost $300 million compared to March 31, 2009,
including $25 million in the first three months of the year.
- Purchase of $US159 million of our senior notes maturing in 2013 year-
to-date in 2010; approximately $US18 million remain outstanding.
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Financial Summary
-----------------
Selected consolidated information
(in millions of Canadian dollars, ---------------------------
except amounts per share) Q1/2010 Q1/2009 Q4/2009
------------------------------------------- ---------------------------
Sales 942 970 952
Excluding specific items(1)
Operating income before depreciation and
amortization (OIBD or EBITDA) 78 107 110
Operating income 23 53 54
Net earnings attributable to shareholders
for the period - 21 26
per common share $ - $0.22 $0.27
Cash flow from operations (adjusted) 41 70 77
As reported
Operating income before depreciation and
amortization (OIBD or EBITDA)(1) 82 103 70
Operating income 27 49 14
Net earnings (loss) attributable to
shareholders for the period - 37 (41)
per common share $ - $0.38 $(0.42)
Cash flow from operations (adjusted)(1) 38 68 62
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Note 1 - see the supplemental information on non-GAAP measures note.
Commenting on the first quarter results, Mr. Alain Lemaire, President and Chief Executive Officer stated: "As anticipated, our results were pressured in the first quarter as the Canadian dollar continued to rally and the spread between our selling prices and our raw material costs tightened considerably.
However, we remain in good position as we continued to optimize our cost structure and we started to gradually implement selling price increases in most of our sectors. Also, the cost of certain grades of recycled fibre peaked in March, volumes and orders remained on their upward trend and we continued to proactively manage our cash flow. We should therefore progressively benefit from greatly improved business conditions in the second quarter."
Results analysis for the three-month period ended March 31, 2010
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In comparison with the same period last year, sales decreased by 3% to $942 million resulting from lower selling prices and the appreciation of the Canadian dollar partly offset by a 12% increase in shipments (excluding the impact of the acquisition of the tissue assets of Atlantic Packaging).
Net earnings excluding specific items amounted to $0 ($0.00 per share) in the first quarter of 2010 compared to $21 million ($0.22 per share) for the same period of last year. Including specific items, net earnings amounted to $0 ($0.00 per share) compared to $37 million ($0.38 per share) for the same quarter in 2009.
The operating income excluding specific items amounted to $23 million compared to $53 million in Q1 2009. Weaker energy and certain variable costs, the optimization of our cost structure as well as improved operating rates were more than offset by the negative effect of lower selling prices, higher raw material costs and the stronger Canadian dollar. When including specific items, operating income amounted to $27 million in comparison to $49 million in the same period of last year.
In the first quarter of 2010, these specific items impacted our operating income and/or net earnings (before tax):
- $4 million unrealized gain on financial instruments (impact on
operating income and net earnings);
- $3 million loss on long-term debt refinancing (impact on net
earnings);
- $1 million foreign exchange loss on long-term debt and financial
instruments (impact on net earnings).
See the two following tables for more details on GAAP and non-GAAP measures reconciliation.
Second quarter outlook
----------------------
Mr. Alain Lemaire, President and Chief Executive Officer added: "We expect a rebound in profitability mostly as a result of the significant momentum in pricing. Many of our operations will benefit from the selling price increases that were implemented during the first quarter and some recently announced additional hikes should be realized in the coming months. Also, the strong demand that we currently acknowledge in almost all our sectors as well as the usual seasonal pickup should continue to positively impact our operational efficiency and financial results.
On the cost front, energy prices are currently lower than in the first three months of the year. In addition, the publication price of old corrugated containers (OCC), the main grade of recycled fibres consumed by Cascades, is down since its peak in March. All in all, we remain confident for the coming months, especially for our packaging operations."
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 June 11, 2010 to shareholders of record at the close of business on May 28, 2010. This dividend paid by Cascades is an "eligible dividend" as per the Income Tax Act (Bill C-28, Canada). In addition, in the first quarter of 2010, in accordance with its normal course issuer bid program, Cascades purchased for cancellation 237,718 shares at an average price of $8.14 representing an aggregate amount of approximately $1.9 million.
Supplemental information on non-GAAP measures
Operating income before depreciation and amortization, earnings before interests, taxes, depreciation and amortization, operating income and cash flow from operations are not measures of performance under Canadian GAAP. The Company includes operating income before depreciation and amortization, earnings before interests, taxes, depreciation and amortization, operating income and cash flow from operations because they are measures used by management to assess the operating and financial performance of the Company's operating segments. Additionally, the Company 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 interests, taxes, depreciation and amortization, operating income and cash flow from operations 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 Canadian GAAP, 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 interests, taxes, depreciation and amortization, operating income and cash flow from operations may differ from those of other companies. Cash flow from operations is defined as cash flow from operating activities as determined in accordance with Canadian GAAP excluding the change in working capital components.
Operating income before depreciation and amortization excluding specific items, earnings before interests, taxes, depreciation and amortization excluding specific items, operating income excluding specific items, net earnings excluding specific items, net earnings per common share excluding specific items and cash flow from operations excluding specific items are non-GAAP measures. The Company believes that it is useful for investors to be aware of specific items that have adversely or positively affected its GAAP measures, and that the above mentioned non-GAAP measures provide investors with a measure of performance with which to compare its results between periods without regard to these specific items. The Company's measures excluding specific items have no standardized meaning prescribed by GAAP and are not necessarily comparable to similar measures presented by other companies and therefore should not be considered in isolation.
Specific items are defined to include charges for impairment of assets, charges for facility or machine closures, debt restructuring charges, gains or losses on sale of business unit, unrealized gains or losses on derivative financial instruments that do not qualify for hedge accounting, foreign exchange gains or losses on long-term debt and other significant items of an unusual or non-recurring nature.
Net earnings (loss) attributable, which is a performance measure defined by Canadian GAAP is reconciled below to operating income (loss), operating income excluding specific items and operating income before depreciation excluding specific items or earnings before interests, taxes, depreciation and amortization excluding specific items:
---------------------------
(in millions of Canadian dollars) Q1/2010 Q1/2009 Q4/2009
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Net earnings (loss) attributable to
shareholders for the period - 37 (41)
Non-controlling interest - (1) -
Share of results of significantly influenced
companies (2) (5) (7)
Provision for (recovery of) income taxes (3) 5 (16)
Foreign exchange loss on long-term debt and
financial instruments 1 - 37
Gain on purchase of senior notes - (14) -
Loss on long-term debt refinancing 3 - 17
Financing expense 28 27 24
---------------------------
Operating income 27 49 14
Specific items :
Impairment loss - 3 42
Closure and restructuring costs - 2 2
Unrealized gain on financial instruments (4) (1) (4)
---------------------------
(4) 4 40
---------------------------
Operating income - excluding specific items 23 53 54
Depreciation and amortization 55 54 56
---------------------------
Operating income before depreciation and
amortization (OIBD or EBITDA) - excluding
specific items 78 107 110
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The following table reconciles net earnings (loss) attributable to shareholders for the period and net earnings (loss) per share attributable to shareholders for the period to net earnings (loss) attributable to shareholders for the period excluding specific items and net earnings (loss) per share attributable to shareholders for the period excluding specific items:
-------------------------- --------------------------
(in millions of Net earnings (loss) Net earnings (loss)
Canadian dollars, attributable to per share attributable
except amounts shareholders to shareholders
per share) for the period for the period(1)
--------------------------------------------- --------------------------
Q1/2010 Q1/2009 Q4/2009 Q1/2010 Q1/2009 Q4/2009
-------------------------- --------------------------
As per GAAP - 37 (41) $ - $0.38 $(0.42)
Specific items :
Impairment loss - 3 42 $ - $0.02 $0.32
Closure and
restructuring
costs - 2 2 $ - $0.02 $0.02
Unrealized gain
financial
instruments (4) (1) (4) $(0.03) $(0.01) $(0.03)
Loss on long-term
debt refinancing 3 - 17 $0.02 $ - $0.11
Gain on purchase
of senior notes - (14) - $ - $(0.13) $ -
Foreign exchange
loss on long-term
debt and financial
instruments 1 - 37 $0.01 $ - $0.32
Share of results of
significantly
influenced
companies - (2) (3) $ - $(0.02) $(0.03)
Adjustment of
statutory tax rate - (4) (2) $ - $(0.04) $(0.02)
Tax effect on
specific items - - (22)
-------------------------- --------------------------
- (16) 67 $ - $(0.16) $0.69
-------------------------- --------------------------
Excluding specific
items - 21 26 $ - $0.22 $0.27
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Note 1 - specific amounts per share are calculated on an after-tax basis.
The following table reconciles cash flow provided by operating activities to cash flow (adjusted) from operations excluding specific items:
---------------------------
Cash flow from operations
(in millions of Canadian dollars, ---------------------------
except amounts per share) Q1/2010 Q1/2009 Q4/2009
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Cash flow provided by operating activities 33 67 91
Changes in non-cash working capital components 5 1 (29)
---------------------------
Cash flow (adjusted) from operations 38 68 62
Specific items :
Loss on long-term debt refinancing 3 - 13
Closure and restructuring costs, net of
current income tax - 2 2
---------------------------
Excluding specific items 41 70 77
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Founded in 1964, Cascades produces, converts and markets packaging and tissue products that are composed mainly of recycled fibres. The Company employs close to 12,500 employees, who work in more than 100 units located in North America and Europe. Its management philosophy, its more than 45 years of experience in recycling and its continued efforts in research and development are strengths that enable Cascades to create new products for its customers. 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 Company'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 Company's Securities and Exchange Commission filings.
Consolidated Balance Sheets
(in millions of Canadian dollars)
As at As at
March 31, December 31,
2010 2009
---------------------------
Assets (unaudited)
Current assets
Cash and cash equivalents 23 19
Accounts receivable 566 543
Inventories 525 520
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1,114 1,082
Property, plant and equipment 1,859 1,912
Intangible assets 158 165
Other assets 318 317
Goodwill 315 316
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3,764 3,792
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---------------------------
Liabilities and Equity
Current liabilities
Bank loans and advances 78 83
Accounts payable and accrued liabilities 539 505
Current portion of long-term debt 10 10
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627 598
Long-term debt 1,443 1,459
Other liabilities 402 410
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2,472 2,467
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Commitments and Contingencies
Equity attributable to the Shareholders
Capital stock 498 499
Contributed surplus 13 14
Retained earnings 696 700
Accumulated other comprehensive income 64 91
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1,271 1,304
Non-controlling interest 21 21
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Total equity 1,292 1,325
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3,764 3,792
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Consolidated Statements of Earnings (Loss)
(in millions of Canadian dollars, except per share amounts)
(unaudited)
For the 3-month periods
ended March 31,
2010 2009
---------------------------
Sales 942 970
Cost of sales and expenses
Cost of sales (excluding depreciation and
amortization) 766 752
Depreciation and amortization 55 54
Selling and administrative expenses 98 108
Impairment and other restructuring costs - 5
Loss (gain) on financial instruments (4) 2
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915 921
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Operating income 27 49
Financing expense 28 27
Loss on refinancing of long term debt 3 -
Gain on purchases of senior notes - (14)
Foreign exchange loss on long-term debt and
financial instruments 1 -
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(5) 36
Provision for (recovery of) income taxes (3) 5
Share of results of significantly influenced
companies (2) (5)
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Net earnings including non-controlling
interest for the period - 36
Non-controlling interest - (1)
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Net earnings attributable to Shareholders
for the period - 37
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Basic and diluted net earnings per common
share $- $0.38
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---------------------------
Weighted average basic number of Cascades'
common shares outstanding 97,086,643 98,458,747
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Consolidated Statements of Comprehensive Income (Loss)
(in millions of Canadian dollars)
(unaudited)
For the 3-month periods
ended March 31,
2010 2009
---------------------------
Net earnings including non-controlling
interest for the period - 36
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Other comprehensive income (loss)
Translation adjustments
Change in foreign currency translation of
self-sustaining foreign subsidiaries (35) 17
Change in foreign currency translation
related to hedging activities 16 (14)
Income taxes (2) 2
Cash flow hedges
Change in fair value of foreign exchange
forward contracts 4 1
Change in fair value of interest rate
swap agreements (2) -
Change in fair value of commodity
derivative financial instruments (12) (3)
Income taxes 4 -
---------------------------
(27) 3
---------------------------
Comprehensive income (loss) including
non-controlling interest for the period (27) 39
---------------------------
Less: Comprehensive income attribuable
to non-controlling interest: - (1)
---------------------------
Comprehensive income (loss) attributable
to Shareholders (27) 40
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Consolidated Statements of Equity
(in millions of Canadian dollars)
(unaudited)
For the 3-month period ended March 31,
2010
-----------------------------------------------------------
Accu- Total
mulated equity
other attribu-
Contri- Re- compre- table Non-
buted tained hensive to the control-
Capital sur- ear- income Share- ling Total
stock plus nings (loss) holders interest equity
-----------------------------------------------------------
Balance -
Beginning of
period 499 14 700 91 1,304 21 1,325
Comprehensive
income (loss):
Net earnings
for the
period - - - - - - -
Change in
other
comprehensive
income (loss) - - - (27) (27) - (27)
--------------------------
Comprehensive
income (loss)
for the period (27) - (27)
--------------------------
Dividends - - (4) - (4) - (4)
Redemption of
common shares (1) (1) - - (2) - (2)
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Balance - End
of period 498 13 696 64 1,271 21 1,292
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For the 3-month period ended March 31,
2009
-----------------------------------------------------------
Total
Accu- equity
mulated attribu-
Contri Re- other table Non-
buted tained compre- to the control-
Capital sur- ear- hensive Share- ling Total
stock plus nings income holders interest equity
-----------------------------------------------------------
Balance -
Beginning of
period 506 9 656 85 1,256 22 1,278
Comprehensive
income:
Net earnings
for the
period - - 37 - 37 (1) 36
Change in
other
comprehensive
income - - - 3 3 - 3
--------------------------
Comprehensive
income for
the period 40 (1) 39
--------------------------
Dividends - - (4) - (4) - (4)
Redemption of
common shares (5) 3 - - (2) - (2)
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Balance - End
of period 501 12 689 88 1,290 21 1,311
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Consolidated Statements of Cash Flows
(in millions of Canadian dollars)
(unaudited)
For the 3-month periods
ended March 31,
2010 2009
---------------------------
OPERATING ACTIVITIES FROM CONTINUING OPERATIONS
Net earnings attributable to Shareholders
for the period - 37
Adjustments for
Depreciation and amortization 55 54
Impairment and other restructuring costs - 3
Unrealized gain on financial instruments (4) (1)
Gain on purchases of senior notes - (14)
Foreign exchange loss on long-term debt
and financial instruments 1 -
Future income taxes (10) (3)
Share of results of significantly
influenced companies (2) (5)
Non-controlling interest - (1)
Others (2) (2)
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38 68
Change in non-cash working capital components (5) (1)
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33 67
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INVESTING ACTIVITIES FROM CONTINUING OPERATIONS
Purchases of property, plant and equipment (34) (40)
Increase in other assets (2) (3)
Business acquisitions (3) -
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(39) (43)
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FINANCING ACTIVITIES FROM CONTINUING OPERATIONS
Bank loans and advances (2) (32)
Change in revolving credit facilities 185 12
Purchases of senior notes (161) (14)
Increase in other long-term debt 1 22
Payments of other long-term debt (5) (1)
Redemption of common shares (2) (2)
Dividends (4) (4)
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12 (19)
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Change in cash and cash equivalents during
the period from continuing operations 6 5
Change in cash and cash equivalents from
discontinued operations (2) (3)
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Net change in cash and cash equivalents
during the period 4 2
Translation adjustments on cash and cash
equivalents - -
Cash and cash equivalents - Beginning of period 19 11
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Cash and cash equivalents - End of period 23 13
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Selected Segmented Information
(in millions of Canadian dollars)
(unaudited)
For the 3-month periods
ended March 31,
2010 2009
---------------------------
Sales
Packaging products
Boxboard
Manufacturing 177 180
Converting 153 181
Intersegment sales (20) (25)
---------------------------
310 336
Containerboard
Manufacturing 134 131
Converting 194 209
Intersegment sales (73) (77)
---------------------------
255 263
Specialty products
Manufacturing 83 86
Converting 59 61
Recovery and deinked pulp 92 59
Intersegment sales (19) (20)
---------------------------
215 186
Intersegment sales (29) (13)
---------------------------
751 772
Tissue papers
Manufacturing and converting 198 211
Intersegment sales and other (7) (13)
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Total 942 970
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For the 3-month periods
ended March 31,
2010 2009
---------------------------
Operating income (loss) before depreciation
and amortization
Packaging products
Boxboard
Manufacturing 9 12
Converting 15 12
Others (1) (2)
---------------------------
23 22
Containerboard
Manufacturing 10 35
Converting 21 7
Others - (7)
---------------------------
31 35
Specialty products
Manufacturing 6 9
Converting 6 5
Recovery and deinked pulp 6 -
Others - (1)
---------------------------
18 13
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72 70
Tissue papers
Manufacturing and converting 19 39
Corporate (9) (6)
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Operating income before depreciation and
amortization 82 103
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Depreciation and amortization
Boxboard (14) (19)
Containerboard (19) (16)
Specialty products (8) (8)
Tissue papers (11) (9)
Corporate and eliminations (3) (2)
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(55) (54)
---------------------------
Operating income 27 49
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For the 3-month periods
ended March 31,
2010 2009
---------------------------
Purchases of property, plant and equipment
Packaging products
Boxboard
Manufacturing 4 6
Converting 3 7
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7 13
Containerboard
Manufacturing 4 3
Converting 5 2
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9 5
Specialty products
Manufacturing 1 1
Converting 1 1
Recovery and deinked pulp 1 8
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3 10
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19 28
Tissue papers
Manufacturing and converting 8 7
Corporate 3 1
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Total purchases 30 36
Disposal of property, plant and equipment (2) (1)
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28 35
Purchases of property, plant and equipment
included in accounts payable
Beginning of period 13 14
End of period (7) (9)
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Total investing activities 34 40
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SOURCE CASCADES INC.
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