Cascades Announces Strong Annual Net Earnings for 2017, and Releases Results for the Fourth Quarter of 2017
KINGSEY FALLS, QC, March 1, 2018 /PRNewswire/ - Cascades Inc. (TSX: CAS) reports its unaudited financial results for the three-month period and the fiscal year ended December 31, 2017.
Q4 2017 Highlights
- Sales of $1,082 million (compared to $1,103 million in Q3 2017 (-2%) and $979 million in Q4 2016 (+11%))
- As reported (including specific items)
- Operating income of $45 million (compared to $51 million in Q3 2017 (-12%) and $33 million in Q4 2016 (+36%))
- OIBD1 of $104 million (compared to $104 million in Q3 2017 and $83 million in Q4 2016 (+25%))
- Net earnings per common share of $0.60 (compared to net earnings of $0.35 in Q3 2017 and net earnings of $0.04 in Q4 2016)
- Adjusted2 (excluding specific items)
- Operating income of $46 million (compared to $53 million in Q3 2017 (-13%) and $32 million in Q4 2016 (+44%))
- OIBD of $105 million (compared to $106 million in Q3 2017 (-1%) and $82 million in Q4 2016 (+28%))
- Net earnings per common share of $0.14 (compared to net earnings of $0.20 in Q3 2017 and net earnings of $0.16 in Q4 2016)
- US 2017 tax reform reduces future tax liabilities by $57 million
2017 Annual Highlights
- Sales of $4,321 million (compared to $4,001 million in 2016 (+11%))
- As reported (including specific items)
- Operating income of $175 million (compared to $221 million in 2016 (-21%))
- OIBD of $390 million (compared to $413 million in 2016 (-6%))
- Net earnings per common share of $5.35 (compared to net earnings of $1.42 in 2016)
- Adjusted2 (excluding specific items)
- Operating income of $178 million (compared to $211 million in 2016 (-16%))
- OIBD of $393 million (compared to $403 million in 2016 (-2%))
- Net earnings per common share of $0.72 (compared to net earnings of $1.21 in 2016)
- Net debt of $1,522 million as at December 31, 2017 (compared to $1,532 million as at December 31, 2016) and net debt to adjusted OIBD ratio3 of 3.6x, down from 3.8x at year-end 2016.
1 |
OIBD = Operating income before depreciation and amortization. |
2 |
For further details, please refer to the "Supplemental Information on non-IFRS Measures" section. |
3 |
Pro-forma basis to include 2017 business combinations on a LTM basis. |
Mr. Mario Plourde, President and Chief Executive Officer, commented: "Our fourth quarter results reflect year-over-year improvements in shipments, sales, and operating income on a consolidated basis. This was driven by solid performances from our containerboard division and European subsidiary Reno de Medici, where more favourable pricing and mix outweighed the impact of higher average raw material costs. In the case of containerboard, results also benefited from the consolidation of the Greenpac Mill results beginning in the second quarter of 2017. The specialty products segment delivered results that were below prior year levels due to a lower contribution from recovery and recycling activities. Our tissue division continued to face challenging market conditions in the fourth quarter, which resulted in production downtime to manage inventory. These factors, combined with a less favourable sales price and product mix, higher raw material prices and costs related to the ramp up of the new Oregon converting facility, impacted sales and profitability levels in this segment.
Sequentially, consolidated fourth quarter results reflected a less pronounced seasonal contraction than in prior years. This was primarily driven by results in our containerboard division, which generated increases in sales and operating income compared to the previous quarter, reflecting lower raw material prices and healthy demand. European boxboard operations also performed well, highlighting stronger business conditions, while results in our specialty products division remained relatively stable. Finally, our tissue segment performance was negatively impacted by lower volumes related to both seasonal demand variations and difficult market conditions, and a less favourable sales price and product mix.
We continued to make progress on strategic initiatives in 2017. At the corporate level, our internal business process transformation and ERP system initiatives progressed well, with implementations now largely completed. In the containerboard group, we finalized the sale of the Maspeth, NY, converting facility in January 2018 for US$72 million, increased our ownership position in the Greenpac Mill to 66.1%, began the construction of a new state-of-the-art containerboard converting facility in New Jersey, and strengthened our position in Canada with the acquisition of three converting plants and purchase of an interest in Tencorr Holdings Corporation. The European boxboard segment also acquired the Italian boxboard processing company Pac Service S.p.A, by purchasing the 66.67% of shares that it did not already own. Finally, we continued to deliver on our commitment to lower our debt. To this end, our leverage ratio1 stood at 3.6x as of the end of 2017, down from 3.8x in 2016, and we successfully redeemed US$200 million of our US-denominated debt, which reduces our interest expense and exposure to currency fluctuations."
1 |
Pro-forma basis to include 2017 business combinations on a LTM basis. |
Financial Summary
Selected consolidated information |
||||||||||||||||||||
(in millions of Canadian dollars, except amounts per common share) (unaudited) |
2017 |
2016 |
Q4 2017 |
Q3 2017 |
Q4 2016 |
|||||||||||||||
Sales |
4,321 |
4,001 |
1,082 |
1,103 |
979 |
|||||||||||||||
As Reported |
||||||||||||||||||||
Operating income before depreciation and amortization (OIBD)1 |
390 |
413 |
104 |
104 |
83 |
|||||||||||||||
Operating income |
175 |
221 |
45 |
51 |
33 |
|||||||||||||||
Net earnings |
507 |
135 |
57 |
33 |
4 |
|||||||||||||||
per common share |
$ |
5.35 |
$ |
1.42 |
$ |
0.60 |
$ |
0.35 |
$ |
0.04 |
||||||||||
Adjusted1 |
||||||||||||||||||||
Operating income before depreciation and amortization (OIBD) |
393 |
403 |
105 |
106 |
82 |
|||||||||||||||
Operating income |
178 |
211 |
46 |
53 |
32 |
|||||||||||||||
Net earnings |
68 |
114 |
13 |
19 |
15 |
|||||||||||||||
per common share |
$ |
0.72 |
$ |
1.21 |
$ |
0.14 |
$ |
0.20 |
$ |
0.16 |
||||||||||
Margin (OIBD) |
9.1 |
% |
10.1 |
% |
9.7 |
% |
9.6 |
% |
8.4 |
% |
||||||||||
1 - Refer to the "Supplemental Information on Non-IFRS Measures" section. |
||||||||||||||||||||
Segmented Operating Income (loss) as reported |
||||||||||||||||||||
(in millions of Canadian dollars) (unaudited) |
2017 |
2016 |
Q4 2017 |
Q3 2017 |
Q4 2016 |
|||||||||||||||
Packaging Products |
||||||||||||||||||||
Containerboard |
164 |
158 |
51 |
50 |
28 |
|||||||||||||||
Boxboard Europe |
34 |
19 |
11 |
5 |
3 |
|||||||||||||||
Specialty Products |
46 |
51 |
9 |
10 |
14 |
|||||||||||||||
Tissue Papers |
28 |
75 |
(6) |
9 |
12 |
|||||||||||||||
Corporate Activities |
(97) |
(82) |
(20) |
(23) |
(24) |
|||||||||||||||
Operating income as reported |
175 |
221 |
45 |
51 |
33 |
|||||||||||||||
Segmented adjusted OIBD1 |
||||||||||||||||||||
(in millions of Canadian dollars) (unaudited) |
2017 |
2016 |
Q4 2017 |
Q3 2017 |
Q4 2016 |
|||||||||||||||
Packaging Products |
||||||||||||||||||||
Containerboard |
247 |
216 |
74 |
72 |
43 |
|||||||||||||||
Boxboard Europe |
68 |
53 |
19 |
14 |
11 |
|||||||||||||||
Specialty Products |
67 |
65 |
14 |
15 |
17 |
|||||||||||||||
Tissue Papers |
94 |
150 |
12 |
24 |
30 |
|||||||||||||||
Corporate Activities |
(83) |
(81) |
(14) |
(19) |
(19) |
|||||||||||||||
Adjusted OIBD |
393 |
403 |
105 |
106 |
82 |
|||||||||||||||
1 - Refer to the "Supplemental Information on Non-IFRS Measures" section. |
Analysis of results for the three-month period ended December 31, 2017 (compared to the same period last year)
Sales of $1,082 million increased by $103 million or 11% compared to the same period last year. This was driven by the consolidation of results from the Greenpac Mill beginning in the second quarter, improvements realized in pricing and sales mix in all of the Corporation's business segments with the exception of tissue, and improved volumes in the European boxboard and tissue segments. These benefits were partially offset by a less favourable sales and pricing mix in the tissue segment, and less advantageous foreign exchange rates.
Fourth quarter operating income stood at $45 million, a notable improvement from the $33 million generated last year. This increase is largely attributable to the consolidation of Greenpac and a more favourable pricing and sales mix in the containerboard segment. Partially offsetting these benefits were higher raw material costs in all business segments, and higher amortization and depreciation expense as a result of business combinations. On an adjusted basis, fourth quarter operating income stood at $46 million, versus $32 million in the prior year.
The main specific items, before income taxes, that impacted our fourth quarter 2017 operating income and/or net earnings were:
- $2 million reversal of impairment (operating income and net earnings).
- $1 million restructuring costs associated with the closure of a sales unit (operating income and net earnings).
- $2 million unrealized loss on financial instruments (operating income and net earnings).
- $4 million foreign exchange loss on long-term debt and financial instruments (net earnings).
- $14 million loss related to the early repurchase of long-term debt (net earnings).
- $59 million income tax gain resulting mainly from the U.S. tax reform announced at the end of 2017 (net earnings).
The Corporation generated net earnings of $57 million, or $0.60 per common share in the fourth quarter of 2017, versus net earnings of $4 million, or $0.04 per common share in the comparable period of 2016. On an adjusted basis, the Corporation generated net earnings of $13 million, or $0.14 per common share, during the last three months of 2017. This compares to net earnings of $15 million or $0.16 per common share in the same period of 2016. Please see the "Supplemental Information on Non-IFRS Measures" section for reconciliation of the amounts detailed above.
Near-Term and Strategic Outlook
Discussing the outlook for Cascades, Mr. Plourde commented: "We expect several external factors to support results in the near term. The first of these is the combined beneficial impact on our operational performance of the current lower average price for OCC, which accounts for a large portion of the raw materials we use across our operations, and the price increases in linerboard, medium and corrugated products announced for March 5, 2018 in our containerboard segment. The second is the recent corporate tax reform in the US, which will reduce our US corporate tax rate to approximately 25% for 2018, from 38% previously. In addition, underlying industry fundamentals remain positive for both the containerboard business in North America and boxboard operations in Europe. Our tissue division, however, continues to face difficult market conditions, new industry capacity additions, and a slower than anticipated ramp-up of the new Oregon converting facility. On this last point, we are pleased to report that our increased sales and marketing efforts on the West Coast are making inroads in this new end market, and we are confident that this facility will evolve into a solid contributor to our tissue division performance.
As we move forward, we will continue to focus on optimizing our new business platform, and harvesting the gains in productivity, efficiency and cost savings generated through our more customer-centric and efficient processes. On a broader scale, we will continue to advance our strategic plan to position Cascades for the long-term. To this end, in the coming year we intend to invest $250 to $300 million, which will include strategic projects focused on increasing integration, improving operational performance through investments in modern equipment, and optimizing our geographic footprint. Furthermore, we are planning additional investments in tissue over the next several years that will modernize the retail and away-from-home business platforms, and equip this segment with an asset base that is competitively positioned for long-term growth. Each and every investment decision will be made with the goal of delivering quality, innovative and competitive products to our customers within a framework focused on optimal capital allocation, long-term market leadership and return while remaining fully committed to our objective of reducing leverage."
Dividend on common shares and normal course issuer bid
The Board of Directors of Cascades declared a quarterly dividend of $0.04 per common share to be paid on March 28, 2018, to shareholders of record at the close of business on March 14, 2018. This dividend is an "eligible dividend" as per the Income Tax Act (R.C.S. (1985), Canada). Cascades did not purchase any common shares for cancellation during the fourth quarter of 2017.
2017 Fourth Quarter and Annual Financial Results Conference Call Details
Management will discuss the 2017 fourth quarter and annual financial results during a conference call today at 9:00 a.m. EST. 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 April 1, 2018 by dialing 1-855-859-2056, access code 1999496.
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 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 (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) |
December 31, |
December 31, |
|
Assets |
|||
Current assets |
|||
Cash and cash equivalents |
89 |
62 |
|
Accounts receivable |
563 |
524 |
|
Current income tax assets |
18 |
12 |
|
Inventories |
523 |
460 |
|
Current portion of financial assets |
9 |
3 |
|
Assets held for sale |
13 |
— |
|
1,215 |
1,061 |
||
Long-term assets |
|||
Investments in associates and joint ventures |
78 |
335 |
|
Property, plant and equipment |
2,104 |
1,635 |
|
Intangible assets with finite useful life |
212 |
171 |
|
Financial assets |
22 |
10 |
|
Other assets |
74 |
72 |
|
Deferred income tax assets |
149 |
179 |
|
Goodwill and other intangible assets with indefinite useful life |
528 |
350 |
|
4,382 |
3,813 |
||
Liabilities and Equity |
|||
Current liabilities |
|||
Bank loans and advances |
35 |
28 |
|
Trade and other payables |
638 |
661 |
|
Current income tax liabilities |
6 |
1 |
|
Current portion of long-term debt |
59 |
36 |
|
Current portion of provisions for contingencies and charges |
7 |
9 |
|
Current portion of financial liabilities and other liabilities |
101 |
27 |
|
846 |
762 |
||
Long-term liabilities |
|||
Long-term debt |
1,517 |
1,530 |
|
Provisions for contingencies and charges |
36 |
34 |
|
Financial liabilities |
18 |
16 |
|
Other liabilities |
178 |
178 |
|
Deferred income tax liabilities |
186 |
219 |
|
2,781 |
2,739 |
||
Equity attributable to Shareholders |
|||
Capital stock |
492 |
487 |
|
Contributed surplus |
16 |
16 |
|
Retained earnings |
982 |
512 |
|
Accumulated other comprehensive loss |
(35) |
(31) |
|
1,455 |
984 |
||
Non-controlling interests |
146 |
90 |
|
Total equity |
1,601 |
1,074 |
|
4,382 |
3,813 |
CONSOLIDATED STATEMENTS OF EARNINGS |
|||||||||||
For the 3-month periods ended |
For the years ended |
||||||||||
(in millions of Canadian dollars, except per common share amounts and number of common shares) (unaudited) |
2017 |
2016 |
2017 |
2016 |
|||||||
Sales |
1,082 |
979 |
4,321 |
4,001 |
|||||||
Cost of sales and expenses |
|||||||||||
Cost of sales (including depreciation and amortization of $215 million ($59 million in the fourth quarter); 2016 — $192 million ($50 million in the fourth quarter)) |
933 |
841 |
3,708 |
3,380 |
|||||||
Selling and administrative expenses |
110 |
106 |
440 |
402 |
|||||||
Gain on acquisitions, disposals and others |
— |
— |
(8) |
(4) |
|||||||
Impairment charges (reversals) and restructuring costs |
(1) |
(2) |
17 |
12 |
|||||||
Foreign exchange gain |
(7) |
(4) |
(5) |
(4) |
|||||||
Loss (gain) on derivative financial instruments |
2 |
5 |
(6) |
(6) |
|||||||
1,037 |
946 |
4,146 |
3,780 |
||||||||
Operating income |
45 |
33 |
175 |
221 |
|||||||
Financing expense |
22 |
21 |
92 |
88 |
|||||||
Interest expense on employee future benefits |
2 |
1 |
5 |
5 |
|||||||
Loss on repurchase of long-term debt |
14 |
— |
14 |
— |
|||||||
Foreign exchange loss (gain) on long-term debt and financial instruments |
4 |
13 |
(23) |
(22) |
|||||||
Fair value revaluation gain on investments |
— |
— |
(315) |
— |
|||||||
Share of results of associates and joint ventures |
(3) |
(7) |
(39) |
(32) |
|||||||
Earnings before income taxes |
6 |
5 |
441 |
182 |
|||||||
Provision for (recovery of) income taxes |
(57) |
2 |
(81) |
45 |
|||||||
Net earnings including non-controlling interests for the period |
63 |
3 |
522 |
137 |
|||||||
Net earnings (loss) attributable to non-controlling interests |
6 |
(1) |
15 |
2 |
|||||||
Net earnings attributable to Shareholders for the period |
57 |
4 |
507 |
135 |
|||||||
Net earnings per common share |
|||||||||||
Basic |
$ |
0.60 |
$ |
0.04 |
$ |
5.35 |
$ |
1.42 |
|||
Diluted |
$ |
0.58 |
$ |
0.04 |
$ |
5.19 |
$ |
1.39 |
|||
Weighted average basic number of common shares outstanding |
94,744,841 |
94,487,211 |
94,680,598 |
94,709,048 |
|||||||
Weighted average number of diluted common shares |
97,569,209 |
97,058,154 |
97,598,900 |
96,933,338 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
||||||||||
For the 3-month periods ended |
For the years ended |
|||||||||
(in millions of Canadian dollars) (unaudited) |
2017 |
2016 |
2017 |
2016 |
||||||
Net earnings including non-controlling interests for the period |
63 |
3 |
522 |
137 |
||||||
Other comprehensive income (loss) |
||||||||||
Items that may be reclassified subsequently to earnings |
||||||||||
Translation adjustments |
||||||||||
Change in foreign currency translation of foreign subsidiaries |
13 |
4 |
(43) |
(33) |
||||||
Change in foreign currency translation related to net investment hedging activities |
(12) |
(13) |
33 |
21 |
||||||
Cash flow hedges |
||||||||||
Change in fair value of foreign exchange forward contracts |
— |
— |
1 |
— |
||||||
Change in fair value of commodity derivative financial instruments |
2 |
4 |
1 |
10 |
||||||
Available-for-sale financial assets |
(1) |
1 |
(1) |
(2) |
||||||
Share of other comprehensive income of associates |
— |
9 |
21 |
— |
||||||
Provision for (recovery of) income taxes |
2 |
(3) |
(13) |
(6) |
||||||
4 |
2 |
(1) |
(10) |
|||||||
Items that are reclassified to retained earnings |
||||||||||
Actuarial gain (loss) on employee future benefits |
(16) |
42 |
(13) |
11 |
||||||
Provision for (recovery of) income taxes |
4 |
(11) |
3 |
(3) |
||||||
(12) |
31 |
(10) |
8 |
|||||||
Other comprehensive income (loss) |
(8) |
33 |
(11) |
(2) |
||||||
Comprehensive income including non-controlling interests for the period |
55 |
36 |
511 |
135 |
||||||
Comprehensive income (loss) attributable to non-controlling interests for the period |
9 |
(4) |
18 |
(4) |
||||||
Comprehensive income attributable to Shareholders for the period |
46 |
40 |
493 |
139 |
CONSOLIDATED STATEMENTS OF EQUITY |
||||||||||||||
For the year ended December 31, 2017 |
||||||||||||||
(in millions of Canadian dollars) (unaudited) |
CAPITAL |
CONTRIBUTED SURPLUS |
RETAINED |
ACCUMULATED |
TOTAL EQUITY |
NON- |
TOTAL |
|||||||
Balance - Beginning of period |
487 |
16 |
512 |
(31) |
984 |
90 |
1,074 |
|||||||
Comprehensive income (loss) |
||||||||||||||
Net earnings |
— |
— |
507 |
— |
507 |
15 |
522 |
|||||||
Other comprehensive income (loss) |
— |
— |
(10) |
(4) |
(14) |
3 |
(11) |
|||||||
— |
— |
497 |
(4) |
493 |
18 |
511 |
||||||||
Business combination |
— |
— |
— |
— |
— |
57 |
57 |
|||||||
Dividends |
— |
— |
(15) |
— |
(15) |
— |
(15) |
|||||||
Stock options expense |
— |
1 |
— |
— |
1 |
— |
1 |
|||||||
Issuance of common share upon exercise of stock options |
5 |
(1) |
— |
— |
4 |
— |
4 |
|||||||
Partial disposal of a subsidiary to non-controlling interests |
— |
— |
(1) |
— |
(1) |
1 |
— |
|||||||
Acquisition of non-controlling interests |
— |
— |
(11) |
— |
(11) |
(15) |
(26) |
|||||||
Dividends paid to non-controlling interests |
— |
— |
— |
— |
— |
(5) |
(5) |
|||||||
Balance - End of period |
492 |
16 |
982 |
(35) |
1,455 |
146 |
1,601 |
|||||||
For the year ended December 31, 2016 |
||||||||||||||
(in millions of Canadian dollars) (unaudited) |
CAPITAL |
CONTRIBUTED |
RETAINED |
ACCUMULATED |
TOTAL EQUITY |
NON-CONTROLLING |
TOTAL |
|||||||
Balance - Beginning of period |
490 |
17 |
387 |
(27) |
867 |
96 |
963 |
|||||||
Comprehensive income (loss) |
||||||||||||||
Net earnings |
— |
— |
135 |
— |
135 |
2 |
137 |
|||||||
Other comprehensive income (loss) |
— |
— |
8 |
(4) |
4 |
(6) |
(2) |
|||||||
— |
— |
143 |
(4) |
139 |
(4) |
135 |
||||||||
Dividends |
— |
— |
(15) |
— |
(15) |
— |
(15) |
|||||||
Stock options expense |
— |
1 |
— |
— |
1 |
— |
1 |
|||||||
Issuance of common share upon exercise of stock options |
2 |
(1) |
— |
— |
1 |
1 |
||||||||
Redemption of common shares |
(5) |
(1) |
(3) |
— |
(9) |
— |
(9) |
|||||||
Dividends paid to non-controlling interests and acquisition of non-controlling interests |
— |
— |
— |
— |
— |
(2) |
(2) |
|||||||
Balance - End of period |
487 |
16 |
512 |
(31) |
984 |
90 |
1,074 |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||||
For the 3-month periods ended |
For the years ended |
|||||
(in millions of Canadian dollars) (unaudited) |
2017 |
2016 |
2017 |
2016 |
||
Operating activities |
||||||
Net earnings attributable to Shareholders for the period |
57 |
4 |
507 |
135 |
||
Adjustments for: |
||||||
Financing expense and interest expense on employee future benefits |
24 |
22 |
97 |
93 |
||
Loss on repurchase of long-term debt |
14 |
— |
14 |
— |
||
Depreciation and amortization |
59 |
50 |
215 |
192 |
||
Gain on acquisitions, disposals and others |
— |
1 |
(8) |
(4) |
||
Impairment charges (reversals) and restructuring costs (gains) |
(2) |
(2) |
11 |
4 |
||
Unrealized loss (gain) on derivative financial instruments |
2 |
1 |
(8) |
(18) |
||
Foreign exchange loss (gain) on long-term debt and financial instruments |
4 |
13 |
(23) |
(22) |
||
Provision for (recovery of) income taxes |
(57) |
2 |
(81) |
45 |
||
Fair value revaluation gain on investments |
— |
— |
(315) |
— |
||
Share of results of associates and joint ventures |
(3) |
(7) |
(39) |
(32) |
||
Net earnings (loss) attributable to non-controlling interests |
6 |
(1) |
15 |
2 |
||
Net financing expense paid |
(11) |
(4) |
(99) |
(89) |
||
Premium paid on long-term debt repurchase |
(11) |
— |
(11) |
— |
||
Net income taxes received (paid) |
(4) |
— |
(10) |
10 |
||
Dividends received |
4 |
6 |
12 |
18 |
||
Employee future benefits and others |
(5) |
— |
(17) |
(18) |
||
77 |
85 |
260 |
316 |
|||
Changes in non-cash working capital components |
18 |
93 |
(87) |
56 |
||
95 |
178 |
173 |
372 |
|||
Investing activities |
||||||
Investments in associates and joint ventures |
(1) |
(4) |
(17) |
(6) |
||
Payments for property, plant and equipment |
(57) |
(57) |
(193) |
(182) |
||
Proceeds from disposals of property, plant and equipment |
1 |
2 |
15 |
5 |
||
Change in intangible and other assets |
(16) |
(2) |
256 |
14 |
||
Cash acquired in (paid for) a business combination |
(25) |
(1) |
9 |
(16) |
||
(98) |
(62) |
70 |
(185) |
|||
Financing activities |
||||||
Bank loans and advances |
3 |
(4) |
8 |
(8) |
||
Change in revolving credit facilities |
194 |
(99) |
114 |
(146) |
||
Repurchase of senior notes |
(257) |
— |
(257) |
— |
||
Increase in other long-term debt |
— |
29 |
11 |
40 |
||
Payments of other long-term debt |
(18) |
(16) |
(47) |
(47) |
||
Settlement of derivative financial instruments |
(3) |
3 |
(12) |
3 |
||
Issuance of common shares |
3 |
1 |
4 |
1 |
||
Redemption of common shares |
— |
(1) |
— |
(9) |
||
Dividends paid to non-controlling interests and acquisition of non-controlling interests |
(19) |
— |
(24) |
(1) |
||
Dividends paid to the Corporation's Shareholders |
(4) |
(3) |
(15) |
(15) |
||
(101) |
(90) |
(218) |
(182) |
|||
Change in cash and cash equivalents during the period |
(104) |
26 |
25 |
5 |
||
Currency translation on cash and cash equivalents |
1 |
(1) |
2 |
(3) |
||
Cash and cash equivalents - Beginning of period |
192 |
37 |
62 |
60 |
||
Cash and cash equivalents - End of period |
89 |
62 |
89 |
62 |
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, 2016.
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, Specialty Products (which constitutes the Corporation's Packaging Products) and Tissue Papers.
SALES |
||||||||
For the 3-month periods ended |
For the years ended |
|||||||
(in millions of Canadian dollars) (unaudited) |
2017 |
2016 |
2017 |
2016 |
||||
Packaging Products |
||||||||
Containerboard |
440 |
336 |
1,652 |
1,370 |
||||
Boxboard Europe |
212 |
191 |
838 |
796 |
||||
Specialty Products |
161 |
156 |
703 |
620 |
||||
Intersegment sales |
(24) |
(16) |
(105) |
(61) |
||||
789 |
667 |
3,088 |
2,725 |
|||||
Tissue Papers |
301 |
319 |
1,268 |
1,305 |
||||
Intersegment sales and Corporate activities |
(8) |
(7) |
(35) |
(29) |
||||
1,082 |
979 |
4,321 |
4,001 |
|||||
OPERATING INCOME (LOSS) BEFORE DEPRECIATION AND AMORTIZATION |
||||||||
For the 3-month periods ended |
For the years ended |
|||||||
(in millions of Canadian dollars) (unaudited) |
2017 |
2016 |
2017 |
2016 |
||||
Packaging Products |
||||||||
Containerboard |
73 |
42 |
238 |
214 |
||||
Boxboard Europe |
19 |
11 |
67 |
51 |
||||
Specialty Products |
14 |
19 |
67 |
71 |
||||
106 |
72 |
372 |
336 |
|||||
Tissue Papers |
12 |
30 |
90 |
139 |
||||
Corporate |
(14) |
(19) |
(72) |
(62) |
||||
Operating income before depreciation and amortization |
104 |
83 |
390 |
413 |
||||
Depreciation and amortization |
(59) |
(50) |
(215) |
(192) |
||||
Financing expense and interest expense on employee future benefits |
(24) |
(22) |
(97) |
(93) |
||||
Loss on repurchase of long-term debt |
(14) |
— |
(14) |
— |
||||
Foreign exchange gain (loss) on long-term debt and financial instruments |
(4) |
(13) |
23 |
22 |
||||
Fair value revaluation gain on investments |
— |
— |
315 |
— |
||||
Share of results of associates and joint ventures |
3 |
7 |
39 |
32 |
||||
Earnings before income taxes |
6 |
5 |
441 |
182 |
||||
PAYMENTS FOR PROPERTY, PLANT AND EQUIPMENT |
||||||||
For the 3-month periods ended |
For the years ended |
|||||||
(in millions of Canadian dollars) (unaudited) |
2017 |
2016 |
2017 |
2016 |
||||
Packaging Products |
||||||||
Containerboard |
37 |
25 |
65 |
51 |
||||
Boxboard Europe |
7 |
6 |
27 |
26 |
||||
Specialty Products |
15 |
7 |
32 |
26 |
||||
59 |
38 |
124 |
103 |
|||||
Tissue Papers |
11 |
30 |
64 |
77 |
||||
Corporate |
8 |
5 |
19 |
26 |
||||
Total acquisitions |
78 |
73 |
207 |
206 |
||||
Proceeds from disposals of property, plant and equipment |
(1) |
(2) |
(15) |
(5) |
||||
Capital-lease acquisitions |
(4) |
(1) |
(11) |
(18) |
||||
73 |
70 |
181 |
183 |
|||||
Acquisitions for property, plant and equipment included in "Trade and other payables" |
||||||||
Beginning of period |
11 |
10 |
25 |
19 |
||||
End of period |
(28) |
(25) |
(28) |
(25) |
||||
Payments for property, plant and equipment net of proceeds from disposals |
56 |
55 |
178 |
177 |
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, specific items of discontinued operations and other significant items of an unusual, non-cash or non-recurring nature.
RECONCILIATION OF NON-IFRS MEASURES
To provide more information for evaluating the Corporation's performance, the financial information included in this analysis contains certain data that are not performance measures under IFRS ("non-IFRS measures") which are also calculated on an adjusted basis to exclude specific items. We believe that providing certain key performance measures and non-IFRS measures is useful to both management and investors as they provide additional information to measure the performance and financial position of the Corporation. It also increases the transparency and clarity of the financial information. The following non-IFRS measures are used in our financial disclosures:
- Operating income before depreciation and amortization (OIBD): Used to assess operating performance and contribution of each segment when excluding depreciation & amortization. OIBD is widely used by investors as a measure of a corporation's ability to incur and service debt and as an evaluation metric.
- Adjusted OIBD: Used to assess operating performance and contribution of each segment on a comparable basis.
- Adjusted operating income: Used to assess operating performance of each segment on a comparable basis.
- Adjusted net earnings: Used to assess the Corporation's consolidated financial performance on a comparable basis.
- Adjusted free cash flow: Used to assess the Corporation's capacity to generate cash flows to meet financial obligation 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 the 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:
Q4 2017 |
|||||||
(in millions of Canadian dollars) |
Containerboard |
Boxboard |
Specialty |
Tissue |
Corporate |
Consolidated |
|
Operating income |
51 |
11 |
9 |
(6) |
(20) |
45 |
|
Depreciation and amortization |
22 |
8 |
5 |
18 |
6 |
59 |
|
Operating income (loss) before depreciation and amortization |
73 |
19 |
14 |
12 |
(14) |
104 |
|
Specific items: |
|||||||
Impairment reversal |
— |
— |
— |
— |
(2) |
(2) |
|
Restructuring costs |
— |
— |
— |
— |
1 |
1 |
|
Unrealized loss on financial instruments |
1 |
— |
— |
— |
1 |
2 |
|
1 |
— |
— |
— |
— |
1 |
||
Adjusted operating income (loss) before depreciation and amortization |
74 |
19 |
14 |
12 |
(14) |
105 |
|
Adjusted operating income (loss) |
52 |
11 |
9 |
(6) |
(20) |
46 |
|
Q3 2017 |
|||||||
(in millions of Canadian dollars) |
Containerboard |
Boxboard |
Specialty |
Tissue |
Corporate |
Consolidated |
|
Operating income (loss) |
50 |
5 |
10 |
9 |
(23) |
51 |
|
Depreciation and amortization |
19 |
9 |
5 |
13 |
7 |
53 |
|
Operating income (loss) before depreciation and amortization |
69 |
14 |
15 |
22 |
(16) |
104 |
|
Specific items : |
|||||||
Impairment charges |
— |
— |
— |
2 |
— |
2 |
|
Restructuring costs |
2 |
— |
— |
— |
— |
2 |
|
Unrealized loss (gain) on derivative financial instruments |
1 |
— |
— |
— |
(3) |
(2) |
|
3 |
— |
— |
2 |
(3) |
2 |
||
Adjusted operating income (loss) before depreciation and amortization |
72 |
14 |
15 |
24 |
(19) |
106 |
|
Adjusted operating income (loss) |
53 |
5 |
10 |
11 |
(26) |
53 |
|
Q4 2016 |
|||||||
(in millions of Canadian dollars) |
Containerboard |
Boxboard |
Specialty |
Tissue |
Corporate |
Consolidated |
|
Operating income |
28 |
3 |
14 |
12 |
(24) |
33 |
|
Depreciation and amortization |
14 |
8 |
5 |
18 |
5 |
50 |
|
Operating income (loss) before depreciation and amortization |
42 |
11 |
19 |
30 |
(19) |
83 |
|
Specific items: |
|||||||
Impairment reversal |
— |
— |
(2) |
— |
— |
(2) |
|
Unrealized loss on financial instruments |
1 |
— |
— |
— |
— |
1 |
|
1 |
— |
(2) |
— |
— |
(1) |
||
Adjusted operating income (loss) before depreciation and amortization |
43 |
11 |
17 |
30 |
(19) |
82 |
|
Adjusted operating income (loss) |
29 |
3 |
12 |
12 |
(24) |
32 |
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) |
2017 |
2016 |
Q4 2017 |
Q3 2017 |
Q4 2016 |
|||||
Net earnings attributable to Shareholders for the year |
507 |
135 |
57 |
33 |
4 |
|||||
Net earnings (loss) attributable to non-controlling interests |
15 |
2 |
6 |
2 |
(1) |
|||||
Provision for (recovery of) income taxes |
(81) |
45 |
(57) |
19 |
2 |
|||||
Fair value revaluation gain on investments |
(315) |
— |
— |
(18) |
— |
|||||
Share of results of associates and joint ventures |
(39) |
(32) |
(3) |
(3) |
(7) |
|||||
Foreign exchange loss (gain) on long-term debt and financial instruments |
(23) |
(22) |
4 |
(8) |
13 |
|||||
Financing expense, interest expense on employee future benefits and loss on repurchase of long-term debt |
111 |
93 |
38 |
26 |
22 |
|||||
Operating income |
175 |
221 |
45 |
51 |
33 |
|||||
Specific items: |
||||||||||
Gain on acquisitions, disposals and others |
(8) |
(4) |
— |
— |
— |
|||||
Inventory adjustment resulting from business acquisition |
2 |
— |
— |
— |
— |
|||||
Impairment charges (reversals) |
11 |
3 |
(2) |
2 |
(2) |
|||||
Restructuring costs |
6 |
9 |
1 |
2 |
— |
|||||
Unrealized loss (gain) on derivative financial instruments |
(8) |
(18) |
2 |
(2) |
1 |
|||||
3 |
(10) |
1 |
2 |
(1) |
||||||
Adjusted operating income |
178 |
211 |
46 |
53 |
32 |
|||||
Depreciation and amortization |
215 |
192 |
59 |
53 |
50 |
|||||
Adjusted operating income before depreciation and amortization |
393 |
403 |
105 |
106 |
82 |
The following table reconciles net earnings and net earnings per common share, as per IFRS, with adjusted net earnings and adjusted net earnings per common share:
(in millions of Canadian dollars, except amounts per share) (unaudited) |
NET EARNINGS |
NET EARNINGS PER COMMON SHARE 1 |
||||||||||||||||||||||
2017 |
2016 |
Q4 2017 |
Q3 2017 |
Q4 2016 |
2017 |
2016 |
Q4 2017 |
Q3 2017 |
Q4 2016 |
|||||||||||||||
As per IFRS |
507 |
135 |
57 |
33 |
4 |
$ |
5.35 |
$ |
1.42 |
$ |
0.60 |
$ |
0.35 |
$ |
0.04 |
|||||||||
Specific items: |
||||||||||||||||||||||||
Gain on acquisitions, disposals and others |
(8) |
(4) |
— |
— |
— |
$ |
(0.06) |
$ |
(0.03) |
— |
— |
— |
||||||||||||
Inventory adjustment resulting from business acquisition |
2 |
— |
— |
— |
— |
$ |
0.01 |
— |
— |
— |
— |
|||||||||||||
Impairment charges (reversals) |
11 |
3 |
(2) |
2 |
(2) |
$ |
0.08 |
$ |
0.03 |
$ |
(0.01) |
$ |
0.02 |
$ |
(0.01) |
|||||||||
Restructuring costs |
6 |
9 |
1 |
2 |
— |
$ |
0.05 |
$ |
0.06 |
$ |
0.01 |
$ |
0.01 |
— |
||||||||||
Unrealized loss (gain) on derivative financial instruments |
(8) |
(18) |
2 |
(2) |
1 |
$ |
(0.07) |
$ |
(0.14) |
$ |
0.01 |
$ |
(0.01) |
$ |
0.01 |
|||||||||
Loss on repurchase of long-term debt |
14 |
— |
14 |
— |
— |
$ |
0.10 |
— |
$ |
0.10 |
— |
— |
||||||||||||
Unrealized gain on interest rate swaps |
(2) |
(1) |
(2) |
— |
(1) |
$ |
(0.01) |
$ |
(0.01) |
$ |
(0.01) |
— |
$ |
(0.01) |
||||||||||
Foreign exchange loss (gain) on long-term debt and financial instruments |
(23) |
(22) |
4 |
(8) |
13 |
$ |
(0.21) |
$ |
(0.19) |
$ |
0.04 |
$ |
(0.08) |
$ |
0.12 |
|||||||||
Fair value revaluation gain on investments |
(315) |
— |
— |
(18) |
— |
$ |
(3.85) |
— |
— |
$ |
(0.17) |
— |
||||||||||||
Share of results of associates and joint ventures |
(18) |
7 |
— |
— |
1 |
$ |
(0.15) |
$ |
0.05 |
— |
— |
$ |
0.01 |
|||||||||||
Tax effect on specific items, other tax adjustments and attributable to non-controlling interest1 |
(98) |
5 |
(61) |
10 |
(1) |
$ |
(0.52) |
$ |
0.02 |
$ |
(0.60) |
$ |
0.08 |
— |
||||||||||
(439) |
(21) |
(44) |
(14) |
11 |
$ |
(4.63) |
$ |
(0.21) |
$ |
(0.46) |
$ |
(0.15) |
$ |
0.12 |
||||||||||
Adjusted |
68 |
114 |
13 |
19 |
15 |
$ |
0.72 |
$ |
1.21 |
$ |
0.14 |
$ |
0.20 |
$ |
0.16 |
1 |
Specific amounts per common share are calculated on an after-tax basis and are net of the portion attributable to non-controlling interests. Per common 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) |
2017 |
2016 |
Q4 2017 |
Q3 2017 |
Q4 2016 |
||||
Cash flow from operating activities |
173 |
372 |
95 |
18 |
178 |
||||
Changes in non-cash working capital components |
87 |
(56) |
(18) |
43 |
(93) |
||||
Depreciation and amortization |
(215) |
(192) |
(59) |
(53) |
(50) |
||||
Net income taxes paid (received) |
10 |
(10) |
4 |
— |
— |
||||
Net financing expense paid |
99 |
89 |
11 |
40 |
4 |
||||
Premium paid on long-term debt repurchase |
11 |
— |
11 |
— |
— |
||||
Gain (loss) on acquisitions, disposals and others |
8 |
4 |
— |
— |
(1) |
||||
Impairment reversals (charges) and restructuring costs |
(11) |
(4) |
2 |
(2) |
2 |
||||
Unrealized gain (loss) on derivative financial instruments |
8 |
18 |
(2) |
2 |
(1) |
||||
Dividend received, employee future benefits and others |
5 |
— |
1 |
3 |
(6) |
||||
Operating income |
175 |
221 |
45 |
51 |
33 |
||||
Depreciation and amortization |
215 |
192 |
59 |
53 |
50 |
||||
Operating income before depreciation and amortization |
390 |
413 |
104 |
104 |
83 |
The following table reconciles cash flow from operating activities with cash flow from operating activities (excluding changes in non-cash working capital components) and adjusted cash flow from operating activities. It also reconciles adjusted cash flow from operating activities to adjusted free cash flow which is also calculated on a per share basis:
(in millions of Canadian dollars, except amount per common share or otherwise mentioned) |
2017 |
2016 |
Q4 2017 |
Q3 2017 |
Q4 2016 |
||||||||||
Cash flow from operating activities |
173 |
372 |
95 |
18 |
178 |
||||||||||
Changes in non-cash working capital components |
87 |
(56) |
(18) |
43 |
(93) |
||||||||||
Cash flow from operating activities (excluding changes in non-cash working capital components) |
260 |
316 |
77 |
61 |
85 |
||||||||||
Specific items, net of current income taxes if applicable: |
|||||||||||||||
Restructuring costs |
6 |
8 |
1 |
2 |
(1) |
||||||||||
Premium paid on long-term debt repurchase |
11 |
— |
11 |
— |
— |
||||||||||
Adjusted cash flow from operating activities |
277 |
324 |
89 |
63 |
84 |
||||||||||
Capital expenditures & other assets1 and capital lease payments, net of disposals |
(205) |
(196) |
(63) |
(46) |
(59) |
||||||||||
Dividends paid |
(20) |
(16) |
(4) |
(5) |
(3) |
||||||||||
Adjusted free cash flow |
52 |
112 |
22 |
12 |
22 |
||||||||||
Adjusted free cash flow per common share |
$ |
0.55 |
$ |
1.18 |
$ |
0.23 |
$ |
0.13 |
$ |
0.23 |
|||||
Weighted average basic number of common shares outstanding |
94,680,598 |
94,709,048 |
94,744,841 |
94,718,891 |
94,487,211 |
||||||||||
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) |
December 31, |
September 30, |
December 31, |
||
Long-term debt |
1,517 |
1,575 |
1,530 |
||
Current portion of long-term debt |
59 |
53 |
36 |
||
Bank loans and advances |
35 |
33 |
28 |
||
Total debt |
1,611 |
1,661 |
1,594 |
||
Less: Cash and cash equivalents |
89 |
192 |
62 |
||
Net debt |
1,522 |
1,469 |
1,532 |
||
Adjusted OIBD (last twelve months) |
393 |
370 |
403 |
||
Net debt / Adjusted OIBD ratio |
3.9 |
4.0 |
3.8 |
||
Net debt / Adjusted OIBD ratio on a pro forma basis1 |
3.6 |
3.6 |
N/A |
1 |
Pro forma basis to add Greenpac adjusted OIBD for Q1 2017 and other business combinations completed for the LTM period ended December 31, 2017. |
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