Business News

Cascades reports results for 2007

Thursday 28. February 2008 - For the fiscal year ended December 31, 2007, Cascades Inc. (Symbol: CAS-TSX) reports unaudited net earnings of $95 million ($0.95 per share) compared to net earnings of $3 million ($0.04 per share) for the same period in 2006. When excluding specific items(1), net earnings amount to $22 million ($0.22 per share) compared to net earnings of $52 million ($0.64 per share) in 2006.

For the fourth quarter ended December 31, 2007, net earnings amounted to $12 million ($0.12 per share) compared to a net loss of $46 million ($0.56 per share) for the fourth quarter ended December 31, 2006. When excluding specific items(1), net earnings for the fourth quarter of 2007 amounted to $1 million ($0.01 per share) compared to net earnings of $13 million ($0.16 per share) for the same quarter in 2006.

Financial Highlights

Selected consolidated information(2)
(in millions of
Canadian dollars, except —————– —————————–
amounts per share) 2007 2006 Q4/2007 Q4/2006 Q3/2007
——————————————- —————————–

Sales 3,929 3,278 937 843 984
Operating income before
depreciation and
amortization (OIBD)(1) 352 257 68 23 93
Operating income (loss)
from continuing operations 144 96 19 (17) 38
Net earnings (loss) 95 3 12 (46) 16
per common share $0.95 $0.04 $0.12 $(0.56) $0.16
Cash flow from operations
from continuing
operations(1) 178 183 36 32 55
per common share(1) $1.79 $2.26 $0.36 $0.39 $0.56

Excluding specific items(1)
Operating income before
depreciation and
amortization (OIBD) 350 315 82 77 95
Operating income from
continuing operations 142 154 33 37 40
Net earnings 22 52 1 13 9
per common share $0.22 $0.64 $0.01 $0.16 $0.09
Cash flow from
operations from
continuing operations 202 196 49 40 56
per common share $2.03 $2.42 $0.49 $0.49 $0.57
——————————————- —————————–

Note 1 – see the supplemental information on non-GAAP measures note.
Note 2 – unaudited and restated to exclude discontinued operations.

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2007 Business highlights

– Improved operating results compared to 2006 due for the most part to
the strategic acquisition of the remaining 50% of Norampac and
generally higher prices, which more than offset the negative impact of
approximately $150 million resulting from higher recycled fibre and
pulp costs as well as the appreciation of the $CAN.

– Cascades fixed the remaining portion of its $US denominated debt to
secure its foreign exchange gain.

– Cascades continues to deliver on its action plan:
– Divestiture of two indefinitely shut facilities, one non-core mill
and one non-core joint venture;
– Recently approved merger of its European recycled boxboard
operations with those of Reno de Medici S.p.A. which will be
effective March 1, 2008

– Strong demand for our Cascades’ recycled tissue paper retail brand and
our 100-per-cent recycled fine paper with respective annual sales
increases of 60% and 228%.

– Cascades’ shares reclassified to the Containers & Packaging industry
from the Paper & Forest Products industry within the S&P/TSX Composite
index.
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Commenting on the yearly results, Mr. Alain Lemaire, President and Chief Executive Officer stated: “Given the rapid appreciation of the Canadian dollar and rising fiber costs, 2007 was definitely a challenging year for Cascades. However, in spite of these significant headwinds, we remain focused on delivering on our strategic plan. In the past twelve months, we continued to streamline our portfolio of assets, to implement restructuring initiatives, and we announced the merger with Reno de Medici in Europe. With the acquisition of Norampac at the end of 2006, Cascades is now in a stronger operational and financial position to continue its turnaround.”

Three-month period ended December 31, 2007
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Sales increased by 11% during the fourth quarter of 2007, amounting to $937 million compared with $843 million for the same period last year. Operating income amounted to $19 million for the period compared to operating losses of $17 million for the same quarter last year.

Operating income from continuing operations excluding specific items amounted to $33 million. Specific items include, amongst others, a loss of $10 million on the sale of the Red Rock linerboard mill (Containerboard group), $3 million of restructuring and closure costs in regards to the Red Rock mill and the St-Jerome fine papers mill (Specialty Products group), as well as a $3 million gain from the sale of a non-core participation. This compares to operating income from continuing operations excluding specific elements of $37 million realized last year. Net earnings for the fourth quarter include an after-tax loss of $3 million on the sale of the Thunder Bay fine papers mill (discontinued operations), an after-tax $14 million foreign exchange gain on $U.S. denominated debt, as well as $10 million in positive adjustment to future tax following reduction of the federal tax rate in Canada.

Fiscal year ended December 31, 2007
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Sales increased 20% in 2007 to $3.9 billion as a result of business acquisitions and better selling prices. Operating income from continued operations amounted to $144 million compared to $96 million achieved last year.

Operating income from continuing operations excluding specific items amounted to $142 million compared to $154 million last year. Specific items include, amongst others, a gain of $25 million on the sale of our joint-venture interest in GSD Packaging (Boxboard), a loss of $10 million on the sale of the Red Rock mill, and $6 million in restructuring and closure costs associated with the Red Rock and the St-Jerome mills. Net earnings for the fiscal year ended December 31, 2007 include $6 million in after-tax impairment loss and closure costs for the Scierie Lemay (discontinued operations), a $15 million dilution gain reflecting the adjustment of our equity investment in Boralex, $49 million in after-tax foreign exchange gains on $U.S. denominated debt, as well as $16 million in positive adjustment to future tax following the reduction of the tax rate in Canada and in Germany.

Outlook
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Mr. Alain Lemaire, President and Chief Executive Officer added: “We expect business conditions will continue to be challenging in the first half of the year as a result of high fiber costs and the uncertain economic environment. We will however maintain and strengthen initiatives aimed at improving profitability through increased operational efficiency and enhanced product offering. Also, we will continue to focus on less performing assets with the goal of reaching an acceptable level of profitability within a reasonable time frame. As we have done in the last three years, we will continue to act proactively.”

Dividend on Common Shares and normal course issuer bid
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The Board of Cascades declared a quarterly dividend of $0.04 per share to be paid March 21, 2008 to shareholders of record at the close of business on March 7, 2008. This dividend paid by Cascades is an “eligible dividend” as per the proposed changes to the Income Tax Act (Bill C-28, Canada). Pursuant to its normal course issuer bid, the Company purchased during the fourth quarter 132,200 of its common shares at an average price of $8.47 for a total of 492,700 shares purchased for the fiscal year.

Discontinued operations
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The activities of the Company’s Greenfield SAS pulp mill located in France and Scierie Lemay sawmill located in Quebec were reclassified as discontinued operations during the fourth quarter of 2007. Consequently, the comparative financial information of 2006 and 2007 have been restated to reflect this change.

Supplemental information on non-GAAP measures

Operating income, cash flow from operations and cash flow from operations per share are not measures of performance under Canadian GAAP. The Company includes operating income, cash flow from operations and cash flow from operations per share 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, cash flow from operations and cash flow from operations per share does 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, cash flow from operations and cash flow from operations per share 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 and cash flow from operations per share is determined by dividing cash flow from operations by the weighted average number of common shares of the period.

Operating income excluding specific items, net earnings excluding specific items, net earnings per common share excluding specific items, cash flow from operations excluding specific items and cash flow from operations per share 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.