Business News

Cascades concludes the year 2008 on a positive note

Monday 02. March 2009 - Cascades Inc. ("Cascades") (CAS on the Toronto stock exchange) announces its unaudited financial results for the three months and fiscal year ended December 31, 2008.

Operating income before depreciation (OIBD or EBITDA) and net earnings excluding specific items increased respectively to $96 million and $17 million ($0.17 per share) in the fourth quarter of 2008 compared to $82 million and $1 million ($0.01 per share) in the same period last year. With these better results in the last quarter, Cascades’ 2008 operating income before depreciation and net earnings reached $306 million and $3 million respectively.

Fourth quarter and annual highlights
————————————

– Fourth quarter unaudited EBITDA, cash flow from operations and net
earnings excluding specific items(1) all increased compared to the same
period last year and the previous quarter.
– Fourth quarter EBITDA represents the highest quarterly EBITDA since
2002.
– Cascades is benefiting from its diversified business mix as lower
annual results in boxboard and containerboard operations were partially
offset by the better profitability in specialty products and tissue
papers.
– Cascades proactively improved its financial flexibility:
– In the fourth quarter, early settlement of forward exchange
contracts on its US$ denominated debt for net cash proceeds of
approximately $150 million;
– In February 2009, amendment of financial covenants.
– Cascades continued to promote environmentally-sound manufacturing and
products as three of its boxboard mills received FSC certification.

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————————————————————————-

Financial Highlights
——————–

Selected consolidated
information
(unaudited)
(in millions
of Canadian
dollars, except —————————————————–
amounts per share) 2008 2007 Q4/2008 Q4/2007 Q3/2008
————————————————————————-
Sales 4,017 3,929 1,020 937 1,039
Excluding
specific items(1)
Operating
income before
depreciation
and
amortization
(OIBD or
EBITDA) 306 350 96 82 88
Operating
income from
continuing
operations 92 142 40 33 34
Net earnings 3 22 17 1 6
per common
share $ 0.03 $ 0.22 $ 0.17 $ 0.01 $ 0.06
Cash flow
from
operations
(adjusted)
from
continuing
operations 183 202 68 49 47
per common
share $ 1.85 $ 2.03 $ 0.69 $ 0.49 $ 0.47
As reported
Operating
income before
depreciation
and
amortization
(OIBD or
EBITDA)(1) 229 352 52 68 71
Operating
income (loss)
from continuing
operations 15 144 (4) 19 17
Net earnings
(loss) (55) 95 (19) 12 (7)
per common
share $(0.56) $ 0.95 $(0.20) $ 0.12 $(0.07)
Cash flow from
operations
(adjusted)
from continuing
operations(1) 155 178 59 36 43
per common
share(1) $ 1.57 $ 1.79 $ 0.60 $ 0.36 $ 0.43
————————————————————————-
Note 1 – see the supplemental information on non-GAAP measures note.



In the fourth quarter ended December 31, 2008, net loss including specific items amounted to $19 million ($0.20 per share) compared to net earnings of $12 million ($0.12 per share) for the same quarter in 2007 and a net loss of $7 million ($0.07per share) in the previous quarter.

For the fiscal year ended December 31, 2008, the net loss including specific items amounted to $55 million ($0.56 per share) compared to net earnings of $95 million ($0.95 per share) in 2007.

Commenting on the annual results, Mr. Alain Lemaire, President and Chief Executive Officer stated: “In 2008, we were confronted with very challenging business conditions throughout the year including in particular, a severe economic downturn in latter half of the fourth quarter. However, despite of all these factors, we reported positive annual net earnings and relatively stable cash flow from operations excluding specific items. During the second half of the year we benefited from restructuring initiatives in our boxboard segment, the depreciation of the Canadian dollar and a more favourable variable cost environment which more than offset the weakness in demand in certain of our sectors.

We are also fortunate that our balanced portfolio of assets helps to mitigate the impact of a cyclical slowdown as demonstrated in the fourth quarter where the drop of volumes in our packaging operations was offset by record quarterly results in our Tissue Papers Group due in part, to strong demand for recycled products.”

Three-month period ended December 31, 2008
——————————————



In comparison with the same period last year, sales increased $83 million or 9% to $1 billion reflecting generally higher prices and the depreciation of the Canadian dollar.

Operating loss from continuing operations amounted to $4 million compared to an operating income of $19 million achieved for the same period last year. When excluding specific items, operating income from continuing operations increased 21% to $40 million in comparison to $33 million for the same quarter in 2007.

Despite lower sales volumes, operating results improved in the quarter compared to last year resulting from higher selling prices, lower raw material and energy costs and the depreciation of the Canadian dollar.

The fourth quarter net earnings excluding specific items of $17 million reflect a $5 million recovery of income tax resulting mainly from provision adjustments for prior years.

Fiscal year ended December 31, 2008
———————————–



In 2008, sales increased by $88 million to $4.0 billion due to improved average selling prices.

Operating income from continued operations amounted to $15 million compared to $144 million achieved last year. Operating income from continuing operations excluding specific items was $92 million compares to $142 million achieved in 2007.

Operating results were lower in 2007 as the first six months of the year were impacted by sharp increases in our input costs such as raw materials, energy and freight. Improved selling prices during the second part of the year were not sufficient to offset the increase in our input costs and the weak performance of our North American boxboard sector in the first six months of 2008.

Near term outlook
—————–



Mr. Alain Lemaire, President and Chief Executive Officer added: “From a business standpoint, we remain cautiously optimistic despite recent and ongoing selling price and demand erosion for certain of our products. In fact, we expect to continue benefiting from relatively stable recycled fibre and energy costs, from the lower Canadian dollar, and from our significant position in consumer markets such as tissue papers and food packaging which are proving to be more recession resistant. Also, following a weak month of December for our packaging operations, business conditions improved slightly in January.

On the financial front, notwithstanding our increased liquidity and the recently announced amendment of our credit agreement, we will continue to carefully manage our cash flows to preserve financial flexibility in the face of economic uncertainty.”

Dividend on Common Shares and normal course issuer bid
——————————————————



The Board of Cascades declared a quarterly dividend of $0.04 per share to be paid March 23, 2009 to shareholders of record at the close of business on March 10, 2009. This dividend paid by Cascades is an “eligible dividend” as per the Income Tax Act (Bill C-28, Canada). In addition, in 2008, in accordance with its normal course issuer bid, Cascades has purchased for cancellation 595,500 common shares at an average price of $6.77 per share representing an aggregate amount of approximately $4.0 million.

Supplemental information on non-GAAP measures

Operating income before depreciation and amortization, earnings before interests, taxes, depreciation and amortization, 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 before depreciation and amortization, earnings before interests, taxes, depreciation and amortization, 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 before depreciation and amortization, earnings before interests, taxes, depreciation and amortization, 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 before depreciation and amortization, earnings before interests, taxes, depreciation and amortization, 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 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, 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.

Net earnings (loss), 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) 2008 2007 Q4/2008 Q4/2007 Q3/2008
————————————- ——————————–

Net earnings
(loss) (55) 95 (19) 12 (7)
Net loss
(earnings) from
discontinued
operations (18) 19 – 11 –
Non-controlling
interest 2 3 – 1 1
Share of results
of significantly
influenced
companies (8) (27) (2) (4) (2)
Provision for
(recovery of)
income taxes (32) 11 (12) (9) (2)
Foreign exchange
loss (gain) on
long-term debt 24 (59) 4 (16) –
Interest expense 102 102 25 24 27
————————————- ——————————–

Operating income
(loss) 15 144 (4) 19 17
Specific items :
Inventory
adjustment
resulting from
business
acquisition 2 6 – – –
Loss (gain) on
disposals and other 5 (17) – 7 –
Impairment loss 16 3 13 2 –
Closure and
restructuring costs 27 6 10 3 4
Unrealized loss on
financial
instruments 27 – 21 2 13
————————————- ——————————–
77 (2) 44 14 17
————————————- ——————————–

Operating income –
excluding specific
items 92 142 40 33 34

Depreciation and
amortization 214 208 56 49 54
————————————- ——————————–

Operating income
before
depreciation and
amortization (OIBD)
– excluding
specific items(1) 306 350 96 82 88
————————————- ——————————–
————————————- ——————————–
Note 1 – also refers to earnings before interests, taxes, depreciation
and amortization (EBITDA).



The following table reconciles net earnings and net earnings per share to net earnings excluding specific items and net earnings per share excluding specific items

(in millions of
Canadian dollars,
except amounts ——————————————————
per share) Net earnings (loss)
————————————————————————-
2008 2007 Q4/2008 Q4/2007 Q3/2008
—————— ———————————
As per GAAP (55) 95 (19) 12 (7)
Specific items :
Inventory
adjustment
resulting from
business
acquisition 2 6 – – –
Loss (gain) on
disposals and
other 5 (17) – 7 –
Impairment loss 16 3 13 2 –
Closure and
restructuring
costs 27 6 10 3 4
Unrealized loss
on financial
instruments 27 – 21 2 13
Foreign exchange
loss (gain) on
long-term debt 24 (59) 4 (16) –
Share of results
of significantly
influenced
companies – (15) – – –
Loss (gain)
included in
discontinued
operations (23) 9 – 7 –
Adjustment of
statutory tax
rate – (16) – (10) –
Tax effect on
specific items (20) 10 (12) (6) (4)
—————— ———————————
58 (73) 36 (11) 13
—————— ———————————
Excluding
specific items 3 22 17 1 6
————————————– ———————————

(in millions of
Canadian dollars,
except amounts ——————————————————
per share) Net earnings (loss) per share(1)
————————————————————————-
2008 2007 Q4/2008 Q4/2007 Q3/2008
—————— ———————————

As per GAAP
Specific items : $(0.56) $ 0.95 $(0.20) $ 0.12 $(0.07)
Inventory
adjustment
resulting from
business
acquisition $ 0.01 $ 0.04 $ – $ – $ –
Loss (gain) on
disposals and
other $ 0.05 $(0.09) $ – $ 0.05 $ –
Impairment loss $ 0.13 $ 0.02 $ 0.11 $ 0.01 $ –
Closure and
restructuring
costs $ 0.19 $ 0.04 $ 0.07 $ 0.02 $ 0.03
Unrealized loss
on financial
instruments $ 0.19 $ – $ 0.15 $ 0.01 $ 0.10
Foreign exchange
loss (gain) on
long-term debt $ 0.21 $(0.49) $ 0.04 $(0.14) $ –
Share of results
of significantly
influenced
companies $ – $(0.15) $ – $ – $ –
Loss (gain)
included in
discontinued
operations $(0.19) $ 0.06 $ – $ 0.04 $ –
Adjustment of
statutory tax
rate $ – $(0.16) $ – $(0.10) $ –
Tax effect on
specific items
—————— ———————————
$ 0.59 $(0.73) $ 0.37 $(0.11) $ 0.13
—————— ———————————
Excluding
specific items $ 0.03 $ 0.22 $ 0.17 $ 0.01 $ 0.06
————————————– ———————————
Note 1 – specific amounts per share are calculated on an after-tax basis.




The following table reconciles cash flow from operations and cash flow from operations per share to cash flow from operations excluding specific items and cash flow from operations per share excluding specific items:

————————————————————————-
(in millions of
Canadian dollars, Cash flow from operations
except amounts ——————————————————
per share) 2008 2007 Q4/2008 Q4/2007 Q3/2008
—————— ———————————

Cash flow
provided by
operating
activities 124 89 85 98 22
Changes in
non-cash
working
capital
components 31 89 (26) (62) 21
—————— ———————————
Cash flow
(adjusted)
from
operations 155 178 59 36 43
Specific items :
Inventory
adjustment
resulting from
business
acquisition 2 6 – – –
Loss on disposals
and other – 12 – 10 –
Closure and
restructuring
costs, net of
current income
tax 26 6 9 3 4
—————— ———————————

Excluding
specific items 183 202 68 49 47
————————————– ———————————

————————————————————————-
(in millions of
Canadian dollars, Cash flow from operations per share
except amounts ——————————————————
per share) 2008 2007 Q4/2008 Q4/2007 Q3/2008
—————— ———————————

Cash flow
provided by
operating
activities
Changes in
non-cash
working
capital
components
—————— ———————————
Cash flow
(adjusted)from
operations $ 1.57 $ 1.79 $ 0.60 $ 0.36 $ 0.43
Specific items :
Inventory
adjustment
resulting from
business
acquisition $ 0.02 $ 0.06 – – –
Loss on disposals
and other – $ 0.12 – $ 0.10 –
Closure and
restructuring
costs, net of
current income
tax $ 0.26 $ 0.06 $ 0.09 $ 0.03 $ 0.04
—————— ———————————

Excluding
specific items $ 1.85 $ 2.03 $ 0.69 $ 0.49 $ 0.47