Business News
Cascades posts significantly improved results in the first quarter
Friday 15. May 2009 - Net earnings of $37 million ($0.38 per share) compared to a net loss of $4 million in the first quarter of 2008;
Operating income before depreciation and amortization (EBITDA) excluding specific items of $107 million, highest for a first quarter in Cascades’ history, an increase of 81 % compared to last year and of 11 % compared to the previous quarter;
Net earnings excluding specific items of $21 million ($0.22 per share) compared to a net loss of $9 million in the same period of last year;
169% improvement in cash flow from operations excluding specific items to $70 million;
$14 million gain on purchase of long-term debt (included in specific items);
Current cash availability of approximately $300 million;
Buy-back of approximately 1.1 million shares at an average cost of $2.12 by the Company;
Purchase of more than 630,000 shares by insiders during the quarter;
Start-up of the new sorting facility in April to support the launch of the new blue cart recycling program of the City of Calgary;
Cascades named one of Canada’s greenest employers by Mediacorp.
Financial Highlights
Cascades Inc. (CAS on the Toronto stock exchange), leader in recovery and in green packaging and tissue paper products, announces its financial results for the three months ended March 31, 2009. Operating income before depreciation (OIBD or EBITDA) and net earnings excluding specific items increased significantly to respectively $107 million and $21 million ($0.22 per share) in the first quarter of 2009 compared to $59 million and a net loss of $9 million in the same period in 2008.
Excluding specific items, EBITDA also improved by $11 million in comparison to the previous quarter while net earnings increased by $3 million. This sequential rise constitutes the fourth quarter of consecutive growth in EBITDA.
Including specific items, the operating income before depreciation and net earnings grew respectively to $103 million and $37 million ($0.38 per share) in the first quarter of 2009 compared to $45 million and a net loss of $4 million for the same quarter in 2008.
Commenting on the quarterly results, Mr. Alain Lemaire, President and Chief Executive Officer stated: “During the quarter, we benefited from restructuring initiatives implemented in the past twelve months, from the depreciation of the Canadian dollar and a more favourable variable cost environment. These factors have more than offset the capacity utilization rate of less than 80% in our packaging sector and our EBITDA margin on sales increased from 6% in the first quarter of 2008 to 11% in 2009. Our Tissue Group has continued to perform well and our boxboard operations’ EBITDA almost tripled to $24 million. Since a trough in Q2 2008, this group’s EBITDA has in fact been multiplied by 8.”
Results analysis for the three-month period ended March 31, 2009
In comparison with the same period last year, sales increased 1% to $970 million reflecting the increase in selling prices and the depreciation of the Canadian dollar which have more than offset the 12% drop in shipments.
The operating income from continuing operations amounted to $49 million compared to an operating loss of $6 million last year. When excluding specific items, operating income from continuing operations increased $45 million to $53 million. Despite lower sales volumes, operating results improved mainly due to higher selling prices, lower raw material and energy costs and the depreciation of the Canadian dollar.
The specific items that impacted the operating income in the first quarter of 2009 include a $3 million impairment loss following the announcement of the closure of the Quebec City corrugated box plant and $2 million in other closure and restructuring costs.
Net earnings of $37 million reflect a $14 million gain on purchase of long-term debt at 56% of their nominal value and $6 million in positive income tax adjustment following the change of the Quebec provincial tax rate for investment income.
The net debt remained relatively stable despite a $33 million negative impact of the depreciation of the Canadian dollar on long-term debt. The ratio of net debt to EBITDA excluding specific items in the last twelve months decreased from 5.9x in the fourth quarter of 2008 to 5.1x in the first quarter of 2009.
Near term outlook
Mr. Alain Lemaire, President and Chief Executive Officer added: “We expect to benefit from the seasonal pickup in demand in the second quarter and we anticipate that our two main variable costs, recycled fibre and energy, should stay relatively stable. However, we remain cautious in regards to short term business conditions considering the decrease in selling prices for certain of our products in recent months and the potential appreciation of the Canadian dollar.”
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 June 12, 2009 to shareholders of record at the close of business on May 29, 2009. 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 2009, in accordance with its normal course issuer bid, Cascades has purchased for cancellation 1,081,200 common shares at an average price of $2.12 per share representing an aggregate amount of approximately $2.3 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:
Supplemental information on non-GAAP measures
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:
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:
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Founded in 1964, Cascades produces, converts and markets packaging and tissue products composed mainly of recycled fibres. Cascades employs close to 13,000 employees who work in more than 100 modern and flexible production units located in North America and Europe. Cascades’ management philosophy, its 45 years of experience in recycling, its continued efforts in research and development are strengths which enable the company to create new products for its customers. The 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.