Positive outlook supported by favourable containerboard industry dynamics
Q3 2020 Highlights
- Sales of
$1,275 million (compared with$1,285 million in Q2 2020 (-1%) and$1,264 million in Q3 2019 (+1%)) - As reported (including specific items)
- Operating income of
$73 million (compared with$94 million in Q2 2020 (-22%) and$108 million in Q3 20192 (-32%)) - Operating income before depreciation and amortization (OIBD)1 of
$154 million (compared with$169 million in Q2 2020 (-9%) and$181 million in Q3 20192 (-15%)) - Net earnings per share of
$0.51 (compared with$0.57 in Q2 2020 and$0.45 in Q3 20192) - Adjusted (excluding specific items)1
- Operating income of
$81 million (compared with$111 million in Q2 2020 (-27%) and$88 million in Q3 2019 (-8%)) - OIBD of
$162 million (compared with$186 million in Q2 2020 (-13%) and$161 million in Q3 2019 (+1%)) - Net earnings per share of
$0.50 (compared with$0.61 in Q2 2020 and$0.30 in Q3 2019) - Added
US$300 million of Senior Notes due in 2028; RedeemedUS$200 million of remaining 2023 Senior Notes. - Net debt1 of
$1,982 million as atSeptember 30, 2020 (compared with$2,077 million as atJune 30, 2020 ) reflecting solid cash flow from operations. Net debt to adjusted OIBD ratio1 at 3.0x down from 3.1x as atJune 30, 2020 . - European Boxboard business announced the acquisition of
Papelera del Principado S.A. ("Paprinsa"). - Announced plans for the
Bear Island containerboard conversion project inVirginia, USA in October and concurrently completed a bought deal equity issue of 7,441,000 shares priced at$16.80 , generating gross proceed of$125 million to finance a portion of the project. - Announced the closure of two tissue production and converting operations in
Pennsylvania .
1 For further details, please refer to the "Supplemental Information on non-IFRS Measures" section. |
2 2019 third quarter consolidated results have been adjusted to reflect retrospective adjustments of purchase price allocation. |
On the strategic side, we are very pleased to have announced the launch of our
Discussing near-term outlook,
Financial Summary
Selected consolidated information
(in millions of Canadian dollars, except amounts per share) (unaudited) | Q3 2020 | Q2 2020 | Q3 2019 | |||
Sales | 1,275 | 1,285 | 1,264 | |||
As Reported | ||||||
Operating income before depreciation and amortization (OIBD)1 2 | 154 | 169 | 181 | |||
Operating income2 | 73 | 94 | 108 | |||
Net earnings2 | 49 | 54 | 43 | |||
per share2 | $ | 0.51 | $ | 0.57 | $ | 0.45 |
Adjusted1 | ||||||
Operating income before depreciation and amortization (OIBD) | 162 | 186 | 161 | |||
Operating income | 81 | 111 | 88 | |||
Net earnings | 48 | 58 | 28 | |||
per share | $ | 0.50 | $ | 0.61 | 0.30 | |
Margin (OIBD) | 12.7% | 14.5% | 12.7% |
Segmented OIBD as reported
(in millions of Canadian dollars) (unaudited) | Q3 2020 | Q2 2020 | Q3 2019 |
Packaging Products | |||
Containerboard | 101 | 83 | 120 |
Boxboard Europe | 31 | 42 | 25 |
Specialty Products | 16 | 16 | 14 |
Tissue Papers2 | 25 | 48 | 49 |
Corporate Activities | (19) | (20) | (27) |
OIBD as reported | 154 | 169 | 181 |
1 Please refer to the "Supplemental Information on Non-IFRS Measures" section for reconciliation of these figures. |
2 2019 third quarter consolidated results have been adjusted to reflect retrospective adjustments of purchase price allocation. |
Segmented adjusted OIBD1
(in millions of Canadian dollars) (unaudited) | Q3 2020 | Q2 2020 | Q3 2019 | ||
Packaging Products | |||||
Containerboard | 100 | 94 | 118 | ||
Boxboard Europe | 29 | 43 | 25 | ||
Specialty Products | 16 | 17 | 16 | ||
Tissue Papers | 36 | 54 | 24 | ||
Corporate Activities | (19) | (22) | (22) | ||
Adjusted OIBD | 162 | 186 | 161 | ||
1 - Refer to the "Supplemental Information on Non-IFRS Measures" section. |
Analysis of results for the three-month period ended
Sales of
The Corporation generated an operating income before depreciation and amortization (OIBD) of
On an adjusted basis1, third quarter 2020 OIBD stood at
$7 million of gains recorded in Containerboard and Tissue related to the sale of previously closed assets (OIBD and net earnings);$3 million of restructuring charges recorded in Containerboard following the announced closure of a converting facility inOntario by no later thanAugust 31, 2021 (OIBD and net earnings);$13 million of impairment charges recorded in Tissue related to changes in the valuation of certain assets due to the current economic and market demand conditions (OIBD and net earnings);$1 million unrealized gain on financial instruments (OIBD and net earnings);$11 million foreign exchange gain on long-term debt and financial instruments (net earnings);
For the 3-month periods ended
1 For further details, please refer to the "Supplemental Information on non-IFRS Measures" section. |
2 2019 third quarter consolidated results have been adjusted to reflect retrospective adjustments of purchase price allocation |
Dividend on common shares and normal course issuer bid
The Board of Directors of Cascades declared a quarterly dividend of
2020 Third Quarter Results Conference Call Details
Management will discuss the 2020 third quarter financial results during a conference call today at
Founded in 1964, Cascades offers sustainable, innovative and value-added packaging, hygiene and recovery solutions. The company employs 12,000 women and men across a network of 88 facilities in
CONSOLIDATED BALANCE SHEETS
(in millions of Canadian dollars) (unaudited) |
|
|
Assets | ||
Current assets | ||
Cash and cash equivalents | 227 | 155 |
Accounts receivable | 661 | 606 |
Current income tax assets | 23 | 32 |
Inventories | 606 | 598 |
Current portion of financial assets | 9 | 10 |
1,526 | 1,401 | |
Long-term assets | ||
Investments in associates and joint ventures | 86 | 80 |
Property, plant and equipment | 2,785 | 2,770 |
Intangible assets with finite useful life | 166 | 182 |
Financial assets | 19 | 16 |
Other assets | 48 | 55 |
Deferred income tax assets | 179 | 153 |
534 | 527 | |
5,343 | 5,184 | |
Liabilities and Equity | ||
Current liabilities | ||
Bank loans and advances | 9 | 11 |
Trade and other payables | 800 | 788 |
Current income tax liabilities | 19 | 17 |
Current portion of other debt without recourse to the Corporation to be refinanced | 162 | — |
Current portion of long-term debt | 91 | 85 |
Current portion of provisions for contingencies and charges | 7 | 5 |
Current portion of financial liabilities and other liabilities | 30 | 137 |
1,118 | 1,043 | |
Long-term liabilities | ||
Long-term debt | 1,947 | 2,022 |
Provisions for contingencies and charges | 55 | 49 |
Financial liabilities | 4 | 5 |
Other liabilities | 212 | 198 |
Deferred income tax liabilities | 210 | 198 |
3,546 | 3,515 | |
Equity | ||
Capital stock | 498 | 491 |
Contributed surplus | 13 | 15 |
Retained earnings | 1,089 | 1,003 |
Accumulated other comprehensive loss | (10) | (17) |
Equity attributable to Shareholders | 1,590 | 1,492 |
Non-controlling interests | 207 | 177 |
Total equity | 1,797 | 1,669 |
5,343 | 5,184 |
CONSOLIDATED STATEMENTS OF EARNINGS
For the 3-month periods ended | For the 9-month periods ended | |||||||
(in millions of Canadian dollars, except per common share amounts and number of common shares) (unaudited) | 2020 | 2019 | 2020 | 2019 | ||||
Sales | 1,275 | 1,264 | 3,873 | 3,769 | ||||
Cost of sales and expenses | ||||||||
Cost of sales (including depreciation and amortization of | 1,086 | 1,071 | 3,243 | 3,210 | ||||
Selling and administrative expenses | 107 | 105 | 348 | 320 | ||||
Gain on acquisitions, disposals and others | (7) | (22) | (5) | (29) | ||||
Impairment charges and restructuring costs | 16 | 1 | 31 | 11 | ||||
Foreign exchange loss (gain) | 1 | — | — | (1) | ||||
Loss (gain) on derivative financial instruments | (1) | 1 | (1) | (4) | ||||
1,202 | 1,156 | 3,616 | 3,507 | |||||
Operating income | 73 | 108 | 257 | 262 | ||||
Financing expense | 25 | 24 | 79 | 74 | ||||
Interest expense on employee future benefits and other liabilities | 1 | 24 | 3 | 48 | ||||
Loss on repurchase of long-term debt | 6 | — | 6 | — | ||||
Foreign exchange gain on long-term debt and financial instruments | (11) | — | (3) | (7) | ||||
Share of results of associates and joint ventures | (3) | (2) | (9) | (6) | ||||
Earnings before income taxes | 55 | 62 | 181 | 153 | ||||
Provision for (recovery of) income taxes | (3) | 12 | 24 | 30 | ||||
Net earnings including non-controlling interests for the period | 58 | 50 | 157 | 123 | ||||
Net earnings attributable to non-controlling interests | 9 | 7 | 32 | 25 | ||||
Net earnings attributable to Shareholders for the period | 49 | 43 | 125 | 98 | ||||
Net earnings per common share | ||||||||
Basic | $ | 0.51 | $ | 0.45 | $ | 1.32 | $ | 1.04 |
Diluted | $ | 0.50 | $ | 0.44 | $ | 1.30 | $ | 1.02 |
Weighted average basic number of common shares outstanding | 95,019,694 | 93,860,367 | 94,577,538 | 93,886,909 | ||||
Weighted average number of diluted common shares | 96,077,440 | 95,519,226 | 95,735,264 | 95,437,252 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the 3-month periods ended | For the 9-month periods ended | |||
(in millions of Canadian dollars) (unaudited) | 2020 | 2019 | 2020 | 2019 |
Net earnings including non-controlling interests for the period | 58 | 50 | 157 | 123 |
Other comprehensive income (loss) | ||||
Items that may be reclassified subsequently to earnings | ||||
Translation adjustments | ||||
Change in foreign currency translation of foreign subsidiaries | (14) | 1 | 43 | (57) |
Change in foreign currency translation related to net investment hedging activities | 7 | (3) | (27) | 32 |
Cash flow hedges | ||||
Change in fair value of foreign exchange forward contracts | — | — | — | 1 |
Change in fair value of interest rate swaps | — | — | — | (1) |
Change in fair value of commodity derivative financial instruments | 2 | 1 | 2 | (1) |
(5) | (1) | 18 | (26) | |
Items that are not released to earnings | ||||
Actuarial gain (loss) on employee future benefits | (4) | 2 | (19) | (13) |
Recovery of income taxes | 1 | — | 5 | 3 |
(3) | 2 | (14) | (10) | |
Other comprehensive income (loss) | (8) | 1 | 4 | (36) |
Comprehensive income including non-controlling interests for the period | 50 | 51 | 161 | 87 |
Comprehensive income attributable to non-controlling interests for the period | 12 | 4 | 43 | 13 |
Comprehensive income attributable to Shareholders for the period | 38 | 47 | 118 | 74 |
CONSOLIDATED STATEMENTS OF EQUITY
For the 9-month period ended | |||||||
(in millions of Canadian dollars) | CAPITAL | CONTRIBUTED | RETAINED | ACCUMULATED | TOTAL EQUITY | NON- | TOTAL |
Balance - End of previous | 491 | 15 | 1,000 | (17) | 1,489 | 177 | 1,666 |
Business combinations | — | — | 3 | — | 3 | — | 3 |
Adjusted balance - Beginning | 491 | 15 | 1,003 | (17) | 1,492 | 177 | 1,669 |
Comprehensive income (loss) | |||||||
Net earnings | — | — | 125 | — | 125 | 32 | 157 |
Other comprehensive income (loss) | — | — | (14) | 7 | (7) | 11 | 4 |
— | — | 111 | 7 | 118 | 43 | 161 | |
Dividends | — | — | (22) | — | (22) | (13) | (35) |
Issuance of common shares upon exercise of stock options | 9 | (2) | — | — | 7 | — | 7 |
Redemption of common shares | (2) | — | (3) | — | (5) | — | (5) |
Balance - End of period | 498 | 13 | 1,089 | (10) | 1,590 | 207 | 1,797 |
For the 9-month period ended | |||||||
(in millions of Canadian dollars) | CAPITAL | CONTRIBUTED | RETAINED | ACCUMULATED | TOTAL EQUITY | NON- | TOTAL |
Adjusted balance - Beginning of period | 490 | 16 | 989 | 2 | 1,497 | 180 | 1,677 |
Comprehensive income (loss) | |||||||
Net earnings | — | — | 98 | — | 98 | 25 | 123 |
Other comprehensive loss | — | — | (10) | (14) | (24) | (12) | (36) |
— | — | 88 | (14) | 74 | 13 | 87 | |
Dividends | — | — | (15) | — | (15) | (14) | (29) |
Issuance of common shares upon exercise of stock options | 5 | (1) | — | — | 4 | — | 4 |
Redemption of common shares | (5) | — | (3) | — | (8) | — | (8) |
Disposal of a subsidiary | — | — | — | — | — | (1) | (1) |
Capital contribution from a non-controlling interest | — | — | (3) | — | (3) | — | (3) |
Balance - End of period | 490 | 15 | 1,056 | (12) | 1,549 | 178 | 1,727 |
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the 3-month periods ended | For the 9-month periods | |||
(in millions of Canadian dollars) (unaudited) | 2020 | 2019 | 2020 | 2019 |
Operating activities | ||||
Net earnings attributable to Shareholders for the period | 49 | 43 | 125 | 98 |
Adjustments for: | ||||
Financing expense and interest expense on employee future benefits and other liabilities | 26 | 48 | 82 | 122 |
Loss on repurchase of long-term debt | 6 | — | 6 | — |
Depreciation and amortization | 81 | 73 | 227 | 212 |
Gain on acquisitions, disposals and others | (7) | (26) | (5) | (32) |
Impairment charges and restructuring costs | 16 | 1 | 31 | 6 |
Unrealized loss (gain) on derivative financial instruments | (1) | 1 | (1) | (4) |
Foreign exchange gain on long-term debt and financial instruments | (11) | — | (3) | (7) |
Provision for (recovery of) income taxes | (3) | 12 | 24 | 30 |
Share of results of associates and joint ventures | (3) | (2) | (9) | (6) |
Net earnings attributable to non-controlling interests | 9 | 7 | 32 | 25 |
Net financing expense paid | (49) | (42) | (73) | (101) |
Premium paid on repurchase of long-term debt | (4) | — | (4) | — |
Net income taxes received (paid) | (1) | (12) | 1 | (14) |
Dividends received | 2 | 1 | 7 | 3 |
Employee future benefits and others | (4) | — | (19) | (22) |
106 | 104 | 421 | 310 | |
Changes in non-cash working capital components | 30 | 53 | (38) | (13) |
136 | 157 | 383 | 297 | |
Investing activities | ||||
Disposals of associates and joint ventures | 4 | — | 3 | 1 |
Payments for property, plant and equipment | (52) | (66) | (165) | (185) |
Proceeds from disposals of property, plant and equipment | 7 | 19 | 9 | 21 |
Change in intangible and other assets | (3) | (1) | (8) | (3) |
Cash paid for business combinations | — | (300) | — | (314) |
Proceeds on disposals of a subsidiary, net of cash disposed | — | 9 | — | 9 |
(44) | (339) | (161) | (471) | |
Financing activities | ||||
Bank loans and advances | — | (2) | (2) | (2) |
Change in credit facilities | (138) | 252 | (81) | 317 |
Issuance of unsecured senior notes, net of related expenses | 409 | — | 409 | — |
Repurchase of unsecured senior notes | (264) | — | (264) | — |
Increase in other long-term debt | — | — | — | 7 |
Payments of other long-term debt | (22) | (15) | (64) | (94) |
Settlement of derivative financial instruments | — | — | 1 | — |
Issuance of common shares upon exercise of stock options | — | 4 | 7 | 4 |
Redemption of common shares | — | (3) | (5) | (8) |
Partial disposal of a subsidiary to non-controlling interests | — | — | — | — |
Payment of other liabilities | — | — | (121) | — |
Dividends paid to non-controlling interests | (4) | (4) | (13) | (14) |
Dividends paid to the Corporation's Shareholders | (7) | (8) | (22) | (15) |
(26) | 224 | (155) | 195 | |
Change in cash and cash equivalents during the period | 66 | 42 | 67 | 21 |
Currency translation on cash and cash equivalents | (1) | (2) | 5 | (6) |
Cash and cash equivalents - Beginning of period | 162 | 98 | 155 | 123 |
Cash and cash equivalents - End of period | 227 | 138 | 227 | 138 |
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
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 and Specialty Products (which constitutes the Corporation's Packaging Products), and Tissue Papers.
SALES | ||||||||||
For the 3-month periods ended | ||||||||||
Other countries | Total | |||||||||
(in millions of Canadian dollars) | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 |
Packaging Products | ||||||||||
Containerboard | 307 | 289 | 199 | 184 | — | — | — | — | 506 | 473 |
Boxboard Europe | — | — | — | — | 79 | 88 | 182 | 168 | 261 | 256 |
Specialty Products | 42 | 35 | 75 | 74 | — | — | — | 14 | 117 | 123 |
Intersegment sales | (2) | (4) | (2) | — | — | — | — | — | (4) | (4) |
347 | 320 | 272 | 258 | 79 | 88 | 182 | 182 | 880 | 848 | |
Tissue Papers | 72 | 64 | 292 | 320 | — | — | — | 3 | 364 | 387 |
Intersegment sales and Corporate Activities | 32 | 28 | (1) | 1 | — | — | — | — | 31 | 29 |
451 | 412 | 563 | 579 | 79 | 88 | 182 | 185 | 1,275 | 1,264 | |
SALES | ||||||||||
For the 9-month periods ended | ||||||||||
Other countries | Total | |||||||||
(in millions of Canadian dollars) | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 |
Packaging Products | ||||||||||
Containerboard | 835 | 824 | 582 | 550 | — | — | 1 | 2 | 1,418 | 1,376 |
Boxboard Europe | — | — | — | — | 240 | 247 | 558 | 558 | 798 | 805 |
Specialty Products | 119 | 104 | 229 | 233 | — | 1 | 2 | 49 | 350 | 387 |
Intersegment sales | (9) | (10) | (3) | (1) | — | — | — | — | (12) | (11) |
945 | 918 | 808 | 782 | 240 | 248 | 561 | 609 | 2,554 | 2,557 | |
Tissue Papers | 207 | 192 | 1,026 | 910 | — | — | 1 | 10 | 1,234 | 1,112 |
Intersegment sales and Corporate Activities | 86 | 93 | (1) | 7 | — | — | — | — | 85 | 100 |
1,238 | 1,203 | 1,833 | 1,699 | 240 | 248 | 562 | 619 | 3,873 | 3,769 |
OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION | ||||
For the 3-month periods ended | For the 9-month periods | |||
(in millions of Canadian dollars) (unaudited) | 2020 | 2019 | 2020 | 2019 |
Packaging Products | ||||
Containerboard | 101 | 120 | 286 | 345 |
Boxboard Europe | 31 | 25 | 104 | 84 |
Specialty Products | 16 | 14 | 43 | 43 |
148 | 159 | 433 | 472 | |
Tissue Papers | 25 | 49 | 118 | 70 |
Corporate Activities | (19) | (27) | (67) | (68) |
Operating income before depreciation and amortization | 154 | 181 | 484 | 474 |
Depreciation and amortization | (81) | (73) | (227) | (212) |
Financing expense and interest expense on employee future benefits and other liabilities | (26) | (48) | (82) | (122) |
Loss on repurchase of long-term debt | (6) | — | (6) | — |
Foreign exchange gain on long-term debt and financial instruments | 11 | — | 3 | 7 |
Share of results of associates and joint ventures | 3 | 2 | 9 | 6 |
Earnings before income taxes | 55 | 62 | 181 | 153 |
PAYMENTS FOR PROPERTY, PLANT AND EQUIPMENT | ||||
For the 3-month periods ended | For the 9-month periods | |||
(in millions of Canadian dollars) (unaudited) | 2020 | 2019 | 2020 | 2019 |
Packaging Products | ||||
Containerboard | 36 | 19 | 67 | 55 |
Boxboard Europe | 14 | 13 | 23 | 41 |
Specialty Products | 6 | 4 | 15 | 11 |
56 | 36 | 105 | 107 | |
Tissue Papers | 23 | 27 | 62 | 74 |
Corporate Activities | 5 | 19 | 16 | 40 |
Total acquisitions | 84 | 82 | 183 | 221 |
Proceeds from disposals of property, plant and equipment | (7) | (19) | (9) | (21) |
Right-of-use assets acquisitions and acquisitions included in other debts | (23) | (9) | (36) | (42) |
54 | 54 | 138 | 158 | |
Acquisitions for property, plant and equipment included in "Trade and other payables" | ||||
Beginning of period | 19 | 24 | 46 | 37 |
End of period | (28) | (31) | (28) | (31) |
Payments for property, plant and equipment net of proceeds from disposals | 45 | 47 | 156 | 164 |
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 repurchase of long-term debt, 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 and financial instruments, 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. This 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 the contribution of each segment when excluding depreciation and 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 the 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 obligations 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 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:
Q3 2020 | ||||||
(in millions of Canadian dollars) (unaudited) | Containerboard | Boxboard | Specialty | Tissue Papers | Corporate | Consolidated |
Operating income (loss) | 71 | 19 | 11 | 3 | (31) | 73 |
Depreciation and amortization | 30 | 12 | 5 | 22 | 12 | 81 |
Operating income (loss) before depreciation and amortization | 101 | 31 | 16 | 25 | (19) | 154 |
Specific items: | ||||||
Gain on acquisitions, disposals and others | (5) | — | — | (2) | — | (7) |
Impairment charges | — | — | — | 13 | — | 13 |
Restructuring costs | 3 | — | — | — | — | 3 |
Unrealized loss (gain) on financial instruments | 1 | (2) | — | — | — | (1) |
(1) | (2) | — | 11 | — | 8 | |
Adjusted operating income (loss) before depreciation and | 100 | 29 | 16 | 36 | (19) | 162 |
Adjusted operating income (loss) | 70 | 17 | 11 | 14 | (31) | 81 |
Q2 2020 | ||||||
(in millions of Canadian dollars) (unaudited) | Containerboard | Boxboard | Specialty | Tissue Papers | Corporate | Consolidated |
Operating income (loss) | 54 | 30 | 11 | 31 | (32) | 94 |
Depreciation and amortization | 29 | 12 | 5 | 17 | 12 | 75 |
Operating income (loss) before depreciation and amortization | 83 | 42 | 16 | 48 | (20) | 169 |
Specific items : | ||||||
Loss on acquisitions, disposals and others | — | — | 1 | — | — | 1 |
Impairment charges | 8 | — | — | 5 | — | 13 |
Restructuring costs | 1 | — | — | 1 | — | 2 |
Unrealized loss (gain) on derivative financial instruments | 2 | 1 | — | — | (2) | 1 |
11 | 1 | 1 | 6 | (2) | 17 | |
Adjusted operating income (loss) before depreciation and | 94 | 43 | 17 | 54 | (22) | 186 |
Adjusted operating income (loss) | 65 | 31 | 12 | 37 | (34) | 111 |
Q3 2019 | ||||||
(in millions of Canadian dollars) (unaudited) | Containerboard | Boxboard | Specialty | Tissue Papers1 | Corporate | Consolidated |
Operating income (loss) | 91 | 14 | 10 | 34 | (41) | 108 |
Depreciation and amortization | 29 | 11 | 4 | 15 | 14 | 73 |
Operating income (loss) before depreciation and amortization | 120 | 25 | 14 | 49 | (27) | 181 |
Specific items: | ||||||
Loss (gain) on acquisitions, disposals and others | (2) | — | 1 | (25) | 4 | (22) |
Impairment charges | — | — | 1 | — | — | 1 |
Unrealized loss on financial instruments | — | — | — | — | 1 | 1 |
(2) | — | 2 | (25) | 5 | (20) | |
Adjusted operating income (loss) before depreciation and | 118 | 25 | 16 | 24 | (22) | 161 |
Adjusted operating income (loss) | 89 | 14 | 12 | 9 | (36) | 88 |
1 2019 third quarter consolidated results have been adjusted to reflect retrospective adjustments of purchase price allocation. |
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) | Q3 2020 | Q2 2020 | Q3 20191 |
Net earnings attributable to Shareholders for the period | 49 | 54 | 43 |
Net earnings attributable to non-controlling interests | 9 | 12 | 7 |
Provision for (recovery of) income taxes | (3) | 12 | 12 |
Share of results of associates and joint ventures | (3) | (3) | (2) |
Foreign exchange gain on long-term debt and financial instruments | (11) | (9) | — |
Financing expense and interest expense on employee future benefits and other liabilities and other liabilities and loss on | 32 | 28 | 48 |
Operating income | 73 | 94 | 108 |
Specific items: | |||
Loss (gain) on acquisitions, disposals and others | (7) | 1 | (22) |
Impairment charges | 13 | 13 | 1 |
Restructuring costs | 3 | 2 | — |
Unrealized loss (gain) on derivative financial instruments | (1) | 1 | 1 |
8 | 17 | (20) | |
Adjusted operating income | 81 | 111 | 88 |
Depreciation and amortization | 81 | 75 | 73 |
Adjusted operating income before depreciation and amortization | 162 | 186 | 161 |
1 2019 third quarter consolidated results have been adjusted to reflect retrospective adjustments of purchase price allocation. |
The following table reconciles net earnings and net earnings per share, as per IFRS, with adjusted net earnings and adjusted net earnings per share:
(in millions of Canadian dollars, except amounts per share) (unaudited) | NET EARNINGS | NET EARNINGS PER SHARE 1 | ||||||||
Q3 2020 | Q2 2020 | Q3 20192 | Q3 2020 | Q2 2020 | Q3 20192 | |||||
As per IFRS | 49 | 54 | 43 | $ | 0.51 | $ | 0.57 | $ | 0.45 | |
Specific items: | ||||||||||
Loss (gain) on acquisitions, disposals and others | (7) | 1 | (22) | $ | (0.05) | — | $ | (0.24) | ||
Impairment charges | 13 | 13 | 1 | $ | 0.10 | $ | 0.10 | 0.01 | ||
Restructuring costs | 3 | 2 | — | $ | 0.03 | $ | 0.02 | — | ||
Unrealized loss (gain) on derivative financial instruments | (1) | 1 | 1 | — | $ | 0.01 | $ | 0.01 | ||
Loss on repurchase of long-term debt | 6 | — | — | $ | 0.05 | — | — | |||
Unrealized loss on interest rate swaps and option fair value | — | — | 7 | — | — | $ | 0.07 | |||
Foreign exchange gain on long-term debt and financial instruments | (11) | (9) | — | $ | (0.12) | $ | (0.09) | — | ||
Tax effect on specific items, other tax adjustments and attributable | (4) | (4) | (2) | $ | (0.02) | — | — | |||
(1) | 4 | (15) | $ | (0.01) | $ | 0.04 | $ | (0.15) | ||
Adjusted | 48 | 58 | 28 | $ | 0.50 | $ | 0.61 | $ | 0.30 |
1 Specific amounts per share are calculated on an after-tax basis and are net of the portion attributable to non-controlling interests. Per 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. |
2 2019 third quarter consolidated results have been adjusted to reflect retrospective adjustments of purchase price allocation. |
The following table reconciles cash flow from operating activities with operating income and operating income before depreciation and amortization:
(in millions of Canadian dollars) (unaudited) | Q3 2020 | Q2 2020 | Q3 20191 |
Cash flow from operating activities | 136 | 128 | 157 |
Changes in non-cash working capital components | (30) | 34 | (53) |
Depreciation and amortization | (81) | (75) | (73) |
Net income taxes paid | 1 | 7 | 12 |
Net financing expense paid | 49 | 7 | 42 |
Premium paid on long-term debt repurchase | 4 | — | — |
Gain (loss) on acquisitions, disposals and others | 7 | (1) | 26 |
Impairment charges and restructuring costs | (16) | (15) | (1) |
Unrealized gain (loss) on derivative financial instruments | 1 | (1) | (1) |
Dividend received, employee future benefits and others | 2 | 10 | (1) |
Operating income | 73 | 94 | 108 |
Depreciation and amortization | 81 | 75 | 73 |
Operating income before depreciation and amortization | 154 | 169 | 181 |
1 2019 third quarter consolidated results have been adjusted to reflect retrospective adjustments of purchase price allocation. |
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 share or otherwise mentioned) (unaudited) | Q3 2020 | Q2 2020 | Q3 2019 | |||
Cash flow from operating activities | 136 | 128 | 157 | |||
Changes in non-cash working capital components | (30) | 34 | (53) | |||
Cash flow from operating activities (excluding changes in non-cash working capital components) | 106 | 162 | 104 | |||
Specific items paid | 9 | — | 4 | |||
Adjusted cash flow from operating activities | 115 | 162 | 108 | |||
Capital expenditures & other assets1 and right-of-use assets payments, net of disposals | (60) | (51) | (58) | |||
Dividends paid to the Corporation's Shareholders and to non-controlling interests | (11) | (14) | (12) | |||
Adjusted free cash flow | 44 | 97 | 38 | |||
Adjusted free cash flow per share | $ | 0.46 | $ | 1.02 | $ | 0.40 |
Weighted average basic number of shares outstanding | 95,019,694 | 94,459,257 | 93,860,367 |
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) | September 30, | 2020 |
|
Long-term debt | 1,947 | 1,975 | 2,107 |
Current portion of long-term debt | 253 | 255 | 87 |
Bank loans and advances | 9 | 9 | 14 |
Total debt | 2,209 | 2,239 | 2,208 |
Less: Cash and cash equivalents | 227 | 162 | 138 |
Net debt | 1,982 | 2,077 | 2,070 |
Adjusted OIBD (last twelve months) | 661 | 660 | 565 |
Net debt / Adjusted OIBD ratio | 3.0x | 3.1x | 3.7x |
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