Cascades Continues to Show Good Results (Part 1 of 3 - Financial Tables Will Follow Shortly).KINGSEY FALLS, QUEBEC--(BUSINESS WIRE)--Oct. 27, 1997--(ME, TSE See Tokyo Stock Exchange. TSE 1. See Tokyo Stock Exchange (TSE). 2. See Toronto Stock Exchange (TSE). CAS. ) Cascades Inc. announces for the third quarter ending September 30, 1997, net earnings before non- recurring re·cur intr.v. re·curred, re·cur·ring, re·curs 1. To happen, come up, or show up again or repeatedly. 2. To return to one's attention or memory. 3. To return in thought or discourse. items of $10.7M or $0.15 per share, compared to $20.9M or $0.34 per share for the corresponding period in 1996. These earnings are relatively stable compared to the earnings of the second quarter of 1997 which were $11M or $0.16 per share. The good performance of the mills purchased during the year as well as the important increase in profitability of the fine papers group compensated the losses incurred in the containerboard con·tain·er·board n. A corrugated or solid cardboard used to make containers. group which has experienced a temporary increase in its recycled fiber supply costs. Taking into account non-recurring items after income taxes and non- controlling interests controlling interest The ownership of a quantity of outstanding corporate stock sufficient to control the actions of the firm. Controlling interest often involves ownership of significantly less than 51% of a firm's outstanding stock because many owners fail of $10.2M or $0.16 per share, net earnings for the third quarter of 1997 were $426,000. The non-recurring loss resulted from a major debt refinancing Refinancing An extension and/or increase in amount of existing debt. program of our subsidiary, Paperboard paperboard, material similiar in shape and composition to paper, but generally thicker, stronger, and more rigid. Paper machines, e.g., Fourdrinier machines, are used to make sheets of paperboard. Industries International Inc., completed on September 25, 1997 consisting mainly of the premium paid on the redemption of $US 76.9M of debentures bearing interest at 11.05 percent and 11.38 percent and a write-off of the deferred exchange loss and financing fees. This refinancing will result in annual savings of approximately $3M. For the nine-month period ending September 30, 1997, net earnings were $22.7M or $0.30 per share compared with $72.5M or $1.18 per share for the corresponding period in 1996. Excluding the non- recurring items, net earnings for the nine-month period ending September 30, 1997 were $24.8M or $0.33 per share compared with $58.7M or $0.94 per share for the corresponding period in 1996. In commenting on the results, Mr. Laurent Lemaire, President and Chief Executive Officer of Cascades Inc., stated: "We are satisfied with the recent significant progress of our fine papers and boxboard box·board n. A firm cardboard used for making boxes. groups. These groups operate in favorable markets and have completed acquisitions which are highly accretive. With regard to our other operations, the containerboard group has posted disappointing results due to difficult market conditions. However, this group should improve its profitability during the next quarter given that recycled fiber costs have declined since then and that a containerboard price increase was implemented in October. The tissue papers group performed well, taking into account an increasingly competitive market environment. Perkins Papers Ltd has begun a major investment program which is progressing according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. the expected timeframe. This program will allow this group to maintain its level of profitability during the next quarters. The specialty products group continues to offer earnings stability to the Company. This group will concentrate on innovation and improving its market share in the different niche markets A niche market also known as a target market is a focused, targetable portion (subset) of a market sector. By definition, then, a business that focuses on a niche market is addressing a need for a product or service that is not being addressed by mainstream providers. in which it evolves." Mr. Lemaire added : "The diversity of our operations has served us well this quarter by providing a measure of stability to the Company's consolidated results and protection against the cyclical cyclical Of or relating to a variable, such as housing starts, car sales, or the price of a certain stock, that is subject to regular or irregular up-and-down movements. variations of the pulp and paper industry The global pulp and paper industry is dominated by North American (United States, Canada), northern European (Finland, Sweden) and East Asian countries (such as Japan). Australasia and Latin America also have significant pulp and paper industries. ." Revenues The Company's consolidated revenues increased by 13.5 percent, going from $514.1M in the third quarter of 1996 to $583.5M for the corresponding period in 1997. This increase results mainly from the fine papers group for which revenues increased by 65 percent following the integration of Provincial Papers Inc. and the opening of new distribution centers. The acquisitions completed in 1997, have more than compensated the revenues attributable to the sale of assets in 1996. The decline in revenues for the boxboard and tissue papers groups resulted from lower sales prices. Moreover, revenues of the boxboard group have been influenced by important variations of the $CAN/FF exchange rate. Profitability The Company's operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. was $40.6M for quarter ending September 30, 1997 compared with $50.3M for the corresponding period in 1996. The third quarter operating income is nevertheless slightly higher than the second quarter of 1997 which was $39.2M. This increase resulted from improved results in the boxboard and fine papers groups. Financing charges decreased 9.2 percent going from $15.1M in the third quarter of 1996 to $13.7M for the corresponding period in 1997. The decrease is essentially due to lower financing cost. Cash flow and financial position For the quarter ending September 30, 1997, Cascades generated cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses of $49M or $0.73 per share, compared with $53.2M or $0.90 per share for the corresponding quarter in 1996. During the quarter, 1,521,374 common shares were issued at $10 per share for a total amount of $15.2M following the exercise of warrants expiring on September 2, 1997. Moreover, 89,200 common shares were redeemed pursuant to the Company's redemption plan at an average cost of $10.14 during the quarter. With these two transactions, the number of common shares issued and outstanding was 66,393,360 as of September 30, 1997. The net bank indebtedness of the Company, which was $127.6M at the beginning of the third quarter of 1997, was reduced to $74.5M. The long-term indebtedness of the Company has increased $187.6M compared to the beginning of the third quarter in 1997 following the acquisition of the Arnsberg mill, the redemption of preferred shares Preferred shares Preferred shares give investors a fixed dividend from the company's earnings and entitle them to be paid before common shareholders. See: Preferred stock. and convertible debentures Convertible Debenture Any type of debenture that can be converted into some other security. Notes: For example, a convertible bond can be converted into stock. , and the refinancing of short- term loans Optimization of the capital structure During the quarter ending September 30, 1997, the Company has undertaken several transactions to optimize its capital structure and decrease its financing charges in order to create shareholders' value. Among others, it has accomplished the following: - As of September 30, 1997, the Company reimbursed $27.6 M$ of convertible debentures bearing interest at 7.25 percent for a total amount of $41.3M (including the reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. premium) thereby allowing the Company to avoid the dilution of 4,239,554 common shares. - On September 1, 1997 the Company redeemed $50.9M Class A Preferred Shares which paid a dividend of 7.5 percent. - On September 25, Paperboard Industries International Inc., completed a private placement of $473.6M to repay loans with restrictive covenants Restrictive covenants Provisions that place constraints on the operations of borrowers, such as restrictions on working capital, fixed assets, future borrowing, and payment of dividends. , provide greater flexibility and extend the average maturity of its debt. Merger of the assets of Cascades and Domtar Containerboard On October 9, Cascades and Domtar announced the merger of their respective containerboard operations. This transaction estimated at $1 billion will allow Cascades to obtain a critical mass in this highly fragmented cyclical business which is heading toward a consolidation phase. Based on the independent financial advice of CIBC Wood Gundy CIBC Wood Gundy was created in 1988 with the purchase of Wood Gundy Inc. by CIBC. CIBC Wood Gundy is a division of CIBC World Markets. Canadian Imperial Bank of Commerce Chief Executive Officer: Gerald T. McCaughey | FY 2006 Statistics: Net income: $2. on the value of the respective assets, Cascades will receive a 50 per cent interest in the joint venture and a cash consideration of $70M, in exchange for assets valued at approximately $350 M. The joint venture is also considering the acquisition of the Mississauga corrugated cor·ru·gate v. cor·ru·gat·ed, cor·ru·gat·ing, cor·ru·gates v.tr. To shape into folds or parallel and alternating ridges and grooves. v.intr. container facility for a cash consideration to be determined in an agreement with our subsidiary, Paperboard Industries International Inc. Cascades and Domtar will have equal representation on the Board of directors of the new entity. Cascades will have a two-year management contract renewable for one year, during which it will develop an autonomous management team for the new Company. The Chairman of the new entity will be Mr. Raymond Royer, who is President and Chief Executive Officer of Domtar Inc. The President and Chief Executive Officer will be Mr. Alain Lemaire, Executive Vice President of Cascades. In commenting the transaction, Mr. Alain Lemaire stated: "The operations of the two companies are an excellent fit because of their complementary strengths, including geographic location of the mills and box plants, mix of linerboard lin·er·board n. A type of paperboard used in making corrugated cartons. and corrugated medium products, and of virgin and recycled content. The facilities are well maintained, with minimal capital expenditures required. Although some rationalization clearly is expected, the partners are confident in the growth prospects of the new entity." The merger is subject to certain conditions, including financing, completion of due diligence Research; analysis; your homework. This term has caught on in all industries, because it sounds so "wired." Who would want to do analysis or research when they can do due diligence. See wired. and regulatory approvals. It is expected to be finalized See finalization. by December 31, 1997. Outlook In the coming quarters, we will pursue our strategic growth by consolidating recent acquisitions and optimizing the resulting synergies. We expect a constant demand and few capacity additions during the coming quarters for most of the markets in which our groups operate. At the sales price level, price increases were put in place during the third quarter and other increases are expected in the coming quarters in the containerboard, fine papers and boxboard businesses. Tissue paper prices and recycled fibre costs should remain stable. Increases in production capacity in our boxboard and tissue papers groups should also increase the Company's revenues. Consequently, the overall profitability of Cascades should continue to improve during the coming quarters. CONTACT: Cascades Inc. Mr. Andre Belzile, 819/363-5140 abelzile@cascades.com or Cascades Inc. Mr. Stephane Milot, 514/282-2681 smilot@cascades.com |
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