PR Newswire | May 6, 2021 06:00AM EDT

05/06 05:00 CDT

Cascades Reports Results for the First Quarter of 2021 KINGSEY FALLS, QC, May 6, 2021

Volume headwinds in Tissue limit consolidated performance

KINGSEY FALLS, QC, May 6, 2021 /PRNewswire/ - Cascades Inc. (TSX: CAS) reports its unaudited financial results for the three-month period ended March 31, 2021.

Q1 2021 Highlights (comparative figures have been restated to reflect discontinued operations2)

* Sales of $1,182 million (compared with $1,242 million in Q4 2020 (-5%) and $1,265 million in Q1 2020 (-7%)) * As reported (including specific items) * Operating income of $52 million (compared with $113 million in Q4 2020 (-54%) and $87 million in Q1 2020 (-40%)) * Operating income before depreciation and amortization (OIBD)1 of $128 million (compared with $183 million in Q4 2020 (-30%) and $157 million in Q1 2020 (-18%)) * Net earnings per share of $0.22 (compared with $0.72 in Q4 2020 and $0.24 in Q1 2020)

* Adjusted (excluding specific items)1 * Operating income of $65 million (compared with $92 million in Q4 2020 (-29%) and $87 million in Q1 2020 (-25%)) * OIBD of $141 million (compared with $162 million in Q4 2020 (-13%) and $157 million in Q1 2020 (-10%)) * Net earnings per share of $0.29 (compared with $0.42 in Q4 2020 and $0.42 in Q1 2020)

* Net debt1 of $1,654 million as at March 31, 2021 (compared with $1,679 million as at December 31, 2020). Net debt to adjusted OIBD ratio1, 3 of 2.5x is unchanged from December 31, 2020. * Adjusted free cash flow1 of ($4) million, or ($0.04) per share, in Q1 2021, compared to $83 million, or $0.83 per share, in Q4 2020 and $55 million, or $0.58 per share, in Q1 2020. * Total capital expenditures, net of disposals, of $78 million in Q1 2021, compared to $37 million in Q4 2020 and to $73 million in Q1 2020; Forecasted 2021 capital expenditures of between $450 million and $475 million, encompassing $250 million for the Bear Island containerboard conversion project in Virginia, USA, is unchanged. * Following the February 2021 announcement by Reno De Medici S.p.A. (Boxboard Europe) regarding the sale of its French virgin fibre boxboard subsidiary, financial information of this facility are now presented as discontinued operations. The transaction closed April 30, 2021.

1 Please refer to the "Supplemental Information on Non-IFRS Measures" sectionfor a complete reconciliation.

2 2020 consolidated results have been adjusted to reflect retrospectiveadjustments of discontinued operations.

3 Not adjusted for discontinued operations.

Mario Plourde, President and CEO, commented: "Our first quarter consolidated results highlight the dynamic and challenging business environment in view of the ongoing COVID-19 pandemic. The sequential decrease in our results was largely driven by an important contraction in retail tissue demand as customers worked through high inventory levels built up throughout 2020, and continued lower volumes in Away-from-Home. Tissue volumes were also impacted by inclement weather in the quarter, which resulted in lost production in one of the Corporation's Southern U.S. tissue plants. Conversely, the European Boxboard segment generated strong sequential sales growth in the period, the beneficial impact of which was offset by a notable increase in raw material prices and higher energy costs in the period. Solid demand levels and higher selling prices in the Containerboard segment were largely offset by transportation and raw material cost increases, and lower volume related to seasonality and scheduled maintenance downtime in the first three months of the year. Specialty Products generated strong sequential margin improvement.

Within the context of today's unpredictable business environment, we are pleased with the progress we made in our strategic initiatives and investments during the first quarter. The optimization and modernization of our Tissue platform is nearing completion, and the strategic decisions and investments made in recent years have better equipped this business to navigate the current challenging market dynamics. In Containerboard, our Bear Island conversion project is advancing on schedule and on budget, and the European Boxboard segment is expected to close its acquisition of Papelera del Principado S.A. ("Paprinsa") at the end of June 2021. We continued to focus on our margin improvement program, with these initiatives expected to contribute 1% annually to our consolidated adjusted OIBD level based on our 2019 reference year."

Discussing near-term outlook, Mr. Plourde commented, "In light of continued uncertainty regarding the COVID-19 pandemic, we are maintaining a cautiously optimistic view for our near-term performance. Sequential results from our Tissue business are expected to remain stable, with performance over the longer-term expected to improve as consumer tissue demand normalizes once inventories are re-balanced, Away-from-Home demand increases as the economy and businesses reopen, and benefits are realized from the high single digit price increase announced for consumer and Away-from-Home tissue products beginning in the third quarter. We expect near-term Containerboard performance to reflect good demand and cumulative benefits from announced price increases, counterbalanced by raw material price inflation and planned maintenance downtime at our two Niagara Falls facilities in the second quarter. Near-term results for the Specialty Products are forecasted to remain stable sequentially, with higher volume and average selling prices offsetting slightly higher raw material costs. Lastly, sequential performance from the European Boxboard segment is expected to remain stable as good volumes and higher average selling price as a result of announced price increases should mitigate higher raw material costs.

More broadly speaking, we are focused on advancing our Bear Island containerboard project, and finalizing modernization investments in our tissue converting operations. These investments will be fully funded by projected operational cash flows for the year. We continue to remain vigilant on ensuring the health and safety of our employees, and on actively working with our customers to meet their evolving needs and expectations."

Financial Summary

Selected consolidated information

(in millions of Canadian dollars, except amounts per Q1 2021 Q4 2020^ Q1 2020^share) (unaudited) 2 2

Sales 1,182 1,242 1,265

As Reported

Operating income before depreciation and amortization 128 183 157(OIBD)^1

Operating income 52 113 87

Net earnings 22 73 22

per share $ 0.22 $ 0.72 $ 0.24

Adjusted^1

Operating income before depreciation and amortization 141 162 157(OIBD)

Operating income 65 92 87

Net earnings 29 42 39

per share $ 0.29 $ 0.42 0.42

Margin (OIBD) 11.9 % 13.0 % 12.4 %

1 Please refer to the "Supplemental Information on Non-IFRS Measures" sectionfor reconciliation of these figures.

2 2020 consolidated results have been adjusted to reflect retrospectiveadjustments of discontinued operations.

Segmented OIBD as reported

(in millions of Canadian dollars) (unaudited) Q1 2021 Q4 2020^2 Q1 2020^2

Packaging Products

Containerboard 96 150 102

Boxboard Europe 23 18 31

Specialty Products 18 15 11

Tissue Papers 18 27 45

Corporate Activities (23) (29) (28)

Total before discontinued operations 132 181 161

Discontinued operations - Boxboard Europe (4) 2 (4)

OIBD as reported 128 183 157

1 Please refer to the "Supplemental Information on Non-IFRS Measures" sectionfor reconciliation of these figures.

2 2020 consolidated results have been adjusted to reflect retrospectiveadjustments of discontinued operations.

Segmented adjusted OIBD1

(in millions of Canadian dollars) (unaudited) Q1 2021 Q4 2020^2 Q1 2020^2

Packaging Products

Containerboard 108 110 99

Boxboard Europe 23 27 30

Specialty Products 18 15 12

Tissue Papers 20 40 45

Corporate Activities (24) (26) (25)

Total before discontinued operations 145 166 161

Discontinued operations - Boxboard Europe (4) (4) (4)

Adjusted OIBD 141 162 157

1 Please refer to the "Supplemental Information on Non-IFRS Measures"section for a complete reconciliation.

2 2020 consolidated results have been adjusted to reflect retrospectiveadjustments of discontinued operations.

Analysis of results for the three-month period ended March 31, 2021 (compared to the same period last year2)

Sales of $1,182 million decreased by $83 million, or 7%, compared with the same period last year. This was driven by lower volumes in the Tissue segment attributable to continued COVID-19 related market softness in the Away-from-Home segment, and an important contraction in consumer retail product volumes as customers rebalanced inventory levels that had been built up in response to elevated Covid-19 demand. This was partially offset by stronger volumes in all packaging segments, most notably in the Containerboard segment which benefited from strong demand on both the manufacturing and converting side. Year-over-year consolidated sales levels also benefited from more favourable average selling prices and sales mix, with price increases realized in Tissue and Containerboard. Foreign exchange rates were beneficial for the European Boxboard business, but these benefits were more than offset by the impact of less favourable foreign exchange rates in North America.

The Corporation generated an operating income before depreciation and amortization (OIBD) of $128 million in the first quarter of 2021, down from $157 million in the first quarter of 2020. On an adjusted basis1, first quarter OIBD totaled $141 million, a decrease of $16 million, or 10% from the $157 million generated in the same period last year. This decrease is largely attributable to lower Tissue results, which reflected difficult year-over-year comparisons following elevated Covid-19 related demand in the year-ago period and customer inventory management in the current period that impacted retail consumer demand levels. European Boxboard adjusted OIBD levels also decreased from the year ago period, as material cost inflation more than offset the benefits from improved volumes. Good results from the North American packaging segments partially counterbalanced these headwinds. Results from the Containerboard segment increased 9% year-over-year, with higher volumes and beneficial selling price and sales mix mitigating the impact of higher raw material prices, while those of Specialty Products increased 50% compared to the prior year period, driven by higher volumes and better realized spreads. Results also benefited from lower SG&A costs as a $10 million expected credit loss provision on accounts receivable amounts was recorded in 2020 in relation to the COVID-19 pandemic.

The main specific items, before income taxes, that impacted our first quarter 2021 OIBD and/or net earnings were:

* $5 million of restructuring charges recorded in Containerboard and Tissue as part of profitability improvement and restructuring initiatives (OIBD and net earnings); * $8 million unrealized loss on financial instruments (OIBD and net earnings); * $3 million foreign exchange gain on long-term debt and financial instruments (net earnings);

For the 3-month period ended March 31, 2021, the Corporation posted net earnings of $22 million, or $0.22 per share, compared to net earnings of $22 million, or $0.24 per share, in the same period of 2020. On an adjusted basis1, the Corporation generated net earnings of $29 million in the first quarter of 2021, or $0.29 per share, compared to net earnings of $39 million, or $0.42 per share, in the same period of 2020.

1 Please refer to the "Supplemental Information on Non-IFRS Measures" sectionfor a complete reconciliation.

2 2020 consolidated results have been adjusted to reflect retrospectiveadjustments of discontinued operations.

Dividend on common shares and normal course issuer bid

The Board of Directors of Cascades declared a quarterly dividend of $0.08 per share to be paid on June 3, 2021 to shareholders of record at the close of business on May 19, 2021. This dividend is an "eligible dividend" as per the Income Tax Act (R.C.S. (1985), Canada). Cascades purchased no share for cancellation during the first quarter of 2021.

2021 First Quarter Results Conference Call Details

Management will discuss the 2021 first quarter financial results during a conference call today at 9:00 a.m. EDT. The call can be accessed by dialing 1-888-231-8191 (international dial-in 1-647-427-7450). The conference call, including the investor presentation, will be broadcast live on the Cascades website (www.cascades.com under the "Investors" section). A replay of the call will be available on the Cascades website and may also be accessed by phone until June 6, 2021 by dialing 1-855-859-2056 (international dial-in 1-416-849-0833), access code 1148359.

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 85 facilities in North America and Europe. Driven by its participative management, half a century of experience in recycling, and continuous research and development efforts, Cascades continues to provide innovative products that customers have come to rely on, while contributing to the well-being of people, communities and the entire planet. 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 Corporation'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 Corporation's Securities and Exchange Commission filings.

CONSOLIDATED BALANCE SHEETS

March December(in millions of Canadian dollars) (unaudited) 31, 31, 2021 2020

Assets

Current assets

Cash and cash equivalents 328 384

Accounts receivable 621 659

Current income tax assets 22 23

Inventories 577 569

Current portion of financial assets 11 5

Assets classified as held for sale 64 -

1,623 1,640

Long-term assets

Investments in associates and joint ventures 85 82

Property, plant and equipment 2,730 2,772

Intangible assets with finite useful life 155 160

Financial assets 9 16

Other assets 46 50

Deferred income tax assets 151 170

Goodwill and other intangible assets with indefinite 518 522useful life

5,317 5,412

Liabilities and Equity

Current liabilities

Bank loans and advances 6 12

Trade and other payables 822 861

Current income tax liabilities 21 17

Current portion of long-term debt 87 102

Current portion of provisions for contingencies and 13 14charges

Current portion of financial liabilities and other 19 25liabilities

Liabilities classified as held for sale 48 -

1,016 1,031

Long-term liabilities

Long-term debt 1,889 1,949

Provisions for contingencies and charges 58 57

Financial liabilities 7 6

Other liabilities 177 202

Deferred income tax liabilities 200 210

3,347 3,455

Equity

Capital stock 622 622

Contributed surplus 13 13

Retained earnings 1,172 1,146

Accumulated other comprehensive loss (34) (28)

Equity attributable to Shareholders 1,773 1,753

Non-controlling interests 197 204

Total equity 1,970 1,957

5,317 5,412

CONSOLIDATED STATEMENTS OF EARNINGS

For the 3-month periods ended March 31,

(in millions of Canadian dollars, except per common 2021 2020share amounts and number of common shares) (unaudited)

Sales 1,182 1,265

Cost of sales and expenses

Cost of sales (including depreciation and amortization 1,008 1,051of $76 million (2020 - $70 million))

Selling and administrative expenses 108 127

Loss on acquisitions, disposals and others - 1

Restructuring costs 5 -

Foreign exchange loss 1 -

Loss (gain) on derivative financial instruments 8 (1)

1,130 1,178

Operating income 52 87

Financing expense 23 27

Interest expense on employee future benefits 1 1

Foreign exchange loss (gain) on long-term debt and (3) 17financial instruments

Share of results of associates and joint ventures (2) (3)

Earnings before income taxes 33 45

Provision for income taxes 8 15

Net earnings from continuing operations including 25 30non-controlling interests for the period

Results from discontinued operations 3 3

Net earnings including non-controlling interests for the 28 33period

Net earnings attributable to non-controlling interests 6 11

Net earnings attributable to Shareholders for the period 22 22

Net earnings from continuing operations per share

Basic $ 0.20 $ 0.22

Diluted $ 0.20 $ 0.21

Net earnings per common share

Basic $ 0.22 $ 0.24

Diluted $ 0.22 $ 0.23

Weighted average basic number of common shares 102,279,404 94,248,804outstanding

Weighted average number of diluted common shares 103,437,340 95,523,990

Net earnings attributable to Shareholders:

Continuing operations 20 20

Discontinued operations 2 2

Net earnings 22 22

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the 3-month periods ended March 31,

(in millions of Canadian dollars) (unaudited) 2021 2020

Net earnings including non-controlling interests for the 28 33period

Other comprehensive income (loss)

Items that may be reclassified subsequently to earnings

Translation adjustments

Change in foreign currency translation of foreign (33) 101subsidiaries

Change in foreign currency translation of foreign (1) 1subsidiaries from discontinued operations

Change in foreign currency translation related to net 21 (59)investment hedging activities

Cash flow hedges

Change in fair value of interest rate swaps - (1)

Change in fair value of commodity derivative financial 1 -instruments

Recovery of income taxes (3) -

(15) 42

Items that are not released to earnings

Actuarial loss on employee future benefits 17 10

Recovery of income taxes (5) (3)

12 7

Other comprehensive income (loss) (3) 49

Comprehensive income including non-controlling interests 25 82for the period

Comprehensive income (loss) attributable to non-controlling (3) 23interests for the period

Comprehensive income attributable to Shareholders for the 28 59period

Comprehensive income attributable to Shareholders:

Continuing operations 27 56

Discontinued operations 1 3

Comprehensive income 28 59

CONSOLIDATED STATEMENTS OF EQUITY

For the 3-month period ended March 31, 2021

(in millions ACCUMULATED TOTAL EQUITY NON-of Canadian CAPITAL CONTRIBUTED RETAINED OTHER ATTRIBUTABLE CONTROLLING TOTALdollars) STOCK SURPLUS EARNINGS COMPREHENSIVE TO INTERESTS EQUITY(unaudited) INCOME (LOSS) SHAREHOLDERS

Balance -Beginning of 622 13 1,146 (28) 1,753 204 1,957period

Comprehensiveincome (loss)

Net earnings - - 22 - 22 6 28

Othercomprehensive - - 12 (6) 6 (9) (3)income (loss)

- - 34 (6) 28 (3) 25

Dividends - - (8) - (8) (4) (12)

Balance - End 622 13 1,172 (34) 1,773 197 1,970of period

For the 3-month period ended March 31, 2020

(in millions ACCUMULATED TOTAL EQUITY NON-of Canadian CAPITAL CONTRIBUTED RETAINED OTHER ATTRIBUTABLE CONTROLLING TOTALdollars) STOCK SURPLUS EARNINGS COMPREHENSIVE TO INTERESTS EQUITY(unaudited) INCOME (LOSS) SHAREHOLDERS

Balance -Beginning of 491 15 1,003 (17) 1,492 177 1,669period

Comprehensiveincome

Net earnings - - 22 - 22 11 33

Othercomprehensive - - 7 30 37 12 49income

- - 29 30 59 23 82

Dividends - - (7) - (7) (3) (10)

Issuance ofcommon sharesupon exercise 4 (1) - - 3 - 3of stockoptions

Redemption of (3) - (2) - (5) - (5)common shares

Balance - End 492 14 1,023 13 1,542 197 1,739of period

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the 3-month periods ended March 31,

(in millions of Canadian dollars) (unaudited) 2021 2020

Operating activities from continuing operations

Net earnings attributable to Shareholders for the period 22 22

Results from discontinued operations (3) (3)

Results from discontinued operations attributable to 1 1non-controlling interests

Net earnings from continuing operations 20 20

Adjustments for:

Financing expense and interest expense on employee future 24 28benefits

Depreciation and amortization 76 70

Loss on acquisitions, disposals and others - 1

Restructuring costs 5 -

Unrealized loss (gain) on derivative financial 8 (1)instruments

Foreign exchange loss (gain) on long-term debt and (3) 17financial instruments

Provision for income taxes 8 15

Share of results of associates and joint ventures (2) (3)

Net earnings attributable to non-controlling interests 5 10

Net financing expense paid (41) (17)

Net income taxes received 1 9

Provisions for contingencies and charges and other (3) -liabilities

98 149

Changes in non-cash working capital components (14) (32)

84 117

Investing activities from continuing operations

Payments for property, plant and equipment (82) (74)

Proceeds from disposals of property, plant and equipment 4 1

Change in intangible and other assets (4) (2)

Cash received from business combinations - 2

(82) (73)

Financing activities from continuing operations

Bank loans and advances (6) (2)

Change in credit facilities - 97

Payments of other long-term debt, including lease (33) (20)obligations

Issuance of common shares upon exercise of stock options - 3

Redemption of common shares - (5)

Payment of other liabilities - (121)

Dividends paid to non-controlling interests (4) (3)

Dividends paid to the Corporation's Shareholders (8) (7)

(51) (58)

Change in cash and cash equivalents during the period (49) (14)from continuing operations

Change in cash during the period from discontinued (1) -operations

Net change in cash and cash equivalents during the period (50) (14)

Currency translation on cash and cash equivalents (6) 12

Cash and cash equivalents - Beginning of the period 384 155

Cash and cash equivalents - End of the period 328 153

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 December 31, 2020.

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 TO

For the 3-month periods ended March 31,

Canada United Italy Other Total States countries

(in millions of Canadiandollars) 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020(unaudited)

Packaging Products

Containerboard 299 260 204 197 - - - 1 503 458

Boxboard Europe - - - - 91 81 195 191 286 272

Specialty Products 47 35 75 76 - - - 2 122 113

Inter-segment sales (4) (3) (3) - - - - - (7) (3)

342 292 276 273 91 81 195 194 904 840

Tissue Papers 57 70 235 375 - - - 1 292 446

Inter-segment sales and 31 26 1 1 - - - - 32 27Corporate Activities

430 388 512 649 91 81 195 195 1,228 1,313

Discontinued operations - - - - - (10) (9) (36) (39) (46) (48)Boxboard Europe

430 388 512 649 81 72 159 156 1,182 1,265

OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION

For the 3-month periods ended March 31,

(in millions of Canadian dollars) (unaudited) 2021 2020

Packaging Products

Containerboard 96 102

Boxboard Europe 23 31

Specialty Products 18 11

137 144

Tissue Papers 18 45

Corporate Activities (23) (28)

Operating income before depreciation and amortization 132 161before discontinued operations

Discontinued operations - Boxboard Europe (4) (4)

Operating income before depreciation and amortization 128 157

Depreciation and amortization (76) (70)

Financing expense and interest expense on employee (24) (28)future benefits

Foreign exchange gain (loss) on long-term debt and 3 (17)financial instruments

Share of results of associates and joint ventures 2 3

Earnings before income taxes 33 45

PAYMENTS FOR PROPERTY, PLANT AND EQUIPMENT

For the 3-month periods ended March 31,

(in millions of Canadian dollars) (unaudited) 2021 2020

Packaging Products

Containerboard 54 16

Boxboard Europe 7 5

Specialty Products 8 5

69 26

Tissue Papers 8 24

Corporate Activities 4 6

Total acquisitions 81 56

Proceeds from disposals of property, plant and (4) (1)equipment

Right-of-use assets acquisitions and acquisitions - (9)included in other debts

77 46

Acquisitions for property, plant and equipmentincluded in "Trade and other payables"

Beginning of period 40 46

End of period (39) (19)

Payments for property, plant and equipment net of 78 73proceeds from disposals

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 and option fair value revaluation, foreign exchange gains or losses on long-term debt and financial instruments, fair value revaluation gain or losses on investments, 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:

Q1 2021

Exclusion of Including Discontinued Operations Discontinued As reported Operations

(in millionsof Canadian Containerboard Boxboard Specialty Tissue Corporate Boxboard Consolidateddollars) Europe Products Papers Activities Europe(unaudited)

Operating 65 12 15 - (36) (4) 52income (loss)

Depreciationand 31 11 3 18 13 - 76amortization

Operatingincome (loss)before 96 23 18 18 (23) (4) 128depreciationandamortization

Specificitems:

Restructuring 3 - - 2 - - 5costs

Unrealizedloss (gain)on derivative 9 - - - (1) - 8financialinstruments

12 - - 2 (1) - 13

Adjustedoperatingincome (loss)before 108 23 18 20 (24) (4) 141depreciationandamortization

Adjustedoperating 77 12 15 2 (37) (4) 65income (loss)

Q4 2020

Exclusion of As reported in 2020 Discontinued As reported Operations^1

(in millionsof Canadian Containerboard Boxboard Specialty Tissue Corporate Boxboard Consolidateddollars) Europe Products Papers Activities Europe(unaudited)

Operating 122 5 12 10 (40) 4 113income (loss)

Depreciationand 28 13 3 17 11 (2) 70amortization

Operatingincome (loss)before 150 18 15 27 (29) 2 183depreciationandamortization

Specificitems :

Loss (gain)onacquisitions, (40) - - 2 - - (38)disposals andothers

Impairmentcharges (2) 9 - 5 1 (6) 7(reversals)

Restructuring - - - 6 2 - 8costs

Unrealizedloss onderivative 2 - - - - - 2financialinstruments

(40) 9 - 13 3 (6) (21)

Adjustedoperatingincome (loss)before 110 27 15 40 (26) (4) 162depreciationandamortization

Adjustedoperating 82 14 12 23 (37) (2) 92income (loss)

1 2020 consolidated results have been adjusted to reflect retrospectiveadjustments of discontinued operations.

Q1 2020

Exclusion of As reported in 2020 Discontinued As reported Operations^1

(in millionsof Canadian Containerboard Boxboard Specialty Tissue Corporate Boxboard Consolidateddollars) Europe Products Papers Activities Europe(unaudited)

Operating 74 20 8 28 (40) (3) 87income (loss)

Depreciationand 28 11 3 17 12 (1) 70amortization

Operatingincome (loss)before 102 31 11 45 (28) (4) 157depreciationandamortization

Specificitems:

Loss onacquisitions, - - 1 - - - 1disposals andothers

Unrealizedloss (gain)on derivative (3) (1) - - 3 - (1)financialinstruments

(3) (1) 1 - 3 - -

Adjustedoperatingincome (loss)before 99 30 12 45 (25) (4) 157depreciationandamortization

Adjustedoperating 71 19 9 28 (37) (3) 87income (loss)

1 2020 consolidated results have been adjusted to reflect retrospectiveadjustments of discontinued operations.

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) Q1 Q4 2020 Q1 2020 2021 ^1 ^1

Net earnings attributable to Shareholders for the period 22 73 22

Net earnings attributable to non-controlling interests 6 4 11

Results from discontinued operations (3) 3 (3)

Provision for income taxes 8 22 15

Fair value revaluation loss on investments - 3 -

Share of results of associates and joint ventures (2) (5) (3)

Foreign exchange loss (gain) on long-term debt and (3) (3) 17financial instruments

Financing expense and interest expense on employee 24 16 28future benefits

Operating income 52 113 87

Specific items:

Loss (gain) on acquisitions, disposals and others - (38) 1

Impairment charges - 7 -

Restructuring costs 5 8 -

Unrealized loss (gain) on derivative financial 8 2 (1)instruments

13 (21) -

Adjusted operating income 65 92 87

Depreciation and amortization 76 70 70

Adjusted operating income before depreciation and 141 162 157amortization

1 2020 consolidated results have been adjusted to reflect retrospectiveadjustments of discontinued operations.

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 Canadiandollars, except amounts NET EARNINGS NET EARNINGS PER SHARE ^1per share) (unaudited)

Q1 2021 Q4 2020^2 Q1 2020 Q1 2021 Q4 2020^2 Q1 2020

As per IFRS 22 73 22 $0.22 $0.72 $0.24

Specific items:

Loss (gain) onacquisitions, disposals - (38) 1 - ($0.34) $0.01and others

Impairment charges - 7 - - $0.06 -

Restructuring costs 5 8 - $0.03 $0.05 -

Unrealized loss (gain) onderivative financial 8 2 (1) $0.06 $0.02 ($0.01)instruments

Unrealized gain oninterest rate swaps and - (11) - - ($0.12) -option fair value

Foreign exchange loss(gain) on long-term debt (3) (3) 17 ($0.02) ($0.02) $0.18and financial instruments

Fair value revaluation - 3 - - $0.02 -loss on investments

Included in discontinued - 6 - - $0.03 -operations, net of tax

Tax effect on specificitems, other taxadjustments and (3) (5) - - - -attributable tonon-controlling interest^1

7 (31) 17 $0.07 ($0.30) $0.18

Adjusted 29 42 39 $0.29 $0.42 $0.42

Specific amounts per share are calculated on an after-tax basis and are net of the portion attributable to non-controlling interests. Per share amounts1 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 2020 consolidated results have been adjusted to reflect retrospective adjustments of discontinued operations.

The following table reconciles cash flow from operating activities from continuing operations with operating income and operating income before depreciation and amortization:

(in millions of Canadian dollars) (unaudited) Q1 Q4 2020^ Q1 2020^ 2021 1 1

Cash flow from operating activities from continuing 84 202 117operations

Changes in non-cash working capital components 14 (60) 32

Depreciation and amortization (76) (70) (70)

Net income taxes paid (received) (1) 10 (9)

Net financing expense paid 41 6 17

Gain (loss) on acquisitions, disposals and others - 38 (1)

Impairment charges and restructuring costs (5) (15) -

Unrealized gain (loss) on derivative financial (8) (2) 1instruments

Provisions for contingencies and charges and other 3 4 -liabilities

Operating income 52 113 87

Depreciation and amortization 76 70 70

Operating income before depreciation and amortization 128 183 157

1 2020 consolidated results have been adjusted to reflect retrospectiveadjustments of discontinued operations.

The following table reconciles cash flow from operating activities from continuing operations with cash flow from operating activities from continuing operations (excluding changes in non-cash working capital components) and adjusted cash flow from operating activities from continuing operations. It also reconciles adjusted cash flow from operating activities from continuing operations to adjusted free cash flow, which is also calculated on a per share basis:

(in millions of Canadian dollars, exceptamount per share or otherwise mentioned) Q1 2021 Q4 2020^2 Q1 2020^2(unaudited)

Cash flow from operating activities from 84 202 117continuing operations

Changes in non-cash working capital 14 (60) 32components

Cash flow from operating activities fromcontinuing operations (excluding changes in 98 142 149non-cash working capital components)

Specific items paid 4 6 -

Adjusted cash flow from operating activities 102 148 149from continuing operations

Capital expenditures & other assets^1 andright-of-use assets payments, net of (94) (53) (84)disposals

Dividends paid to the Corporation's (12) (12) (10)Shareholders and to non-controlling interests

Adjusted free cash flow (4) 83 55

Adjusted free cash flow per share ($0.04) $0.83 $0.58

Weighted average basic number of shares 102,279,404 99,937,437 94,248,804outstanding

1 Excluding increase in investments

2 2020 consolidated cash flows have been adjusted to reflect retrospectiveadjustments of discontinued operations.

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):

March 31, December 31, March 31,(in millions of Canadian dollars) 2020 2021 2020

Long-term debt 1,889 1,949 2,264

Current portion of long-term debt 87 102 92

Bank loans and advances 6 12 9

Total debt 1,982 2,063 2,365

Less: Cash and cash equivalents 328 384 153

Net debt 1,654 1,679 2,212

Net debt of discontinued operations classified 11 - -as Held for sale^1

Net debt - before reclassification as Held for 1,665 1,679 2,212sale^1

Adjusted OIBD including $16 million (March,31, 2021), $16 million (December 31, 2020) and 659 675 630$11 million (March 31, 2020) from discontinuedoperations (last twelve months)^1

Net debt / Adjusted OIBD^1 2.5 x 2.5 x 3.5 x

1 Net debt / Adjusted OIBD before discontinued operations in the BoxboardEurope segment.

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SOURCE Cascades Inc.