PR Newswire | Aug 5, 2021 06:01AM EDT

08/05 05:00 CDT

Cascades Reports Results for the Second Quarter of 2021, increases dividend 50% KINGSEY FALLS, QC, Aug. 5, 2021

Good packaging market dynamics partially mitigate softness in the Tissue industry and inflationary pressure on production costs;Dividend increased 50% reflecting commitment toshareholder value and confidence in long-term performance

KINGSEY FALLS, QC, Aug. 5, 2021 /PRNewswire/ - Cascades Inc. (TSX: CAS) reports its unaudited financial results for the three-month period ended June 30, 2021.

Q2 2021 Highlights (comparative figures have been restated to reflect discontinued operations2)

* Sales of $956 million (compared with $942 million in Q1 2021 (+1%) and $1,020 million in Q2 2020 (-6%)) * As reported (including specific items) * Operating income of $23 million (compared with $44 million in Q1 2021 (-48%) and $64 million in Q2 2020 (-64%)) * Operating income before depreciation and amortization (OIBD)1 of $87 million (compared with $109 million in Q1 2021 (-20%) and $127 million in Q2 2020 (-31%)) * Net earnings per share of $0.02 (compared with $0.22 in Q1 2021 and $0.57 in Q2 2020)

* Adjusted (excluding specific items1) * Operating income of $34 million (compared with $57 million in Q1 2021 (-40%) and $80 million in Q2 2020 (-58%)) * OIBD of $98 million (compared with $122 million in Q1 2021 (-20%) and $143 million in Q2 2020 (-31%)) * Net earnings per share of $0.07 (compared with $0.29 in Q1 2021 and $0.61 in Q2 2020)

* Following the July 2021 announcement by the Corporation regarding the monetization of its 57.6% controlling equity interest in Reno de Medici S.p.A. (RDM) for (euro)1.45 per share, expected to result in total net proceeds of $461 million, financial information for the Boxboard Europe segment is now presented as discontinued operations. The transaction is expected to close in the third quarter of 20212. * Quarterly dividend increased to $0.12 per share from $0.08 per share previously, effective for the second quarter payment, resulting in an annual dividend of $0.48 per share, from $0.32 per share previously, and a return of approximately 3%. * Net debt1 of $1,707 million as at June 30, 2021 (compared with $1,654 million as at March 31, 2021). Net debt to adjusted OIBD ratio1, 3 of 2.9x up from 2.5x as at March 31, 2021. Net debt amount does not reflect the RDM transaction. * Total capital expenditures, net of disposals, of $65 million in Q2 2021, compared to $71 million in Q1 20212, and to $36 million in Q2 20202; Forecasted 2021 capital expenditures of between $400 million and $425 million, encompassing $250 million for the Bear Island containerboard conversion project in Virginia, USA. * S&P Global rating agency revised its outlook on the Corporation to positive from stable.

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

2 2021 and 2020 consolidated results have been adjusted to reflect retrospective adjustments of discontinued operations.

3 Not adjusted for discontinued operations.

Mario Plourde, President and CEO, commented: "Our second quarter results were below expectations, with the sequential shortfall driven by our tissue segment. This reflected several factors, the most prominent being $12 million due to higher raw material costs and $9 million related to the net impact of sales prices and mix variance in the current period. We continued to see lower demand levels in tissue in the quarter, notably in US consumer retail product categories, as customers worked through inventories built up throughout 2020 in response to COVID-19 demand volatility. Operationally, we made the decision to temporarily curtail some tissue converting production in June to manage inventories. Notwithstanding the tissue results this quarter, we see current demand contraction as being an interim response to COVID-19 volatility given the essential nature of these products. Looking ahead, the modernization completed across our tissue platform has equipped this segment to generate important benefits when demand levels begin to normalize. On the packaging side, the Containerboard and Specialty products businesses delivered good results. Higher selling prices in Containerboard that reflect only two of the three announced price increases, coupled with good volume, were however not sufficient to fully cover raw material and production cost inflation in the second quarter, while benefits from volume growth in Specialty products more than offset the impact of higher raw material costs. A less favourable foreign exchange rate impacted the performance of all our businesses in the second quarter.

We completed an important step in our strategic plan this quarter with the announced monetization of our 57.6% equity position in Reno de Medici. This move underscores our commitment to creating long term value for the Corporation and our shareholders, and is aligned with our objective of focusing on our core North American packaging and tissue businesses. The expected net proceeds of $461 million from the transaction will improve financial flexibility and support our initiatives aimed at improving the financial performance and competitive positioning of our North American businesses. We remain dedicated to prudently and strategically deploying capital to enhance our operational platforms, while also optimizing our capital structure and evaluating opportunities to increase shareholder return including aligning our dividend return with industry averages. To this end, we are pleased to announce that we are increasing our quarterly dividend by 50% to $0.12 per share as of the second quarter of 2021, reflecting our confidence in our long-term free cash flow generation and operational performance. On an annual basis, this translates into a dividend of $0.48 per share, and increases our yield to approximately 3%."

Discussing near-term outlook, Mr. Plourde commented, "We are expecting improved results in the upcoming third quarter, supported by the roll-out of announced price increases in our Containerboard and Specialty Products segments, and a gradual normalization of demand in tissue. Notwithstanding our positive sequential outlook, the COVID-19 pandemic continues to bring with it the potential for volatility in operational and financial performance. As our second quarter results highlight, continued fluctuations in demand as well as pricing of raw materials and other input costs remain difficult to accurately predict, as does the timing and scope of economic reopening across North America. We are focused on effectively managing these uncertainties, taking decisive and necessary steps to meet the sometimes changing needs of our customers while also ensuring the safety of our employees. We are pleased with the flexibility our operations have demonstrated throughout what has been a challenging 18 months, and are very proud of the commitment and hard work of our employees."

Financial Summary

Selected consolidated information

(in millions of Canadian dollars, except amounts per Q2 Q1 2021Q2 2020share) (unaudited) 2021 ^2 ^2



Sales 956 942 1,020

As Reported

Operating income before depreciation and amortization 87 109 127 (OIBD)^1

Operating income 23 44 64

Net earnings 3 22 54

per share $0.02$0.22 $0.57

Adjusted^1

Operating income before depreciation and amortization 98 122 143 (OIBD)

Operating income 34 57 80

Net earnings 8 29 58

per share $0.07$0.29 $0.61

Margin (OIBD) 10.3 13.0 % 14.0 % %

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

2 2021 and 2020 consolidated results have been adjusted to reflect retrospective adjustments of discontinued operations.

Segmented OIBD as reported

(in millions of Canadian dollars) (unaudited)Q2 2021Q1 2021^2Q2 2020^2



Packaging Products

Containerboard 95 96 83

Boxboard Europe 11 23 42

Specialty Products 18 18 16



Tissue Papers (5) 18 48



Corporate Activities (21) (23) (20)

Total before discontinued operations 98 132 169

Discontinued operations - Boxboard Europe (11) (23) (42)

OIBD as reported 87 109 127

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

2 2021 and 2020 consolidated results have been adjusted to reflect retrospective adjustments of discontinued operations.

Segmented adjusted OIBD1

(in millions of Canadian dollars) (unaudited)Q2 2021Q1 2021^2Q2 2020^2



Packaging Products

Containerboard 100 108 94

Boxboard Europe 11 23 43

Specialty Products 18 18 17



Tissue Papers 1 20 54



Corporate Activities (21) (24) (22)

Total before discontinued operations 109 145 186

Discontinued operations - Boxboard Europe (11) (23) (43)

Adjusted OIBD^1 98 122 143

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

2 2021 and 2020 consolidated results have been adjusted to reflect retrospective adjustments of discontinued operations.

Analysis of results for the three-month period ended June 30, 2021 (compared to the same period last year2)

Sales of $956 million decreased by $64 million, or 6%, compared with the same period last year. This was driven by a less favourable Canadian dollar - US dollar exchange rate, and lower volumes in the Tissue segment following very strong retail demand in the year-ago period attributable to COVID-19 driven fluctuations in consumer buying patterns. This was partially offset by higher pricing and stronger volumes in all packaging segments and in Recovery & Recycling activities compared to the prior year period.

The Corporation generated an operating income before depreciation and amortization (OIBD) of $87 million in the second quarter of 2021, down from $127 million in the second quarter of 2020. On an adjusted basis1, second quarter OIBD totaled $98 million, a decrease of $45 million, or 31% from the $143 million generated in the same period last year. This decrease is largely attributable to higher raw material costs in all segments, a less favourable exchange rate, lower volumes in Tissue and higher production costs in Containerboard that included inflationary pressure in labour, transportation and energy. Additionally, $9 million of R&D tax credits were recorded in the second quarter of 2020, while none was recorded in the current period.

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

* $6 million of impairment and restructuring charges recorded in Tissue as part of profitability improvement and restructuring initiatives (OIBD and net earnings); * $5 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 June 30, 2021, the Corporation posted net earnings of $3 million, or $0.02 per share, compared to net earnings of $54 million, or $0.57 per share, in the same period of 2020. On an adjusted basis1, the Corporation generated net earnings of $8 million in the second quarter of 2021, or $0.07 per share, compared to net earnings of $58 million, or $0.61 per share, in the same period of 2020.

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 retrospective adjustments of discontinued operations.

Dividend on common shares and normal course issuer bid

The Board of Directors of Cascades declared a quarterly dividend of $0.12 per share to be paid on September 2, 2021 to shareholders of record at the close of business on August 18, 2021. This dividend is an "eligible dividend" as per the Income Tax Act (R.C.S. (1985), Canada). Cascades purchased no shares for cancellation during the second quarter of 2021.

2021 Second Quarter Results Conference Call Details

Management will discuss the 2021 second quarter financial results during a conference call today at 9:00 a.m. EDT. The call can be accessed by dialing 1-888-390-0620 (international dial-in 1-416-764-8651). 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 September 5, 2021 by dialing 1-888-390-0541 (international dial-in 1-416-764-8677), access code 787468.

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

June December (in millions of Canadian dollars) (unaudited) 30, 31, 2021 2020

Assets

Current assets

Cash and cash equivalents 171 384

Accounts receivable 508 659

Current income tax assets 19 23

Inventories 477 569

Current portion of financial assets 12 5

Assets classified as held for sale 735 -

1,922 1,640

Long-term assets

Investments in associates and joint ventures 82 82

Property, plant and equipment 2,406 2,772

Intangible assets with finite useful life 133 160

Financial assets 8 16

Other assets 46 50

Deferred income tax assets 149 170

Goodwill and other intangible assets with indefinite 505 522 useful life

5,251 5,412

Liabilities and Equity

Current liabilities

Bank loans and advances 7 12

Trade and other payables 608 861

Current income tax liabilities 12 17

Current portion of long-term debt 72 102

Current portion of provisions for contingencies and 11 14 charges

Current portion of financial liabilities and other 19 25 liabilities

Liabilities classified as held for sale 392 -

1,121 1,031

Long-term liabilities

Long-term debt 1,799 1,949

Provisions for contingencies and charges 52 57

Financial liabilities 8 6

Other liabilities 123 202

Deferred income tax liabilities 190 210

3,293 3,455

Equity

Capital stock 622 622

Contributed surplus 13 13

Retained earnings 1,171 1,146

Accumulated other comprehensive loss (40) (28)

Equity attributable to Shareholders 1,766 1,753

Non-controlling interests 192 204

Total equity 1,958 1,957

5,251 5,412

CONSOLIDATED STATEMENTS OF EARNINGS

For the 3-month For the 6-month periods ended June 30,periods ended June 30,

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

Sales 956 1,020 1,898 2,061

Cost of sales and expenses

Cost of sales (including depreciation and amortization of $64 million for 3-month 834 855 1,631 1,718 period (2020 - $63 million) and $129 million for 6-month period (2020 - $123 million))

Selling and administrative 87 86 174 193 expenses

Loss on acquisitions, disposals- 1 - 2 and others

Impairment charges and 6 15 11 15 restructuring costs

Foreign exchange loss (gain) 1 (1) 2 (1)

Loss on derivative financial 5 - 13 - instruments

933 956 1,831 1,927

Operating income 23 64 67 134

Financing expense 20 26 42 52

Interest expense on employee 1 1 2 2 future benefits

Foreign exchange loss (gain) on long-term debt and financial (3) (9) (6) 8 instruments

Share of results of associates (5) (3) (7) (6) and joint ventures

Earnings before income taxes 10 49 36 78

Provision for income taxes 2 7 8 17

Net earnings from continuing operations including 8 42 28 61 non-controlling interests for the period

Results from discontinued (3) 24 5 38 operations

Net earnings including non-controlling interests for 5 66 33 99 the period

Net earnings attributable to 2 12 8 23 non-controlling interests

Net earnings attributable to 3 54 25 76 Shareholders for the period

Net earnings from continuing operations per share

Basic $0.04 $0.43 $0.21 $0.58

Diluted $0.04 $0.43 $0.21 $0.57

Net earnings per common share

Basic $0.02 $0.57 $0.24 $0.81

Diluted $0.02 $0.57 $0.24 $0.80

Weighted average basic number 102,281,07294,459,257102,280,24394,354,030of common shares outstanding

Weighted average number of 103,285,36195,600,602103,360,93095,562,296diluted common shares



Net earnings attributable to Shareholders:

Continuing operations 5 40 22 54

Discontinued operations (2) 14 3 22

Net earnings 3 54 25 76

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the 3-monthFor the 6-month periods periods ended June 30, ended June 30,

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

Net earnings including non-controlling 5 66 33 99 interests for the period

Other comprehensive income (loss)

Items that may be reclassified subsequently to earnings

Translation adjustments

Change in foreign currency translation of (14) (39) (29) 43 foreign subsidiaries

Change in foreign currency translation of foreign subsidiaries from discontinued (1) (6) (20) 14 operations

Change in foreign currency translation related to net investment hedging 9 22 18 (26) activities

Change in foreign currency translation related to net investment hedging - 3 12 (8) activities from discontinued operations

Cash flow hedges

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

Change in fair value of commodity 2 - 3 - derivative financial instruments

Provision for income taxes (2) - (3) -

Provision for income taxes from - - (2) - discontinued operations

(6) (19) (21) 23

Items that are not released to earnings

Actuarial gain (loss) on employee future 4 (25) 21 (15) benefits

Recovery of (provision for) income taxes (1) 7 (6) 4

3 (18) 15 (11)

Other comprehensive income (loss) (3) (37) (6) 12

Comprehensive income including 2 29 27 111 non-controlling interests for the period

Comprehensive income (loss) attributable to2 8 (1) 31 non-controlling interests for the period

Comprehensive income attributable to - 21 28 80 Shareholders for the period

Comprehensive income (loss) attributable to Shareholders:

Continuing operations 3 8 27 58

Discontinued operations (3) 13 1 22

Comprehensive income - 21 28 80

CONSOLIDATED STATEMENTS OF EQUITY

For the 6-month period ended June 30, 2021

(in millions of ACCUMULATED TOTAL EQUITY Canadian CAPITALCONTRIBUTEDRETAINEDOTHER ATTRIBUTABLE TONON-CONTROLLINGTOTAL dollars) STOCK SURPLUS EARNINGSCOMPREHENSIVESHAREHOLDERS INTERESTS EQUITY (unaudited) LOSS

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

Comprehensive income (loss)

Net earnings - - 25 - 25 8 33

Other comprehensive - - 15 (12) 3 (9) (6) income (loss)

- - 40 (12) 28 (1) 27

Dividends - - (16) - (16) (10) (26)

Acquisition of non-controlling- - 1 - 1 (1) - interests

Balance - End 622 13 1,171 (40) 1,766 192 1,958 of period



For the 6-month period ended June 30, 2020

(in millions of ACCUMULATED TOTAL EQUITY Canadian CAPITALCONTRIBUTEDRETAINEDOTHER ATTRIBUTABLE TONON-CONTROLLINGTOTAL dollars) STOCK SURPLUS EARNINGSCOMPREHENSIVESHAREHOLDERS INTERESTS EQUITY (unaudited) LOSS

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

Comprehensive income

Net earnings - - 76 - 76 23 99

Other comprehensive - - (11) 15 4 8 12 income (loss)

- - 65 15 80 31 111

Dividends - - (15) - (15) (9) (24)

Issuance of common shares upon exercise 9 (2) - - 7 - 7 of stock options

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

Balance - End 498 13 1,050 (2) 1,559 199 1,758 of period

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the 3-monthFor the 6-month periods periods ended June 30, ended June 30,

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

Operating activities from continuing operations

Net earnings attributable to Shareholders for3 54 25 76 the period

Results from discontinued operations 3 (24) (5) (38)

Results from discontinued operations (1) 10 2 16 attributable to non-controlling interests

Net earnings from continuing operations 5 40 22 54

Adjustments for:

Financing expense and interest expense on 21 27 44 54 employee future benefits

Depreciation and amortization 64 63 129 123

Loss on acquisitions, disposals and others - 1 - 2

Impairment charges and restructuring costs 6 15 11 15

Unrealized loss on derivative financial 5 - 13 - instruments

Foreign exchange loss (gain) on long-term (3) (9) (6) 8 debt and financial instruments

Provision for income taxes 2 7 8 17

Share of results of associates and joint (5) (3) (7) (6) ventures

Net earnings attributable to non-controlling 3 2 6 7 interests

Net financing expense paid (4) (7) (44) (23)

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

Dividends received 5 5 5 5

Provisions for contingencies and charges and (11) (15) (13) (16) other liabilities

87 125 169 249

Changes in non-cash working capital (47) (19) (72) (43) components

40 106 97 206

Investing activities from continuing operations

Disposals (investments) in associates and 1 (1) 1 (1) joint ventures

Payments for property, plant and equipment (66) (37) (137) (101)

Proceeds from disposals of property, plant 1 1 1 2 and equipment

Change in intangible and other assets (7) (3) (11) (4)

Cash received from business combinations - - - 2

(71) (40) (146) (102)

Financing activities from continuing operations

Bank loans and advances 1 - (5) (2)

Change in credit facilities (1) (40) (1) 57

Increase in other long-term debt 5 - 5 -

Payments of other long-term debt, including (20) (10) (44) (20) lease obligations

Settlement of derivative financial - 1 - 1 instruments

Issuance of common shares upon exercise of - 4 - 7 stock options

Redemption of common shares - - - (5)

Payment of other liabilities - - - (121)

Dividends paid to non-controlling interests (4) (4) (8) (7) and acquisition of non-controlling interests

Dividends paid to the Corporation's (8) (8) (16) (15) Shareholders

(27) (57) (69) (105)

Change in cash and cash equivalents during (58) 9 (118) (1) the period from continuing operations

Change in cash and cash equivalents from discontinued operations and reclassification (98) 6 (88) 2 of cash and cash equivalent as held for sale

Net change in cash and cash equivalents (156) 15 (206) 1 during the period

Currency translation on cash and cash (1) (6) (7) 6 equivalents

Cash and cash equivalents - Beginning of the 328 153 384 155 period

Cash and cash equivalents - End of the period171 162 171 162

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 June 30,

Canada United Italy Other Total States countries

(in millions of Canadian dollars) 2021202020212020202120202021 2020 2021 2020 (unaudited)

Packaging Products

Containerboard 301 268 196 186 - - - - 497 454

Boxboard Europe - - - - 83 80 170 185 253 265

Specialty Products 58 42 73 78 - - - - 131 120

Inter-segment sales (3) (4) (4) (1) - - - - (7) (5)

356 306 265 263 83 80 170 185 874 834

Tissue Papers 58 65 239 359 - - - - 297 424

Inter-segment sales and34 28 4 (1) - - - - 38 27 Corporate Activities

448 399 508 621 83 80 170 185 1,2091,285

Discontinued operations- - - - (83)(80)(170)(185)(253)(265)- Boxboard Europe

448 399 508 621 - - - - 956 1,020

SALES TO

For the 6-month periods ended June 30,

Canada United Italy Other Total States countries

(in millions of Canadian dollars) 202120202021 2020 2021 2020 2021 2020 2021 2020 (unaudited)

Packaging Products

Containerboard 600 528 400 383 - - - 1 1,000912

Boxboard Europe - - - - 174 161 365 376 539 537

Specialty Products 105 77 148 154 - - - 2 253 233

Inter-segment sales(7) (7) (7) (1) - - - - (14) (8)

698 598 541 536 174 161 365 379 1,7781,674

Tissue Papers 115 135 474 734 - - - 1 589 870

Inter-segment sales and Corporate 65 54 5 - - - - - 70 54 Activities

878 787 1,0201,270174 161 365 380 2,4372,598

Discontinued operations - - - - - (174)(161)(365)(376)(539)(537)Boxboard Europe

878 787 1,0201,270- - - 4 1,8982,061

OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION

For the 3-month For the 6-month periods periods ended June 30, ended June 30,

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

Packaging Products

Containerboard 95 83 191 185

Boxboard Europe 11 42 34 73

Specialty Products 18 16 36 27

124 141 261 285

Tissue Papers (5) 48 13 93

Corporate Activities (21) (20) (44) (48)

Operating income before depreciation and amortization before discontinued 98 169 230 330 operations

Discontinued operations - Boxboard Europe (11) (42) (34) (73)

Operating income before depreciation and 87 127 196 257 amortization

Depreciation and amortization (64) (63) (129) (123)

Financing expense and interest expense on (21) (27) (44) (54) employee future benefits

Foreign exchange gain (loss) on long-term 3 9 6 (8) debt and financial instruments

Share of results of associates and joint 5 3 7 6 ventures

Earnings before income taxes 10 49 36 78

PAYMENTS FOR PROPERTY, PLANT AND EQUIPMENT

For the 3-monthFor the 6-month periods periods ended June 30, ended June 30,

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

Packaging Products

Containerboard 52 15 106 31

Boxboard Europe 10 4 17 9

Specialty Products 8 4 16 9

70 23 139 49

Tissue Papers 4 15 12 39

Corporate Activities 7 5 11 11

Total acquisitions before discontinued 81 43 162 99 operations

Discontinued operations - Boxboard Europe (10) (4) (17) (9)

Total acquisitions 71 39 145 90

Proceeds from disposals of property, plant and (1) (1) (1) (2) equipment

Right-of-use assets acquisitions and (12) (4) (12) (11) acquisitions included in other debts

58 34 132 77

Acquisitions for property, plant and equipment included in "Trade and other payables"

Beginning of period 49 32 46 52

End of period (42) (30) (42) (30)

Payments for property, plant and equipment net 65 36 136 99 of proceeds 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:

Q2 2021

Exclusion of Including Discontinued Operations DiscontinuedAs reported Operations^1

(in millions of Canadian ContainerboardBoxboardSpecialtyTissue PapersCorporate Boxboard Consolidateddollars) Europe Products ActivitiesEurope (unaudited)

Operating 64 (1) 14 (22) (33) 1 23 income (loss)

Depreciation and 31 12 4 17 12 (12) 64 amortization

Operating income (loss) before 95 11 18 (5) (21) (11) 87 depreciation and amortization

Specific items:

Loss on acquisitions,- 2 - - - (2) - disposals and others

Impairment - - - 1 - - 1 charges

Restructuring- - - 5 - - 5 costs

Unrealized loss (gain) on derivative5 (2) - - - 2 5 financial instruments

5 - - 6 - - 11

Adjusted operating income (loss) before 100 11 18 1 (21) (11) 98 depreciation and amortization

Adjusted operating 69 (1) 14 (16) (33) 1 34 income (loss)

Q1 2021

Exclusion of As reported in 2021 DiscontinuedAs reported Operations^1

(in millions of Canadian ContainerboardBoxboardSpecialtyTissueCorporate Boxboard Consolidateddollars) Europe Products PapersActivitiesEurope (unaudited)

Operating 65 12 15 - (36) (12) 44 income (loss)

Depreciation and 31 11 3 18 13 (11) 65 amortization

Operating income (loss) before 96 23 18 18 (23) (23) 109 depreciation and amortization

Specific items :

Restructuring3 - - 2 - - 5 costs

Unrealized loss (gain) on derivative9 - - - (1) - 8 financial instruments

12 - - 2 (1) - 13

Adjusted operating income (loss) before 108 23 18 20 (24) (23) 122 depreciation and amortization

Adjusted operating 77 12 15 2 (37) (12) 57 income (loss)

1 2021 consolidated results have been adjusted to reflect retrospectiveadjustments of discontinued operations.

Q2 2020

Exclusion of As reported in 2020 DiscontinuedAs reported Operations^1

(in millions of Canadian ContainerboardBoxboardSpecialtyTissueCorporate Boxboard Consolidateddollars) Europe Products PapersActivitiesEurope (unaudited)

Operating 54 30 11 31 (32) (30) 64 income (loss)

Depreciation and 29 12 5 17 12 (12) 63 amortization

Operating income (loss) before 83 42 16 48 (20) (42) 127 depreciation and amortization

Specific items:

Loss on acquisitions,- - 1 - - - 1 disposals and others

Impairment 8 - - 5 - - 13 charges

Restructuring1 - - 1 - - 2 costs

Unrealized loss (gain) on derivative2 1 - - (2) (1) - financial instruments

11 1 1 6 (2) (1) 16

Adjusted operating income (loss) before 94 43 17 54 (22) (43) 143 depreciation and amortization

Adjusted operating 65 31 12 37 (34) (31) 80 income (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) Q2 2021Q1 2021Q2 2020 ^1 ^1 ^1



Net earnings attributable to Shareholders for the 3 22 54 period

Net earnings attributable to non-controlling 2 6 12 interests

Results from discontinued operations 3 (8) (24)

Provision for income taxes 2 6 7

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

Foreign exchange gain on long-term debt and financial(3) (3) (9) instruments

Financing expense and interest expense on employee 21 23 27 future benefits

Operating income 23 44 64

Specific items:

Loss on acquisitions, disposals and others - - 1

Impairment charges 1 - 13

Restructuring costs 5 5 2

Unrealized loss on derivative financial instruments 5 8 -

11 13 16

Adjusted operating income 34 57 80

Depreciation and amortization 64 65 63

Adjusted operating income before depreciation and 98 122 143 amortization

1 2021 and 2020 consolidated results have been adjusted to reflectretrospective adjustments 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 Canadian dollars, NET EARNINGS PER SHARE except amounts per share) NET EARNINGS ^1 (unaudited)

Q2 Q1 Q2 Q2 2021 2021^20212020^1 Q1 2021Q2 2020 1



As per IFRS 3 22 54 $0.02 $0.22 $0.57

Specific items:

Loss on acquisitions, disposals and- - 1 - - - others

Impairment charges 1 - 13 $0.01 - $0.10

Restructuring costs 5 5 2 $0.04 $0.03 $0.02

Unrealized loss on derivative 5 8 - $0.03 $0.06 - financial instruments

Foreign exchange gain on long-term (3) (3) (9) ($0.03)($0.02)($0.09)debt and financial instruments

Included in discontinued - - 1 - - $0.01 operations, net of tax

Tax effect on specific items, other tax adjustments and attributable to(3) (3) (4) - - - non-controlling interest^1

5 7 4 $0.05 $0.07 $0.04

Adjusted 8 29 58 $0.07 $0.29 $0.61

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.

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) Q2 2021Q1 2021Q2 2020 ^1 ^1 ^1

Cash flow from operating activities from continuing 40 57 106 operations

Changes in non-cash working capital components 47 25 19

Depreciation and amortization (64) (65) (63)

Net income taxes paid (received) 1 (2) 1

Net financing expense paid 4 40 7

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

Impairment charges and restructuring costs (6) (5) (15)

Unrealized loss on derivative financial instruments (5) (8) -

Provisions for contingencies and charges and other 6 2 10 liabilities

Operating income 23 44 64

Depreciation and amortization 64 65 63

Operating income before depreciation and 87 109 127 amortization

1 2021 and 2020 consolidated results and consolidated cash flows have beenadjusted to reflect retrospective adjustments 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, except amount per share or otherwise mentioned) Q2 2021^1 Q1 2021^2 Q2 2020^2 (unaudited)

Cash flow from operating activities from 40 57 106 continuing operations

Changes in non-cash working capital 47 25 19 components

Cash flow from operating activities from continuing operations(excluding changes in87 82 125 non-cash working capital components)

Specific items paid 2 4 -

Adjusted cash flow from operating 89 86 125 activities from continuing operations

Capital expenditures & other assets^1 and right-of-use assets payments, net of (83) (86) (47) disposals

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

Adjusted free cash flow generated (used) (4) (12) 66

Adjusted free cash flow generated (used) ($0.04) ($0.12) $0.70 per share (in Canadian dollars)

Weighted average basic number of shares 102,281,072102,279,40494,459,257outstanding

1 Excluding increase in investments

2 2021 and 2020 consolidated cash flows have been adjusted to reflect retrospective adjustments 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):

June 30,MarchJune (in millions of Canadian dollars) (unaudited) 31, 30, 2021 2021 2020

Long-term debt 1,799 1,8891,975

Current portion of long-term debt 72 87 255

Bank loans and advances 7 6 9

Total debt 1,878 1,9822,239

Less: Cash and cash equivalents 171 328 162

Net debt as reported 1,707 1,6542,077

Net debt of discontinued operations classified as held (6) 11 - for sale^1

Net debt - before reclassification as held for sale^1 1,701 1,6652,077

Adjusted OIBD including $90 million (June 30, 2021), $122 million (March 31, 2021) and $122 million 582 659 660 (June 30, 2020) from discontinued operations (last twelve months)^1

Net debt / Adjusted OIBD^1 2.9 x 2.5 x3.1 x



Net debt as reported 1,707 1,6542,077

Expected net proceeds of disposal of RDM^1 (461) - -

Pro forma net debt 1,246 1,6542,077

Adjusted OIBD as reported on a last twelve months basis 492 659 660

Pro forma net debt / Adjusted OIBD^1 2.5 x 2.5 x3.1 x

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

Source:Allan HoggVice-President and Chief Financial Officer

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SOURCE Cascades Inc.