Leading
the way.
T
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P
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L
A
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N
A
1
2
0
2
I
S
E
D
A
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2021
Annual
Report
Containerboard
Packaging
A Canadian leader
6th largest producer
in North America
Recovery
A Canadian leader
in the recovery
of recyclable fibres
$3,956 M
Sales
$330 M
Invested in property,
plant & equipment, excluding
right-of-use assets
2021 at
a Glance
Specialty Products
A North American leader in industrial
and food packaging
A leading North American producer
of honeycomb paperboard
Tissue Papers
A Canadian leader
4th largest producer
in North America
$302 M
Operating income
before depreciation and
amortization (OIBD)
$389 M
Adjusted OIBD1
1 Some information represent Non-IFRS financial measures, other financial measures or Non-IFRS ratios which are not standardized under IFRS
and therefore might not be comparable to similar financial measures disclosed by other corporations. Please refer to the “Supplemental Information
on Non-IFRS Measures and Other Financial Measures” section for a complete reconciliation.
Always leading the way
in sustainable development
4.3 X1
less water consumed
than the North American
pulp and paper industry
average (m3/mt)
Launch of the 4th Sustainable
Development Plan (2021-2025)
Greenhouse gas reduction targets approved
by the Science Based Targets initiative
2.4 X1
less energy used
than the North American
pulp and paper industry
average (GJ/mt)
2.1 M
short tons of recycled fibres
saved from landfills
CDP (B)
18th in the Global100 ranking
83%
of the fibres used
to manufacture our
products are recycled
45%2
less greenhouse gas emitted
than the North American
pulp and paper industry
average (t CO2 eq./mt)
1.23
OSHA frequency rate
1 Source: FisherSolve™Next, ©2022 Fisher International, water (cubic meters of water discharged/metric ton of saleable products), energy
(gigajoules of energy purchased/metric ton of saleable products)
2 Source:FisherSolve™Next,©2022FisherInternational,directandindirectemissions(scope1and2)(tonsofCO2equivalentemitted/metricton
of saleable products). Preliminary data.
3 OSHAfrequencyrate:numberofaccidentswithlosttimeortemporaryassignmentsormedicaltreatmentsX200,000hours/hourworked.
3
Leading the way.
Financial Snapshot
(inmillionsofCanadiandollars,unlessotherwisenoted)
20211
20201
20191
AS REPORTED
Sales
Operatingincome
% of sales2
Operatingincomebeforedepreciationandamortization(OIBD)
% of sales2
Net earnings
per share (in dollars)
Dividend per share (in dollars)
ADJUSTED2
Operatingincome
% of sales
Operatingincomebeforedepreciationandamortizationadjusted(OIBD)
% of sales
Net earnings
per share (in dollars)
FINANCIAL POSITION (AS AT DECEMBER 31)
Totalassets
Net debt2
Netdebt/adjustedOIBD2
EquityattributabletoShareholders
per share (in dollars)
Workingcapitalasapercentageofsales2,5
KEY INDICATORS
Totalshipments(in‘000ofs.t.)3
Manufacturingcapacityutilizationrate4
US$/CAN$-Averagerate
3,956
50
1.3%
302
7.6%
162
$1.60
$0.48
137
3.5%
389
9.8%
27
$0.26
4,566
1,351
3.5x
1,879
$18.63
8.6%
2,075
90%
$0.80
4,105
292
7.1%
543
13.2%
198
$2.04
$0.32
295
7.2%
546
13.3%
187
$1.95
5,412
1,679
2.5x
1,753
$17.14
8.8%
2,189
92%
$0.75
3,948
216
5.5%
458
11.6%
72
$0.77
$0.24
254
6.4%
496
12.6%
96
$1.02
5,188
1,963
3.3x
1,492
$15.83
9.8%
2,076
90%
$0.75
1 2021firstquarter,2020and2019consolidatedresultshavebeenadjustedtoreflectretrospectiveadjustmentsofdiscontinuedoperations.Pleaserefer
tothe“DiscontinuedOperations”sectionandNote5ofthe2021AuditedConsolidatedFinancialStatementsformoredetails.
2
3
4
5
4
4
SomeinformationrepresentNon-IFRSfinancialmeasures,otherfinancialmeasuresorNon-IFRSratioswhicharenotstandardizedunderIFRSandtherefore
mightnotbecomparabletosimilarfinancialmeasuresdisclosedbyothercorporations.Pleaserefertothe“SupplementalInformationonNon-IFRS
MeasuresandOtherFinancialMeasures”sectionforacompletereconciliation.
Shipmentsdonottakeintoaccounttheeliminationofbusinesssectorinter-segmentshipments.ShipmentsfromourSpecialtyProductssegmentare
notpresentedasdifferentunitsofmeasureareused.
Definedas:Manufacturinginternalandexternalshipments/practicalcapacity.ExcludingSpecialtyProductssegmentmanufacturingactivities.
Percentageofsales=Averagequarterlylasttwelvemonths(LTM)workingcapital/LTMsales(Notadjustedforretrospectivereclassification
of discontinued operations).
2021 Annual Report
2021 Annual Report Financial Highlights
Symbol: CAS
(ON THE TORONTO STOCK EXCHANGE)
S&P/TSX Indices
- COMPOSITE CAP
- COMPOSITE HIGH DIVIDEND
- COMPOSITE TR
- SMALL CAP
MSCI Indices
- ACWI EX US IMI
- CANADA IMI EXTENDED ESG FOCUS INDEX
FTSE Indices
- CANADA ALL CAP
- DEVELOPED EX US ALL CAP
- DEVELOPED SMALL CAP EX-U.S.
Solactive Indices1
- CANADA BROAD MARKET
- ISS ESG SCREEN PARIS ALIGN
DEVELOPED MARKETS
100.9 million
Common shares
outstanding
as at December 31, 2021
145.4 million
Total number of common
shares traded
in 2021
$0.48
Annual dividend
per share
in 20212
$18.49
Intraday high
in 2021
3.4%
Annual
dividend yield
as at December 31, 2021
$12.82
Intraday low
in 2021
$1.41 billion
Market capitalization
as at December 31, 2021
Moody’s: Ba2 (stable)
S&P: BB- (positive)
Corporate credit ratings
as at December 31, 2021
1 Solactive is a Germany-based index provider.
2Quarterlydividendincreasedfrom$0.08to$0.12pershareinQ22021.
Cascades Share Price Performance
in 2021
$13.97
as at December 31, 2021
$19.00
$18.00
$17.00
$16.00
$15.00
$14.00
$13.00
$12.00
Jan
Feb
March
April
May
June
July
Aug
Sept
Oct
Nov
Dec
CAS–TSX – Closing price ($)
5
5
Leading the way. Leading
Transfer Agent and Registrar
Computershare
Shareholders Services
1500Robert-BourassaBoulevardSuite700
Montréal,QuébecH3A3S8Canada
Telephone:514-982-7555
Toll-free(Canada):1-800-564-6253
Fax:514-982-7635
service@computershare.com
Head Office
CascadesInc.
404Marie-VictorinBoulevard
KingseyFalls,QuébecJ0A1B0Canada
Telephone:819-363-5100
Fax:819-363-5155
Investor Relations
JenniferAitken,MBA
Director, Investor Relations
investor@cascades.com
Telephone:514-282-2697
www.cascades.com/investors
CascadesInc.’s2021AnnualInformationForm
willbeavailable,uponrequest,fromtheCorporation’s
headofficeasofMarch30,2022.
ThedocumentwillalsobeaccessibleviatheCorporation’swebsite
(www.cascades.com)andwillbefiledonSEDAR
(www.sedar.com) as of this date.
Onpeutseprocurerlaversionfrançaiseduprésentrapportannuel
ens’adressantausiègesocialdelaSociétéàl’adressesuivante:
Secrétaire corporatif
Cascadesinc.
404, boulevard Marie-Victorin
Kingsey Falls (Québec)
J0A1B0
the way
6
2021 Annual Report Leading
the way
Table of
Contents
08
Message from Alain Lemaire
Executive Chairman of the Board
TakingtheLead
·
10
Message from Mario Plourde
President and Chief
Executive Officer
ThePathForward
·
14
Our Innovations
Seeing Further
·
21
Financial Information
Management’sDiscussionandAnalysis,
Management’sReport,IndependentAuditor’s
ReportandConsolidatedFinancialStatements
·
142
Raw Materials and
Overview of our Results
·
144
Our Facilities
On the cover, Felipe Medina,
Operator of the Thermoforming Machine 13,
at the Cascades Plastics - Kingsey Falls facility:
“I believe that diversity allows for creativity and innovation because everyone
bringstheirownuniquebackground.AtCascades,diversityopenstheway
toinnovativesolutions,promotesabetterabilitytoadapttochange
andallowsforevolution.Iamveryproudofthis.”
7
Leading the way. Alain
Lemaire
Executive Chairman
of the Board of Directors
8
2021 Annual Report
Taking the Lead.
Dear Fellow Shareholders,
It is often said that necessity is the mother of all inventions. It certainly was part of the drive motivating my
brothers and I when we founded Cascades almost six decades ago. Added to it was a steadfast belief that an
important amount of material destined for the landfill could and should be given another life – recycled and
reused to create something new. In so doing, we knew the environmental impact inherent in the transformation
of materials could be reduced. This belief, and this commitment to build and enhance the circular economy,
remains at the core of Cascades’ business practices today.
Withoutquestion,theCorporationhaschanged–insomeways
considerably–overtheyears.Whatremainsintact,however,is
our unwavering commitment to sustainability – making
something new out of something old with less water, less
energy,andwithlessimpactonournaturalsurroundings–our
commitment to the health, safety and well-being of our
employees, and our dedication to positively contributing to
socialcausesandourcommunities.Thisisnothingnewforus.
Wearenotsimplyrealigningourselvestokeepupwiththelatest
trend, it is not a marketing ploy nor a sales tactic. Rather, it
isingrainedinCascades’DNA.
ItisinthisspiritthatCascadeslauncheditsnewSustainability
ActionPlanin2021,ourfourthsuchplanandanaturalextension
ofCascades’25+yearhistoryofreportingonsocialandenviron-
mental indicators. Encompassing multiple targets, the plan is
both broad in scope and ambitious in nature. Goals have been
expanded, including the objective to reduce Scope 3 green-
housegas(GHG)emissionslevelsby22%by2030fromthe2019
base year. Importantly, these GHG reduction targets were
submittedandsubsequentlyapprovedbySBTi(ScienceBased
Targets initiative) and are all the more ambitious given that
Cascades is already a leader on the environmental front,
having consumed 4.3x less water and 2.4x less energy and
emitted 45% fewer GHG Scope 1 and Scope 2 emissions than
theNorthAmericanpulpandpaperindustryin2021.Cascades
takesitsenvironmentalstewardshipseriously.Itisapriority.
initiatives
From a practical standpoint, the modernization
carried out over recent years have equipped the Corporation
with the necessary tools and the required level of oversight to
trackprogress,toadjustoperationalpracticesasneeded,and
to allocate resources to ensure that our sustainable develop-
ment plan’s objectives are met. Stewardship falls under the
mandateoftheHealthandSafety,EnvironmentandSustainable
Development Committee, with broader governance oversight
extendedtotheentireBoardofDirectors.
The same holds true for the Corporation’s newly announced
strategicplanfor2022–2024,forwhichoversightwillbecom-
prehensivefromaBoardofDirectorsperspective.Everyaspect
of the plan was questioned, challenged, and discussed at the
Boardlevelpriortoitslaunch,withexternalresourcesproviding
additionalinsight,analysis,competitiveandmarketperspective
and validation. Environmental, social and governance (ESG)
practices and objectives are spelled out in the plan, as they are
asmuchapartoftheCorporation’sDNAastheyareofitsfuture
growth and success, as well as its positioning in the market,
along with its activities and employees.
On behalf of the Board of Directors, I would like to thank
Cascades’ employees, shareholders, business partners, and
stakeholdersfortheirsupportthroughout2021.Itwasadifficult
year from many perspectives, with the ongoing pandemic
leading to unforeseeable and unpredictable operational
constraints and causing an
impact on our
activities. With its most recent strategic plan coming to an end,
Cascades’Managementteam,supportedbytheBoardofDirec-
tors, has put in place a rigorous plan of action that will position
theCorporationtogenerateimportantsustainablevalueinthe
future. We look forward to updating all of the Corporation’s
stakeholdersonourprogressasthisnewplanisputintoaction.
immeasurable
Leading the way.
9
Leading the way. Mario
Plourde
President and Chief
Executive Officer
10
2021 Annual Report
2021 Annual Report The Path Forward.
Dear Fellow Shareholders,
Every year brings new challenges and opportunities, and in this regard, 2021 was no different. What distin-
guished 2021 was the scope and speed with which the pandemic triggered significant demand fluctuations,
inflationary pressures on costs, constraints in the availability of labour, as well as logistical and supply chain
disruptions. Without question, the business realities prevalent throughout 2021 meant that this past year was
unlike any before, and the unprecedented operational complexities that evolved from the ongoing COVID-19
pandemic are clearly reflected in the Corporation’s consolidated financial performance.
While the Cascades’ management team is certainly not
satisfiedwiththeseresults,wedonotbelievethattheyare
an accurate portrayal of what our operations can deliver.
And,giventhedifficultandcontinuouslyevolvingbusiness
context of the past year, we are proud of the level of
resiliency shown by our employees and our operations.
Acompanyisdefinedbothbyhowitexecutesduringusual
business cycles and by how it navigates more challenging
periods. What truly sets a company apart, however, is how it
applies the operational insights gained during periods of
unparalleled business and macro-economic environments,
like those of the past 24 months, toward positive change
andfuturegrowth.Tothisend,IamconfidentthatCascades
is equipped to deliver important value momentum going
forward. While this may seem optimistic in light of continued
long-term
uncertainty
ramifications of the pandemic, this steadfast belief is
foundedonfourkeyelements.
surrounding
the mid
and
Our Employees
The first and most important of these are our employees.
Cascaders have always exemplified a great deal of
ingenuity,dedication,anddetermination.Theircommitment
and initiative have been the fundamental drivers behind
Cascades’ success over the past six decades and were
indispensable to our ability to meet the needs of our
customers while concurrently navigating the unprece-
dented human and operational challenges brought about by
the pandemic. Our employees have been the heart of
Cascades since our founding, and their resolve and
versatility will be the foundation of its future successes.
Our Sustainability Leadership
For almost 60 years Cascades has been a champion of
responsible products and has striven to continuously
its production practices to minimize their
optimize
environmental impact and provide our customers with
innovative solutions that embody the circular economy.
While this may not have always been the simplest approach,
it has always been the right one, and we are proud that
our longstanding environmental commitment has been
recognizedforthethirdstraightyearwithCascadesbeing
ranked as the 18th most sustainable company
in the
world by Corporate Knights. Cascades’ new 2021 – 2025
Sustainability Action Plan takes this commitment even
further,andclearlydemonstratesnotonlytheCorporation’s
longstanding dedication to minimizing the impact on its
natural environment, but also our perseverance to always do
more with less. Our expertise in providing our customers
with industry-leading sustainable solutions and dedication
tominimizingourenvironmentalfootprintwillbeimportant
differentiators in Cascades’ competitive positioning and a
keycatalystforourfuturegrowthandvaluecreation.
Our Track-Record of Adaptability
Cascades has consistently demonstrated an openness to
change, a capacity to transform its operations, and an ability
to make strategically important changes to its business
portfoliothroughoutitshistory.TheCorporation’sexitfrom
the European boxboard market, which generated net
proceedsof$450millionin2021,highlightsexactlythis.The
significantmodernizationinitiativesandinvestmentscom-
pleted over the past decade are similarly concrete indica-
tions of these changes. Over this timeframe we have
Leading the way.
11
Leading the way. The key pillars to accelerate profitability and strengthen
fundamentals in our tissue papers segment include:
1.
2.
3.
Focusingonexecutionandefficiencyattheproduction
level, particularly in our U.S. operations, while streng-
thening commercial strategies to drive value
Leveraging this segment’s well-invested asset base
whilelimitingannualcapitalexpendituresto$35million
through 2024
Generatingrevenuesof$1.7billionandOIBDmargins1 of
9%-10%in2024.
Iamconfident wehave the right teamandthe right expe-
rience to deliver on this plan. We have taken significant
steps to reposition our businesses and adapt to evolving
market dynamics and customer needs over the past
10 years. I am proud of the work we have accomplished,
andthisrenewedvisionequipsCascadestodeliverforour
customers and our shareholders.
OnbehalfoftheCascadesmanagementteam,Iwouldliketo
thankyouforyourcontinuedsupportthroughthispastyear.
Theyear2021wasindeedchallengingonmanyfronts,but
the operational and human insights gained will be the cata-
lysts for our path forward. We are intently focused and com-
mittedtodrivevalueonmultiplefrontsforCascadesandour
stakeholders, and to continue “leading the way” in our
unwavering belief that our industry-leading sustainability
practices are inseparable from our responsibility as a corpo-
ratecitizen,andanintegralpartofourgrowthinthefuture.
streamlined our business portfolio, modernized our plat-
formsandequipment,realignedandoptimizedourinternal
business processes, and tailored our product offerings to
provide an ever-growing number of innovative sustainable
solutions that meet the evolving needs of our customers.
As a result, Cascades is in the best position it has ever
beentocapitalizeonbusinessopportunitiesandgenerate
significantvalueonmultiplefronts.
Our Comprehensive 2022 – 2024 Strategic Plan
The path forward to do just this is laid out in Cascades’
2022–2024newStrategicPlan.Withourlastplanfinishing
attheendof2021,theCorporationcompletedanextensive
analysis of the competitive positioning of our operations
that took into consideration existing market dynamics,
centralelementsshapingfuturemarketfundamentalsand
a wide range of scenarios for both macro-economic
factors and demand forecasts. Comprehensive in scope,
the in-depth review considered the prevailing business
context of the past two years and exhaustive analytical
analysis supported by external resources.
Broadlyspeaking,thehighlightsofour2022–2024Strate-
gic Plan can be broken down into the following areas, key
strategic growth drivers and value creating initiatives in our
packagingandtissuesegments:
Thekeypillarsoftheactionplanforourpackagingsegments
include:
1.
CompletingtheBearIslandprojectstart-upinDecember
2022
2. Growing our
integration
level with new converting
capacity in the U.S.
3. Driving development initiatives and commercial launches
of new sustainable products
4. Generating packaging revenues of over $3.5 billion and
OIBDmargins1of19%-21%inContainerboardPackaging
and17%to19%inSpecialtyProductsPackagingin2024
1Pleasereferto“Forward-lookingStatements”and“SupplementalInformationonNon-IFRSMeasuresandOtherFinancialMeasures”sections
for a complete reconciliation.
12
12
2021 Annual Report
2021 Annual Report Sales ($M)
4,500
4,250
4,105
4,000
3,948
3,956
3,750
3,500
3,250
3,000
Adjusted OIBD2 ($M)
546
496
389
600
500
400
300
200
100
0
20191
20201
20211
20191
20201
20211
Net debt/Adjusted OIBD2
Total shipments and manufacturing
capacity utilization rate3 (’000 s.t. and %)
3.3x
3.5x
2.5x
4.0x
3.0x
2.0x
1.0x
0.0x
2,250
2,000
1,750
1,500
1,250
1,000
2,189
2,076
2,075
92%
90%
90%
100%
95%
90%
85%
80%
2019
2020
2021
2019
2020
2021
1 2021firstquarter,2020and2019consolidatedresultshavebeenadjustedtoreflectretrospectiveadjustmentsofdiscontinuedoperations.
Pleaserefertothe“DiscontinuedOperations”sectionandNote5ofthe2021AuditedConsolidatedFinancialStatementsformoredetails.
2
SomeinformationrepresentNon-IFRSfinancialmeasures,otherfinancialmeasuresorNon-IFRSratioswhicharenotstandardizedunderIFRS
andthereforemightnotbecomparabletosimilarfinancialmeasuresdisclosedbyothercorporations.Pleaserefertothe“Supplemental
InformationonNon-IFRSMeasuresandOtherFinancialMeasures”sectionforacompletereconciliation.
3 ContainerboardandTissuePaperssegmentsonly.
Leading the way.
13
Leading the way. Eco-responsible
packaging
solutions
for fruits
and vegetables
Cascades FreshTM offers
solutions that help growers
achieve their sustainability
goals while preserving
the freshness of their products
all the way to the consumer.
14
14
2021 Annual Report
2021 Annual Report North America’s
first 100% recycled1
paperboard tray
Our tray is coated with a water-based
barrier coating which makes it
recyclable2 and compostable.
In addition, the use of this tray
reduces GHG emissions by 34%
compared to those made
from virgin wood-based
moulded pulp3.
1 Excludingcoating.
2How2Recycle®haspre-qualifiedthistrayasrecyclableinCanadaandtheUnitedStates.
3Source:LifeCycleAssessmentofCascadestrays,AGÉCOGroup,July2021.
1515
Leading the way. Cascades
PRO® Tandem®
dispensers
Our range of dispensers ensures
the highest level of hygiene and
protection. Able to complement
any space, their innovative
features and solutions also
offer unrivalled efficiency
to save you time and money.
16
16
2021 Annual Report
2021 Annual Report Cascades
“goes soft
on the planet”
Cascades is breaking new ground
by becoming the first company
of its category in Canada1
to launch 100% recycled
packaging for its entire line
of Cascades Fluff & Tuff®
products. This packaging
has a 76% lower potential
impact on global warming2.
1 FirstcompanyinthetoiletpaperandpapertowelcategoryinCanada.ResearchcompletedbyJuly30,2021.
2 Comparedtoitsvirginresinequivalent.StatisticbasedonLCAStudyAgeco(2021).CascadesSustainabilityReport.
1717
Leading the way. We transform
your challenges
into solutions!
Cascades E-comTM provides a
range of eco-friendly packaging
solutions designed for online
businesses that reflect
the trends and challenges
of our clients’ markets.
18
2021 Annual Report
2021 Annual Report An ecodesign
approach for
delivery of fresh
products
Engineered for freshness,
Cascades northbox® is lab-tested
to create one of the best-insulated
technologies on the market.
It meets the thermal requirements
of transport so meal kits and fresh
seafood are delivered safely with
less environmental impact.
Leading the way.
19
Leading the way.
Cascades
northbox® XTENDTM
The new Cascades northbox XTEND
technology1 is up to 20% more
efficient to keep your products
cold. Its design allows you to ship
products for longer transit time
or in areas with hot weather.
Thanks to our innovation, our
customers now have a northbox®
alternative all year long. In addition,
our solution is not only made
from recycled fibre but it is
also recyclable2.
1 Design patent pending.
20
2
TestedbyInnofibre,aleadinglaboratoryforthecertificationforpaper-basedproducts.How2Recycle®
hasprequalifiedthisproductaswidelyrecyclableinCanadaandintheUnitedStates.
2021 Annual Report
2021 Annual Report Financial
Information
22
Management’sDiscussionandAnalysis
·
81
Management’sReport
totheShareholdersofCascades
·
82
IndependentAuditor’sReport
totheShareholdersofCascades
·
86
ConsolidatedFinancialStatements
·
91
Segmented Information
·
93
NotestoConsolidatedFinancialStatements
·
141
BoardofDirectors
Leading the way.
2121
Leading the way. DISCONTINUED OPERATIONS
On July 5, 2021, the Corporation announced the monetization of its 57.6% controlling equity interest in Reno de Medici S.p.A. (RDM) for
an amount per share of €1.45, or $462 million including foreign exchange contracts and before related transaction fees of $12 million. The
transaction closed on October 26, 2021. The Corporation recorded a gain of $228 million before income taxes of $24 million. The
Corporation used tax assets to offset this tax expense, resulting in no income tax payable on this transaction. The operations are
presented as discontinued operations since the second quarter of 2021 with reclassification of first quarter of 2021, as well as the
comparative years 2020 and 2019.
On February 15, 2021, the Boxboard Europe segment, via its ownership in Reno de Medici S.p.A., announced the sale of all the shares of
its French subsidiary which produces virgin fibre-based boxboard. The transaction was closed on April 30, 2021 and resulted in a loss of
$2 million which is presented within the results from discontinued operations of the Boxboard Europe segment.
See the “Business Highlights” section and Note 5 of the 2021 Audited Consolidated Financial Statements for all details regarding the
discontinued operations. The following tables reconcile our consolidated results and consolidated cash flows:
(in millions of Canadian dollars) (unaudited)
Consolidated results
Sales
Cost of sales and expenses (excluding depreciation and amortization)
Depreciation and amortization
Selling and administrative expenses
Restructuring costs
Foreign exchange loss
Loss on derivative financial instruments
Operating income
Financing expense
Interest expense on employee future benefits
Foreign exchange gain on long-term debt and financial instruments
Share of results of associates and joint ventures
Earnings before income taxes
Provision for income taxes
Net earnings from continuing operations including non-controlling interests for the period
Results from discontinued operations
Net earnings including non-controlling interests for the period
Net earnings attributable to non-controlling interests
Net earnings attributable to Shareholders for the period
(in millions of Canadian dollars) (unaudited)
Consolidated net cash flow
Cash flow from (used for):
Operating activities
Investing activities
Financing activities
Change in cash and cash equivalents from discontinued operations
Net change in cash and cash equivalents during the period
Currency translation on cash and cash equivalents
Cash and cash equivalents - Beginning of period
Cash and cash equivalents - End of period
22
For the 3-month period
ended March 31, 2021
As reported
in the first
quarter of
2021
Discontinued
operations -
Boxboard
Europe
As reported
1,182
932
76
108
5
1
8
1,130
52
23
1
(3)
(2)
33
8
25
3
28
6
22
(240)
(200)
(11)
(21)
—
—
—
(232)
(8)
(1)
—
—
—
(7)
(2)
(5)
5
—
—
—
942
732
65
87
5
1
8
898
44
22
1
(3)
(2)
26
6
20
8
28
6
22
For the 3-month period
ended March 31, 2021
As reported
in the first
quarter of
2021
Discontinued
operations -
Boxboard
Europe
As reported
84
(82)
(51)
(1)
(50)
(6)
384
328
(27)
7
9
6
(5)
5
—
—
57
(75)
(42)
5
(55)
(1)
384
328
2021 Annual Report
For the 3-month period
ended March 31, 2020
For the 6-month period
ended June 30, 2020
For the 9-month period
ended September 30, 2020
For the year
ended December 31, 2020
(in millions of Canadian dollars)
(unaudited)
As reported
in 2020
Discontinued
operations -
Boxboard
Europe
As reported
As reported
in 2020
Discontinued
operations -
Boxboard
Europe
As reported
As reported
in 2020
Discontinued
operations -
Boxboard
Europe
As
reported in
2020
As reported
Discontinued
operations -
Boxboard
Europe As reported
Consolidated results
Sales
1,313
(272)
1,041
2,598
(537)
2,061
3,873
(798)
3,075
5,157
(1,052)
4,105
Cost of sales and expenses (excluding
depreciation and amortization)
1,021
(218)
2,011
(416)
1,595
3,016
(623)
2,393
4,022
(829)
3,193
Depreciation and amortization
Selling and administrative expenses
Loss (gain) on acquisitions, disposals
and others
Impairment charges and restructuring
costs
Foreign exchange gain
Loss (gain) on derivative financial
instruments
Operating income
Financing expense
Interest expense (revenue) on
employee future benefits and other
liabilities
Loss on repurchase of long-term debt
Foreign exchange loss (gain) on long-
term debt and financial instruments
Fair value revaluation loss on
investments
Share of results of associates and joint
ventures
(3)
Earnings before income taxes
Provision for income taxes
Net earnings from continuing
operations including non-
controlling interests for the period
Results from discontinued
operations
Net earnings including non-
controlling interests for the period
Net earnings attributable to non-
controlling interests
Net earnings attributable to
Shareholders for the period
48
15
33
—
33
11
22
71
131
1
—
—
(1)
(11)
(24)
—
—
—
1
1,223
(252)
90
27
1
—
17
—
(20)
(1)
—
—
—
—
—
(19)
(5)
(14)
14
—
—
—
803
60
107
1
—
—
—
971
70
26
1
—
17
—
146
241
2
15
(1)
—
2,414
184
54
2
—
8
—
(3)
(6)
29
10
19
14
33
11
22
126
27
99
—
99
23
76
(23)
(48)
—
—
—
—
123
193
2
15
(1)
—
227
348
(5)
31
—
(35)
(72)
—
—
(1)
192
276
299
460
(48)
(93)
251
367
(5)
(43)
—
(43)
31
(1)
52
—
1
(9)
(1)
2
43
(1)
3
(1)
2
1
(487)
1,927
3,616
(729)
2,887
4,791
(978)
3,813
257
79
(69)
(3)
188
76
366
105
(74)
(4)
(50)
(2)
—
—
—
—
—
(48)
(10)
(38)
38
—
—
—
134
52
2
—
8
—
3
6
(3)
—
(6)
(9)
78
17
61
38
99
23
76
181
24
157
—
157
32
125
—
—
—
—
—
3
6
(3)
—
(7)
6
(6)
3
(9)
(14)
(66)
(14)
115
10
(52)
105
52
—
—
—
52
157
32
125
279
45
234
—
234
36
198
292
101
(7)
6
(6)
3
(14)
209
26
—
—
—
—
—
(70)
(19)
(51)
183
51
—
—
—
51
234
36
198
For the 3-month period
ended March 31, 2020
For the 6-month period
ended June 30, 2020
For the 9-month period
ended September 30, 2020
For the year
ended December 31, 2020
(in millions of Canadian dollars)
(unaudited)
As reported
in 2020
Discontinued
operations -
Boxboard
Europe
As reported
As reported
in 2020
Discontinued
operations -
Boxboard
Europe
As reported
As reported
in 2020
Discontinued
operations -
Boxboard
Europe
As
reported in
2020
As reported
Discontinued
operations -
Boxboard
Europe As reported
Consolidated net cash flow
Cash flow from (used for):
Operating activities
Investing activities
Financing activities
Change in cash and cash equivalents
from discontinued operations
Net change in cash and cash
equivalents during the period
Currency translation on cash and cash
equivalents
Cash and cash equivalents - Beginning
of period
Cash and cash equivalents - End of
period
117
(73)
(58)
—
(14)
12
155
153
(17)
100
11
10
1
5
(5)
—
—
(62)
(48)
1
(9)
7
155
153
245
(115)
(129)
—
1
6
155
162
(39)
206
13
24
6
4
(4)
—
—
(102)
(105)
6
5
2
155
162
381
(159)
(155)
—
67
5
155
227
(62)
319
19
34
14
5
(5)
—
—
(140)
(121)
14
72
—
155
227
587
(203)
(156)
—
228
1
155
384
(110)
35
39
41
5
477
(168)
(117)
41
233
(5)
(4)
—
—
155
384
23
Leading the way.
For the 3-month period
ended March 31, 2019
For the 6-month period
ended June 30, 2019
For the 9-month period
ended September 30, 2019
For the year
ended December 31, 2019
(in millions of Canadian dollars)
(unaudited)
As reported
in 2019
Discontinued
operations -
Boxboard
Europe
As reported
As reported
in 2019
Discontinued
operations -
Boxboard
Europe
As reported
As reported
in 2019
Discontinued
operations -
Boxboard
Europe
As
reported in
2019
As reported
Discontinued
operations -
Boxboard
Europe As reported
Consolidated results
Sales
Cost of sales and expenses (excluding
depreciation and amortization)
Depreciation and amortization
Selling and administrative expenses
Gain on acquisitions, disposals and
others
Impairment charges and restructuring
costs
Foreign exchange gain
Gain on derivative financial instruments
Operating income
Financing expense
Interest expense on employee future
benefits and other liabilities
Loss on repurchase of long-term debt
Foreign exchange gain on long-term
debt and financial instruments
Share of results of associates and joint
ventures
Earnings before income taxes
Provision for income taxes
Net earnings from continuing
operations including non-
controlling interests for the period
Results from discontinued
operations
Net earnings including non-
controlling interests for the period
Net earnings attributable to non-
controlling interests
Net earnings attributable to
Shareholders for the period
1,230
(279)
991
67
104
(10)
9
—
(3)
(227)
(11)
(23)
—
—
—
—
951
764
56
81
2,505
(549)
1,956
3,769
(805)
2,964
4,996
(1,048)
3,948
2,000
(447)
1,553
2,998
(657)
2,341
3,943
(854)
3,089
139
215
(22)
(43)
117
172
212
320
(33)
(64)
179
256
289
453
(47)
(86)
242
367
(10)
(7)
9
—
(3)
10
(1)
(5)
—
—
—
—
(7)
(29)
10
(1)
(5)
11
(1)
(4)
—
—
—
—
(29)
(24)
—
(24)
11
(1)
(4)
78
(2)
(2)
(14)
—
(2)
64
(2)
(4)
1,158
(261)
897
2,351
(512)
1,839
3,507
(754)
2,753
4,735
(1,003)
3,732
72
25
14
—
(6)
(2)
41
8
33
—
33
9
24
(18)
(1)
—
—
—
—
(17)
(5)
(12)
12
—
—
—
54
24
14
—
(6)
(2)
24
3
21
12
33
9
24
154
50
24
—
(7)
(4)
91
18
73
—
73
18
55
(37)
(3)
—
—
—
—
(34)
(9)
(25)
25
—
—
—
117
47
24
—
(7)
(4)
57
9
48
25
73
18
55
262
74
48
—
(7)
(6)
153
30
123
—
123
25
98
(51)
(4)
(1)
—
—
—
(46)
(11)
(35)
35
—
—
—
211
70
47
—
(7)
(6)
107
19
88
35
123
25
98
261
101
42
14
(6)
(9)
119
19
100
—
100
28
72
(45)
(5)
(1)
—
—
—
(39)
(14)
(25)
25
—
—
—
216
96
41
14
(6)
(9)
80
5
75
25
100
28
72
For the 3-month period
ended March 31, 2019
For the 6-month period
ended June 30, 2019
For the 9-month period
ended September 30, 2019
For the year
ended December 31, 2019
(in millions of Canadian dollars)
(unaudited)
As reported
in 2019
Discontinued
operations -
Boxboard
Europe
As reported
As reported
in 2019
Discontinued
operations -
Boxboard
Europe
As reported
As reported
in 2019
Discontinued
operations -
Boxboard
Europe
As reported
As reported
in 2019
Discontinued
operations -
Boxboard
Europe As reported
(47)
93
297
(49)
248
460
(101)
(108)
(471)
(8)
195
31
26
(440)
(540)
221
121
140
(132)
(29)
—
24
21
—
(21)
(2)
(23)
—
—
21
(12)
(12)
(4)
17
—
41
(4)
123
98
2
—
—
(2)
(6)
123
98
123
138
4
—
—
(2)
(9)
123
138
123
155
359
(491)
157
12
37
(5)
123
155
49
36
12
(4)
4
—
—
Consolidated net cash flow
Cash flow from (used for):
Operating activities
Investing activities
Financing activities
Change in cash and cash equivalents
from discontinued operations
Net change in cash and cash
equivalents during the period
Currency translation on cash and cash
equivalents
Cash and cash equivalents - Beginning
of period
Cash and cash equivalents - End of
period
52
(66)
12
—
(2)
(4)
123
117
(37)
17
6
12
(2)
2
—
—
15
(49)
18
12
(4)
(2)
123
117
24
2021 Annual Report
OUR BUSINESS
Cascades Inc. is a paper and packaging company that produces, converts and sells packaging and tissue products composed primarily of
recycled fibres. Established in 1964 in Kingsey Falls, Québec, Canada, the Corporation was founded by the Lemaire brothers, who saw the
economic and social potential of building a company focused primarily on the sustainable development principles of reusing, recovering
and recycling. More than 55 years later, Cascades is a multinational business with close to 80 operating facilities1 and approximately
10,000 employees1 across Canada and the United States. The Corporation currently operates three business segments:
(Business segments) (unaudited)
PACKAGING PRODUCTS
Containerboard
Specialty Products
TISSUE PAPERS
Number of
Facilities1
2021 Sales2
(in $M)
2021
Operating Income
(loss) Before
Depreciation and
Amortization
(OIBD)2 (in $M)
2021
Adjusted OIBD2, 3
(in $M)
2021 Adjusted OIBD
Margin2, 3 (%)
25
18
15
2,009
548
1,272
350
74
(38)
372
74
27
18.5%
13.5%
2.1%
The location of our plants4 and employees in North America are as follows:
Our facilities
Our employees
13
17%
20
26%
16
21%
27
36%
Canada - Québec
United States
Canada - Ontario
Canada - Other provinces
2,000
20%
1,000
10%
2,600
27%
4,200
43%
Canada - Québec
United States
Canada - Ontario
Canada - Other provinces
1 Including significant joint ventures. The Corporation also has 18 Recovery and Recycling facilities which are included in Corporate Activities.
2 Excluding associates and joint ventures not included in consolidated results. Refer to Note 8 of the 2021 Audited Consolidated Financial Statements for more information on associates and
joint ventures.
3 Some information represent Non-IFRS financial measures, other financial measures or Non-IFRS ratios which are not standardized under IFRS and therefore might not be comparable to
similar financial measures disclosed by other corporations. Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section for a complete
reconciliation.
4 Excluding sales offices, distribution and transportation hubs and corporate offices. Including main associates and joint ventures.
25
Leading the way.
BUSINESS DRIVERS
Cascades’ results may be impacted by fluctuations in the following areas:
EXCHANGE RATES
On a year-over-year basis, the average value of the Canadian
dollar increased by 7% compared to the US dollar in 2021.
ENERGY COSTS
The average price of natural gas increased by 85% in 2021
compared to the previous year. In the case of crude oil, the
average price was 61% higher in 2021 than in 2020.
0.85
0.80
0.75
0.70
7.00
6.00
5.00
4.00
3.00
2.00
1.00
—
100.00
80.00
60.00
40.00
20.00
—
Q1
19
Q2
19
Q3
19
Q4
19
Q1
20
Q2
20
Q3
20
Q4
20
Q1
21
Q2
21
Q3
21
Q4
21
Q1
19
Q2
19
Q3
19
Q4
19
Q1
20
Q2
20
Q3
20
Q4
20
Q1
21
Q2
21
Q3
21
Q4
21
US$/CAN$
Natural gas (US$/mmBtu)
Crude oil (US$/barrel)
(unaudited)
US$/CAN$ - Average rate
US$/CAN$ - End of period rate
Natural Gas Henry Hub - US$/
mmBtu
2019
YEAR
$0.75
$0.77
Q1
Q2
Q3
Q4
$0.74
$0.71
$0.72
$0.74
$0.75
$0.75
$0.77
$0.79
2020
YEAR
$0.75
$0.79
Q1
Q2
Q3
Q4
$0.79
$0.80
$0.81
$0.81
$0.79
$0.79
$0.79
$0.79
2021
YEAR
$0.80
$0.79
$2.63
$1.95
$1.72
$1.98
$2.67
$2.08
$2.69
$2.83
$4.01
$5.83
$3.84
Crude oil (US$/barrel)
$56.98
$57.78
$21.65
$41.67
$41.07
$40.54
$54.16
$62.01
$67.60
$76.84
$65.15
Source: Bloomberg
RAW MATERIALS
Reference prices - recycled fibre costs in North America1
The brown grade recycled paper No. 11 (old corrugated containers, OCC) and the
recycled paper No. 56 (sorted residential papers, SRP) index prices increased by
108% and 233%, respectively, in 2021 compared to 2020. The white grade recycled
paper No. 37 (sorted office papers, SOP) increased by 23% in 2021 compared to
2020. The variances in fibre costs reflected changes in both supply and demand
levels of fibre throughout the year as a result of the COVID-19 pandemic.
Reference prices - virgin pulp in North America1
In 2021, the reference price for NBSK and NBHK increased by 30% and 39%
respectively, compared to 2020, reflecting global demand supply dynamics.
200
160
120
80
40
0
Q1
19
Q2
19
Q3
19
Q4
19
Q1
20
Q2
20
Q3
20
Q4
20
Q1
21
Q2
21
Q3
21
Q4
21
Recycled paper No. 37 (SOP) (Northeast) (US$/s.t.)
Recycled paper No. 11 (OCC) (Northeast) (US$/s.t.)
Recycled paper No. 56 (SRP) (Northeast) (US$/s.t.)
1,800
1,600
1,400
1,200
1,000
800
Q1
19
Q2
19
Q3
19
Q4
19
Q1
20
Q2
20
Q3
20
Q4
20
Q1
21
Q2
21
Q3
21
Q4
21
Bleached hardwood kraft, mixed, Canada / U.S. (US$/m.t.)
Northern bleached softwood kraft, Canada (US$/m.t.)
1 Source: RISI, excluding mixed papers
26
2021 Annual Report
HISTORICAL MARKET PRICES OF MAIN PRODUCTS AND RAW MATERIALS
These indexes should only be used as trend indicators; they may
differ from our actual selling prices and purchasing costs.
(unaudited)
Selling prices (average)
PACKAGING PRODUCTS
Containerboard (US$/short ton)
Linerboard 42-lb. unbleached kraft,
Eastern US (open market)
Corrugating medium 26-lb. semichemical,
Eastern US (open market)
Specialty Products (US$/short ton)
Uncoated recycled boxboard - 20-pt. bending
chip (series B)
TISSUE PAPERS (US$/short ton)
2019
2020
2021
2021 vs. 2020
YEAR
Q1
Q2
Q3
Q4
YEAR
Q1
Q2
Q3
Q4
YEAR Change
%
734
715
715
715
748
723
772
825
858
875
833
110
15%
638
615
615
615
648
623
675
735
775
795
745
122
20%
730
710
700
700
720
708
740
793
867
980
845
137
19%
Parent rolls, recycled fibres (transaction)
1,142
1,111
1,138
1,123
1,110
1,120
1,115
1,159
1,170
1,178
1,156
Parent rolls, virgin fibres (transaction)
1,429
1,416
1,450
1,427
1,418
1,428
1,453
1,550
1,544
1,511
1,515
36
87
3%
6%
Raw materials prices (average)
RECYCLED PAPER
North America (US$/short ton)
Sorted residential papers, No. 56 (SRP -
Northeast average)
Old corrugated containers, No. 11 (OCC -
Northeast average)
Sorted office papers, No. 37 (SOP -
Northeast average)
VIRGIN PULP (US$/metric ton)
15
41
128
8
36
89
18
93
33
58
160
109
39
59
80
24
61
109
44
79
94
59
108
108
80
56
233%
102
162
167
127
66
108%
117
153
173
134
25
23%
Northern bleached softwood kraft, Canada
1,239
1,127
1,158
1,140
1,138
1,141
1,302
1,598
1,542
1,472
1,478
Bleached hardwood kraft, mixed, Canada/US
1,036
890
897
875
868
883
1,037
1,297
1,320
1,262
1,229
337
346
30%
39%
Source: RISI and Cascades.
27
Leading the way.
SENSITIVITY TABLE1
The following table provides a quantitative estimate of the impact that potential changes in the prices of our main products, the costs of
certain raw materials, energy and the exchange rates may have on Cascades’ annual OIBD, assuming, for each price change, that all
other variables remain constant. Estimates are based on Cascades’ 2021 manufacturing and converting external shipments and
consumption quantities. It is important to note that this table does not consider the Corporation's use of hedging instruments for risk
management. These hedging policies and portfolios (see the “Risk Factors” section) should also be considered in order to fully analyze the
Corporation’s sensitivity to the highlighted factors.
Potential indirect sensitivity to the CAN$/US$ exchange rate is not considered in this table. Some of Cascades’ selling prices and raw
material costs in Canada are based on US dollar reference prices and costs that are then converted into Canadian dollars. Consequently,
fluctuations in the exchange rate may have a direct impact on the value of sales and purchases of Canadian facilities in Canada. However,
because it is difficult to measure the precise impact of this fluctuation, we do not take it into consideration in the following table. The impact
of the exchange rate on the working capital items and cash positions denominated in currencies other than CAN$ at the Corporation's
Canadian units is also excluded. Fluctuations in foreign exchange rates may also impact the translation of the results of our non-Canadian
units into CAN$.
SHIPMENTS/
CONSUMPTION ('000
SHORT TONS, '000 MMBTU
FOR NATURAL GAS)
INCREASE
OIBD IMPACT
(IN MILLIONS OF CAN$)
SELLING PRICE (MANUFACTURING AND CONVERTING)2
Packaging
Linerboard 42-lb. unbleached kraft, Eastern US
Corrugating medium 26-lb. semichemical, Eastern US
Uncoated recycled boxboard - 20-pt. bending chip, Eastern US
Converting products (cartonboard based only)
Tissue Papers
RAW MATERIALS2
Packaging
Brown grades (OCC and others)
Groundwood grades (SRP and others)
Tissue Papers
Virgin pulp
Brown grades (OCC and others)
White grades (SOP and others)
NATURAL GAS
Packaging
Tissue Papers
EXCHANGE RATE3
U.S. subsidiaries translation
400
330
140
840
1,710
550
2,260
1,500
110
1,610
180
160
330
670
4,000
4,200
8,200
US$25/s.t.
US$25/s.t.
US$25/s.t.
US$25/s.t.
US$25/s.t.
US$15/s.t.
US$15/s.t.
US$30/s.t.
US$15/s.t.
US$15/s.t.
US$1.00/mmBtu
US$1.00/mmBtu
CAN$/US$ 0.01 change
13
10
4
26
53
17
70
(28)
(2)
(30)
(7)
(3)
(6)
(16)
(5)
(5)
(10)
1
1 Sensitivity calculated according to 2021 volumes or consumption with year-end closing exchange rate of CAN$/US$ 1.25, excluding hedging programs and the impact of related expenses
such as discounts, commissions on sales and profit-sharing.
2 Based on 2021 external manufacturing and converting shipments, as well as fibre and pulp consumption. Including purchases sourced internally from our recovery and recycling operations.
Adjusted to reflect acquisitions, disposals and closures, if needed.
3 As an example, from CAN$/US$ 1.25 to CAN$/US$ 1.26.
28
2021 Annual Report
SUPPLEMENTAL INFORMATION ON NON-IFRS MEASURES AND OTHER FINANCIAL
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 that of other corporations and some of these items 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 gains or losses on investments, specific items of discontinued operations and other significant items of an unusual, non-cash or
non-recurring nature.
RECONCILIATION AND USES OF NON-IFRS AND OTHER FINANCIAL 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 and capital measures as well as 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 and other
financial measures are used in our financial disclosures:
Non-IFRS measures
•
•
•
•
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.
• Working capital: Used to assess the short-term liquidity of the Corporation.
Other financial measures
•
Total debt: Used to calculate all the Corporation’s debt including long-term debt and bank loans. Often put in relation to equity to
calculate the debt-to-equity ratio.
Net debt: Used to calculate the Corporation’s total debt less cash and cash equivalents. Often put in relation to adjusted OIBD to
calculate net debt to adjusted OIBD ratio.
Net debt to adjusted OIBD ratio: Used to assess the Corporation’s ability to pay its debt 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.
Adjusted OIBD margin : Used to assess operating performance and the contribution of each segment on a comparable basis.
Adjusted net earnings per common share: Used to assess the Corporation’s consolidated financial performance on a
comparable basis.
Net debt / Net debt + Shareholders’ equity: Used to evaluate the Corporation’s financial leverage and thus the risk to Shareholders.
•
• Working capital as a percentage of sales: Used to assess the Corporation’s operating liquidity performance.
•
Adjusted free cash flow per common share: Used to assess the Corporation’s financial flexibility.
Non-IFRS ratios
•
•
•
•
•
29
Leading the way.
Non-IFRS and other financial 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 and other financial 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:
(in millions of Canadian dollars) (unaudited)
Operating income (loss)
Depreciation and amortization
Operating income (loss) before depreciation and amortization
Specific items:
Gain on acquisitions, disposals and others
Impairment charges
Restructuring costs
Unrealized loss on derivative financial instruments
Adjusted operating income (loss) before depreciation and amortization
Adjusted operating income (loss)
Containerboard
Specialty
Products
Tissue Papers
Corporate
Activities
Consolidated
20211
230
120
350
—
1
4
17
22
372
252
59
15
74
—
—
—
—
—
74
59
(108)
70
(38)
(40)
88
17
—
65
27
(43)
(131)
47
(84)
—
—
—
—
—
(84)
(131)
50
252
302
(40)
89
21
17
87
389
137
20201
(in millions of Canadian dollars) (unaudited)
Operating income (loss)
Depreciation and amortization
Operating income (loss) before depreciation and amortization
Specific items:
Loss (gain) on acquisitions, disposals and others
Impairment charges
Restructuring costs
Unrealized loss on derivative financial instruments
Adjusted operating income (loss) before depreciation and amortization
Adjusted operating income (loss)
Containerboard
Specialty
Products
Tissue Papers
Corporate
Activities
Consolidated
321
115
436
(45)
6
4
2
(33)
403
288
42
16
58
2
—
—
—
2
60
44
72
73
145
—
23
7
—
30
175
102
(143)
47
(96)
—
1
2
1
4
(92)
(139)
292
251
543
(43)
30
13
3
3
546
295
1 2021 first quarter, 2020 and 2019 consolidated results have been adjusted to reflect retrospective adjustments of discontinued operations. Please refer to the “Discontinued Operations”
section and Note 5 of the 2021 Audited Consolidated Financial Statements for more details.
30
2021 Annual Report
Net earnings, as per IFRS, are reconciled below with operating income, adjusted operating income and adjusted operating income before
depreciation and amortization:
(in millions of Canadian dollars) (unaudited)
Net earnings attributable to Shareholders for the year
Net earnings attributable to non-controlling interests
Results from discontinued operations
Provision for income taxes
Fair value revaluation loss on investments
Share of results of associates and joint ventures
Foreign exchange gain on long-term debt and financial instruments
Financing expense and interest expense (revenue) on employee future benefits and other liabilities and loss on
repurchase of long-term debt
Operating income
Specific items:
Gain on acquisitions, disposals and others
Impairment charges
Restructuring costs
Unrealized loss on derivative financial instruments
Adjusted operating income
Depreciation and amortization
Adjusted operating income before depreciation and amortization
20211
162
25
(234)
9
—
(18)
(3)
109
50
(40)
89
21
17
87
137
252
389
20201
198
36
(51)
26
3
(14)
(6)
100
292
(43)
30
13
3
3
295
251
546
The following table reconciles net earnings and net earnings per common share, as per IFRS, with adjusted net earnings and adjusted net
earnings per common share:
NET EARNINGS
NET EARNINGS PER COMMON SHARE2
(in millions of Canadian dollars, except per common share amounts and number of
common shares) (unaudited)
As per IFRS
Specific items:
2021
162
2020
198
2021
$1.60
Gain on acquisitions, disposals and others
(40)
(43)
($0.32)
Impairment charges
Restructuring costs
Unrealized loss on derivative financial instruments
Loss on repurchase of long-term debt
Unrealized loss (gain) on interest rate swaps and options
fair value
Foreign exchange gain on long-term debt and financial
instruments
Fair value revaluation loss on investments
Included in discontinued operations, net of tax
Tax effect on specific items, other tax adjustments and
attributable to non-controlling interests2
Adjusted
Weighted average basic number of common shares
outstanding
89
21
17
20
1
(3)
—
(224)
(16)
(135)
27
30
13
3
6
(11)
(6)
3
6
(12)
(11)
187
$0.75
$0.15
$0.11
$0.13
—
($0.02)
—
($2.14)
—
($1.34)
$0.26
101,884,051
95,924,835
2020
$2.04
($0.38)
$0.24
$0.10
$0.03
$0.05
($0.12)
($0.05)
$0.02
$0.04
($0.02)
($0.09)
$1.95
1 2021 first quarter, 2020 and 2019 consolidated results have been adjusted to reflect retrospective adjustments of discontinued operations. Please refer to the “Discontinued Operations”
section and Note 5 of the 2021 Audited Consolidated Financial Statements for more details.
2 Specific amounts per common share are calculated on an after-tax basis and are net of the portion attributable to non-controlling interests. Per common share amounts in line item “Tax effect
on specific items, other tax adjustments and attributable to non-controlling interests” only include the effect of tax adjustments. Please refer to “Provision for income taxes” section for
more details.
31
Leading the way.
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)
Cash flow from operating activities from continuing operations
Changes in non-cash working capital components
Depreciation and amortization
Net income taxes received
Net financing expense paid
Premium and transaction fees paid on long-term debt redemption
Gain on acquisitions, disposals and others
Impairment charges and restructuring costs
Unrealized loss on derivative financial instruments
Provisions for contingencies and charges and other liabilities, net of dividends received
Operating income
Depreciation and amortization
Operating income before depreciation and amortization
20211
211
36
(252)
(2)
96
24
40
(110)
(17)
24
50
252
302
20201
477
(19)
(251)
(9)
76
4
43
(43)
(3)
17
292
251
543
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 common share basis:
(in millions of Canadian dollars, except per common share amounts or as otherwise noted) (unaudited)
Cash flow from operating activities from continuing operations
Changes in non-cash working capital components
Cash flow from operating activities from continuing operations (excluding changes in non-cash working
capital components)
Restructuring costs paid
Premium and transaction fees paid on long-term debt redemption
Specific items paid
Adjusted cash flow from operating activities from continuing operations
Capex expenditures
Change in intangible and other assets
Lease obligation payments
Proceeds from disposals of property, plant and equipment
Dividends paid to the Corporation's Shareholders and to non-controlling interests
Adjusted free cash flow generated (used)
Adjusted free cash flow generated (used) per common share (in Canadian dollars)
Weighted average basic number of common shares outstanding
20211
211
36
247
25
24
49
296
(286)
(15)
(47)
53
1
(55)
(54)
20201
477
(19)
458
11
4
15
473
(219)
(9)
(43)
55
257
(45)
212
($0.53)
101,884,051
$2.21
95,924,835
1 2021 first quarter, 2020 and 2019 consolidated results and consolidated cash flows have been adjusted to reflect retrospective adjustments of discontinued operations. Please refer to the
“Discontinued Operations” section and Note 5 of the 2021 Audited Consolidated Financial Statements for more details.
32
2021 Annual Report
The following table reconciles working capital as reported:
(in millions of Canadian dollars, except ratios) (unaudited)
Accounts receivables
Inventories
Trade and other payable
Working capital
December 31,
2021
December 31,
2020
December 31,
2019
510
494
(707)
297
659
569
(861)
367
610
598
(792)
416
The following table reconciles total debt and net debt with the ratio of net debt to adjusted operating income before depreciation and
amortization (adjusted OIBD):
(in millions of Canadian dollars, except ratios) (unaudited)
Long-term debt
Current portion of long-term debt
Bank loans and advances
Total debt
Less: Cash and cash equivalents
Net debt as reported
Last twelve months adjusted OIBD (before discontinued operations for the year ended December 31, 2020
and 2019)
Net debt / Adjusted OIBD ratio
December 31,
2021
December 31,
2020
December 31,
2019
1,450
74
1
1,525
174
1,351
389
3.5x
1,949
102
12
2,063
384
1,679
675
2.5x
2,022
85
11
2,118
155
1,963
604
3.3x
SPECIFIC ITEMS INCLUDED IN OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION AND
NET EARNINGS
The Corporation incurred the following specific items in 2021 and 2020:
GAIN ON ACQUISITIONS, DISPOSALS AND OTHERS
2021
The Tissue Papers segment recorded a $40 million gain from the sale of buildings related to closed plants in the USA and in Canada.
2020
The Containerboard Packaging segment recorded a $40 million gain from the sale of a building and the land of Etobicoke, Ontario,
Canada, Containerboard Packaging facility.
The Containerboard Packaging segment also recorded a $5 million gain following the release of the escrow amount pertaining to the sale
of a building in 2018 located in Maspeth, New York, USA.
The Specialty Products segment recorded a $5 million environmental provision related to plants in Canada that were closed in
previous years.
The Specialty Products segment also recorded a $3 million gain on the sale of a non-significant associate investment.
The Tissue Papers segment recorded a $2 million gain from the sale of assets and a $2 million environmental provision related to closed
plants in the USA.
33
Leading the way.
IMPAIRMENT CHARGES
2021
The Containerboard Packaging segment recorded an impairment charge of $1 million on an asset that became idle following the
introduction of a new technology. The recoverable amount was lower than its carrying amount which was based on its fair value less cost
of disposal determined using the market approach of comparable assets on the market.
The Tissue Papers segment recorded an impairment charge of $1 million on spare parts related to the closure of plants in Pittston and
Ransom, Pennsylvania, USA and Waterford, New York, USA and in Laval, Québec, Canada.
The COVID-19 pandemic has led to lower than usual volumes in the Tissue Papers segment. Specifically, volume impacts in the Away-
from-Home market began in the second quarter of 2020, while lower volumes in the Consumer Products market started in the second
quarter of 2021 following higher than usual demand in the prior year. The current market dynamic led the Corporation to record an
impairment charge totaling $71 million on the segment's goodwill and other intangible assets reflecting uncertainty of the recoverable
amount of the segment compared to its carrying value. The Tissue Papers segment also recorded an impairment charge of $16 million on
property, plant and equipment of one of its United States CGUs due to sustained difficult market conditions and assets underperformance.
The recoverable amount of these assets was determined using the market approach of comparable assets on the market, OIBD multiples
or an income approach.
2020
The Containerboard Packaging segment recorded an impairment charge of $6 million on some equipment as part of the network
optimization and profitability improvement initiatives.
The Tissue Papers segment recorded an impairment charge of $13 million on the assets of certain plants as their recoverable amount was
lower than their carrying amount due to the lower demand in the Away-from-Home market due to the COVID-19 pandemic.
Tissue Papers segment also recorded an impairment charge of $10 million on some assets as part of the network optimization and
profitability improvement initiatives.
The Corporate Activities recorded an impairment charge of $1 million related to renewable energy assets.
RESTRUCTURING COSTS
2021
The Containerboard Packaging segment recorded severance charges totaling $3 million as part of the margin improvement program.
The Containerboard Packaging segment also recorded closure costs totaling $1 million related to the closure of plants in Ontario, Canada.
The Tissue Papers segment recorded additional restructuring charges and closure costs totaling $17 million related to closed plants.
2020
The Containerboard Packaging segment recorded restructuring charges totaling $3 million as part of the network optimization and
profitability improvement initiatives.
The Containerboard Packaging segment also recorded restructuring charges totaling $3 million following the announcement of the closure
of its Etobicoke, Ontario, Canada converting facility, which was permanently closed in mid-September 2021.
The Containerboard Packaging segment also recorded a gain of $2 million as a reversal of a contingency related to a plant sold in
prior years.
The Tissue Papers segment recorded restructuring charges totaling $4 million as part of the network optimization and profitability
improvement initiatives. The segment also recorded restructuring charges totaling $3 million following the announcement of the closure of
plants in Pittston and Ransom, Pennsylvania, USA and Waterford, New York, USA.
The Corporate Activities recorded restructuring charges totaling $2 million as part of profitability improvement initiatives.
LOSS ON DERIVATIVE FINANCIAL INSTRUMENTS
In 2021, the Corporation recorded an unrealized loss of $17 million, compared to an unrealized loss of $3 million in 2020, on certain
derivative financial instruments not designated for hedge accounting.
34
2021 Annual Report
LOSS ON REPURCHASE OF LONG-TERM DEBT
In 2021, the Corporation redeemed US$144 million ($180 million) and US$155 million ($192 million) of its 2026 and 2028 unsecured senior
notes, respectively, and paid an early repurchase premium totaling US$18 million ($22 million) and wrote off $4 million of unamortized
financing costs and $8 million of unamortized issuance premium related to these notes. The Corporation also paid transactions fees
totaling $2 million.
In 2020, the Corporation redeemed US$200 million of its unsecured senior notes and recorded an early repurchase premium of $4 million
and wrote off $2 million related unamortized financing costs.
OPTION FAIR VALUE REVALUATION
In 2021, the Corporation recorded in the line item “Interest expense (revenue) on employee future benefits and other liabilities” an
unrealized loss of $1 million, compared to an unrealized loss of $2 million in 2020, pertaining to a call option granted to the Corporation by
one of the minority shareholders of Falcon Packaging LLC.
In 2020, the Corporation also recorded in the line item “Interest expense (revenue) on employee future benefits and other liabilities” an
unrealized gain of $13 million on fair value revaluation of a one-time option granted to White Birch to purchase an interest of up to 10% in
the Bear Island containerboard mill project.
FOREIGN EXCHANGE GAIN ON LONG-TERM DEBT AND FINANCIAL INSTRUMENTS
In 2021, the Corporation recorded a gain of $3 million on its US$ denominated debt and related financial instruments, compared to a gain
of $6 million in 2020. This is composed of a gain of $3 million in 2021, compared to a gain of $3 million in 2020, on foreign exchange
forward contracts not designated for hedge accounting. It also includes a nil result in 2021, compared to a gain of $3 million in 2020, on the
US$ denominated long-term debt, net of our net investment hedges in the US, as well as forward exchange contracts designated as
hedging instruments.
FAIR VALUE REVALUATION LOSS ON INVESTMENTS
In 2020, the Corporation recorded a fair value revaluation loss on investments of $3 million on a joint venture.
PROVISION FOR INCOME TAXES
In 2020, the Corporation reassessed the probability of recovering unrealized capital losses following the redemption of its
US$ denominated debts, which resulted in the recognition of tax assets totaling $3 million, of which $2 million was recorded in results.
DISCONTINUED OPERATIONS
2021
The Boxboard Europe segment recorded a $2 million loss from the sale of all the shares of its French subsidiary which produces virgin
fibre-based boxboard. The Boxboard Europe segment also recorded a $18 million gain from a business acquisition. The segment also
recorded an unrealized gain on financial instruments of $6 million (before income tax of $2 million).
The Corporate Activities recorded a gain of $228 million (before income tax of $24 million) from the sale of its 57.6% controlling equity
interest in Reno de Medici S.p.A. (RDM).
2020
The Boxboard Europe segment recorded an impairment charge of $9 million (before income tax of $1 million) on some assets as their
recoverable amount was lower than their carrying amount. Recoverable amount of the assets was based on their fair value less cost
of disposal. The segment also recorded an unrealized gain on financial instruments of $2 million.
Please refer to the “Discontinued Operations” section and Note 5 of the 2021 Audited Consolidated Financial Statements for more details.
35
Leading the way. MANAGEMENT'S DISCUSSION & ANALYSIS
FINANCIAL OVERVIEW - 2021
In 2021, the Corporation posted net earnings of $162 million, or $1.60 per common share, compared to net earnings of $198 million, or
$2.04 per common share, in 2020. On an adjusted basis2, the Corporation generated net earnings of $27 million during 2021, or $0.26 per
common share, compared to net earnings of $187 million, or $1.95 per common share, in 2020.
For the year ended December 31, 20211, consolidated sales totaled $3,956 million, a decrease of $149 million, or 4%, compared to
$4,105 million in 20201. This largely reflects the sales decrease of 21% in both Consumer Products and Away-from-Home markets of the
Tissue Papers segment, offsetting higher sales in our Packaging segments.
The Corporation recorded an operating income before depreciation and amortization (OIBD) of $302 million during 20211, compared to
$543 million in 20201. On an adjusted basis2, operating income before depreciation and amortization stood at $389 million in 20211,
compared to $546 million in 20201. This largely reflects the increase in raw material and freight costs for all segments along with lower
volume in our Tissue Paper segment, while the Packaging Products segments benefited from higher selling prices.
As a response to the effects of the COVID-19 pandemic, the Corporation continues to review the assumptions for operating plans, regularly
updates the financial and cash flow forecasts and monitors the credit risk as well as the evolution of the market. The Corporation continues
to closely monitor the consequences of the COVID-19 situation: the duration, spread or intensity of the pandemic as it continues to evolve,
along with the supply chain, market pricing and customer demand. The COVID-19 pandemic has led to lower than usual volumes in the
Tissue Papers segment. Specifically, volume impacts in the Away-from-Home market began in the second quarter of 2020, while lower
volumes in the Consumer Products market started in the second quarter of 2021 following higher than usual demand in the prior year. The
Corporation recorded impairment charges in the Tissue Papers segment on property, plant and equipment, goodwill and other intangible
assets (see Notes 9, 10 and 26 of the 2021 Audited Consolidated Financial Statements).These factors may further impact the
Corporation’s operating plan, its cash flows, its ability to raise funds and the valuation of its long-lived assets.
FINANCIAL OVERVIEW - 2020
Annual consolidated sales reached $4,105 million in 20201, an increase of $157 million, or 4%, compared to 20191. This performance
reflected strong sales driven mostly by increased demand in the Tissue Papers Consumer Products and overall packaging solutions,
mainly attributable to the repercussions of the COVID-19 pandemic which contributed to higher demand for the essential products we offer
and favourable exchange rates. However, these items were partly offset by lower average selling prices and mix of products for the
Packaging Products segments.
The Corporation recorded an operating income before depreciation and amortization (OIBD) of $543 million in 20201, compared to
$458 million in 20191. On an adjusted basis2, operating income before depreciation and amortization stood at $546 million in 20201,
compared to $496 million in 20191. This largely reflected year-over-year improved results in the Tissue Papers segment. Energy costs
were lower for all segments while pricing of raw materials were also beneficial for all segments except Containerboard. Volume increased
for all segments while year-over-year average selling price and mix were lower for the Packaging Products segments and positive for
Tissue Papers.
MARGIN IMPROVEMENT PROGRAM
In the first quarter of 2020, the Corporation initiated an important profit margin improvement program for its North American operations
focused on improving competitiveness, efficiency and productivity thereby limiting the potential negative effects related to economic
downturns or adverse market conditions.
The program is built on five strategic pillars: net revenue management, production efficiency, optimization of sales and operations
planning, supply chain efficiency and organizational effectiveness.
The objective of this program is to improve adjusted OIBD margin2 by 1% annually in 2020, 2021 and 2022, with these improvements
calculated from the levels of 2019, our baseline year.
Following on the initiatives implemented in 2020 and new ones started in 2021, we were able to continue improving our competitiveness by
achieving approximately $230 million as of December 2021 of adjusted OIBD2, net of related costs to implement such initiatives. This is
measured against our 2019 baseline. These benefits offset some headwinds related to increased raw material and production costs,
foreign exchange variation and current lower demand for tissue paper products. As part of its ongoing continuous improvement, the
Corporation is setting new objectives and baseline for 2022 and the coming years.
1 2021 first quarter, 2020 and 2019 consolidated results have been adjusted to reflect retrospective adjustments of discontinued operations. Please refer to the “Discontinued Operations”
section and Note 5 of the 2021 Audited Consolidated Financial Statements for more details.
2 Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section for a complete reconciliation.
36
2021 Annual Report
KEY PERFORMANCE INDICATORS
We use several key performance indicators to monitor our action plan and analyze the progress we are making toward achieving our long-
term objectives. These include the following:
(unaudited)
OPERATIONAL
Total shipments (in ’000 s.t.)1
Packaging Products
Containerboard
Boxboard Europe
20196
YEAR
Q1
Q2
Q3
Q4
20206
YEAR
Q16
Q2
Q3
Q4
YEAR
2021
1,447
374
360
411
399
1,544
391
385
377
368
1,521
1,290
351
326
316
312
1,305
361
318
295
—
974
2,737
725
686
727
711
2,849
752
703
672
368
2,495
Tissue Papers
629
181
167
145
152
645
123
138
148
145
554
Total before discontinued operations
3,366
906
853
872
863
3,494
875
841
820
513
3,049
Discontinued operations - Boxboard Europe
(1,290)
(351)
(326)
(316)
(312)
(1,305)
(361)
(318)
(295)
—
(974)
Total
Integration rate2
Containerboard
Tissue Papers
Manufacturing capacity utilization rate3
Containerboard
Tissue Papers
Consolidated total
FINANCIAL
Working capital
In millions of CAN$, at end of period4
As a percentage of sales5
2,076
555
527
556
551
2,189
514
523
525
513
2,075
58%
76%
91%
88%
90%
57%
72%
98%
88%
95%
57%
73%
92%
87%
90%
53%
76%
98%
73%
90%
55%
79%
97%
86%
93%
56%
75%
96%
83%
92%
57%
79%
97%
80%
92%
57%
69%
96%
78%
90%
58%
71%
94%
84%
91%
58%
76%
89%
85%
88%
58%
74%
94%
82%
90%
416
493
497
467
367
367
376
377
410
297
297
9.8%
9.6%
9.4%
9.2%
8.8%
8.8%
8.4%
8.4%
8.5%
8.6%
8.6%
1 Shipments do not take into account the elimination of business sector inter-segment shipments. Shipments from our Specialty Products segment are not presented as different units
of measure are used.
2 Defined as: Percentage of manufacturing shipments transferred to our converting operations.
3 Defined as: Manufacturing internal and external shipments/practical capacity. Excluding Specialty Products segment manufacturing activities.
4 Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section for a complete reconciliation.
5 Percentage of sales = Average quarterly last twelve months (LTM) working capital / LTM sales (Not adjusted for retrospective reclassification of discontinued operations).
6 Adjusted for discontinued operations. Please refer to the “Discontinued operations” section for more details.
37
Leading the way.
HISTORICAL FINANCIAL INFORMATION
(in millions of Canadian dollars, unless otherwise noted) (unaudited)
Sales
Packaging Products
Containerboard
Boxboard Europe
Specialty Products
Inter-segment sales
Tissue Papers
Inter-segment sales and Corporate Activities
Total before discontinued operations
Discontinued operations - Boxboard Europe
Total
Operating income (loss)
Packaging Products
Containerboard
Boxboard Europe
Specialty Products
Tissue Papers
Corporate Activities
Total before discontinued operations
Discontinued operations - Boxboard Europe
Total
Operating income before depreciation (OIBD)
OIBD / Sales (%)2
Adjusted OIBD1
Packaging Products
Containerboard
Boxboard Europe
Specialty Products
Tissue Papers
Corporate Activities
Total before discontinued operations
Discontinued operations - Boxboard Europe
Total
Adjusted OIBD / Sales (%)1, 2
Net earnings (loss)
Adjusted1
Net earnings (loss) from continuing operations per basic
common share (in Canadian dollars)2
Net earnings (loss) from discontinued operations per
basic common share (in Canadian dollars)2
Net earnings (loss) per common share (in Canadian
dollars)
Basic
Diluted
Basic, adjusted1
20192
20202
2021
YEAR
Q1
Q2
Q3
Q4
YEAR
Q12
Q2
Q3
Q4
YEAR
1,827
1,048
492
(14)
3,353
1,509
134
4,996
(1,048)
3,948
328
45
36
409
6
(154)
261
(45)
216
458
458
272
113
(3)
840
446
27
1,313
(272)
1,041
74
20
8
102
28
(40)
90
(20)
70
130
454
265
120
(5)
834
424
27
1,285
(265)
1,020
54
30
11
95
31
(32)
94
(30)
64
127
506
261
117
(4)
880
364
31
1,275
(261)
1,014
71
19
11
101
3
(31)
73
(19)
54
123
500
254
123
(6)
871
381
32
1,284
(254)
1,030
122
5
12
139
10
(40)
109
(5)
104
163
1,918
1,052
473
(18)
3,425
1,615
117
5,157
(1,052)
4,105
321
74
42
437
72
(143)
366
(74)
292
543
503
286
122
(7)
904
292
32
1,228
(286)
942
65
12
15
92
—
(36)
56
(12)
44
109
11.6%
12.5%
12.5%
12.1%
15.8%
13.2%
11.6%
497
253
131
(7)
874
297
38
1,209
(253)
956
507
355
144
(10)
996
344
45
1,385
(355)
1,030
502
—
151
(8)
645
339
44
1,028
—
1,028
2,009
894
548
(32)
3,419
1,272
159
4,850
(894)
3,956
64
(1)
14
77
(22)
(33)
22
1
23
87
9.1%
58
24
13
95
29
(27)
97
(24)
73
136
13.2%
43
—
17
60
(115)
(35)
(90)
—
(90)
(30)
(2.9%)
230
35
59
324
(108)
(131)
85
(35)
50
302
7.6%
441
108
55
604
86
(86)
604
(108)
496
99
30
12
141
45
(25)
161
(30)
131
94
43
17
154
54
(22)
186
(43)
143
100
29
16
145
36
(19)
162
(29)
133
110
27
15
152
40
(26)
166
(27)
139
403
129
60
592
175
(92)
675
(129)
546
108
23
18
149
20
(24)
145
(23)
122
12.6%
72
96
12.6%
22
39
14.0%
54
58
13.1%
49
48
13.5%
73
42
13.3%
198
187
13.0%
22
29
100
11
18
129
1
(21)
109
(11)
98
10.3%
3
8
94
17
17
128
12
(16)
124
(17)
107
10.4%
32
(1)
70
—
21
91
(6)
(23)
62
—
62
6.0%
372
51
74
497
27
(84)
440
(51)
389
9.8%
105
(9)
162
27
$0.61
$0.15
$0.43
$0.43
$0.73
$1.74
$0.17
$0.04
$0.18
($0.98)
($0.59)
$0.16
$0.09
$0.14
$0.08
($0.01)
$0.30
$0.05
($0.02)
$0.14
$2.02
$2.19
$0.77
$0.75
$1.02
$0.24
$0.23
$0.42
$0.57
$0.57
$0.61
$0.51
$0.50
$0.50
$0.72
$0.72
$0.42
$2.04
$2.02
$1.95
$0.22
$0.22
$0.29
$0.02
$0.02
$0.07
$0.32
$0.32
($0.01)
$1.04
$1.03
($0.09)
$1.60
$1.59
$0.26
Cash flow from operating activities (excluding
changes in non-cash working capital components)2
Net debt1
323
1,963
124
2,212
125
2,077
78
1,982
131
1,679
458
1,679
82
1,654
87
1,707
58
1,760
20
1,351
247
1,351
1 Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section for a complete reconciliation.
2 2021 first quarter, 2020 and 2019 consolidated results and consolidated cash flow have been adjusted to reflect retrospective adjustments of discontinued operations. Please refer to the
“Discontinued Operations” section and Note 5 of the 2021 Audited Consolidated Financial Statements for more details.
38
2021 Annual Report
The following graphics show the breakdown of sales1, 4, before corporate activities and inter-segment eliminations, operating income (loss)
before depreciation and amortization2, 4, and adjusted operating income before depreciation and amortization2, 3, 4 by business segment:
SALES BREAKDOWN1, 4
OPERATING INCOME (LOSS) BEFORE
DEPRECIATION AND AMORTIZATION
BREAKDOWN2, 4
ADJUSTED OPERATING INCOME
BEFORE DEPRECIATION AND
AMORTIZATION BREAKDOWN2, 3, 4
% OF TOTAL SALES
% OF TOTAL OIBD
% OF TOTAL ADJUSTED OIBD
100.0%
100.0%
100.0%
47.9%
52.5%
40.3%
11.8%
2020
33.2%
14.3%
2021
50.0%
—%
50.0%
—%
68.2%
22.7%
9.1%
2020
90.7%
19.2%
(9.9%)
2021
50.0%
—%
63.2%
27.4%
9.4%
2020
78.7%
5.7%
15.6%
2021
Containerboard Packaging
Specialty Products
Tissue papers
FORWARD-LOOKING STATEMENTS
The following document is the annual financial report and Management’s Discussion and Analysis (“MD&A”) of the operating results and
financial position of Cascades Inc. (“Cascades” or “the Corporation”) and should be read in conjunction with the Corporation's Audited
Consolidated Financial Statements and accompanying notes for the years ended December 31, 2021 and 2020. Information contained
herein includes any significant developments as at February 23, 2022, the date on which the MD&A was approved by the Corporation’s
Board of Directors. For additional information, readers are referred to the Corporation’s Annual Information Form (“AIF”), which is published
separately. Additional information relating to the Corporation is also available on SEDAR at www.sedar.com.
The financial information contained herein, including tabular amounts, is expressed in Canadian dollars, unless otherwise specified, and is
prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board
(IFRS), unless otherwise specified. Unless otherwise specified or if required by context, the terms “we”, “our” and “us” refer to
Cascades Inc. and all of its subsidiaries, joint ventures and associates.
This MD&A is intended to provide readers with information that Management believes is necessary for an understanding of Cascades'
current results and to assess the Corporation's future prospects. Consequently, certain statements herein, including statements regarding
future results and performance, are forward-looking statements within the meaning of securities legislation, 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, prices and availability of raw materials, changes in relative values of certain currencies, fluctuations in selling
prices and adverse changes in general market and industry conditions. Cascades disclaims any intention or obligation to update or revise
any forward-looking statements, whether as a result of new information, future events or otherwise, except as required under applicable
securities regulations. This MD&A also includes price indices, as well as variance and sensitivity analysis that are intended to provide the
reader with a better understanding of the trends with respect to our business activities. These items are based on the best estimates
available to the Corporation.
1 Excluding inter-segment sales and Corporate activities.
2 Excluding Corporate activities.
3 Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section for a complete reconciliation.
4 2021 first quarter, 2020 and 2019 consolidated results have been adjusted to reflect retrospective adjustments of discontinued operations. Please refer to the “Discontinued Operations”
section and Note 5 of the 2021 Audited Consolidated Financial Statements for more details.
39
Leading the way.
BUSINESS HIGHLIGHTS
As part of the annual review of its corporate strategy, the Corporation analyzes its overall business and the environment in which it
competes, sets objectives for the following year and the years ahead and approves its budgets, all with a view to enhancing shareholder
value. On February 24, 2022, Management and the Board of Directors will disclose the highlights of this review to Shareholders of
the Corporation.
The following transactions should be taken into consideration when reviewing the overall and segmented analysis of the Corporation’s
2021 and 2020 results.
BUSINESS START-UP, ACQUISITION, DISPOSAL AND CLOSURE
BOXBOARD EUROPE
•
On October 26, 2021, the Corporation closed the transaction of the Boxboard Europe segment and recorded, in discontinued
operations, a gain of $228 million before income taxes of $24 million. The Corporation used tax assets to offset this tax expense,
resulting in no income tax payable on this transaction. The operations are presented as discontinued operations since the second
quarter of 2021 with reclassification of first quarter of 2021, as well as the comparative years 2020 and 2019.
BEAR ISLAND PROJECT
•
The Bear Island project, the Corporation's major for conversion of assets to recycled containerboard production, is progressing
according to plan. The initial total investment was set at US$380 million and is now revised to a range of US$425-450 million due to
continued inflationary pressure on material and labour costs. Since 2018 we have invested $177 million to acquire the site and
prepare the building and the equipment for its expected start-up in December 2022. The project incurred $6 million of operational
costs in 2021 (2020 - $4 million).
SIGNIFICANT FACTS AND DEVELOPMENTS
2021
•
On November 9, 2021, the Corporation completed the partial redemption of its unsecured senior notes. The transaction was settled
on November 10, 2021 and the Corporation redeemed US$144 million ($180 million) and US$155 million ($192 million) of its 2026
and 2028 unsecured senior notes, respectively, and paid an early repurchase premium totaling US$18 million ($22 million). The
Corporation incurred transaction fees of $2 million, wrote off $4 million of unamortized financing costs and $8 million of unamortized
issuance premium related to these notes. The Corporation also paid US$5 million ($6 million) of interest accrued on these notes.
•
•
On August 5, 2021, the Corporation announced an increase of its quarterly dividend from $0.08 to $0.12 per common share.
On April 30, 2021, the Corporation entered into an agreement with its lenders to extend and amend its existing $750 million revolving
credit facility. The amendment extends the term on the facility to July 7, 2025. The financial conditions remain unchanged.
2020
•
On December 11, 2020, Greenpac entered into an agreement with its lenders to extend and amend its credit facilities. The amended
credit agreement still provides Greenpac with a revolving credit of US$50 million while the principal of the term loan was reduced, with
cash on hand and utilization of the revolving line of credit, to US$75 million, from US$122 million at the time of the amendment. The
term of
terms and conditions remain
essentially unchanged.
the amended credit agreement
to December 2023. The
is extended
financing
On November 25, 2020, the Corporation announced the forthcoming closure of its tissue converting operations of its Laval plant,
located in Québec, Canada. Operations ceased June 30, 2021 and volume has been transferred to other plants.
On October 8, 2020, the Corporation announced the forthcoming closure of its tissue production and converting operations at its
Ransom and Pittston plants, located in Pennsylvania, USA. Operations ceased in December 2020 and January 2021 and volume has
been transferred to other plants.
On October 5, 2020, to finance the equity portion of the Bear Island project, the Corporation entered into an agreement with
underwriters pursuant to which the Corporation issued and the underwriters purchased on a bought deal basis 7,441,000 common
shares at a price of $16.80 per common share for gross proceeds of $125 million.
•
•
•
40
2021 Annual Report
•
•
•
•
On August 17, 2020, the Corporation announced that it had completed its private offering of US$300 million aggregate principal
amount of 5.375% senior notes due in 2028. The new notes were issued at a price of 104.25%, resulting in an effective yield of
4.69%. Transaction fees amounted to $4 million. The net proceed from the notes offering was used by the Corporation to redeem all
of its outstanding 5.75% US$200 million senior notes due in 2023 and repay certain amounts outstanding under its revolving
credit facility. The Corporation also paid $4 million premium and wrote off $2 million unamortized financing costs related to
these notes.
On July 28, 2020, the Corporation announced the closure of its Etobicoke, Ontario, Canada, Containerboard Packaging facility as part
of the strategic repositioning of its containerboard platform in Ontario, Canada. Operations permanently closed in June 2021 and
production capacity has been redeployed to other units within the region.
On May 26, 2020, the Corporation announced the closure of the Brown Containerboard Packaging facility located in Burlington,
Ontario, Canada, as part of the Corporation's continuing optimization initiatives for its Containerboard Packaging business. Production
was redeployed to our other units in Ontario, Canada.
The Corporation exercised its option to purchase the 20.20% interest in Greenpac Holding LLC (“Greenpac”) held by the Caisse de
dépôt et placement du Québec (CDPQ) on November 30, 2019 for an exercise price of US$93 million ($121 million). The transaction
closed January 3, 2020 and increased the Corporation's direct and indirect ownership interest in Greenpac to 86.35%.
41
Leading the way.
FINANCIAL RESULTS FOR THE YEAR ENDED DECEMBER 31, 2021 COMPARED TO THE
YEAR ENDED DECEMBER 31, 2020
SALES
Sales decreased by $149 million, or 4%, to $3,956 million in 20211, compared with $4,105 million in 20201. This was largely a reflection of
the 21% decrease in sales in both Consumer Products and Away-from-Home markets in the Tissue Papers segment. The 7% average
appreciation of the Canadian dollar compared to the US dollar had a negative impact on the sales of all the segments. This was partially
compensated by the net volume increase and favourable price and mix in the Packaging Products segments and in our Recovery and
Recycling activities.
Sales by geographic segment are as follows:
Sales from (in %):
Sales to (in %):
49%
51%
55%
45%
United States
Canada
United States
Canada
The main variances in sales in 20211, compared to 20201, are shown below:
(in millions of Canadian dollars)
SALES ($M)
200
26
4,105
(165)
3,956
(210)
0
2
0
2
l
s
e
a
S
e
c
i
r
P
i
x
M
&
&
y
r
e
v
o
c
e
R
d
n
a
g
n
i
l
c
y
c
e
R
s
m
e
t
i
r
e
h
O
t
X
F
/
$
N
A
C
e
m
u
o
V
l
1
2
0
2
l
s
e
a
S
1 2021 first quarter, 2020 and 2019 consolidated results have been adjusted to reflect retrospective adjustments of discontinued operations. Please refer to the “Discontinued Operations”
section and Note 5 of the 2021 Audited Consolidated Financial Statements for more details.
42
2021 Annual Report
OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION (OIBD)
The Corporation generated an OIBD of $302 million in 20211, compared with $543 million in 20201, a decrease of $241 million. Specific
items2 recorded in both years impacted the OIBD respectively. Excluding specific items, the $157 million adjusted OIBD2 decrease
reflected lower volumes in the Tissue segment while Packaging Products segments volume remained stable. Solid price increases in
Packaging segments mitigated headwinds from raw material cost increases, overall inflationary costs pressure, and the impact of
COVID-19 on our operations and logistics. Railway disruption mainly in Canada also had a negative impact at the end of the year.
Adjusted OIBD2 was $389 million in 20211, compared with $546 million in 20201, a decrease of $157 million.
The main variances in OIBD in 20211, compared to 20201, are shown below:
(in millions of Canadian dollars)
OIBD ($M)
200
(27)
(50)
543
3
546
(72)
0
2
0
2
D
B
O
I
s
m
e
t
i
c
i
f
i
c
e
p
S
0
2
0
2
D
B
O
I
.
j
d
A
e
c
i
r
P
i
x
M
&
r
e
h
t
O
s
n
o
i
t
a
i
r
a
v
.
d
o
r
P
i
x
m
&
s
t
s
o
c
e
m
u
o
V
l
w
a
R
l
s
a
i
r
e
t
a
m
1
2
0
2
D
B
O
I
.
j
d
A
302
1
2
0
2
D
B
O
I
(87)
s
m
e
t
i
c
i
f
i
c
e
p
S
389
(208)
Adjusted OIBD
Raw materials
(OIBD)
F/X CAN$
(OIBD)
Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section for a complete reconciliation.
The impacts of these estimated costs are based on production costs per unit shipped externally or inter-segment, which are affected by yield, product
mix changes, inbound freight costs and purchase and transfer prices. In addition to market pulp and recycled fibre, these costs include purchases of
external boards and parent rolls for the converting sector, and other raw materials such as plastic and wood chips.
The estimated impact of the exchange rate is based on the Corporation’s Canadian export sales less purchases, denominated in US$, that are
impacted by exchange rate fluctuations and by the translation of our non-Canadian subsidiaries OIBD into CAN$. It also includes the impact of
exchange rate fluctuations on the Corporation’s Canadian units in currency other than the CAN$ working capital items and cash positions, as well as
our hedging transactions. It excludes indirect sensitivity (please refer to the “Sensitivity Table” section for further details).
Other production costs and mix (OIBD)
These costs include the impact of variable and fixed costs based on production costs per unit shipped externally, which are affected by downtime,
efficiency and product mix changes.
Recovery and Recycling activities (Sales
and OIBD)
While this sub-segment is integrated within the other segments of the Corporation, any variation in the results of Recovery and Recycling activities
are presented separately and on a global basis in the charts.
The sales and OIBD variances analysis by segment is shown in each business segment review (please refer to “Business Segment
Review” for more details).
The Corporation incurred certain specific items in 2021 and 2020 that adversely or positively affected its operating results2.
1 2021 first quarter, 2020 and 2019 consolidated results have been adjusted to reflect retrospective adjustments of discontinued operations. Please refer to the “Discontinued Operations”
section and Note 5 of the 2021 Audited Consolidated Financial Statements for more details.
2 Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section for a complete reconciliation.
43
Leading the way.
BUSINESS SEGMENT REVIEW
PACKAGING PRODUCTS - CONTAINERBOARD
Our Industry
U.S. containerboard industry production and capacity utilization rate1
Total U.S.containerboard production amounted to 40 million short tons in
2021, an increase of 5% compared to 2020, a reflection of stronger
demand levels driven by the COVID-19 pandemic. As a result, the
industry's capacity utilization rate increased to 95% in 2021 from 94%
in 2020.
U.S. containerboard inventories at box plants and mills2
The average inventory level increased by 2% year-over-year in 2021,
reflecting another year of strong demand driven by the COVID-19
pandemic. The number of weeks of supply in inventory averaged 3.8x for
the year, stable from 2020.
45,000
40,000
35,000
30,000
25,000
36,840
92%
2019
38,064
94%
40,046
95%
2020
2021
100%
95%
90%
85%
3,000
2,500
2,000
1,500
1,000
500
—
2,584
2,470
4.0
2019
3.8
2020
2,528
3.8
2021
5.0
4.5
4.0
3.5
3.0
Total production ('000 s.t.)
Capacity utilization rate
Average inventory level ('000 s.t.)
Weeks of supply
U.S corrugated box industry shipments2
Total U.S. corrugated box shipments increased by 2% in 2021 compared
to 2020. This reflects strong demand related to continued essential
manufacturing activity, in addition to heightened demand, including e-
commerce, related to the COVID-19 pandemic.
Canadian corrugated box industry shipments3
Canadian corrugated box shipments increased by 4% in 2021 compared to
2020. This reflects continuation of essential manufacturing and services, in
addition to heightened demand, including e-commerce, related to the
COVID-19 pandemic.
392.6
406.8
416.3
450.0
400.0
350.0
300.0
33.7
35.2
36.5
40.0
35.0
30.0
25.0
2019
2020
2021
2019
2020
2021
Total shipments (Billion sq. ft.)
Total shipments (Billion sq. ft.)
Reference prices - containerboard1
2021 reference prices for linerboard and corrugating medium increased by
15% and 20%, respectively, compared to 2020. This was largely driven by
demand dynamics, as a result of the COVID-19 pandemic.
Reference prices - recovered papers (brown grade)1
The average reference price of old corrugated containers no.11 (“OCC̑
̑”)
increased by 108% in 2021 compared to 2020. This was largely due to
increased demand levels for the fibre throughout the year as demand for
packaging products increased as a result of the COVID-19 pandemic.
900
800
700
600
734
638
623
723
745
833
2019
2020
2021
Corrugating medium 26-lb. semichemical, Eastern U.S. (open market) (US$/s.t.)
140
120
100
80
60
40
20
—
127
41
61
2019
2020
2021
Linerboard 42-lb. unbleached kraft, Eastern U.S. (open market) (US$/s.t.)
Old corrugated containers, no. 11 (OCC - Northeast average) (US$/s.t.)
1 Source: RISI
2 Source: Fibre Box Association
3 Source: Canadian Corrugated and Containerboard Association
44
2021 Annual Report
Our Performance
OIBD and adjusted OIBD2 ($M)
Sales ($M) and adjusted OIBD margin2
200
150
100
50
0
450
400
350
300
250
150
102
99
101
100
94
83
110
108
96
100
95
94
88
71
70
506 500 503 497 507 502
458 454
600
500
400
300
200
Q1
20
Q2
20
Q3
20
Q4
20
Q1
21
Q2
21
Q3
21
Q4
21
Q1
20
Q2
20
Q3
20
Q4
20
Q1
21
Q2
21
Q3
21
Q4
21
OIBD ($M)
Adjusted OIBD ($M)
SALES ($M)
Adj. OIBD margin (% of sales)
Shipments and manufacturing capacity
utilization rate
374 360
411 399 391 385 377 368
Q1
20
Q2
20
Q3
20
Q4
20
Q1
21
Q2
21
Q3
21
Q4
21
100%
95%
90%
85%
1,400
1,350
1,300
1,250
1,200
1,150
Average selling price
Q1
20
Q2
20
Q3
20
Q4
20
Q1
21
Q2
21
Q3
21
Q4
21
Shipments ('000 s.t.)
Utilization rate
(CAN$/s.t.)
(US$/s.t.)
30%
25%
20%
15%
10%
1,200
1,100
1,000
900
800
The main variances1 in sales and operating income before depreciation and amortization for the Containerboard Packaging segment in
2021, compared to 2020, are shown below:
SALES ($M)
196
(27)
2,009
1,918
(78)
436
OIBD ($M)
196
(29)
(68)
403
(33)
372
350
(130)
(22)
0
2
0
2
l
s
e
a
S
e
c
i
r
P
i
x
M
&
e
m
u
o
V
l
X
F
/
$
N
A
C
1
2
0
2
l
s
e
a
S
0
2
0
2
D
B
O
I
s
m
e
t
i
c
i
f
i
c
e
p
S
e
c
i
r
P
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The Corporation incurred certain specific items in 2021 and 2020 that adversely or positively affected its operating results2.
1 For definitions of certain sales and operating income before depreciation and amortization (OIBD) variation categories, please refer to the "Financial results for the year ended
December 31, 2021, compared to year ended December 31, 2020” section for more details.
2 Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section for a complete reconciliation.
45
Leading the way.
2020
2021
Change in %
Shipments2 (’000 s.t.)
1,544
1,521
Average Selling Price
(CAN$/unit)
1,242
1,321
Sales ($M)
1,918
2,009
OIBD ($M)
(as reported)
% of sales
(adjusted)1
% of sales
436
23%
403
21%
350
17%
372
19%
Operating income ($M)
(as reported)
321
288
(adjusted)1
230
252
-1%
6%
5%
-20%
-8%
-28%
-13%
1 Please refer to the “Supplemental Information on Non-IFRS Measures and Other
Financial Measures” section for a complete reconciliation.
2 Shipments do not take into account the elimination of business sector inter-segment
shipments. Including 14.1 billion square feet in 2021 compared to 14 billion square
feet in 2020, an increase of 1%.
3 Including sales to other partners in Greenpac.
46
Shipments decreased by 23,000 s.t., or 1%, in 2021 compared
to 2020.
This reflect a 32,000 s.t. or 4% decrease in external parent roll
shipments compared to 2020. This was driven by a higher mill
integration rate in the current period and a 2% decrease in the
manufacturing utilization rate to 94%, mainly related to production
slowdown impact of 7,000 s.t. at the Niagara Falls complex due to
water effluent treatment system issues during the second half of the
year. Moreover, a transportation availability shortage towards the end
of 2021 negatively impacted parent rolls shipments by 20,000 s.t..
Shipments from converting activities increased by 9,000 s.t., or 1%.
This underperformed the Canadian market increase of 4% and the
US market increase of 5%. Consequently, the mill integration rate
increased to 58% in 2021 from 56% in 2020. Including sales to other
partners3, the integration rate was 73% in 2021, up from 69%
in 2020.
The average selling price denominated in Canadian dollars increased
by 6% in 2021. This reflected a 5% increase for parent rolls and a 5%
for converted products. Similarly, the higher proportion of converted
products sold also increased the average selling price by 1%. The
7% average appreciation of the Canadian dollar compared to the
US dollar had a net negative impact on average selling prices during
the period and partly offset these increases.
Sales increased by $91 million, or 5%, in 2021 compared to 2020.
The higher average selling price and the favourable sales mix added
$174 million and $22 million to sales, respectively. These benefits
were partly offset by lower volume that had a negative impact of
$27 million on sales and the 7% average appreciation of the
Canadian dollar against the US dollar which negatively impacted
sales by $78 million.
Operating income before depreciation and amortization (OIBD)
decreased by $86 million, or 20%, in 2021 compared to 2020.
Excluding specific items1 in both years, adjusted OIBD1 decreased by
$31 million, or 8%, reflecting the impact of inflationary pressure and
of COVID-19 on our operations and our supply chain costs combined
with transportation capacity challenges notably the railway disruption
at the end of the year following flooding in western Canada. The
segment a delivered a higher average selling price and a favourable
mix of products sold, which had a combined positive impact of
$196 million. These benefits were offset by a negative raw material
cost impact of $130 million and higher logistic and distribution costs
that subtracted an additional $19 million. Other headwinds included a
$10 million negative impact related to the 1% volume decrease, an
$11 million negative impact related to the 7% average appreciation of
the Canadian dollar and higher energy costs that subtracted a further
$8 million. Other production costs, including repair and maintenance,
labor and other costs, had a combined negative impact of $49 million
on profitability. These variances include a total negative impact of
$13 million related to the water effluent issues at our Niagara Falls
site.
The segment incurred some specific items1 in 2021 and 2020 that
affected OIBD.
2021 Annual Report
BUSINESS SEGMENT REVIEW
PACKAGING PRODUCTS - SPECIALTY PRODUCTS
Our Performance
OIBD and adjusted OIBD2 ($M)
Sales ($M) and adjusted OIBD margin2
17
16
16
16
15
15
18
18
18
18
17
17
21
21
25
20
15
10
5
0
12
11
150
100
50
0
113 120 117 123 122
144 151
131
20%
15%
10%
5%
0%
Q1
20
Q2
20
Q3
20
Q4
20
Q1
21
Q2
21
Q3
21
Q4
21
Q1
20
Q2
20
Q3
20
Q4
20
Q1
21
Q2
21
Q3
21
Q4
21
OIBD ($M)
Adjusted OIBD ($M)
SALES ($M)
Adj. OIBD margin (% of sales)
The main variances1 in sales and operating income before depreciation and amortization for the Specialty Products segment in 2021,
compared to 2020, are shown below:
SALES ($M)
55
548
46
(26)
58
2
60
473
OIBD ($M)
9
55
(16)
(34)
74
—
74
0
2
0
2
l
s
e
a
S
e
m
u
o
V
l
e
c
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P
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M
&
X
F
/
$
N
A
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1
2
0
2
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0
2
0
2
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0
2
0
2
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2
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1
2
0
2
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The Corporation incurred certain specific items in 2021 and 2020 that adversely or positively affected its operating results2.
1 For definitions of certain sales and operating income before depreciation and amortization (OIBD) variation categories, please refer to the "Financial results for the year ended
December 31, 2021, compared to year ended December 31, 2020” section for more details.
2 Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section for a complete reconciliation.
47
Leading the way.
2020
473
58
12%
60
13%
Sales ($M)
OIBD ($M)
(as reported)
% of sales
(adjusted)1
% of sales
2021
548
74
14%
74
14%
Operating income ($M)
(as reported)
42
44
(adjusted)1
59
59
Change in %
16%
28%
23%
40%
34%
1 Please refer to the “Supplemental Information on Non-IFRS Measures and Other
Financial Measures” section for a complete reconciliation.
Sales increased by $75 million, or 16%, in 2021 compared to 2020.
The combination of volume increases, higher average selling price
and a favourable sales mix increased sales levels by $101 million in
the period. These were partly offset by the 7% average appreciation
of the Canadian dollar compared to the US dollar, which decreased
sales by $26 million.
the COVID-19 situation had negative
Operating income before depreciation and amortization (OIBD)
increased by $16 million, or 28%, in 2021 compared to 2020.
Excluding specific items1 in 2020, the adjusted OIBD1 increased by
$14 million, or 23%. It is worth noting that despite stronger results in
impacts on our
2021,
operations and logistics, limiting our ability to deliver more products
to our customers and deliver a stronger financial performance.
However, the segment's solid performance reflects higher overall
volumes and realized spreads, which positively impacted results by
$30 million. Lower SG&A and direct labour costs also positively
impacted our performance by $4 million. These benefits were
partially offset by the less favourable exchange rate and higher
operating, maintenance and transportation costs, which negatively
impacted results by $20 million.
The segment incurred some specific items1 in 2020 that affected OIBD.
48
2021 Annual Report
BUSINESS SEGMENT REVIEW
TISSUE PAPERS
Our Industry
U.S. tissue paper industry production (parent rolls) and capacity
utilization rate1
Total parent roll production decreased by 5% in 2021. The average capacity
utilization rate of 92% in 2021 decreased by 5% compared to 97% in 2020.
Decreased demand level is most notably related to the COVID-19 pandemic, that
negatively impacted retail tissue products in the first half of 2021.
U.S. tissue paper industry converted product shipments1
In 2021, shipments for the retail and the Away-from-Home markets decreased by
8% and increased by 6%, respectively, compared to 2020. This largely reflects the
decreased demand for retail tissue products in the first half of 2021 and higher
demand for Away-from-Home tissue products as a result of recovery related to the
COVID-19 pandemic.
11,000
10,000
9,000
8,000
7,000
9,245
93%
2019
9,890
97%
2020
9,401
92%
2021
100%
98%
96%
94%
92%
90%
8,000
6,000
4,000
2,000
—
Total parent roll production ('000 s.t.)
Capacity utilization rate
6,028
2,972
7,013
6,483
2,719
2,879
2019
2020
2021
Shipments - Away-from-Home market ('000 s.t.)
Shipments - Retail market ('000 s.t.)
Reference prices - parent rolls1
In 2021, the reference price for recycled and virgin parent rolls respectively
increased by 3% and 6%, compared to 2020.
Reference prices - recovered papers (white grade)1
The reference price of sorted office papers No.37 (“SOP”) increased by 23% in 2021
compared to 2020.
2,000
1,500
1,000
500
—
1,429
1,142
1,428
1,120
1,515
1,156
2019
2020
2021
Recycled parent roll (average publication price) (US$/s.t.)
Virgin parent roll (average publication price) (US$/s.t.)
250
200
150
100
50
—
128
109
134
2019
2020
2021
Sorted office papers, no. 37 (SOP - Northeast average) (US$/s.t.)
Reference prices - market pulp1
In 2021, the reference price for NBSK and NBHK increased by 30% and 39%,
respectively, compared to 2020, reflecting global demand supply dynamics.
1,239
1,036
1,141
883
1,478
1,229
2019
2020
2021
Bleached hardwood kraft, mixed, Canada / U.S. (US$/m.t.)
Northern bleached softwood kraft, Canada (US$/m.t.)
2,000
1,500
1,000
500
—
1 Source: RISI
49
Leading the way.
Our Performance
OIBD and adjusted OIBD2 ($M)
Sales ($M) and adjusted OIBD margin2
50
0
-50
-100
200
150
100
50
0
45
45
54
48
36
25
40
27
18
20
47
12
1
(5)
(6)
Q1
20
Q2
20
Q3
20
Q4
20
Q1
21
Q2
21
Q3
21
(98)
Q4
21
500
400
300
200
100
0
446 424
364 381
344 339
292 297
Q1
20
Q2
20
Q3
20
Q4
20
Q1
21
Q2
21
Q3
21
Q4
21
OIBD ($M)
Adjusted OIBD ($M)
SALES ($M)
Adj. OIBD margin (% of sales)
Shipments and manufacturing capacity
utilization rate
181 167
145 152
123 138 148 145
100%
90%
80%
70%
2,600
2,400
2,200
2,000
Average selling price
Q1
20
Q2
20
Q3
20
Q4
20
Q1
21
Q2
21
Q3
21
Q4
21
Q1
20
Q2
20
Q3
20
Q4
20
Q1
21
Q2
21
Q3
21
Q4
21
Shipments ('000 s.t.)
Utilization rate
(CAN$/s.t.)
(US$/s.t.)
20%
10%
0%
2,000
1,900
1,800
1,700
1,600
1,500
The main variances1 in sales and operating income (loss) before depreciation and amortization for the Tissue Papers segment in 2021,
compared to 2020, are shown below:
SALES ($M)
OIBD (loss) ($M)
1,615
(53)
(61)
1,272
1
2
0
2
l
s
e
a
S
(229)
e
m
u
o
V
l
0
2
0
2
l
s
e
a
S
e
c
i
r
P
i
x
M
&
X
F
/
$
N
A
C
30
175
18
145
(42)
(53)
27
(71)
0
2
0
2
D
B
O
I
s
m
e
t
i
c
i
f
i
c
e
p
S
0
2
0
2
D
B
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I
.
j
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e
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s
n
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t
a
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a
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w
a
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l
s
a
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r
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a
m
t
(65)
(38)
e
c
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P
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u
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V
l
1
2
0
2
D
B
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.
j
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1
2
0
2
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B
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The Corporation incurred certain specific items in 2021 and 2020 that adversely or positively affected its operating results2.
1 For definitions of certain sales and operating income before depreciation and amortization (OIBD) variation categories, please refer to the "Financial results for the year ended
December 31, 2021, compared to year ended December 31, 2020” section for more details.
2 Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section for a complete reconciliation.
50
2021 Annual Report
2020
2021
Change in %
Shipments2 (’000 s.t.)
554
645
Average Selling Price
(CAN$/unit)
2,505
2,299
-14%
-8%
—
Sales ($M)
1,615
1,272
-21%
OIBD (loss) ($M)
(as reported)
145
9%
175
11%
% of sales
(adjusted)1
% of sales
(38)
(3)%
27
2%
Operating income (loss) ($M)
(as reported)
72
102
(adjusted)1
(108)
(43)
-126%
-85%
-250%
-142%
1 Please refer to the “Supplemental Information on Non-IFRS Measures and Other
Financial Measures” section for a complete reconciliation.
2 Shipments do not take into account the elimination of business sector inter-segment
shipments.
Following strong demand in 2020 and inventory management from
customers in 2021, the Tissue market faced important volume
contraction in 2021 compared to 2020. Converted product shipments
decreased by 92,000 s.t., or 18%. This is the result of lower demand
in both the Consumer Products (-23%) and the Away-from-Home
(-11%) markets and reflects the volatility in customer buying patterns
due to COVID-19 which makes year-over-year comparisons difficult.
External manufacturing shipments of parent rolls increased by 1,000
s.t., or 1%, in 2021 compared to 2020. The integration rate was 74%
during the period, compared to 75% in the same period of 2020.
Selling prices were slightly higher for the Away-from-Home market
and stable in Consumer Products, while the overall 8% decrease in
the average selling price was primarily due to the 7% average
appreciation of the Canadian dollar compared to the US dollar, a
higher proportion of sales attributable to parent rolls and a less
favourable mix of converted products sold.
Sales decreased by $343 million, or 21% in 2021 compared to 2020.
This was driven by lower volumes, which reduced sales by
$229 million, a $61 million impact related to the less favourable
exchange rate and a $53 million impact due to lower average selling
price & mix, as explained above.
Operating income (loss) before depreciation and amortization (OIBD)
decreased by $183 million to an operating loss of $38 million, in 2021
compared to 2020. Excluding specific items1 in both years, the
adjusted OIBD1 decreased by $148 million, or 85%, and was mainly
due to lower volumes which had a negative impact of $71 million,
and a less favourable average selling price & mix which further
impacted results by $53 million. Higher raw material and energy
costs reduced results by $42 million and $14 million, respectively.
Lower fixed costs and SG&A following network optimizations, asset
base modernization, plant closures and cost control initiatives
undertaken over the last year helped to partially offset the impacts
these factors had on OIBD.
The COVID-19 pandemic has caused significant volatility in this
business segment, including labour and supply chain challenges and
higher production costs. The difficult labour market is limiting our
ability to achieve productivity efficiency targets following the recent
modernization of our assets. The Corporation has put in place an
important plan of action to resolve these issues in 2022.
The segment incurred some specific items1 in 2021 and 2020 that
affected OIBD.
51
Leading the way.
CORPORATE ACTIVITIES
Corporate Activities incurred some specific items1 in 2021 and 2020 that affected OIBD. Corporate Activities registered an adjusted OIBD1
loss of $84 million in 2021, compared to a loss of $92 million in 2020. The OIBD performance of our Recovery and Recycling activities was
higher by $5 million in 2021.
In 2021, the Corporate Activities recorded a gain of $228 million (before income tax of $24 million) from the sale of its 57.6% controlling
equity interest in Reno de Medici S.p.A. (RDM). This amount is included in discontinued operations. Please refer to the “Discontinued
Operations” section and Note 5 of the 2021 Audited Consolidated Financial Statements for more details. In 2020, the Corporate Activities
recorded an impairment charge of $1 million related to renewable energy assets and restructuring charges totaling $2 million as part of
profitability improvement initiatives.
STOCK-BASED COMPENSATION EXPENSE
Stock-based compensation expense recognized in Corporate Activities amounted to $5 million in 2021, compared to $7 million in 2020. For
more details on stock-based compensation, please refer to Note 21 of the 2021 Audited Consolidated Financial Statements.
OTHER ITEMS ANALYSIS
DEPRECIATION AND AMORTIZATION
The depreciation and amortization expense increased by $1 million to $252 million in 20212, compared to $251 million in 20202. The
Corporation reviewed the useful life of equipment and the residual value of its buildings over the last twelve months which resulted in a
lower depreciation charge in 2021. The appreciation of the Canadian dollar also reduced depreciation and amortization expense. This was
more than offset by the commissioning of new equipments mainly in the Tissue segment and in the Containerboard segment converting
assets as part of the strategic repositioning of its platform in Ontario, Canada.
FINANCING EXPENSE AND INTEREST EXPENSE (REVENUE) ON EMPLOYEE FUTURE BENEFITS AND OTHER LIABILITIES
The financing expense and interest expense (revenue) on employee future benefits and other liabilities amounted to $89 million in 20212,
compared to $94 million in 20202, a decrease of $5 million. The variance is mainly attributable to higher capitalized interests and to lower
indebtedness from positive operating cash flows, the partial redemption of senior notes following the monetization of our RDM equity
investment in October 2021, our equity issuance in the fourth quarter of 2020 and the financing and redemption of unsecured senior notes
in the third quarter of 2020 which have more than offset the impact on indebtedness from capital expenditures, including the Bear Island
project, dividends paid and redemption of common shares.
In 2021, the Corporation recorded an unrealized loss of $1 million, compared to an unrealized loss of $2 million in 2020, pertaining to a call
option granted to the Corporation by one of the minority shareholders of Falcon Packaging LLC.
In 2020, the Corporation recorded an unrealized gain of $13 million on the fair value revaluation of a one-time option granted to White
Birch to purchase an interest of up to 10% in the Bear Island containerboard mill project, which was not exercised.
LOSS ON REPURCHASE OF LONG-TERM DEBT
In 2021, the Corporation redeemed US$144 million ($180 million) and US$155 million ($192 million) of its 2026 and 2028 unsecured senior
notes, respectively, and paid an early repurchase premium totaling US$18 million ($22 million) and wrote off $4 million of unamortized
financing costs and $8 million of unamortized issuance premium related to these notes. The Corporation also paid transactions fees
totaling $2 million.
In 2020, the Corporation redeemed US$200 million of its unsecured senior notes and recorded an early repurchase premium of $4 million
and wrote off $2 million related unamortized financing costs.
FOREIGN EXCHANGE GAIN ON LONG-TERM DEBT AND FINANCIAL INSTRUMENTS
In 2021, the Corporation recorded a gain of $3 million on its US$ denominated debt and related financial instruments, compared to a gain
of $6 million in 2020. Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section for
more details.
FAIR VALUE REVALUATION LOSS ON INVESTMENTS
In 2020, the Corporation recorded a fair value revaluation loss on investments of $3 million on a joint venture.
1 Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section for a complete reconciliation.
2 2021 first quarter, 2020 and 2019 consolidated results have been adjusted to reflect retrospective adjustments of discontinued operations. Please refer to the “Discontinued Operations”
section and Note 5 of the 2021 Audited Consolidated Financial Statements for more details.
52
2021 Annual Report
SHARE OF RESULTS OF ASSOCIATES AND JOINT VENTURES
Share of results of associates and joint ventures amounted to $18 million in 2021, compared to $14 million in 2020. Please refer to Note 8
of the 2021 Audited Consolidated Financial Statements for more information on associates and joint ventures.
PROVISION FOR INCOME TAXES
In 20211, the Corporation recorded an income tax provision of $9 million, which compares to an income tax provision of $26 million
in 20201.
(in millions of Canadian dollars) (unaudited)
Provision for (recovery of) income taxes based on the combined basic Canadian and provincial income tax rate
20211
(10)
20201
55
Adjustment for income taxes arising from the following:
Difference in statutory income tax rate of foreign operations
Prior years reassessment
Reversal of deferred income tax assets related to prior year losses
Change in future income taxes resulting from enacted tax rate change
Permanent differences
Change in deferred income tax assets relating to capital tax losses
Other
Provision for income taxes
—
4
18
—
(2)
—
(1)
19
9
(3)
(5)
—
(1)
(12)
(8)
—
(29)
26
The Corporation reassessed the probability of recovering unrealized capital losses following the redemption of its US$ denominated debts
in 2020, which resulted in the recognition of tax assets totaling $3 million, of which $2 million was recorded in results.
In 2021, the Corporation recorded the reversal of $18 million in tax assets related to prior year losses of one of its subsidiaries as it does
not expect to be able to use them before they expire.
Greenpac is a limited liability company (LLC) and partners agreed to account for it as a disregarded entity for tax purposes. Consequently,
income taxes associated with Greenpac net earnings are proportionately recorded by each partner based on its respective share in the
LLC and no income tax provision is included in Greenpac’s net earnings. As such, although Greenpac is fully consolidated in the
Corporation’s results, only 92% of pre-tax book income is considered for tax provision purposes.
The effective tax rate and income taxes are affected by the results of certain subsidiaries and joint ventures located in countries where the
income tax rates are different from those in Canada, notably the United States. The normal effective tax rate is expected to be in the range
of 21% to 27%. The weighted-average applicable tax rate was 26.0% in 2021.
RESULTS FROM DISCONTINUED OPERATIONS
Results from discontinued operations amounted to $234 million in 20211, compared to $51 million in 20201. Results from discontinued
operations attributable to Shareholders amounted to $221 million in 20211, compared to $29 million in 20201. Please refer to the
“Discontinued Operations” section and Note 5 of the 2021 Audited Consolidated Financial Statements for all details on results from
discontinued operations.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS FROM OPERATING ACTIVITIES FROM CONTINUING OPERATIONS
Cash flows from operating activities from continuing operations generated $211 million in 20211, compared to $477 million generated in
20201. Changes in non-cash working capital components used $36 million liquidity in 20211, compared to $19 million generated in 20201
mainly due to higher inventory resulting from increased raw material and production costs. Also, the decrease in operating cash flow is
driven by lower profitability in the Tissue Papers and Containerboard segments. As at December 31, 2021, average quarterly LTM working
capital as a percentage of LTM sales3 stood at 8.6%, which compares to 8.8% as at December 31, 20202.
Cash flow from operating activities from continuing operations, excluding changes in non-cash working capital components, stood at
$247 million in 20211, compared to $458 million in 20201. This cash flow measurement is relevant to the Corporation’s ability to pursue its
capital expenditure program and reduce its indebtedness.
1 2021 first quarter, 2020 and 2019 consolidated results and consolidated cash flows have been adjusted to reflect retrospective adjustments of discontinued operations. Please refer to the
“Discontinued Operations” section and Note 5 of the 2021 Audited Consolidated Financial Statements for more details.
2 Not adjusted for retrospective reclassification of discontinued operations
3 Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section for a complete reconciliation.
53
Leading the way.
On November 9, 2021, the Corporation completed the partial redemption of its unsecured senior notes and paid transaction fees of
$2 million and an early repurchase premium totaling US$18 million ($22 million) (see “Business Highlights” section for more details).
On August 17, 2020, the Corporation completed the financing and redemption of unsecured senior notes and paid $4 million in premium
for early redemption (see “Business Highlights” section for more details).
The Corporation paid $96 million of financing expense in 20211, compared to $76 million in 20201. The variance is mainly explained by the
early payment of $6 million of interest paid in 2021 following the partial redemption of unsecured senior notes and by the interest payment
of $23 million normally planned for January 2020 but made in December 2019 following the redemption of unsecured senior notes.
The Corporation also received $2 million of income taxes in 20211, compared to $9 million received in 20201.
In 2021, the Corporation paid $25 million for severances and other restructuring costs related to closures and margin improvement
initiatives, compared to $11 million in 2020.
INVESTING ACTIVITIES FROM CONTINUING OPERATIONS
Investing activities from continuing operations used $247 million in 20211, compared to $168 million used in 20201.
DISPOSALS IN ASSOCIATES AND JOINT VENTURES
In 2021, the Corporation sold its participation in an associate for an amount of $1 million.
In 2020, the Corporation increased its participation in an associate for a contribution of $1 million and disposed of one of its investments for
total proceeds of $4 million.
PAYMENTS FOR PROPERTY, PLANT AND EQUIPMENT
(in millions of Canadian dollars) (unaudited)
Total acquisitions
Variation of acquisitions for property, plant and equipment included in “Trade and other payables”
Right-of-use assets acquisitions and of property, plant and equipment included in other debts
Payments for property, plant and equipment
Proceeds from disposals of property, plant and equipment
Payments for property, plant and equipment net of proceeds from disposals
New capital expenditure projects, including right-of-use assets, by segment in 2021 were as follows:
(in millions of Canadian dollars)
43
50
37
26
217
20211
373
(44)
(43)
286
(53)
233
20201
266
6
(53)
219
(55)
164
Tissue Papers
Containerboard
Corporate Activities
Specialty Products
Right-of-use assets
1 2021 first quarter, 2020 and 2019 consolidated cash flows have been adjusted to reflect retrospective adjustments of discontinued operations. Please refer to the “Discontinued Operations”
section and Note 5 of the 2021 Audited Consolidated Financial Statements for more details.
54
2021 Annual Report
The major capital projects that were initiated, are in progress or were completed in 2021 are as follows:
CONTAINERBOARD PACKAGING
•
Bear Island assets in Virginia, USA for site preparation and conversion of equipment to recycled containerboard manufacturing (see
“Business Highlights” section for more details).
Investment in converting assets as part of the strategic repositioning of our containerboard platform in Ontario, Canada, following the
announced closure of our Etobicoke plant.
Investment in converting equipment in the US North-East region to add capacity and better serve the increasing demand for our
products in our strategic markets.
•
•
SPECIALTY PRODUCTS
•
•
Investment in equipment to add capacity in flexible and rigid plastic packaging products.
Investment in insulated container converting equipment to increase capacity and better serve increasing demand in this market.
TISSUE PAPERS
•
Investment in new converting lines and equipment to complete the modernization plan of our asset platform.
PROCEEDS FROM DISPOSALS OF PROPERTY, PLANT AND EQUIPMENT
The main disposals of property, plant and equipment are as follows:
20211
The Tissue Papers segment received $51 million from the sale of assets of plants that were closed in the US and Canada.
20201
The Containerboard Packaging segment received $42 million from the sale of a building in Ontario, Canada.
The Containerboard Packaging segment also received $5 million following the release of the escrow amount related to the 2018 sale of a
building in Maspeth, New York, USA.
The Tissue Papers segment received $2 million from the sale of assets of a closed plant in the USA.
CHANGE IN INTANGIBLE AND OTHER ASSETS
In 20211, the Corporation invested $12 million ($7 million in 20201) in its ERP information technology system and other
software developments. In 2020, the Corporation invested $2 million for an additional participation in one of its equity investments.
CASH RECEIVED IN BUSINESS COMBINATIONS
In 2020, the Corporation received a purchase price adjustment of US$2 million ($2 million) related to the Orchids Paper Products
acquisition concluded in September 2019.
1 2021 first quarter, 2020 and 2019 consolidated cash flows have been adjusted to reflect retrospective adjustments of discontinued operations. Please refer to the “Discontinued Operations”
section and Note 5 of the 2021 Audited Consolidated Financial Statements for more details.
55
Leading the way.
FINANCING ACTIVITIES FROM CONTINUING OPERATIONS
Financing activities from continuing operations used $529 million in liquidity in 20211, compared to $117 million used in 20201, including
$41 million ($31 million in 2020) in dividend payments to the Corporation's Shareholders.
ISSUANCE AND REDEMPTION OF UNSECURED SENIOR NOTES
On November 9, 2021, the Corporation completed the partial redemption of its unsecured senior notes. The transaction was settled on
November 10, 2021 and the Corporation redeemed US$144 million ($180 million) and US$155 million ($192 million) of its 2026 and
2028 unsecured senior notes, respectively, and paid an early repurchase premium totaling US$18 million ($22 million). The Corporation
incurred transaction fees of $2 million, wrote off $4 million of unamortized financing costs and $8 million of unamortized issuance premium
related to these notes. The Corporation also paid US$5 million ($6 million) of interest accrued on these notes.
Partial redemption was used as follows:
(in millions of Canadian dollars) (unaudited)
Transaction fees
Repurchase of 2026 and 2028 Notes
Premium paid on long-term debt redemption
Decrease of credit facility
2021
(2)
(372)
(22)
(396)
On August 17, 2020, the Corporation issued unsecured senior notes for US$300 million ($396 million) aggregate principal amount of
5.375% due in 2028 at a price of 104.25% resulting in a US$13 million ($17 million) premium for total proceed of US$313 million
($413 million) and an effective yield of 4.69%. Transaction fees amounted to $4 million. The Corporation used the proceed from this
offering to fund the redemption of its 5.75% US$200 million ($264 million) unsecured senior notes due in 2023 and paid a premium of
US$3 million ($4 million). The Corporation also wrote off $2 million unamortized financing costs related to these notes.
Issuance proceed was used as follows:
(in millions of Canadian dollars) (unaudited)
Debt issuance
Premium received on debt issuance
Transaction fees
Repurchase of 2023 Notes
Premium paid on long-term debt redemption
Decrease of credit facility and increase in cash and cash equivalent
2020
396
17
(4)
(264)
(4)
141
SETTLEMENT OF DERIVATIVE FINANCIAL INSTRUMENTS
In 2020, the Corporation received $1 million from the settlement of derivative financial instruments.
ISSUANCE OF COMMON SHARES ON PUBLIC OFFERING
On October 5, 2020, the Corporation entered into an agreement with underwriters pursuant to which the Corporation issued and the
underwriters purchased on a bought deal basis 7,441,000 common shares at a price of $16.80 per common share for gross proceeds of
$125 million. Transactions fees amounted to $5 million before income tax recovery of $1 million. The transaction closed on
October 22, 2020.
ISSUANCE OF COMMON SHARES UPON EXERCISE OF STOCK OPTIONS AND REDEMPTION OF COMMON SHARES
The Corporation issued 235,732 common shares at an average price of $6.50 as a result of the exercise of stock options in 2021,
representing an aggregate amount of $2 million (in 2020 - $7 million for 1,225,489 common shares issued at an average price of $5.89).
The Corporation purchased 1,651,600 common shares for cancellation at an average price of $15.45 for $26 million in 2021 (in 2020 -
$8 million for 635,554 common shares for cancellation purchased at an average price of $12.41).
PAYMENT OF OTHER LIABILITIES
On January 3, 2020, the Corporation paid an amount of other liabilities of $121 million related to the purchase of CDPQ interest in
Greenpac Holding LLC (see “Business Highlights” section for more details).
1 2021 first quarter, 2020 and 2019 consolidated cash flows have been adjusted to reflect retrospective adjustments of discontinued operations. Please refer to the “Discontinued Operations”
section and Note 5 of the 2021 Audited Consolidated Financial Statements for more details.
56
2021 Annual Report
DIVIDENDS PAID TO NON-CONTROLLING INTERESTS AND ACQUISITION OF NON-CONTROLLING INTERESTS
Dividends paid to non-controlling interests in Greenpac and Falcon Packaging amounted to $14 million in 20211 ($14 million in 20201). In
2021, the Corporation also increased its participation in a distributor in the Specialty Products segment for a contribution of $2 million.
CASH FLOWS FROM DISCONTINUED OPERATIONS
In 20211, the Boxboard Europe segment received $4 million from the sale of the land of a closed plant. The Boxboard Europe segment
completed two acquisitions and paid a total of €141 million ($210 million). The Boxboard Europe segment received €5 million ($7 million)
from the sale of its French subsidiary which produces virgin based boxboard. The €7 million ($11 million) cash balance of the subsidiary
was also disposed resulting in a net cash balance decrease of €2 million ($4 million).
On July 5, 2021, the Corporation announced the monetization of its 57.6% controlling equity interest in Reno de Medici S.p.A. (RDM) for
an amount per share of €1.45, or $462 million including foreign exchange contracts and before related transaction fees of $12 million.
Please refer to the “Discontinued Operations” section and Note 5 of the 2021 Audited Consolidated Financial Statements for all details on
cash flow from discontinued operations.
CONSOLIDATED FINANCIAL POSITION
AS AT DECEMBER 31, 2021, 2020 AND 2019
The Corporation’s financial position and ratios are as follows:
(in millions of Canadian dollars, unless otherwise noted) (unaudited)
Cash and cash equivalents
Total assets
Total debt2
Net debt2
Equity attributable to Shareholders
Non-controlling interests
Total equity
Total equity and net debt2
Ratio of net debt2/(total equity and net debt2)
Shareholders' equity per common share (in Canadian dollars)
December 31,
2021
December 31,
2020
December 31,
2019
174
4,566
1,525
1,351
1,879
48
1,927
3,278
384
5,412
2,063
1,679
1,753
204
1,957
3,636
155
5,188
2,118
1,963
1,492
177
1,669
3,632
41.2%
$18.63
46.2%
$17.14
54.0%
$15.83
The following table reflects the Corporation’s secured debt rating/corporate rating/unsecured debt rating:
Credit rating (outlook)
2020
2021
MOODY'S
Baa3/Ba2/Ba3 (stable)
Baa3/Ba2/Ba3 (stable)
STANDARD & POOR'S
BB+/BB-/BB- (stable)
BB+/BB-/BB- (positive)
1 2021 first quarter, 2020 and 2019 consolidated cash flows have been adjusted to reflect retrospective adjustments of discontinued operations. Please refer to the “Discontinued Operations”
section and Note 5 of the 2021 Audited Consolidated Financial Statements for more details.
2 Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section for a complete reconciliation.
57
Leading the way.
NET DEBT1 RECONCILIATION
The variances in the net debt1 (total debt1 less cash and cash equivalents) in 2021 are shown below, with the applicable financial
ratios included.
(in millions of Canadian dollars)
1,679
(467)
(247)
(53)
(16)
9
36
43
81
286
1,351
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Adjusted OIBD1 (last twelve months) ($M)
Net debt1/Adjusted OIBD1
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Liquidity available via the Corporation’s credit facilities, cash and cash equivalent balance and the anticipated cash flow generated by its
operating activities are expected to provide sufficient funds to meet our financial obligations and to fulfill our capital expenditure program
for at least the next twelve months. Forecasted 2022 capital expenditures are expected to be approximately $415 million, encompassing
$275 million for the Bear Island containerboard conversion project in Virginia, USA. As at December 31, 2021, the Corporation had
$730 million (net of letters of credit in the amount of $14 million) available on its $750 million credit facility (excluding the credit facilities of
our subsidiary Greenpac). Cash and cash equivalents as at December 31, 2021 are comprised as follows: $144 million in the parent
company and restricted subsidiaries (as defined in the credit agreement) and $30 million in unrestricted subsidiaries, mainly Greenpac.
EMPLOYEE FUTURE BENEFITS
The Corporation’s employee future benefits assets and liabilities amounted to $482 million and $554 million respectively as at
December 31, 2021, including an amount of $79 million for post-employment benefits other than pension plans. The pension plans include
an amount of $33 million, which does not require any funding by the Corporation until it is paid to the employees. This amount is not
expected to increase, as the Corporation has reviewed its benefits program to phase out some of them for future retirees.
With regard to pension plans, the Corporation’s risk is limited, since all defined benefit pension plans are closed to new employees and
less than 10% of its active employees are subject to those pension plans, while the remaining employees are part of the Corporation’s
defined contribution plans, such as group RRSPs or 401(k). Based on their liabilities balances as at December 31, 2021, 97% of the
Corporation pension plans have been evaluated on December 31, 2020 (92% in 2019).
Considering the assumptions used and the asset ceiling limit, the deficit status for accounting purposes of its pension plans amounted to
$10 million as at December 31, 2021, compared to $69 million in 2020. The 2021 pension plan expense was $6 million and the cash
outflow was $5 million. Due to the investment returns in 2021 and the change in the assumptions, the expected expense for these pension
plans is $5 million in 2022. As for the cash flow requirements, these pension plans are expected to require a net contribution of
approximately $5 million in 2022. Finally, on a consolidated basis, the solvency ratio of the Corporation’s pension plans has remained
stable at approximately 100%.
1 Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section for a complete reconciliation.
58
2021 Annual Report
COMMENTS ON THE FOURTH QUARTER OF 2021
For the 3-month period ended December 31, 2021, the Corporation posted net earnings of $105 million, or $1.04 per common share,
compared with net earnings of $73 million, or $0.72 per common share, for the same period in 2020. On an adjusted basis1, the
Corporation generated net loss of $(9) million in the fourth quarter 2021, or $(0.09) per common share, compared with net earnings of
$42 million, or $0.42 per common share, for the same period in 2020.
Sales of $1,028 million decreased by $2 million compared with $1,030 million for the same period last year2. This was driven by lower
volume in both Tissue, especially in the Consumer Products market, and Packaging segment as well as the appreciation of the Canadian
dollar compared to the US dollar. These benefits were partially offset by a higher average selling price in our Packaging segment.
The main variances3 in sales in the fourth quarter of 2021, compared to the same period of 20202, are shown below:
(in millions of Canadian dollars)
SALES ($M)
66
12
1,030
l
s
e
a
S
0
2
0
2
4
Q
e
c
i
r
P
i
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M
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d
n
a
g
n
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l
c
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c
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R
(26)
X
F
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N
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C
(54)
e
m
u
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l
1,028
l
s
e
a
S
1
2
0
2
4
Q
1 Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section.
2 2021 first quarter, 2020 and 2019 consolidated results have been adjusted to reflect retrospective adjustments of discontinued operations. Please refer to the “Discontinued Operations”
section and Note 5 of the 2021 Audited Consolidated Financial Statements for more details.
3 For definitions of certain sales and operating income before depreciation and amortization (OIBD) variation categories, please refer to the "Financial results for the year ended
December 31, 2021, compared to year ended December 31, 2020” section for more details.
59
Leading the way.
The Corporation recorded an operating income (loss) before depreciation and amortization (OIBD) of $(30) million in the fourth quarter
2021, compared with $163 million in the same period last year1. On an adjusted basis2, fourth quarter 2021 OIBD stood at $62 million,
versus $139 million in the previous year1. The $77 million adjusted OIBD2 decrease reflects several factors such as lower volume, higher
raw material and energy costs in both the Tissue and Packaging segments. Conversely, higher average selling prices in the Packaging
segment partially offset these negative impacts.
The main variances3 operating income (loss) before depreciation and amortization in the fourth quarter of 2021, compared to the same
period of 20201, are shown below:
(in millions of Canadian dollars)
OIBD (loss) ($M)
66
3
1
163
139
(24)
(9)
(23)
(28)
62
(87)
(92)
(30)
D
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2
0
2
4
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RECONCILIATION AND USES OF NON-IFRS AND OTHER FINANCIAL MEASURES
The reconciliation of operating income (loss) to OIBD, to adjusted operating income (loss)2 and to adjusted OIBD2 by business segment is
as follows:
(in millions of Canadian dollars) (unaudited)
Operating income (loss)
Depreciation and amortization
Operating income (loss) before depreciation and amortization
Specific items:
Gain on acquisitions, disposals and others
Impairment charges
Restructuring costs
Unrealized loss (gain) on derivative financial instruments
Adjusted operating income (loss) before depreciation and amortization2
Adjusted operating income (loss)2
For the 3-month period ended December 31, 2021
Containerboard
Specialty
Products
Tissue Papers
Corporate
Activities
Consolidated
43
28
71
—
1
—
(2)
(1)
70
42
17
4
21
—
—
—
—
—
21
17
(115)
17
(98)
(1)
87
6
—
92
(6)
(23)
(35)
11
(24)
—
—
—
1
1
(23)
(34)
(90)
60
(30)
(1)
88
6
(1)
92
62
2
1 2021 first quarter, 2020 and 2019 consolidated results have been adjusted to reflect retrospective adjustments of discontinued operations. Please refer to the “Discontinued Operations”
section and Note 5 of the 2021 Audited Consolidated Financial Statements for more details.
2 Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section.
3 For definitions of certain sales and operating income before depreciation and amortization (OIBD) variation categories, please refer to the "Financial results for the year ended
December 31, 2021, compared to year ended December 31, 2020” section for more details.
60
2021 Annual Report
(in millions of Canadian dollars) (unaudited)
Operating income (loss)
Depreciation and amortization
Operating income (loss) before depreciation and amortization
Specific items:
Loss (gain) on acquisitions, disposals and others
Impairment charges (reversals)
Restructuring costs
Unrealized loss on derivative financial instruments
Adjusted operating income (loss) before depreciation and amortization2
Adjusted operating income (loss)2
For the 3-month period ended December 31, 20201
Containerboard
Specialty
Products
Tissue Papers
Corporate
Activities
Consolidated
122
28
150
(40)
(2)
—
2
(40)
110
82
12
3
15
—
—
—
—
—
15
12
10
17
27
2
5
6
—
13
40
23
(40)
11
(29)
—
1
2
—
3
(26)
(37)
104
59
163
(38)
4
8
2
(24)
139
80
Net earnings, as per IFRS, are reconciled below with operating income (loss), adjusted operating income2 and adjusted operating income
before depreciation and amortization2:
(in millions of Canadian dollars) (unaudited)
Net earnings attributable to Shareholders for the period
Net earnings attributable to non-controlling interests
Results from discontinued operations
Provision for (recovery of) income taxes
Fair value revaluation loss on investments
Share of results of associates and joint ventures
Foreign exchange gain on long-term debt and financial instruments
Financing expense and interest expense (revenue) on employee future benefits and other liabilities and loss on
repurchase of long-term debt
Operating income (loss)
Specific items:
Gain on acquisitions, disposals and others
Impairment charges
Restructuring costs
Unrealized loss (gain) on derivative financial instruments
Adjusted operating income2
Depreciation and amortization
Adjusted operating income before depreciation and amortization2
For the 3-month periods ended December 31,
20201
73
2021
105
3
(204)
(29)
—
(7)
—
42
(90)
(1)
88
6
(1)
92
2
60
62
4
1
16
3
(5)
(3)
15
104
(38)
4
8
2
(24)
80
59
139
1 2021 first quarter, 2020 and 2019 consolidated results have been adjusted to reflect retrospective adjustments of discontinued operations. Please refer to the “Discontinued Operations”
section and Note 5 of the 2021 Audited Consolidated Financial Statements for more details.
2 Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section.
61
Leading the way.
The following table reconciles net earnings and net earnings per common share, as per IFRS, with adjusted net earnings (loss)1 and
adjusted net earnings (loss)1 per common share:
(in millions of Canadian dollars, except per common share amounts) (unaudited)
As per IFRS
Specific items:
Gain on acquisitions, disposals and others
Impairment charges
Restructuring costs
Unrealized loss (gain) on derivative financial instruments
Loss on repurchase of long-term debt
Unrealized loss (gain) on interest rate swaps and option fair
value
Foreign exchange gain on long-term debt and financial
instruments
Fair value revaluation loss on investments
Included in discontinued operations, net of tax
Tax effect on specific items, other tax adjustments and
attributable to non-controlling interests2
Adjusted1
Weighted average basic number of common shares
outstanding
NET EARNINGS (LOSS)
For the 3-month periods ended December 31,
NET EARNINGS (LOSS)
PER COMMON SHARE2
For the 3-month periods ended December 31,
2021
105
(1)
88
6
(1)
20
1
—
—
(204)
(23)
(114)
(9)
2020
73
(38)
4
8
2
—
(11)
(3)
3
8
(4)
(31)
42
2021
$1.04
($0.01)
$0.74
$0.04
($0.01)
$0.13
—
—
—
($2.02)
—
($1.13)
($0.09)
2020
$0.72
($0.34)
$0.04
$0.05
$0.02
—
($0.12)
($0.02)
$0.02
$0.05
—
($0.30)
$0.42
100,858,870
99.937437
The following table reconciles cash flow from operating activities from continuing operations with operating income (loss) and operating
income (loss) before depreciation and amortization:
(in millions of Canadian dollars) (unaudited)
Cash flow from operating activities from continuing operations
Changes in non-cash working capital components
Depreciation and amortization
Net income taxes received
Net financing expense paid
Premium and transaction fees paid on long-term debt redemption
Gain on acquisitions, disposals and others
Impairment charges and restructuring costs
Unrealized gain (loss) on derivative financial instruments
Provisions for contingencies and charges and other liabilities, net of dividends received
Operating income (loss)
Depreciation and amortization
Operating income (loss) before depreciation and amortization
For the 3-month periods ended December 31,
20203
158
2021
69
(49)
(60)
—
11
24
1
(94)
1
7
(90)
60
(30)
(27)
(59)
(1)
5
—
38
(12)
(2)
4
104
59
163
1 Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section.
2 Specific amounts per common share are calculated on an after-tax basis and are net of the portion attributable to non-controlling interests. Per common share amounts in line item “Tax effect
on specific items, other tax adjustments and attributable to non-controlling interests” only include the effect of tax adjustments. Please refer to “Provision for income taxes” on the
"Supplemental Information on Non-IFRS Measures and Other Financial Measures" section for more details.
3 2021 first quarter, 2020 and 2019 consolidated results and consolidated cash flows have been adjusted to reflect retrospective adjustments of discontinued operations. Please refer to the
“Discontinued Operations” section and Note 5 of the 2021 Audited Consolidated Financial Statements for more details.
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2021 Annual Report
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 operations2. It also reconciles adjusted cash flow from operating activities from continuing operations2 to adjusted free cash
flow2, which is also calculated on a per common share basis:
(in millions of Canadian dollars, except per common share amounts or as otherwise noted) (unaudited)
Cash flow from operating activities from continuing operations
Changes in non-cash working capital components
Cash flow from operating activities from continuing operations (excluding changes in non-cash working
capital components)
Restructuring costs paid
Premium and transaction fees paid on long-term debt redemption
Specific items paid
Adjusted cash flow from operating activities from continuing operations2
Capex expenditures
Change in intangible and other assets
Lease obligation payments
Proceeds from disposals of property, plant and equipment
Dividends paid to the Corporation's Shareholders and to non-controlling interests
Adjusted free cash flow generated (used)2
Adjusted free cash flow generated (used)2 per common share (in Canadian dollars)
Weighted average basic number of common shares outstanding
For the 3-month periods ended December 31,
20201
158
2021
69
(49)
20
7
24
31
51
(95)
(1)
(12)
2
(55)
(16)
(71)
(27)
131
6
—
6
137
(72)
(2)
(13)
46
96
(12)
84
($0.70)
100,858,870
$0.84
99,937,437
SPECIFIC ITEMS INCLUDED IN OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION AND
NET EARNINGS
The Corporation incurred certain specific items in 2021 and 2020 that adversely or positively affected its operating results2.
The main specific items, before income taxes, that impacted our fourth quarter results OIBD and/or net earnings were:
2021
•
•
•
•
•
•
•
•
•
$1 million gain from the sale of the building related to a closed plant in the Tissue Papers segment in the USA (OIBD and
net earnings);
$1 million of impairment charge in the Containerboard Packaging segment on an asset became idle following the introduction of
a new technology (OIBD and net earnings);
$16 million of impairment charge on property, plant and equipment of one of its United States CGUs in the Tissue Papers
segment due to sustained difficult market conditions and assets underperformance (OIBD and net earnings);
$71 million of impairment charge in the Tissue Paper segment's goodwill and other intangible assets reflecting uncertainty of the
recoverable amount of the segment compared to its carrying value. The COVID-19 pandemic has led to lower than usual
volumes in the Tissue Papers segment. Specifically, volume impacts in the Away-from-Home market began in the second
quarter of 2020, while lower volumes in the Consumer Products market started in the second quarter of 2021 following higher
than usual demand in the prior year (OIBD and net earnings);
$6 million additional restructuring charges and closure costs related to closed plants in the Tissue Papers segment (OIBD and
net earnings);
$1 million unrealized gain on financial instruments (OIBD and net earnings);
$20 million loss on repurchase of long-term debt (net earnings);
$1 million unrealized loss pertaining to a call option granted to the Corporation by one of the minority shareholders of
Falcon Packaging LLC (net earnings);
$228 million gain (before income tax of $24 million) from the sale of its 57.6% controlling equity interest in Reno de Medici S.p.A.
(RDM) in Corporate Activities. This amount is included in discontinued operations. Please refer to the “Discontinued Operations”
section and Note 5 of the 2021 Audited Consolidated Financial Statements for more details. (net earnings).
1 2021 first quarter, 2020 and 2019 consolidated cash flows have been adjusted to reflect retrospective adjustments of discontinued operations. Please refer to the “Discontinued Operations”
section and Note 5 of the 2021 Audited Consolidated Financial Statements for more details.
2 Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section.
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Leading the way.
2020
•
•
•
•
•
•
•
•
•
•
$40 million gain from the sale of a building and the land of the Containerboard Packaging facility located in Etobicoke, Ontario,
Canada (OIBD and net earnings);
$2 million environmental provision related to a closed plant in the Tissue Papers segment in the USA (OIBD and net earnings);
$4 million of impairment charge, primarily in the Tissue Papers segment, related to changes in the valuation of certain assets due
to the current economic and market demand conditions (OIBD and net earnings);
$8 million of restructuring charges recorded in Tissue and Corporate Activities as part of profitability improvement and
restructuring initiatives (OIBD and net earnings);
$2 million unrealized loss on financial instruments (OIBD and net earnings);
$13 million unrealized gain on fair value revaluation of a one-time option granted to White Birch to purchase an interest of up to
10% in the Bear Island containerboard mill project (net earnings);
$2 million unrealized loss pertaining to a call option granted to the Corporation by one of the minority shareholders of
Falcon Packaging LLC (net earnings);
$3 million foreign exchange gain on long-term debt and financial instruments (net earnings);
$3 million fair value revaluation loss on investments (net earnings);
$9 million (before income tax of $1 million) of impairment charge in the Boxboard Europe segment related to some assets as
their recoverable amount was lower than the carrying amount. This amount is included in discontinued operations. Please refer
to the “Discontinued Operations” section and Note 5 of the 2021 Audited Consolidated Financial Statements for more details
(net earnings).
NEAR-TERM OUTLOOK
The ongoing pandemic and related ramifications on input costs, logistics, labour and demand remain unpredictable. Many of these factors
continued in January, but we have begun to see improvement in labour availability in February. Demand remains solid for our packaging
businesses, and results will reflect lower raw material costs in the near-term and roll-out of the announced price increases over the coming
months. Without question the tissue segment remains challenging, and our priority is to return to our pre-pandemic performance trajectory.
The fourth quarter was exceptionally difficult with major and unprecedented headwinds. However, despite these difficult conditions the year
was also successful in terms of a well executed exit from Europe and increased financial capacity. Moreover, I would like to take this
opportunity to express my heartfelt appreciation for our employees who have played such a key role in our ability to continue servicing our
customers through these challenging times.
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2021 Annual Report
CAPITAL STOCK INFORMATION
COMMON SHARE TRADING
Cascades’ stock is traded on the Toronto Stock Exchange under the ticker symbol “CAS”. From January 1, 2021 to December 31, 2021,
Cascades' common share price fluctuated between $13.24 and $18.18. During the same period, 145.4 million Cascades common shares
were traded. On December 31, 2021, Cascades common shares closed at $13.97. This compares with a closing price of $14.55 on the
same closing day last year.
COMMON SHARES OUTSTANDING
As at December 31, 2021, the Corporation’s issued and outstanding capital stock consisted of 100,860,362 common shares (102,276,230
as at December 31, 2020) and 2,373,416 issued and outstanding stock options (2,433,090 as at December 31, 2020). In 2021, the
Corporation purchased 1,651,600 common shares for cancellation, while 235,732 stock options were exercised, 189,752 stock options
were granted and 13,694 stock options were forfeited.
On October 5, 2020, the Corporation entered into an agreement with underwriters pursuant to which the Corporation issued and the
underwriters purchased on a bought deal basis 7,441,000 common shares at a price of $16.80 per common share for gross proceeds of
$125 million. Transactions fees amounted to $5 million before income tax recovery of $1 million. The transaction closed on
October 22, 2020.
As at February 23, 2022, issued and outstanding capital stock consisted of 100,860,362 common shares and 2,373,416 stock options.
NORMAL COURSE ISSUER BID PROGRAM
The normal course issuer bid announced on March 17, 2020 enabled the Corporation to purchase for cancellation up to 1,886,220
common shares between March 19, 2020 and March 18, 2021. During that period, the Corporation purchased 279,700 common shares
for cancellation.
The current normal course issuer bid announced on March 17, 2021 enables the Corporation to purchase for cancellation up to
2,045,621 common shares between March 19, 2021 and March 18, 2022. During the period between March 19, 2021 and
February 23, 2022, the Corporation purchased 1,651,600 common shares for cancellation.
DIVIDEND POLICY
On February 23, 2022, Cascades’ Board of Directors declared a quarterly dividend of $0.12 per common share to be paid on
March 10, 2022 to shareholders of record at the close of business on March 24, 2022. On February 23, 2022, dividend yield was 3.8%.
TSX Ticker: CAS
Common shares outstanding (in millions)1
Closing price (in Canadian dollars)1
Average daily volume2
Dividend yield1
Q1
Q2
Q3
2019
Q4
Q1
Q2
Q3
2020
Q4
Q1
Q2
Q3
2021
Q4
93.6
93.6
94.2
94.2
94.3
95.0
95.0
102.3
102.3
102.3
100.9
100.9
$8.34
$10.54
$11.58
$11.21
$12.57
$14.79
$16.84
$14.55
$15.73
$15.26
$15.67
$13.97
238,606
202,448
164,371
146,157
256,827
298,267
257,710
363,795
342,616
433,394
278,277
272,438
1.9%
1.5%
2.8%
2.9%
2.5%
2.2%
1.9%
2.2%
2.0%
2.1%
3.1%
3.4%
1 On the last day of the quarter.
2 Average daily volume on the Toronto Stock Exchange.
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Leading the way.
CASCADES’ COMMON SHARE PRICE FOR THE PERIOD FROM JANUARY 1, 2019 TO DECEMBER 31, 2021
(in Canadian dollars)
$18.00
$16.00
$14.00
$12.00
$10.00
$8.00
Q1
19
Q2
19
Q3
19
Q4
19
Q1
20
Q2
20
Q3
20
Q4
20
Q1
21
Q2
21
Q3
21
Q4
21
CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS
The Corporation’s principal contractual obligations and commercial commitments relate to outstanding debt, capital expenditures, services
agreements and obligations for its pension and post-employment benefit plans. The following table summarizes these obligations as at
December 31, 2021:
CONTRACTUAL OBLIGATIONS
Payment due by period (in millions of Canadian dollars) (unaudited)
Long-term debt, including capital and interest
Commitments for capital expenditures and intangible assets
Services agreements and exempted leases
Leases not yet commenced but already signed
Pension plans and other post-employment benefits1
Total contractual obligations
TOTAL
1,900
112
39
25
893
2,969
LESS THAN
ONE YEAR
BETWEEN ONE
AND FIVE YEARS
OVER FIVE YEARS
140
112
29
5
36
322
1,064
—
9
19
144
1,236
696
—
1
1
713
1,411
1 These amounts represent all the benefits payable to current members during the following years and thereafter without limitations. The majority of benefit payments are payable from trustee-
administered funds. The difference will come from future investment returns expected on plan assets and future contributions that will be made by the Corporation for services rendered after
December 31, 2021.
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2021 Annual Report
TRANSACTIONS WITH RELATED PARTIES
The Corporation has also entered into various agreements with its joint-venture partners, significantly influenced companies and entities
that are affiliated with one or more of its directors for the supply of raw materials including recycled paper, virgin pulp and energy, as well
as the supply of unconverted and converted products, and other agreements entered into in the normal course of business. Aggregate
sales by the Corporation to its joint-venture partners and other affiliates totaled $324 million and $246 million for 2021 and 2020
respectively. Aggregate purchases to the Corporation from its joint-venture partners and other affiliates came to $76 million and $84 million
for 2021 and 2020 respectively.
CHANGES IN ACCOUNTING POLICY AND DISCLOSURES
A. NEW IFRS ADOPTED
LIBOR reform with amendments to IFRS 9, IAS 29, IFRS 7 and IFRS 16
In August 2020, the IASB issued Interest Rate Benchmark Reform-Phase 2, which amends IFRS 9 Financial Instruments, IAS 39 Financial
Instruments: Recognition and Measurement, IFRS 7 Financial Instruments: Disclosures and IFRS 16 Leases. The amendments
complement those issued in 2019 and focus on the effects on financial statements when a company replaces the old interest rate
benchmark with an alternative benchmark rate as a result of the reform.
The standard became effective on January 1, 2021 and had no impact on the Corporation's financial statements.
B. RECENT IFRS PRONOUNCEMENT NOT YET ADOPTED
Amendment to IAS 16
In May 2020, the IASB issued an amendment to IAS 16 Property, Plant and Equipment which seeks to clarify the way entities should
account for the proceeds from sale, and related production costs, of items produced by an asset prior to it being available for its intended
use. The modification requires that sales proceeds recognized before the related asset is available for use are recognized in profit or loss
together with the costs associated with the items sold, rather than by adjusting the cost of the asset under construction. The amendment is
effective for periods commencing on or after January 1, 2022 and must be applied retrospectively to the earliest period presented in the
financial statements. The Corporation does not anticipate a significant retrospective adjustment to its December 31, 2021 financial
statements as there was no significant asset under construction in the testing phase at the end of 2021.
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Leading the way.
CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of
future events that are believed to be reasonable under the circumstances.
CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported
amounts of assets and liabilities in the financial statements and disclosure of contingencies at the balance sheet date, and the reported
amounts of revenues and expenses during the reporting period. On a regular basis and with the information available, Management
reviews its estimates, including those related to environmental costs, employee future benefits, collectability of accounts receivable,
financial instruments, contingencies, income taxes, useful life and residual value of property, plant and equipment and impairment of
property, plant and equipment and intangible assets. Actual results could differ from those estimates. When adjustments become
necessary, they are reported in earnings in the period in which they occur.
IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT, INTANGIBLE ASSETS AND GOODWILL
A.
In determining the recoverable amount of an asset or CGU, based on the market approach, Management uses the value of comparable
assets on the market. In determining the recoverable amount of an asset or CGU, based on the income approach, Management uses
several key assumptions, including estimated shipment levels, foreign exchange rates, revenue growth rates, operating income before
depreciation (OIBD) margins, discount rates and capital expenditures.
The Corporation believes its assumptions are reasonable. Based on available information at the assessment date, however, these
assumptions involve a high degree of judgment and complexity. Management believes that the following assumptions are the most
susceptible to change and therefore could impact the valuation of the assets in the next year.
DESCRIPTION OF SIGNIFICANT IMPAIRMENT TESTING ASSUMPTIONS
(see Note 26 of the 2021 Audited Consolidated Financial Statements)
REVENUES, OPERATING INCOME BEFORE DEPRECIATION (OIBD) MARGINS, CASH FLOWS AND GROWTH RATES
The assumption used for revenues were based on the segment's internal budget and were projected for a period of five years and a long-
term growth rate of 2% was applied thereafter. The assumption used for OIBD margin was based on the segment's historical performance
and was kept constant. In arriving at its forecasts, the Corporation considers past experience, economic trends such as gross domestic
product growth and inflation, as well as industry and market trends.
DISCOUNT RATES
The Corporation assumed a discount rate in order to calculate the present value of its projected cash flows. The discount rate represents a
weighted average cost of capital (WACC) for comparable companies operating in similar industries of the applicable CGU, group of CGUs
or reportable segment based on publicly available information.
FOREIGN EXCHANGE RATES
When estimating the fair value less cost of disposal, foreign exchange rates are determined using the financial institution's average
forecast for the first two years of forecasting. For the following three years, the Corporation uses the last five years' historical average of
the foreign exchange rate. Terminal rate is based on historical data of the last twenty years and adjusted to reflect Management's
best estimate of market participants expectations.
SHIPMENTS
The assumptions used are based on the Corporation's internal budget for the next year and are usually held constant for the established
capacity, for new capacity the ramp up is considered over the forecast period. In arriving at its budgeted shipments, the Corporation
considers past experience, economic, industry and market trends.
Considering the sensitivity of the key assumptions used, there is measurement uncertainty since adverse changes in one or a combination
of the Corporation's key assumptions could cause a significant change in the carrying amounts of these assets.
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2021 Annual Report
INCOME TAXES
B.
The Corporation is required to estimate the income taxes in each jurisdiction in which it operates. This includes estimating a value for
existing tax losses based on the Corporation's assessment of its ability to use them against future taxable income before they expire. If the
Corporation's assessment of its ability to use the tax losses proves inaccurate in the future, more or less of the tax losses might be
recognized as assets, which would increase or decrease the income tax expense and, consequently, affect the Corporation's results in the
relevant year.
C. EMPLOYEE BENEFITS
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of
high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity
approximating the terms of the related pension liability.
The cost of pensions and other retirement benefits earned by employees is actuarially determined using the projected benefit method pro-
rated on years of service and Management's best estimate of expected plan investment performance, salary escalations, retirement ages
of employees and expected health care costs. The accrued benefit obligation is evaluated using the market interest rate at the evaluation
date. Due to the long-term nature of these plans, such estimates are subject to significant uncertainty. All assumptions are
reviewed annually.
D. GOODWILL, INTANGIBLE ASSETS AND BUSINESS COMBINATIONS
Goodwill and client lists have arisen as a result of business combinations. The acquisition method, which also requires significant
estimates and judgments, is used to account for these business combinations. As part of the allocation process in a business combination,
estimated fair values are assigned to the net assets acquired. These estimates are based on forecasts of future cash flows, estimates of
economic fluctuations and an estimated discount rate. The excess of the purchase price over the estimated fair value of the net assets
acquired is then assigned to goodwill. In the event that actual net assets fair values are different from estimates, the amounts allocated to
the net assets could differ from what is currently reported. This would then have a direct impact on the carrying value of goodwill.
Differences in estimated fair values would also have an impact on the amortization of definite life intangibles.
CRITICAL JUDGMENTS IN APPLYING THE CORPORATION'S ACCOUNTING POLICIES
CRITICAL JUDGMENTS REGARDING THE PANDEMIC IMPACT
As a response to the effects of the COVID-19 pandemic, the Corporation continues to review the assumptions for operating plans,
valuation of property plant and equipment and accounts receivable. The exercise resulted in no additional expected credit loss for accounts
receivables. However, impairment charges were recorded in the Tissue Papers segment on property, plant and equipment, goodwill and
other intangible assets (see Notes 9, 10 and 26 of the 2021 Audited Consolidated Financial Statements). The Corporation continues to
closely monitor the consequences of the COVID-19 situation: the duration, spread or intensity of the pandemic as it continues to evolve,
along with the supply chain, market pricing and customer demand. These factors may further impact the Corporation’s operating plan, its
cash flows, its ability to raise funds and the valuation of its long-lived assets.
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Leading the way.
CONTROLS AND PROCEDURES
EVALUATION OF THE EFFECTIVENESS OF DISCLOSURE CONTROLS AND PROCEDURES, AND INTERNAL CONTROL OVER
FINANCIAL REPORTING
The Corporation’s President and Chief Executive Officer, and its Vice-President and Chief Financial Officer have designed, or caused to be
designed under their supervision, disclosure controls and procedures (DC&P) and internal controls over financial reporting (ICFR), as
defined in National Instrument 52-109, “Certification of Disclosure in Issuer’s Annual and Interim Filings”.
The purpose of internal controls over financial reporting (“ICFR”) is to provide reasonable assurance regarding the reliability of the
Corporation's financial reporting and the preparation of financial statements in accordance with IFRS. The President and Chief Executive
Officer and the Vice-President and Chief Financial Officer certify disclosures in annual and interim filings under Regulation 52-109 using
the internal control framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
During the year ended December 31, 2021, there were no changes in the Corporation’s ICFR that materially affected or are reasonably
likely to materially affect the Corporation’s ICFR.
RISK FACTORS
As part of its ongoing business operations, the Corporation is exposed to certain market risks, including risks ensuing from changes in
selling prices for its principal products, costs of raw material, interest rates and foreign currency exchange rates, all of which impact the
Corporation’s financial position, operating results and cash flows. The Corporation manages its exposure to these and other market risks
through regular operating and financing activities and, on a limited basis, through the use of derivative financial instruments. We use these
derivative financial instruments as risk management tools, not for speculative investment purposes. The following is a discussion of key
areas of business risks and uncertainties that we have identified, and our mitigating strategies. The risk areas below are listed in no
particular order, as risks are evaluated based on both severity and probability. Readers are cautioned that the following is not an
exhaustive list of all the risks we are exposed to, nor will our mitigation strategies eliminate all risks listed.
Risks relating to the Corporation’s business
If the Corporation does not successfully manage the demand, supply and operational challenges associated with the effects of
(COVID-19) pandemic or other similar widespread public health concerns, our results will be
the coronavirus
negatively impacted.
The Corporation’s business may be negatively impacted by the fear of exposure to, actual effects of, or government response to, the
COVID-19, such as travel restrictions, business shutdowns or limitations, shelter-in-place orders, recommendations or mandates from
governmental authorities to avoid large gatherings or to self-quarantine as a result of the COVID-19, or other shutdowns and restrictions.
These impacts include, but are not limited to:
•
•
•
Significant reductions in demand or significant volatility in demand for one or more of the Corporation’s products, which may be
caused by, among other things: quarantine or other travel restrictions, financial hardship, shifts in demand away from one or
more of the Corporation’s products, including our Away-from-Home products or our industrial packaging products, or consumer
stockpiling activity which may result in a decrease in demand for our products in one period as a result of excessive purchases of
the Corporation’s products in another period. If prolonged, these events further increase the difficulty of planning for operations
and may adversely impact the Corporation’s results;
Inability to meet the Corporation’s customers’ needs and achieve cost targets due to disruptions in the Corporation’s
manufacturing and supply arrangements caused by constrained workforce capacity or the loss or disruption of other significant
manufacturing or supply materials such as raw materials or other finished product components, transportation, or other
manufacturing and distribution capability. While the Corporation has not been required to do so to date, in the future the
Corporation may be required to limit or shut down our manufacturing facilities to comply with any future, more stringent
government mandates, which may adversely impact the Corporation’s results;
Failure of third parties on which the Corporation relies, including its suppliers, contract manufacturers, distributors and other
contractors, to meet their obligations to the Corporation, or significant disruptions in their ability to do so, which may be caused
by their own financial or operational difficulties or their inability to deliver goods or services based on governmental restrictions or
other mandates and may adversely impact the Corporation’s operations;
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2021 Annual Report
•
•
Increased expenses related to the implementation of procedures to comply with governmental regulations and recommendations
and maintain the health and safety of the Corporation’s employees such as remote working (which, in turn, creates additional
cyber security risks), health screenings and enhanced cleaning and sanitation protocols. The Corporation expects to continue to
incur costs related to its mitigation efforts and it may have to enact additional, more expensive measures to continue to comply
with governmental regulations and recommendations, which may become more stringent in the future, in order to ensure the
health and safety of its employees; or
Government actions in one or more of the jurisdictions in which Cascades operates, resulting in Cascades no longer having the
benefits of being deemed an “essential business” (or other government actions undertaken to restrict the business activities of
businesses deemed essential) and, as a result, forcing the Corporation to scale back its operations or halt them entirely, or
government action resulting in any of our suppliers, contract manufacturers, distributors and other contractors no longer being
deemed essential and thus impacting the Corporation’s ability to deliver its products and services to its customers, which may
adversely impact its operations and results.
Despite the Corporation’s efforts to manage and remedy these impacts to the Corporation, their ultimate impact also depends on factors
beyond its control, including the duration and severity of the COVID-19 pandemic as well as third-party actions taken to contain its spread
and mitigate its public health effects. The adverse effects described above may also apply to other epidemics, pandemics and other public
health emergencies.
To the extent the COVID-19 pandemic adversely affects the Corporation’s business, operations, financial condition and operating results, it
may also have the effect of heightening many of the other risks described in this “Risk Factors” section, such as those relating to the
Corporation’s high level of indebtedness, its need to generate sufficient cash flows to service its indebtedness, and its ability to comply with
the covenants contained in the agreements that govern its indebtedness.
The markets for some of the Corporation’s products tend to be cyclical in nature and prices for some of its products, as well as
raw material and energy costs, may fluctuate significantly, which can adversely affect its business, operating results, profitability
and financial position.
The markets for some of the Corporation’s products, particularly containerboard, are cyclical. As a result, prices for these types of products
and for its two principal raw materials, recycled paper and virgin fibre, have fluctuated significantly in the past and will likely continue to
fluctuate significantly in the future, principally due to market imbalances between supply and demand. Demand is heavily influenced by the
strength of the global economy and the countries or regions in which Cascades does business, particularly Canada and the United States,
the Corporation’s two primary markets. Demand is also influenced by fluctuations in inventory levels held by customers and consumer
preferences. Supply depends primarily on industry capacity and capacity utilization rates. In periods of economic weakness, reduced
spending by consumers and businesses results in decreased demand, which can potentially cause downward price pressure. Industry
participants may also, at times, add new capacity or increase capacity utilization rates, potentially causing supply to exceed demand and
exerting downward price pressure. In addition, in the event of depressed market prices for recycled paper, the availability of recycled paper
may decrease.
Depending on market conditions and related demand, Cascades may have to take market-related downtime. In addition, the Corporation
may not be able to maintain current prices or implement additional price increases in the future. If Cascades is unable to do so, its
revenues, profitability and cash flows could be adversely affected. In addition, other participants may introduce new capacity or increase
capacity utilization rates, which could also adversely affect the Corporation’s business, operating results and financial position.
Prices for recycled and virgin fibre also fluctuate considerably. The costs of these materials present a potential risk to the Corporation’s
profit margins in the event that it is unable to pass along price increases to its customers on a timely basis. Although changes in the price
of recycled fibre generally correlate with changes in the price of products made from recycled paper, this may not always be the case. If
Cascades were unable to implement increases in the selling prices for its products to compensate for increases in the price of recycled or
virgin fibre, the Corporation’s profitability and cash flows would be adversely affected.
In addition, Cascades uses energy, mainly natural gas and fuel oil, to generate steam, which it then uses in the production process and to
operate machinery. Energy prices, particularly for natural gas and fuel oil, have continued to remain very volatile. Cascades continues to
evaluate its energy costs and consider ways to factor energy costs into its pricing. However, should energy prices increase, the
Corporation’s production costs, competitive position and operating results would be adversely affected. A substantial increase in energy
costs would adversely affect the Corporation’s operating results and could have broader market implications that could further adversely
affect the Corporation’s business or financial results.
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Leading the way.
Cascades faces significant competition and some of its competitors may have greater cost advantages, be able to achieve
greater economies of scale or be able to better withstand periods of declining prices and adverse operating conditions, which
could negatively affect the Corporation’s market share and profitability.
The markets for the Corporation’s products are highly competitive. In some of the markets in which Cascades competes, such as tissue
papers, it competes with a small number of other producers. In some businesses, such as the containerboard industry, competition tends
to be global. In others, such as the tissue industry, competition tends to be regional. In the Corporation’s packaging products segment, it
also faces competition from alternative packaging materials, such as, plastic and Styrofoam, which can lead to excess capacity, decreased
demand and pricing pressures.
Competition in the Corporation’s markets is primarily based on price, as well as customer service and the quality, breadth and performance
characteristics of its products. The Corporation’s ability to compete successfully depends on a variety of factors, including:
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the Corporation’s ability to maintain high plant efficiencies, operating rates and lower manufacturing costs;
the availability, quality and cost of raw materials, particularly recycled and virgin fibre, as well as labour; and
the cost of energy.
Some of the Corporation’s competitors may, at times, have lower fibre, energy and labour costs, and less restrictive environmental and
governmental regulations to comply with than Cascades. For example, fully integrated manufacturers, or those whose requirements for
pulp or other fibre are met fully from their internal sources, may have some competitive advantages over manufacturers that are not fully
integrated, such as Cascades, in periods of relatively high raw material pricing, in that the former are able to ensure a steady source of
these raw materials at costs that may be lower than prices in the prevailing market. In contrast, competitors that are less integrated than
Cascades may have cost advantages in periods of relatively low pulp or fibre prices because they may be able to purchase pulp or fibre at
prices lower than the costs the Corporation incurs in the production process. Other competitors may be larger in size or scope than
Cascades, which may allow them to achieve greater economies of scale on a global basis or to better withstand periods of declining prices
and adverse operating conditions.
In addition, there has been an increasing trend among the Corporation’s customers towards consolidation. With fewer customers in the
market for the Corporation’s products, the strength of its negotiating position with these customers could be weakened, which could have
an adverse effect on its pricing, margins and profitability.
Because of the Corporation’s international operations, it faces political, social and exchange rate risks that can negatively affect
its supply chain, manufacturing capabilities, distribution activities, operating results, net earnings and financial condition.
The Corporation’s international operations present it with a number of risks and challenges, including:
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effective marketing of its products in other countries;
tariffs and other trade barriers;
different regulatory schemes and political environments applicable to the Corporation’s operations in areas such as
environmental and health and safety compliance; and
exposure to health epidemics and pandemics such as the ongoing coronavirus outbreak and other highly communicable
diseases or viruses.
Cascades has customers and operations located outside Canada. In 2021, sales outside Canada, in Canadian dollars, represented
approximately 55% of the Corporation’s consolidated sales, including 55% in the United States. In 2021, 18% of sales from Canadian
operations were made to the United States.
In addition, the Corporation’s consolidated financial statements are reported in Canadian dollars, while a portion of its sales is made in
other currencies, primarily the U.S. dollar. A decrease of the Canadian dollar against the U.S. dollar could adversely affect the
Corporation’s operating results and financial condition. As at December 31, 2021, the Corporation had, on a consolidated basis, total U.S.
dollar-denominated debt of US$992 million.
Moreover, in some cases, the currency of the Corporation’s sales does not match the currency in which it incurs costs, which can
negatively affect the Corporation’s profitability. Fluctuations in exchange rates can also affect the relative competitive position of a
particular facility, where the facility faces competition from non-local producers, as well as the Corporation’s ability to successfully market
its products in export markets. As a result, if the Canadian dollar were to remain permanently strong compared to the US dollar, it could
affect the profitability of the Corporation’s facilities, which could lead Cascades to shut down facilities either temporarily or permanently, all
of which could adversely affect its business or financial results.
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The Corporation uses various foreign exchange forward contracts and related currency option instruments to anticipate sales net of
purchases, interest expenses and debt repayment. These hedging instruments may not be effective in offsetting risks, may generate
losses or otherwise may adversely affect the Corporation’s financial results as compared to what its results would have been had the
hedges not been implemented.
The Corporation’s operations are subject to comprehensive environmental regulations and involve expenditures which may be
material in relation to its operating cash flow.
The Corporation is subject to environmental laws and regulations imposed by the various governments and regulatory authorities in all
countries in which it operates. These environmental laws and regulations impose stringent standards on the Corporation regarding, among
other things:
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air emissions;
water discharges;
use and handling of hazardous materials;
use, handling and disposal of waste; and
remediation of environmental contamination.
The Corporation is also subject to the U.S. Federal Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”)
as well as to other applicable legislation in the United States and Canada that holds companies accountable for the investigation and
remediation of hazardous substances. The Corporation, for some of our Québec plants, is also subject to an emissions market, aimed at
reducing worldwide CO2 emissions. Each unit has been allocated emission rights (“CO2 quota”). On a calendar year basis, the Corporation
must buy the necessary credits to cover its deficit, on the open market, if its emissions are higher than quota.
The Corporation’s failure to comply with applicable environmental laws, regulations or permit requirements may result in civil or criminal
fines, penalties or enforcement actions. These may include regulatory or judicial orders enjoining or curtailing operations, or requiring
corrective measures, the installation of pollution control equipment or remedial actions, any of which could entail significant expenditures. It
is difficult to predict the future development of such laws and regulations, or their impact on future earnings and operations, but these laws
and regulations may require capital expenditures to ensure compliance. In addition, amendments to, or more stringent implementation of,
current laws and regulations governing the Corporation’s operations could have a material adverse effect on its business, operating results
or financial position. Furthermore, although Cascades generally tries to plan for capital expenditures relating to environmental and health
and safety compliance on an annual basis, actual capital expenditures may exceed those estimates. In such an event, Cascades may be
forced to curtail other capital expenditures or other activities. In addition, the enforcement of existing environmental laws and regulations
has become increasingly strict. The Corporation may discover currently unknown environmental problems or conditions in relation to its
past or present operations or may face unforeseen environmental liabilities in the future.
These conditions and liabilities may:
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require site remediation or other costs to maintain compliance or correct violations of environmental laws and regulations; or
result in governmental or private claims for damage to persons, property or the environment.
Either of these possibilities could have a material adverse effect on the Corporation’s financial condition or operating results.
Cascades may be subject to strict liability and, under specific circumstances, joint and several (solidary) liability for the investigation and
remediation of soil, surface and groundwater contamination, including contamination caused by other parties on properties that it owns or
operates and on properties where the Corporation or its predecessors have arranged for the disposal of regulated materials. As a result,
the Corporation is involved from time to time in administrative and judicial proceedings and inquiries relating to environmental matters. The
Corporation may become involved in additional proceedings in the future, the total amount of future costs and other environmental
liabilities of which could be material.
To date, the Corporation is in compliance, in all material respects, with all applicable environmental legislation or regulations. However, the
Corporation expects to incur ongoing capital and operating expenses in order to achieve and maintain compliance with applicable
environmental requirements.
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Leading the way.
Cascades may be subject to losses that might not be covered in whole or in part by its insurance coverage.
Cascades carries comprehensive liability, fire and extended coverage insurance on all of its facilities, with policy specifications and insured
limits customarily carried in its industry for similar properties. In addition, some types of losses, such as losses resulting from wars, acts of
terrorism or natural disasters, are generally not insured because they are either uninsurable or not economically practical. Moreover,
insurers have recently become more reluctant to insure against these types of events. Should an uninsured loss or a loss in excess of
insured limits occur, Cascades could lose capital invested in that property, as well as the anticipated future revenues derived from the
manufacturing activities conducted on that property, while remaining obligated for any mortgage indebtedness or other financial obligations
related to the property. Any such loss could adversely affect its business, operating results or financial condition.
Labour disputes or shortages could have a material adverse effect on the Corporation’s cost structure and ability to run its mills
and plants as it depends on attracting and retaining qualified personnel.
As at December 31, 2021, the Corporation had approximately 10,000 employees, with approximately 30% of its workforce unionized. The
Corporation’s inability to negotiate acceptable contracts with its unions upon expiration of an existing contract could result in strikes or work
stoppages by the affected workers, and increased operating costs as a result of higher wages or benefits paid to union members. If the
unionized workers were to engage in a strike or another form of work stoppage, Cascades could experience a significant disruption in
operations or higher labour costs, which could have a material adverse effect on its business, financial condition, operating results and
cash flow. Of the 29 collective bargaining agreements, 6 have expired and are currently under negotiation, 8 will expire in 2022 and 9 will
expire in 2023.
The Corporation generally begins the negotiation process several months before agreements are due to expire and is currently in the
process of negotiating with the unions where the agreements have expired or will soon expire. However, Cascades may not be successful
in negotiating new agreements on satisfactory terms, if at all.
Cascades's success depends in part upon its ability to continue to attract and retain qualified management, regulatory, technical, and sales
and marketing executives and personnel in various geographical locations. The failure to attract, integrate, motivate, and retain skilled and
qualified personnel could have a material adverse effect on the business. The Corporation competes for such personnel against numerous
companies. There can be no assurance that it will be successful in attracting or retaining such personnel and the failure to do so could
have a material adverse effect on our financial condition and results of operations.
Cascades may make investments in entities that it does not fully control and may not receive dividends or returns from those
investments in a timely fashion or at all.
Cascades has established joint ventures, made investments in associates and acquired significant participation in subsidiaries in order to
increase its vertical integration, enhance customer service and increase efficiency in its marketing and distribution in the United States and
other markets. The Corporation’s principal joint ventures, associates and significant participations in subsidiaries are:
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two 50%-owned joint ventures with Sonoco Products Corporation, of which one is in Canada (two plants) and one is in the United
States (two plants), that produce specialty paper packaging products such as headers, rolls and wrappers; and
a 79.90%-owned subsidiary, Greenpac Holding LLC, a North American manufacturer of linerboard. The percentage including
indirect ownership stands at 86.35% for consolidation and accounting purposes (see Note 8 of the 2021 Audited Consolidated
Financial Statements for more details).
Apart from Greenpac Holding LLC, Cascades does not have control over these entities. The Corporation’s inability to control entities in
which it invests may affect its ability to receive distributions from these entities or to fully implement its business plan. The incurrence of
debt or entrance into other agreements by an entity not under the Corporation’s control may result in restrictions or prohibitions on that
entity’s ability to pay distributions to the Corporation. Even where these entities are not restricted by contract or by law from paying
dividends or making distributions to Cascades, the Corporation may not be able to influence the payout or timing of these dividends or
distributions. In addition, if any of the other investors in a non-controlled entity fail to observe their commitments, the entity may not be able
to operate according to its business plan or Cascades may be required to increase its level of commitment. If any of these events were to
transpire, the Corporation’s business, operating results, financial condition and ability to make payments on indebtedness could be
adversely affected.
In addition, the Corporation has entered into various shareholder agreements relating to its joint ventures and equity investments. Some of
these agreements contain “shotgun” provisions, which provide that if one Shareholder offers to buy all the shares owned by the other
parties to the agreement, the other parties must either accept the offer or purchase all the shares owned by the offering Shareholder at the
same price and conditions. Some of the agreements also stipulate that, in the event that a Shareholder is subject to bankruptcy
proceedings or otherwise defaults on any indebtedness, the non-defaulting parties to that agreement are entitled to invoke the “shotgun”
provision or sell their shares to a third party. The Corporation’s ability to purchase the other Shareholders’ interests in these joint ventures if
they were to exercise these “shotgun” provisions could be limited by the covenants in the Corporation’s credit facility and the indenture.
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2021 Annual Report
In addition, Cascades may not have sufficient funds to accept the offer or the ability to raise adequate financing should the need arise,
which could result in the Corporation having to sell its interests in these entities or otherwise alter its business plan.
Acquisitions have been, and are expected to continue to be a substantial part of the Corporation’s growth strategy, which could
expose the Corporation to difficulties in integrating the acquired operation, diversion of management time and resources, and
unforeseen liabilities, among other business risks.
Acquisitions have been a significant part of the Corporation’s growth strategy. Cascades expects to continue to selectively seek strategic
acquisitions in the future. The Corporation’s ability to consummate and to effectively integrate any future acquisitions on terms that are
favourable to it may be limited by the number of attractive acquisition targets, internal demands on its resources and, to the extent
necessary, its ability to obtain financing on satisfactory terms, if at all. Acquisitions may expose the Corporation to additional
risks, including:
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difficulties in integrating and managing newly acquired operations and improving their operating efficiency;
difficulties in maintaining uniform standards, controls, procedures and policies across all of the Corporation’s businesses;
entry into markets in which Cascades has little or no direct prior experience;
the Corporation’s ability to retain key employees of the acquired company;
disruptions to the Corporation’s ongoing business; and
diversion of management time and resources.
In addition, future acquisitions could result in Cascades' incurring additional debt to finance the acquisition or possibly assuming additional
debt as part of it, as well as costs, contingent liabilities and amortization expenses. The Corporation may also incur costs and divert
Management's attention for potential acquisitions that are never consummated. For acquisitions Cascades does consummate, expected
synergies may not materialize. The Corporation’s failure to effectively address any of these issues could adversely affect its operating
results, financial condition and ability to service debt, including its outstanding senior notes.
Although Cascades performs a due diligence investigation of the businesses or assets that it acquires and anticipates continuing to do so
for future acquisitions, the acquired business or assets may have liabilities that Cascades fails or is unable to uncover during its due
diligence investigation and for which the Corporation, as a successor owner, may be responsible. When feasible, the Corporation seeks to
minimize the impact of these types of potential liabilities by obtaining indemnities and warranties from the seller, which may in some
instances be supported by deferring payment of a portion of the purchase price. However, these indemnities and warranties, if obtained,
may not fully cover the liabilities because of their limited scope, amount or duration, or the financial resources of the indemnitor or
warrantor, or for other reasons.
The Corporation undertakes impairment tests, which could result in a write-down of the value of assets and, as a result, have a
material adverse effect.
IFRS requires that Cascades undertakes impairment tests of long-lived assets and goodwill to determine whether a write-down of such
assets is required. A write-down of asset value as a result of impairment tests would result in a non-cash charge that reduces the
Corporation’s reported earnings. Furthermore, a reduction in the Corporation’s asset value could have a material adverse effect on the
Corporation’s compliance with total debt-to-capitalization tests under its current credit facilities and, as a result, limit its ability to access
further debt capital.
Messrs. Bernard, Laurent and Alain Lemaire and their families (the “Lemaires”) collectively own a significant percentage of the
common shares.
The Lemaires collectively own a significant percentage of the common shares of the Corporation and there may be situations in which their
interests and the interests of other holders of shares do not align. There is no formal agreement among the Lemaires with respect to the
voting of their common shares and, over the past few years, the control of their shares has become more dispersed within their respective
families. However, because the Corporation’s remaining shares are widely held, the Lemaires may still effectively be able to influence:
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the election of all of the Corporation’s directors and, as a result, control matters requiring board approval;
matters submitted to a shareholder vote, including mergers, acquisitions and consolidations with third parties and the sale of all
or substantially all of the Corporation’s assets; and
the Corporation’s business direction and policies.
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Leading the way.
If Cascades is not successful in retaining or replacing its key personnel, including its President and Chief Executive Officer, its
Vice-President and Chief Financial Officer, its Chief of Strategy, Legal Affairs and Corporate Secretary and its Executive
Chairman of the Board and co-founder Alain Lemaire, the Corporation's business, financial condition or operating results could
be adversely affected.
Although Cascades believes that its key personnel will remain active in the business and that Cascades will continue to be able to attract
and retain other talented personnel and replace key personnel should the need arise, competition in recruiting replacement personnel
could be significant. Cascades does not carry key-man insurance on the members of its senior management.
Cascade’s business activities, intellectual property, operating results and financial position could suffer if Cascades is unable to
protect its information systems against, or effectively respond to, cyber-attacks or other cyber incidents.
The Corporation relies on information technology, other computer resources and its employees to process, transmit and store electronic
data in its daily business activities, and to carry out important operational and marketing activities. Despite the implementation of security
measures, the Corporation’s technology systems, and those of third parties on which it relies, are vulnerable to damage, disability or failure
due to computer viruses, malware or other harmful circumstance, intentional penetration or disruption of the Corporation’s information
technology resources by a third party, natural disasters, hardware or software corruption or failure or error (including a failure of security
controls incorporated into or applied to such hardware or software), telecommunications system failure, service provider error or failure,
intentional or unintentional personnel actions (including the failure to follow its security protocols), or lost connectivity to its networked
resources. A significant and extended disruption in the functioning of these resources would result in an interruption of the Corporation’s
operations and could damage its reputation and cause the Corporation to lose customers, sales and revenue.
In addition, security breaches involving the Corporation’s systems or third-party providers may occur, such as unauthorized access, denial
of service, computer viruses and other disruptive problems caused by hackers. This could result in the unintended public disclosure or the
misappropriation of proprietary, personal and confidential information, or in the inability to access company data (including due to
ransomware), and require the Corporation to incur significant expense to address and resolve these kinds of issues. The release of
confidential information may also lead to identity theft and related fraud, litigation or other proceedings against the Corporation by affected
individuals and/or business partners and/or by regulators, and the outcome of such proceedings, which could include penalties or fines,
could have a material and adverse effect on its business activities, intellectual property, operating results and financial condition. The
occurrence of any of these incidents could result in adverse publicity, loss of consumer confidence or employees, and reduced sales and
profits. In addition, the costs of maintaining adequate protection against such threats, including potentially higher insurance costs, as they
develop rapidly in the future (or as legal requirements related to data security increase) could be material. Cyber security represents a
company-wide challenge and the related risks are part of the enterprise risk management program that is presented to the Corporation’s
audit and finance committee.
As a result of the foregoing, the Corporation may have to modify its business systems and practices with the goal of further improving data
security, which would result in increased expenditures and operating complexity. Although the Corporation has to date not experienced any
material losses relating to cyber-attacks or other information security breaches, there can be no assurance that it will not incur such losses
in the future. The Corporation’s risk and exposure to these matters cannot be fully mitigated because of, among other things, the evolving
nature of these threats. As cyber threats continue to evolve, the Corporation may be required to expend additional resources to continue to
modify or enhance protective measures or to investigate and remediate any security vulnerabilities.
Climate change could negatively affect Cascades’ business and operations.
There is concern that carbon dioxide and other greenhouse gases in the atmosphere have an adverse impact on global temperatures,
weather patterns and the frequency and severity of extreme weather and natural disasters. The Corporation operates plants and delivers
products to clients in locations that may be subject to climate stress events such as sea-level rise and increased storm frequency or
intensity. Caused by climate change or not, the occurrence of one or more natural disasters or extreme weather conditions, such as a
hurricane, tornado, earthquake or flooding, may disrupt the productivity of the Corporation’s facilities or the operation of its supply chain
and unfavorably impact the demand for, or its consumers’ ability to purchase, its products. Further, climate changes could require higher
remediation and insurance costs for the Corporation.
Concern over climate change may result in new or increased regional, federal and/or global legal and regulatory requirements to reduce or
mitigate the effects of greenhouse gases, or to limit or impose additional costs on commercial water use due to local water scarcity
concerns. In the event that such regulation is more stringent than current regulatory obligations or the measures that the Corporation is
currently undertaking to monitor and improve its energy efficiency and water conservation, the Corporation may experience disruptions in,
or significant increases in its costs of, operation and delivery and the Corporation may be required to make additional investments in
facilities and equipment or relocate its facilities. In particular, increasing regulation of fuel emissions could substantially increase the cost of
energy, including fuel, required to operate the Corporation’s facilities or transport and distribute its products, thereby substantially
increasing the distribution and supply chain costs associated with its products. As a result, the effects of climate change could negatively
affect the Corporation’s business and operations.
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2021 Annual Report
There is also increased focus, including by governmental and non-governmental organizations, investors, customers and consumers on
environmental sustainability matters, including deforestation, land use, climate impact, water use and recyclability or recoverability of
packaging, including plastic. The Corporation’s reputation could be damaged if it or others in its industry do not act, or are perceived not to
act, responsibly with respect to the Corporation’s impact on the environment.
Risks relating to the Corporation’s indebtedness
The significant amount of the Corporation’s debt could adversely affect its financial health and prevent it from fulfilling its
obligations under its outstanding indebtedness.
The Corporation has a significant amount of debt. As at December 31, 2021, it had $1,351 million of net debt1 outstanding on a
consolidated basis, including lease obligations and net cash and cash equivalents of $174 million.
On August 17, 2020, the Corporation issued unsecured senior notes for US$300 million ($396 million) aggregate principal amount of
5.375% due in 2028 at a price of 104.25% resulting in a US$13 million ($17 million) premium for total proceed of US$313 million
($413 million) and an effective yield of 4.69%. Transaction fees amounted to $4 million. The Corporation used the proceed from this
offering to fund the redemption of its 5.75% US$200 million ($264 million) unsecured senior notes due in 2023 and paid a premium of
US$3 million ($4 million). The Corporation also wrote off $2 million of unamortized financing costs related to these notes.
On November 9, 2021, the Corporation completed the partial redemption of its unsecured senior notes. The transaction was settled on
November 10, 2021 and the Corporation redeemed US$144 million ($180 million) and US$155 million ($192 million) of its 2026 and
2028 unsecured senior notes, respectively, and paid an early repurchase premium totaling US$18 million ($22 million). The Corporation
incurred transaction fees of $2 million, wrote off $4 million of unamortized financing costs and $8 million of unamortized issuance premium
related to these notes. The Corporation also paid US$5 million ($6 million) of interest accrued on these notes.
The Corporation’s leverage could have major consequences for holders of its shares. For example, it could:
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make it more difficult for the Corporation to satisfy its obligations with respect to its indebtedness;
increase the Corporation’s vulnerability to competitive pressures and to general adverse economic or market conditions and
require it to dedicate a substantial portion of its cash flow from operations to servicing debt, reducing the availability of its cash
flow to fund working capital, capital expenditures, acquisitions and other general corporate purposes;
limit its flexibility in planning for, or reacting to, changes in its business and industry; and
limit its ability to obtain additional sources of financing.
The Corporation’s ability to service its indebtedness will depend on its ability to generate cash in the future. The Corporation cannot
provide assurance that its business will generate sufficient cash flow from operations or that future borrowings will be available in an
amount sufficient to enable it to service its indebtedness or to fund other liquidity needs. Additionally, if the Corporation is not in compliance
with the covenants and obligations under its debt instruments, it would be in default, and the lenders could call the debt, which would have
a material adverse effect on its business.
Cascades may incur additional debt in the future, which would intensify the risks it now faces as a result of its leverage as
described above.
Even though the Corporation is substantially leveraged, it and its subsidiaries will be able to incur substantial additional indebtedness in the
future. Although its credit facility and the indentures governing the notes restrict the Corporation and its restricted subsidiaries from
incurring additional debt, these restrictions are subject to important exceptions and qualifications. As at December 31, 2021, the
Corporation had $730 million (net of letters of credit in the amount of $14 million) available on its $750 million revolving credit facility
(excluding the credit facilities of our subsidiary Greenpac). If the Corporation or its subsidiaries incur additional debt, the risks that it and
they now face as a result of its leverage could intensify.
1 Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section for a complete reconciliation.
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Leading the way.
The Corporation’s operations are substantially restricted by the terms of its debt, which could limit its ability to plan for or react
to market conditions, or to meet its capital needs.
The Corporation’s credit facilities and the indenture governing its senior notes include a number of significant restrictive covenants. These
covenants restrict, among other things, the Corporation’s ability to:
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incur debt;
pay dividends on stock, repurchase stock or redeem subordinated debt;
make investments;
sell assets, including capital stock in subsidiaries;
guarantee other indebtedness;
enter into agreements that restrict dividends or other distributions from restricted subsidiaries (solely in the case of the
Corporation’s credit facility);
enter into transactions with affiliates;
create or assume liens securing debt;
sell or transfer and lease back transactions;
engage in mergers or consolidations; and
enter into a sale of all or substantially all of our assets.
These covenants could limit the Corporation’s ability to plan for or react to market conditions or to meet its capital needs.
The Corporation’s current credit facility contains other, more restrictive covenants, including financial covenants that require it to achieve
certain financial and operating results, and maintain compliance with specified financial ratios. The Corporation’s ability to comply with
these covenants and requirements may be affected by events beyond its control, and it may have to curtail some of its operations and
growth plans to maintain compliance.
The restrictive covenants contained in the Corporation’s senior note indenture, along with the Corporation’s credit facility, do not apply to its
joint ventures, minority investments and unrestricted subsidiaries.
The Corporation’s failure to comply with the covenants contained in its credit facility or its senior note indenture, including as a
result of events beyond its control or due to other factors, could result in an event of default that could cause accelerated
repayment of the debt.
If Cascades is not able to comply with the covenants and other requirements contained in the indenture, its credit facility or its other debt
instruments, an event of default under the relevant debt instrument could occur. If an event of default does occur, it could trigger a default
under its other debt instruments, Cascades could be prohibited from accessing additional borrowings and the holders of the defaulted debt
could declare amounts outstanding with respect to that debt, which would then be immediately due and payable. The Corporation’s assets
and cash flow may not be sufficient to fully repay borrowings under its outstanding debt instruments. In addition, the Corporation may not
be able to re-finance or re-structure the payments on the applicable debt. Even if the Corporation were able to secure additional financing,
it might not be available on favourable terms. A significant or prolonged downtime in general business and difficult economic conditions
may affect the Corporation’s ability to comply with the covenants in its debt instruments, and could require it to take actions to reduce its
debt or to act in a manner contrary to its current business objectives.
Cascades is a holding corporation and depends on its subsidiaries to generate sufficient cash flow to meet its debt
service obligations.
Cascades is structured as a holding corporation and its only significant assets are the capital stock or other equity interests in its
subsidiaries, joint ventures and minority investments. As a holding corporation, Cascades conducts substantially all of its business through
these entities. Consequently, the Corporation’s cash flow and ability to service its debt obligations are dependent on the earnings of its
subsidiaries, joint ventures and minority investments, and the distribution of those earnings to Cascades, or on loans, advances or other
payments made by these entities to Cascades. The ability of these entities to pay dividends or make other payments or advances to
Cascades will depend on their operating results and will be subject to applicable laws and contractual restrictions contained in the
instruments governing their debt. In the case of the Corporation’s joint ventures, associates and minority investments, Cascades may not
exercise sufficient control to cause distributions to itself. Although its credit facility and the indenture, respectively, limit the ability of its
restricted subsidiaries to enter into consensual restrictions on their ability to pay dividends and make other payments to the Corporation,
these limitations do not apply to its joint ventures, associates, minority investments or unrestricted subsidiaries. The limitations are also
subject to important exceptions and qualifications.
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2021 Annual Report
The ability of the Corporation’s subsidiaries to generate cash flow from operations that is sufficient to allow the Corporation to make
scheduled payments on its debt obligations will depend on their future financial performance, which will be affected by a range of
economic, competitive and business factors, many of which are outside of the Corporation’s control. If the Corporation’s subsidiaries do not
generate sufficient cash flow from operations to satisfy the Corporation’s debt obligations, Cascades may have to undertake alternative
financing plans, such as refinancing or re-structuring its debt, selling assets, reducing or delaying capital investments, or seeking to raise
additional capital. Re-financing may not be possible, and assets may not be able to be sold, or, if they are sold, Cascades may not realize
sufficient amounts from those sales. Additional financing may not be available on acceptable terms, if at all, or the Corporation may be
prohibited from incurring it, if available, under the terms of its various debt instruments in effect at the time. The Corporation’s inability to
generate sufficient cash flow to satisfy its debt obligations, or to re-finance its obligations on commercially reasonable terms, would have
an adverse effect on its business, financial condition and operating results. The earnings of the Corporation’s operating subsidiaries and
the amount that they are able to distribute to the Corporation as dividends or otherwise may not be adequate for the Corporation to service
its debt obligations.
Variable rate indebtedness subjects Cascades to interest rate risk, which could cause its debt service obligations to
increase significantly.
The Corporation’s borrowings under its credit facility bear interest at variable rates and, accordingly, expose the Corporation to interest rate
risk. If interest rates increase, our debt service obligations on our variable rate indebtedness could increase even though the amount
borrowed remained the same, and our net income could decrease. The applicable margin with respect to the loans under the Corporation’s
credit facility is a percentage per annum equal to a reference rate plus the applicable margin. In order to manage its exposure to interest
rate risk, the Corporation may in the future enter into derivative financial instruments, typically interest rate swaps and caps, involving the
exchange of floating for fixed rate interest payments. If the Corporation is unable to enter into interest rate swaps, it may adversely affect
its cash flow and may impact its ability to make required principal and interest payments on its indebtedness. In addition, the transition
away from LIBOR as a benchmark for establishing the applicable interest rate may affect the cost of servicing its debt under the
Corporation’s credit facility. The borrowing arrangements provide for alternative base rates. However such alternative base rates may or
may not be related to LIBOR, the consequences of the phase-out of LIBOR are deemed non-significant for the Corporation at this time. For
example, if any alternative base rate or means of calculating interest with respect to the Corporation’s outstanding variable rate
indebtedness leads to an increase in the interest rates incurred, it could result in an increase in the cost of such indebtedness, impact its
ability to refinance some or all of its existing indebtedness or otherwise have a material adverse impact on its business, financial condition
and results of operations.
Risks related to the common shares
The market price of the common shares may fluctuate and purchasers may not be able to resell the common shares at or above
the Offering Price.
The market price of the common shares may fluctuate due to a variety of factors relative to the Corporation’s business, including
announcements of new developments, fluctuations in the Corporation’s operating results, sales of the common shares in the marketplace,
failure to meet analysts’ expectations, general conditions in all of our segments or the worldwide economy, especially in the context of the
COVID-19 pandemic and related uncertainty, many of which are beyond the Corporation’s control. In recent years, the common shares,
the stock of other companies operating in the same sectors and the stock market in general have experienced significant price fluctuations,
which have been unrelated to the operating performance of the affected companies. There can be no assurance that the market price of
the common shares will not continue to experience significant fluctuations in the future, including fluctuations that are unrelated to the
Corporation’s performance.
Payments of dividends
Any decisions to pay dividends on the common shares is subject to the discretion of the Board of Directors and based on, among other
things, Cascades’ earnings and financial requirements for operations, the satisfaction of applicable solvency tests for the declaration and
payment of dividends and other conditions existing from time to time. As a result, no assurance can be given as to whether Cascades will
declare and pay any dividends in the future, or the frequency or amount of any such dividend.
Potential dilution
The Corporation’s articles permit the issuance of an unlimited number of common shares and an unlimited number of Class A and Class B
preferred shares, issuable in series. In order to successfully complete targeted acquisitions or to fund its other activities, the Corporation
may issue additional equity securities that could dilute share ownership. The dilutive effect of these issuances may adversely affect the
Corporation’s ability to obtain additional capital or impair the Corporation’s share price.
79
Leading the way.
CONTINGENCIES
LEGAL CLAIMS
In the normal course of operations, the Corporation is party to various legal actions and contingencies, mostly related to contract disputes,
environmental and product warranty claims, and labour issues. While the final outcome with respect to legal actions outstanding or pending
as at December 31, 2021 cannot be predicted with certainty, it is Management's opinion that the outcome will not have a material adverse
effect on the Corporation's consolidated financial position, the results of its operations or its cash flows.
The Corporation is currently working with representatives of the Ontario Ministry of the Environment (MOE) - Northern Region and
Environment Canada - Great Lakes Sustainability Fund in Toronto regarding its potential responsibility for an environmental impact
identified at its former Thunder Bay facility. Both authorities lead the working group and they are developing a site management plan
relating to the sediment quality adjacent to Thunder Bay's lagoon. Several meetings have been held during the past years with the MOE
and Environment Canada and a management plan based on sediment dredging has been proposed by a third party consultant. Both
governments are looking at this proposal with stakeholders to agree on this remediation action plan that would likely be implemented in the
coming years.
The Corporation has recorded an environmental reserve to address its estimated exposure for this matter.
In the third quarter of 2021, the Containerboard Packaging segment had odour problems generated by its water effluent treatment system
of paper machines at our Niagara Falls complex, New York, USA. On August 30, 2021, a class action was filed by two residents of
Niagara Falls (on behalf of themselves and all others similarly situated) for inconvenience related to this issue. On November 16, 2021, the
plaintiffs filed a Stipulation of Plaintiffs’ Voluntary Dismissal resulting in the termination of the lawsuit. Therefore, no liability is to be
recorded as of December 31, 2021.
80
2021 Annual Report
MANAGEMENT'S REPORT
TO THE SHAREHOLDERS OF CASCADES INC.
February 23, 2022
The accompanying Consolidated Financial Statements are the responsibility of the Management of Cascades Inc. and have been reviewed
by the Audit and Finance Committee and approved by the Board of Directors.
The Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards as issued by
the International Accounting Standards Board (IFRS) and include certain estimates that reflect Management’s best judgment.
The Management of the Corporation is also responsible for all other information included in this Annual Report and for ensuring that this
information is consistent with the Corporation’s Consolidated Financial Statements and business activities.
The Management of the Corporation is responsible for the design, establishment and maintenance of appropriate internal controls and
procedures for financial reporting, to ensure that financial statements for external purposes are fairly presented in conformity with IFRS.
Such internal control systems are designed to provide reasonable assurance on the reliability of the financial information and the
safeguarding of assets.
An independent auditor and internal auditors have free and independent access to the Audit and Finance Committee, which comprises
outside independent directors. The Audit and Finance Committee, which meets regularly throughout the year with members of
Management and the external and internal auditors, reviews the Consolidated Financial Statements and recommends their approval to the
Board of Directors.
The Consolidated Financial Statements have been audited by PricewaterhouseCoopers LLP, whose report is provided below.
/s/ Mario Plourde
MARIO PLOURDE
/s/ Allan Hogg
ALLAN HOGG
PRESIDENT AND CHIEF EXECUTIVE OFFICER
KINGSEY FALLS, CANADA
VICE-PRESIDENT AND CHIEF FINANCIAL OFFICER
KINGSEY FALLS, CANADA
81
Leading the way.
INDEPENDENT AUDITOR'S REPORT
TO THE SHAREHOLDERS OF CASCADES INC.
Our opinion
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of
Cascades Inc. and its subsidiaries (together, the Corporation) as at December 31, 2021 and 2020, and its financial performance and its
cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International
Accounting Standards Board (IFRS).
What we have audited
The Corporation’s consolidated financial statements comprise:
•
•
•
•
•
•
the consolidated balance sheets as at December 31, 2021 and 2020;
the consolidated statements of earnings for the years then ended;
the consolidated statements of comprehensive income for the years then ended;
the consolidated statements of equity for the years then ended;
the consolidated statements of cash flows for the years then ended; and
the notes to consolidated financial statements, which include significant accounting policies and other explanatory information.
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards
are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Corporation in accordance with the ethical requirements that are relevant to our audit of the consolidated
financial statements in Canada. We have fulfilled our other ethical responsibilities in accordance with these requirements.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial
statements for the year ended December 31, 2021. These matters were addressed in the context of our audit of the consolidated financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
How our audit addressed the key audit matter
Our approach to addressing the matter involves the following
procedures, among others:
• Tested how management determined the recoverable amounts
of the assets or CGUs related to property, plant and equipment
and intangible assets for which an indicator of impairment was
identified, which included the following:
◦ Tested the appropriateness of the method used and approach
used.
◦ Tested the underlying data used in the recoverable amount
calculation.
◦ Professionals with specialized skill and knowledge in the field
of valuation assisted in testing the reasonableness of the
value of comparable assets on the market and the OIBD
multiples based on comparative market data.
Key audit matter
Impairment assessment of property, plant and equipment and
intangible assets with finite useful life
Refer to note 2, Summary of significant accounting policies, note 4,
Critical accounting estimates and
judgments and note 26,
Impairment charges and restructuring costs to the consolidated
financial statements.
Total net book value of property, plant and equipment and
intangible assets with finite useful life (intangible assets) amounted
to $2,522 million and $88 million as at December 31, 2021. At the
end of each reporting period, management assesses whether there
is an indicator that the carrying amount of an asset or a group of
assets may be higher than its recoverable amount. When the
recoverable amount of an asset of cash-generating unit (CGU) is
lower than the carrying amount, the carrying amount is reduced to
the recoverable amount. A CGU is the lowest level of a group of
assets for which there are separately identifiable cash flows. The
recoverable amount is the higher of fair value less cost of disposal
and value in use of an asset or CGU. The recoverable amount of
each asset or CGU is determined by management using the fair
value less cost of disposal based on the market approach if a
market exists or the income approach.
82
2021 Annual Report
How our audit addressed the key audit matter
for which an
intangible assets
the market approach, management used
Key audit matter
In determining the recoverable amount of an asset of CGU based
the value of
on
comparable assets on the market of operating income before
depreciation and amortization (OIBD) multiples and applied a high
degree of judgment in determining the OIBD multiples and the
value of comparable assets on the market. For the year ended
December 31, 2021 management determined the recoverable
amounts of certain assets or CGUs related to property, plant and
equipment and
indicator of
impairment was identified were lower than the carrying amounts
and recorded impairments charge of $17 million for property, plant
and equipment and $35 million for intangible assets.
We considered this a key audit matter due to the high degree of
judgment required by management in determining the recoverable
amounts of assets or CGUs related to property, plant and
equipment and
indicator of
impairment was identified, including the determination of OIBD
multiples and the value of comparable assets on the market. This
has resulted in a significant audit effort and a high degree of
subjectivity and complexity in performing procedures to test the
recoverable amounts of assets or CGUs determined by
management. Professionals with specialized skill and knowledge in
the field of valuation assisted us in performing the procedures.
intangible assets
for which an
Key audit matter
Impairment assessment of goodwill - Tissue Papers segment Our approach to addressing the matter involves the following
How our audit addressed the key audit matter
Refer to note 2, Summary of significant accounting policies, note 4,
Critical accounting estimates and
judgments and note 26,
Impairment charges and restructuring costs to the consolidated
financial statements.
Management performs an impairment assessment annually, or
more frequently if events or circumstances indicate that the
carrying value of goodwill may be impaired. Goodwill is allocated to
CGUs for the purpose of impairment testing based on the level at
which management monitors il, which is not higher than an
operating segment. An impairment loss is recognized if the carrying
amount of a CGU or group of CGUs exceeds its recoverable
amount. The recoverable amount is the higher of fair value less
cost of disposal and value in use. Management performed its
annual goodwill impairment test for the Tissue Papers segment as
at December 31, 2021. The recoverable amount of the Tissue
Papers segment was determined using the fair value less cost of
disposal based on the income approach. In determining the fair
value less cost of disposal, management applied a high degree of
judgment
including
in developing several key assumptions,
estimated shipment levels, foreign exchange rates, revenue growth
rates, operating income before depreciation and amortization
(OIBD) margins, the discount rate and capital expenditures.
procedures, among others:
• Tested how management determined the recoverable amount of
the Tissue Papers segment as at December 31, 2021, which
included the following:
◦ Tested the appropriateness of the method used and approach
used and the mathematical accuracy of the recoverable
amount calculation.
◦ Tested the underlying data used in the recoverable amount
calculation.
◦ Tested the reasonableness of the assumptions related to
estimated shipment levels, foreign exchange rates, revenue
growth rates, OIBD margins and capital expenditures by
considering (1)
the Board of
the budget approved by
Directors, (ii) the current and past performance of the
segment, (iii) external market and industry data, and whether
these assumptions were consistent with evidence obtained in
other areas of the audit, as applicable.
◦ Professionals with specialized skill and knowledge in the field
of valuation assisted in testing the reasonableness of the
discount rate applied by management based on available data
comparable companies.
83
Leading the way.
Key audit matter
As a result of this impairment test management fully impaired the
goodwill within
at
the Tissue Papers
December 31, 2021 and recorded an impairment charge of
$36 million.
segment
as
How our audit addressed the key audit matter
We considered this a key audit matter due to (i) the significance of
the goodwill balance of the Tissue Papers segment and (ii) the high
degree of judgment required by management in determining the
recoverable amount of
the Tissue Papers segment as at
December 31, 2021, including the use of key assumptions.This has
resulted in significant audit effort and a high degree of subjectivity
and complexity in performing procedures to test the recoverable
amount. Professionals with specialized skill and knowledge in the
field of valuation assisted us in performing the procedures.
Other information
Management is responsible for the other information. The other information comprises the Management’s Discussion and Analysis, which
we obtained prior to the date of this auditor’s report and the information, other than the consolidated financial statements and our auditor’s
report thereon, included in the annual report, which is expected to be made available to us after that date.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance
conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in
the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information obtained prior to the date of this auditor’s report, we conclude that there
is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. When we
read the information, other than the consolidated financial statements and our auditor’s report thereon, included in the annual report, if we
conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.
Responsibilities of management and those charged with governance for the consolidated financial
statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS, and
for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are
free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Corporation’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless
management either intends to liquidate the Corporation or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Corporation’s financial reporting process.
84
2021 Annual Report
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high
level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will
always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of
these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain
professional skepticism throughout the audit. We also:
•
•
•
•
•
•
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to
provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Corporation’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the
Corporation’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause the Corporation to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and
whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves
fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the
Corporation to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and
performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the
audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in
our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Jean-François Lecours.
/s/ PricewaterhouseCoopers LLP1
Montréal, Québec
February 23, 2022
1 CPA auditor, CA, public accountancy permit No. A126402
85
Leading the way.
CONSOLIDATED BALANCE SHEETS
(in millions of Canadian dollars)
Assets
Current assets
Cash and cash equivalents
Accounts receivable
Current income tax assets
Inventories
Current portion of financial assets
Long-term assets
Investments in associates and joint ventures
Property, plant and equipment
Intangible assets with finite useful life
Financial assets
Other assets
Deferred income tax assets
Goodwill and other intangible assets with indefinite useful life
Liabilities and Equity
Current liabilities
Bank loans and advances
Trade and other payables
Current income tax liabilities
Current portion of long-term debt
Current portion of provisions for contingencies and charges
Current portion of financial liabilities and other liabilities
Long-term liabilities
Long-term debt
Provisions for contingencies and charges
Financial liabilities
Other liabilities
Deferred income tax liabilities
Equity
Capital stock
Contributed surplus
Retained earnings
Accumulated other comprehensive loss
Equity attributable to Shareholders
Non-controlling interests
Total equity
The accompanying notes are an integral part of these Audited Consolidated Financial Statements.
86
NOTE
December 31,
2021
December 31,
2020
27
6
7
16
8
9 and 14
10
16
11
19
10
27
12
13 and 27
15
16 and 17
13 and 27
15
16
17 and 18
19
20
21
5 and 22
5 and 8
174
510
19
494
1
1,198
87
2,522
88
6
54
138
473
4,566
1
707
12
74
12
16
822
1,450
47
6
122
192
2,639
614
14
1,274
(23)
1,879
48
1,927
4,566
384
659
23
569
5
1,640
82
2,772
160
16
50
170
522
5,412
12
861
17
102
14
25
1,031
1,949
57
6
202
210
3,455
622
13
1,146
(28)
1,753
204
1,957
5,412
2021 Annual Report
CONSOLIDATED STATEMENTS OF EARNINGS
For the years ended December 31 (in millions of Canadian dollars, except per common share
amounts and number of common shares)
NOTE
Sales
Cost of sales and expenses
Cost of sales (including depreciation and amortization of $252 million (2020 — $251 million))
Selling and administrative expenses
Gain on acquisitions, disposals and others
Impairment charges and restructuring costs
Foreign exchange gain
Loss on derivative financial instruments
Operating income
Financing expense
Interest expense (revenue) on employee future benefits and other liabilities
Loss on repurchase of long-term debt
Foreign exchange gain on long-term debt and financial instruments
Fair value revaluation loss on investments
Share of results of associates and joint ventures
Earnings (loss) before income taxes
Provision for income taxes
Net earnings (loss) from continuing operations including non-controlling interests for the year
Results from discontinued operations
Net earnings including non-controlling interests for the year
Net earnings attributable to non-controlling interests
Net earnings attributable to Shareholders for the year
Net earnings (loss) from continuing operations per common share
Basic
Diluted
Net earnings per common share
Basic
Diluted
Weighted average basic number of common shares outstanding
Weighted average number of diluted common shares
Net earnings (loss) attributable to Shareholders:
Continuing operations
Discontinued operations
Net earnings
The accompanying notes are an integral part of these Audited Consolidated Financial Statements.
23
23
25
26
16
14 and 27
27
13
8
8
19
5
5 and 8
2021
3,956
3,465
356
(40)
110
(2)
17
3,906
50
84
5
20
(3)
—
(18)
(38)
9
(47)
234
187
25
162
($0.59)
($0.59)
$1.60
$1.59
101,884,051
102,902,364
5
(59)
221
162
2020
4,105
3,444
367
(43)
43
(1)
3
3,813
292
101
(7)
6
(6)
3
(14)
209
26
183
51
234
36
198
$1.74
$1.72
$2.04
$2.02
95,924,835
97,061,136
169
29
198
87
Leading the way.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended December 31 (in millions of Canadian dollars)
Net earnings including non-controlling interests for the year
Other comprehensive income (loss)
Items that may be reclassified subsequently to earnings
Translation adjustments
Change in foreign currency translation of foreign subsidiaries
Change in foreign currency translation of foreign subsidiaries from discontinued operations
Change in foreign currency translation related to net investment hedging activities
Change in foreign currency translation related to net investment hedging activities from
discontinued operations
Cash flow hedges
Change in fair value of commodity derivative financial instruments
Provision for income taxes
Provision for income taxes from discontinued operations
Items that are not released to earnings
Actuarial gain (loss) on employee future benefits
Actuarial loss on employee future benefits from discontinued operations
Recovery of (provision for) income taxes
Recovery of income taxes from discontinued operations
Other comprehensive income (loss)
Comprehensive income including non-controlling interests for the year
Comprehensive income attributable to non-controlling interests for the year
Comprehensive income attributable to Shareholders for the year
Comprehensive income (loss) attributable to Shareholders:
Continuing operations
Discontinued operations
Comprehensive income
The accompanying notes are an integral part of these Audited Consolidated Financial Statements.
NOTE
2021
187
2020
234
22
5
5
22
5
18
5
19
5
5
(8)
(18)
11
9
2
(2)
(1)
(7)
29
—
(7)
—
22
15
202
13
189
(33)
222
189
(28)
21
16
(13)
2
(2)
—
(4)
(19)
(3)
5
1
(16)
(20)
214
43
171
145
26
171
88
2021 Annual Report
CONSOLIDATED STATEMENTS OF EQUITY
For the year ended December 31, 2021
(in millions of Canadian
dollars)
NOTE
CAPITAL STOCK
CONTRIBUTED
SURPLUS
RETAINED
EARNINGS
ACCUMULATED
OTHER
COMPREHENSIVE
LOSS
TOTAL EQUITY
ATTRIBUTABLE TO
SHAREHOLDERS
NON-
CONTROLLING
INTERESTS
Balance - Beginning of year
Comprehensive income (loss)
Net earnings
Other comprehensive
income (loss)
Dividends
Dividends paid to non-
controlling interests from
discontinued operations
Stock options expense
Issuance of common shares
upon exercise of stock
options
Redemption of common
shares
Acquisitions of non-controlling
interests
Disposals of non-controlling
interests
Balance - End of year
5
20
20
5
622
—
—
—
—
—
—
2
(10)
—
—
614
13
—
—
—
—
—
1
—
—
—
—
14
1,146
(28)
1,753
162
22
184
(41)
—
—
—
(16)
1
—
1,274
—
5
5
—
—
—
—
—
—
—
162
27
189
(41)
—
1
2
(26)
1
—
(23)
1,879
204
25
(12)
13
(14)
(3)
—
—
—
(1)
(151)
48
TOTAL EQUITY
1,957
187
15
202
(55)
(3)
1
2
(26)
—
(151)
1,927
(in millions of Canadian
dollars)
NOTE
CAPITAL STOCK
CONTRIBUTED
SURPLUS
RETAINED
EARNINGS
For the year ended December 31, 2020
ACCUMULATED
OTHER
COMPREHENSIVE
LOSS
TOTAL EQUITY
ATTRIBUTABLE TO
SHAREHOLDERS
NON-
CONTROLLING
INTERESTS
TOTAL EQUITY
Balance - Beginning of year
Comprehensive income (loss)
Net earnings
Other comprehensive
income (loss)
Dividends
Dividends paid to non-
controlling interests from
discontinued operations
Issuance of common shares
on public offering
Stock options expense
Issuance of common shares
upon exercise of stock
options
Redemption of common
shares
Balance - End of year
5
20
20
20
491
—
—
—
—
—
125
—
10
(4)
622
15
—
—
—
—
—
—
1
(3)
—
13
1,003
(17)
1,492
177
1,669
198
(16)
182
(31)
—
(4)
—
—
(4)
—
(11)
(11)
—
—
—
—
—
—
1,146
(28)
198
(27)
171
(31)
—
121
1
7
(8)
1,753
36
7
43
(14)
(2)
—
—
—
—
204
234
(20)
214
(45)
(2)
121
1
7
(8)
1,957
The accompanying notes are an integral part of these Audited Consolidated Financial Statements.
89
Leading the way.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31 (in millions of Canadian dollars)
Operating activities from continuing operations
Net earnings attributable to Shareholders for the year
Results from discontinued operations
Results from discontinued operations attributable to non-controlling interests
Net earnings (loss) from continuing operations
Adjustments for:
Financing expense and interest expense (revenue) on employee future benefits and other liabilities
Loss on repurchase of long-term debt
Depreciation and amortization
Gain on acquisitions, disposals and others
Impairment charges and restructuring costs
Unrealized loss on derivative financial instruments
Foreign exchange gain on long-term debt and financial instruments
Provision for income taxes
Fair value revaluation loss on investments
Share of results of associates and joint ventures
Net earnings attributable to non-controlling interests
Net financing expense paid
Premium and transaction fees paid on long-term debt redemption
Net income taxes received
Dividends received
Provisions for contingencies and charges and other liabilities
Changes in non-cash working capital components
Investing activities from continuing operations
Disposals in associates and joint ventures
Payments for property, plant and equipment
Proceeds from disposals of property, plant and equipment
Change in intangible and other assets
Cash received from business combinations
Financing activities from continuing operations
Bank loans and advances
Change in credit facilities
Issuance of unsecured senior notes, net of related expenses
Repurchase of unsecured senior notes
Increase in other long-term debt
Payments of other long-term debt, including lease obligations
Settlement of derivative financial instruments
Issuance of common shares on public offering, net of transaction fees
Issuance of common shares upon exercise of stock options
Redemption of common shares
Payment of other liabilities
Dividends paid to non-controlling interests and acquisition of non-controlling interests
Dividends paid to the Corporation’s Shareholders
Change in cash and cash equivalents during the year from continuing operations
Change in cash and cash equivalents from discontinued operations, including reclassification
of beginning of year cash and cash equivalent in 2021
Net change in cash and cash equivalents during the year
Currency translation on cash and cash equivalents
Cash and cash equivalents - Beginning of the year
Cash and cash equivalents - End of the year
The accompanying notes are an integral part of these Audited Consolidated Financial Statements.
90
NOTE
5
5
27
13
25
26
19
8
8
5 and 8
13
8
15, 17 and 18
27
25
27
13 and 27
13 and 27
13 and 27
13 and 14
16
20
20
20
8
8
5
2021
162
(234)
13
(59)
89
20
252
(40)
110
17
(3)
9
—
(18)
12
(96)
(24)
2
11
(35)
247
(36)
211
1
(286)
53
(15)
—
(247)
(11)
5
—
(372)
5
(75)
—
—
2
(26)
—
(16)
(41)
(529)
(565)
356
(209)
(1)
384
174
2020
198
(51)
22
169
94
6
251
(43)
43
3
(6)
26
3
(14)
14
(76)
(4)
9
10
(27)
458
19
477
3
(219)
55
(9)
2
(168)
1
(131)
409
(264)
31
(117)
1
120
7
(8)
(121)
(14)
(31)
(117)
192
41
233
(4)
155
384
2021 Annual Report
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. Inter-segment 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 Note 2.
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 three segments: Containerboard and Specialty Products (which constitutes the Corporation’s
Packaging Products) and Tissue Papers.
For the years ended December 31 (in millions of Canadian dollars)
2021
2020
2021
2020
2021
2020
2021
2020
Canada
United States
Other countries
SALES TO
Total
Packaging Products
Containerboard
Specialty Products
Inter-segment sales
Tissue Papers
Inter-segment sales and Corporate Activities
1,197
202
1,130
165
811
346
787
305
(14)
(13)
(18)
(5)
1,385
1,282
252
145
278
115
1,782
1,675
1,139
1,020
14
2,173
1,087
1,336
2
2,425
1
—
—
1
—
—
1
1
3
—
4
1
—
5
2,009
548
(32)
2,525
1,272
159
3,956
1,918
473
(18)
2,373
1,615
117
4,105
For the years ended December 31 (in millions of Canadian dollars)
OPERATING INCOME BEFORE
DEPRECIATION AND AMORTIZATION
2021
2020
Packaging Products
Containerboard
Specialty Products
Tissue Papers
Corporate Activities
Operating income before depreciation and amortization
Depreciation and amortization
Financing expense and interest expense (revenue) on employee future benefits and other liabilities
Loss on repurchase of long-term debt
Foreign exchange gain on long-term debt and financial instruments
Fair value revaluation loss on investments
Share of results of associates and joint ventures
Earnings (loss) before income taxes
350
74
424
(38)
(84)
302
(252)
(89)
(20)
3
—
18
(38)
436
58
494
145
(96)
543
(251)
(94)
(6)
6
(3)
14
209
91
Leading the way.
For the years ended December 31 (in millions of Canadian dollars)
PAYMENTS FOR PROPERTY, PLANT AND
EQUIPMENT
2021
2020
Packaging Products
Containerboard
Specialty Products
Tissue Papers
Corporate Activities
Total acquisitions
Right-of-use assets acquisitions and of property, plant and equipment included in other debts
Acquisitions for property, plant and equipment included in “Trade and other payables”
Beginning of year
End of year
Payments for property, plant and equipment
Proceeds from disposals of property, plant and equipment
Payments for property, plant and equipment net of proceeds from disposals
(in millions of Canadian dollars)
Packaging Products
Containerboard
Boxboard Europe
Specialty Products
Tissue Papers
Corporate Activities
Intersegment eliminations
Investments in associates and joint ventures
Other investments
Information by geographic segment is as follows:
(in millions of Canadian dollars)
Canada
United States
Italy
Other countries
(in millions of Canadian dollars)
Canada
United States
Italy
Other countries
92
236
42
278
49
46
373
(43)
330
31
(75)
286
(53)
233
111
25
136
104
26
266
(53)
213
37
(31)
219
(55)
164
December 31,
2021
TOTAL ASSETS
December 31,
2020
2,308
—
318
2,626
1,176
766
(91)
4,477
87
2
4,566
2,196
799
283
3,278
1,314
821
(88)
5,325
82
5
5,412
PROPERTY, PLANT AND EQUIPMENT
December 31,
2021
December 31,
2020
974
1,548
—
—
2,522
945
1,463
200
164
2,772
GOODWILL, CUSTOMER RELATIONSHIPS
AND CLIENT LISTS, AND OTHER FINITE AND
INDEFINITE USEFUL LIFE INTANGIBLE
ASSETS
December 31,
2021
December 31,
2020
291
270
—
—
561
375
275
29
3
682
2021 Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts are in millions of Canadian dollars, except per common share and option amounts and number of common shares
and options.)
NOTE 1
GENERAL INFORMATION
Cascades Inc. and its subsidiaries (together “Cascades” or the “Corporation”) produce, convert and market packaging and tissue products
composed mainly of recycled fibres. Cascades Inc. is incorporated and domiciled in Québec, Canada. The address of its registered office
is 404, Marie-Victorin Boulevard, Kingsey Falls. Its shares are listed on the Toronto Stock Exchange under the ticker symbol “CAS”.
The Board of Directors approved the Consolidated Financial Statements on February 23, 2022.
NOTE 2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The Corporation prepares its financial statements in accordance with Canadian generally accepted accounting principles (GAAP) as set
forth in Part I of the Chartered Professional Accountants of Canada (CPA Canada) Handbook – Accounting, which incorporates IFRS as
issued by the International Accounting Standards Board. The key accounting policies applied in the preparation of these Consolidated
Financial Statements are described below.
BASIS OF MEASUREMENT
The Consolidated Financial Statements have been prepared under the historical cost convention, except for the revaluation of certain
financial assets and liabilities, including derivative instruments, which are measured at fair value.
BASIS OF CONSOLIDATION
These Consolidated Financial Statements include the accounts of the Corporation, which include:
A. SUBSIDIARIES
Subsidiaries are all entities over which the Corporation has control, where control is defined as the power to direct decisions about relevant
activities. The existence and effect of potential voting rights that are exercisable or convertible are considered when assessing whether the
Corporation controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Corporation.
They are unconsolidated from the date on which control ceases. Accounting policies of subsidiaries have been changed, where necessary,
to ensure consistency with the policies adopted by the Corporation. The purchase method of accounting is used to account for the
acquisition of subsidiaries by the Corporation. Results of operations are consolidated commencing on the date of acquisition. The
purchase consideration is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at
the date of exchange. The transaction costs directly attributable to the acquisition are expensed. Identifiable assets acquired, as well as
liabilities and contingent liabilities assumed in a business combination, are measured initially at their fair values at the acquisition date,
irrespective of the extent of any non-controlling interests. The excess of the purchase consideration over the fair value of the Corporation's
share of the identifiable net assets acquired is recorded as goodwill. If the purchase consideration is less than the fair value of the net
assets of the subsidiary acquired, the difference is recognized directly in the consolidated statement of earnings. Intercompany
transactions, balances and unrealized gains on transactions between subsidiaries are eliminated.
The following are the principal subsidiaries of the Corporation:
Cascades Canada ULC
Cascades USA Inc.
Greenpac Holding LLC1
1 Including indirect ownership, percentage stands at 86.35% for accounting purposes. See Note 8 for more details.
PERCENTAGE OWNED (%)
JURISDICTION
100
100
79.90
Canada
Delaware
Delaware
93
Leading the way.
B. TRANSACTIONS AND CHANGE IN OWNERSHIP
Acquisitions or disposals of equity interests in subsidiaries that do not result in the Corporation obtaining or losing control are treated as
equity transactions. When the Corporation obtains or loses control, the revaluation of the previously held interest or the non-controlling
interests that results in gains or losses for the Corporation is recognized in the consolidated statement of earnings.
C. ASSOCIATES
Associates are all entities over which the Corporation has significant influence but not control, generally accompanying a shareholding of
between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method and are initially
recognized at cost.
Unrealized gains on transactions between the Corporation and its associates are eliminated to the extent of the Corporation's interest in
the associates. Accounting policies of associates have been adjusted where necessary to ensure consistency with the policies adopted by
the Corporation. Dilution gains and losses arising from changes in the level of investments in associates are recognized in the consolidated
statement of earnings.
The Corporation assesses, at each year-end, whether there is any objective evidence that its interest in associates is impaired. If impaired,
the carrying value of the Corporation's investment is written down to its estimated recoverable amount (being the higher of fair value less
cost of disposal or value in use) and charged to the consolidated statement of earnings.
JOINT VENTURES
D.
A joint venture is an entity in which the Corporation holds a long-term interest and for which it shares joint control over decisions regarding
relevant activities. The Corporation reports its interests in joint ventures using the equity method. Accounting policies of joint ventures have
been adjusted where necessary to ensure consistency with the policies adopted by the Corporation.
E. STRUCTURED ENTITIES
Structured entities are entities controlled by the Corporation which were designed so that voting or similar rights are not the dominant factor
in deciding who controls the entity. Structured entities are consolidated if, based on an evaluation of the substance of its relationship with
the Corporation, the Corporation concludes that it controls the structured entity. Structured entities controlled by the Corporation were
established under terms that impose strict limitations on the decision-making powers of the structured entities’ management and that
results in the Corporation receiving the majority of the benefits related to the structured entities’ operations and net assets, being exposed
to the majority of risks incident to the structured entities’ activities, and retaining the majority of the residual or ownership risks related to
the structured entities or their assets.
REVENUE FROM CONTRACT WITH CUSTOMERS
The revenues of the Corporation come mainly from sales of packaging and tissue products that are recognized at a point in time. Sales of
goods in the consolidated statement of earnings are recognized by the Corporation when control of the goods has been transferred, being
when the goods are delivered to customers and when all performance obligations have been fulfilled.
The amounts recognized as sales of goods represent the fair values of the considerations received or receivable from third parties on the
sales of goods to customers, net of returns, volume rebates and discounts, at which time there are no conditions for the payment to
become due other than the passage of time. Accumulated experience is used to estimate and provide for discounts and returns (expected
value method), whereas volume discounts are assessed based on anticipated annual sales (most likely amount method). The transaction
price is not adjusted for the time value of money since all sales are due within twelve months.
FINANCIAL INSTRUMENTS AND HEDGING RELATIONSHIPS
Financial assets and financial liabilities are recognized when the Corporation becomes a party to the contractual provisions of the
instrument. Financial assets and financial liabilities are offset and the net amount is reported in the consolidated balance sheet when there
is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or to realize the asset and
settle the liability simultaneously.
A. CLASSIFICATION
On initial recognition, the Corporation determines the financial instruments classification as per the following categories:
•
•
•
instruments measured at amortized cost;
instruments measured at fair value through other comprehensive income (FVOCI);
instruments measured at fair value through net income (FVTPL)
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2021 Annual Report
The financial instruments' classification under IFRS 9 is based on the business model in which a financial asset is managed and on its
contractual cash flow characteristics. Derivatives embedded in contracts where the host is a financial instrument in the scope of the
standard are never separated. Instead, the hybrid financial instrument as a whole is assessed for classification.
A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated at FVTPL:
•
•
it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal
amount outstanding.
Equity investments not subject to significant influence and held for trading are classified as FVTPL. The Corporation, on initial recognition,
may irrevocably elect to present subsequent changes in the investment's fair value in other comprehensive income (OCI). This election is
made on an investment-by-investment basis.
Financial liabilities are measured at amortized cost unless they must be measured at FVTPL (such as derivatives) or if the Corporation
elects to measure them at FVTPL.
B. EVALUATION
Financial instruments at amortized cost
Financial instruments at amortized cost are initially measured at fair value and subsequently at amortized cost, using the effective interest
method, less any impairment loss. Interest income, foreign exchange gains and losses and impairment are recognized in the consolidated
statement of earnings.
Financial instruments at fair value
Financial instruments are initially and subsequently measured at fair value and transaction costs are accounted for in the consolidated
statement of earnings. When the Corporation elects to measure a financial liability at FVTPL, gains or losses related to the Corporation's
own credit risk are accounted for in the consolidated statement of earnings.
IMPAIRMENT
C.
The Corporation prospectively estimates the expected credit losses associated with the debt instruments accounted for at amortized cost
or FVOCI. The impairment methodology used depends on whether there is a significant increase in the credit risk or not. For trade
receivables, the Corporation measures loss allowances at an amount equal to lifetime expected credit loss (ECL) as allowed by IFRS 9
under the simplified method.
D. DERECOGNITION
Financial assets
The Corporation derecognizes a financial asset when and only when the contractual rights to the cash flows from the financial asset have
expired or when contractual rights to the cash flows have been transferred.
Financial liabilities
The Corporation derecognizes a financial liability when and only when it is extinguished, meaning when the obligation specified in the
contract is discharged, canceled or expired. The difference between the carrying amount of the extinguished financial liability and the
consideration paid or payable, including non-cash assets transferred or liabilities assumed, is recognized in the consolidated statement
of earnings.
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
Derivative financial instruments are initially recognized at fair value on the date a derivative contract is entered into and are subsequently
remeasured at their fair value. The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a
hedging instrument, and, if so, the nature of the item being hedged. The Corporation designates certain derivative financial
instruments as :
i) hedges of the fair value of recognized assets or liabilities or a firm commitment (fair value hedge);
ii) hedges of a particular risk associated with a recognized asset or liability or a highly probable forecast transaction (cash flow hedge); or
iii) hedges of a net investment in a foreign operation (net investment hedge).
The Corporation formally documents, at the inception of the transaction, the relationship between hedging instruments and hedged items,
as well as its risk management objectives and strategy for undertaking various hedging transactions. The Corporation also documents its
assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly
effective in offsetting changes in fair values or cash flows of hedged items.
95
Leading the way.
The full fair value of a hedging derivative is classified as a long-term asset or liability when the remaining maturity of the hedged item is
more than twelve months and as a current asset or liability when the remaining maturity of the hedged item is less than twelve months.
Trading derivatives are classified as current assets or liabilities.
A. FAIR VALUE HEDGE
The periodic change in fair value of the hedging derivative is recorded in net earnings. The periodic change in the cumulative gain or loss
on the hedged item is recorded as an adjustment to its carrying amount on the balance sheet and is also recorded in net earnings.
Hedging ineffectiveness is automatically recorded to net earnings as the difference between the above amounts recorded in net earnings.
Realized gains and losses on the hedging item, resulting from the difference between the payments on the receive leg and the pay leg of
the hedging derivative, are recorded on an accrual basis in net earnings.
If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the
effective interest method is used is amortized to profit or loss over the period to maturity using a recalculated effective interest rate.
B. CASH FLOW HEDGE
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in the
consolidated statement of other comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in the
consolidated statement of earnings.
Amounts accumulated in equity are reclassified to earnings against the gain (loss) on the hedged item when the latter is realized (for
example, when the forecasted sale that is hedged takes place).
When a hedging instrument expires or is sold or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or
loss existing in equity at that time remains in equity and is recognized when the forecast transaction is ultimately recognized in the
consolidated statement of earnings. When a forecasted transaction is no longer expected to occur, the cumulative gain or loss that was
reported in equity is immediately transferred to the consolidated statement of earnings.
C. NET INVESTMENT HEDGE
Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any gain or loss on the hedging
instrument relating to the effective portion of the hedge is recognized in the consolidated statement of other comprehensive income. The
gain or loss relating to the ineffective portion is recognized immediately in the consolidated statement of earnings. Gains and losses
accumulated in equity are included in the consolidated statement of earnings when the foreign operation is partially disposed of or sold.
The Corporation also uses cross-currency interest rate swaps and forward contracts to manage the currency fluctuations risk associated
with forecasted cash flows in foreign currency. These cross-currency interest rate swaps are designated as a foreign exchange hedge of its
net investment in foreign operations. The portion of the gains and losses arising from the translation of those derivatives that are
determined to be an effective hedge is recognized in other comprehensive income, counterbalancing gains and losses arising from the
translation of the Corporation's net investment in its foreign operations.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash on hand, bank balances and short-term liquid investments with original maturities of three
months or less.
ACCOUNTS RECEIVABLE
Accounts receivable are initially recognized at fair value and subsequently measured at amortized cost using the effective interest method,
less an expected credit loss allowance that is based on expected collectability.
INVENTORIES
Inventories of finished goods are valued at the lower of cost, which is established using the average production cost, and net realizable
value. Inventories of raw materials as well as supplies and spare parts are valued at the lower of cost and replacement value, which is the
best available measure of their net realizable value. Cost for both raw materials and supplies and spare parts is determined using the
average cost. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion
and the estimated costs necessary to make the sale.
PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION
Property, plant and equipment are recorded at cost, including capitalized interest incurred during the construction period of qualifying
assets, less accumulated depreciation and net impairment losses. Repairs and maintenance costs are charged to the consolidated
statement of earnings during the period in which they are incurred. Residual values, method of depreciation and useful lives of the assets
are reviewed annually and adjusted if appropriate.
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2021 Annual Report
Depreciation is calculated on a straight-line basis as follows:
Between 10 and 33 years
Buildings
Between 3 and 30 years
Machinery and equipment
Automotive equipment
Between 5 and 10 years
Other property, plant and equipment Between 3 and 10 years
Right-of-use assets
Lease term
GRANTS AND INVESTMENT TAX CREDITS
Grants and investment tax credits for property, plant and equipment are accounted for using the cost reduction method and are amortized
to earnings as a reduction of depreciation using the same basis as that used to depreciate the related property, plant and equipment. The
grants related to any other operational activities and/or economic circumstances are accounted as reduction of the costs they refer to.
BORROWING COSTS
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily
take a substantial period of time to get ready for their intended use, are added to the cost of those assets until all the activities necessary to
prepare the asset for its intended use are complete. The capitalized borrowing costs for major acquisition, construction or production of
qualifying assets, which are financed through non directly attributable sources, are calculated using the actual interest rate, if not available
the Cascades' long term incremental borrowing rate. All other borrowing costs are recognized in the consolidated statement of earnings in
the period in which they are incurred.
INTANGIBLE ASSETS
Intangible assets consist primarily of customer relationships and client lists, as well as application software. They are recorded at cost less
accumulated amortization and impairment losses and amortized on a straight-line basis over the estimated useful lives as follows:
Application software
Enterprise Resource Planning (ERP)
Customer relationships and client lists
Other intangible assets with finite useful life
Between 3 and 10 years
7 years
Between 2 and 20 years
Between 2 and 20 years
Expenditure on research activities is recognized as an expense in the period in which it is incurred.
GOODWILL AND OTHER INTANGIBLE ASSETS WITH INDEFINITE USEFUL LIFE
Goodwill and other intangible assets with an indefinite useful life are recognized at cost less any accumulated impairment losses. They
have an indefinite useful life due to their permanent nature since they are acquired rights or not subject to wear and tear.
IMPAIRMENT
A. PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS WITH FINITE USEFUL LIFE
At the end of each reporting period, the Corporation assesses whether there is an indicator that the carrying amount of an asset or a group
of assets may be higher than its recoverable amount, which is described in section C hereunder. For that purpose, assets are grouped at
the lowest levels for which there are separately identifiable cash inflows (cash generating units (CGUs)). If there is any indication that an
individual asset may be impaired, the recoverable amount shall be estimated for the individual asset.
When the recoverable amount is lower than the carrying amount, the carrying amount is reduced to the recoverable amount. Impairment
losses are recorded immediately in the consolidated statement of earnings in the line item “Impairment charges and restructuring costs”.
Impairment losses are evaluated for potential reversals when events or changes in circumstances warrant such consideration. The
revalued carrying value is the lower of the estimated recoverable amount and the carrying amount that would have been determined had
no impairment loss been recognized and depreciation had been taken previously on the asset or CGU. A reversal of impairment loss is
recorded directly in the consolidated statement of earnings in the line item “Impairment charges and restructuring costs”.
B. GOODWILL AND OTHER INTANGIBLE ASSETS WITH INDEFINITE USEFUL LIFE
Goodwill and other intangible assets are reviewed for impairment annually on December 31 or when an event or a circumstance occurs
and indicates that the value could be permanently impaired. Goodwill is allocated to CGUs for the purpose of impairment testing based on
the level at which Management monitors it, which is not higher than an operating segment. The allocation is made to CGUs that are
expected to benefit from the business combination in which the goodwill and other intangible assets with an indefinite useful life arose.
Impairment loss on goodwill is not reversed.
97
Leading the way.
C. RECOVERABLE AMOUNTS
A recoverable amount is the higher of fair value less cost of disposal and value in use. To determine the recoverable amount of each asset
or CGU, the Corporation uses the fair value less cost of disposal calculation based on the market approach if a market exists for the asset
or CGU or the income approach.
LONG-TERM DEBT
Long-term debt is recognized initially at fair value, net of financing costs incurred. Long-term debt is subsequently carried at amortized
cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the consolidated statement
of earnings over the period of the term of the debt using the effective interest method.
Financing costs paid on establishment of the revolving credit facility are recognized as deferred financing costs in the consolidated balance
sheet under intangible assets with finite useful life and are amortized on a straight-line basis over the anticipated period of the
credit facility.
LEASES
The Corporation recognize, in the consolidated balance sheet, a lease liability and a corresponding right-of-use asset at the date at which
the leased asset is available for use. Subsequently, lease payments are allocated between the liability and finance cost. Right-of-use
assets are depreciated over the lease term on a straight-line basis.
The lease liability equals the net present value of the lease payments discounted using the interest rate implicit in the lease or the
Corporation’s incremental borrowing rate which is determined for each lease.
Right-of-use assets are measured at cost, which includes the initial lease liability amount, lease payments made at or before the lease
commencement date less lease incentives, initial direct costs and restoration costs.
The Corporation uses the low-value exception, as well as the short-term exception on all categories of assets, except buildings.
The Corporation does not apply IFRS 16 to leases of intangible assets.
PROVISIONS FOR CONTINGENCIES AND CHARGES
Provisions for contingencies include mainly legal and other claims. A provision is recognized when the Corporation has a legal or
constructive obligation as a result of a past event and it is probable that settlement of the obligation will require a financial payment or
cause a financial loss, and a reliable estimate of the amount of the obligation can be made.
If some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement is
recorded in the consolidated balance sheet as a separate asset, but only if it is virtually certain that the reimbursement will be received.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a discount rate that
reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to
the passage of time is recognized as a financing expense in the consolidated statement of earnings.
ENVIRONMENTAL RESTORATION OBLIGATIONS AND ENVIRONMENTAL COSTS
An obligation to incur restoration and environmental costs arises when environmental disturbance is caused by the development or
ongoing production of a plant or landfill site. Such costs arising from the installation of a plant and other site preparation work are provided
for and capitalized at the start of each project, or as soon as the obligation to incur such costs arises. Decommissioning costs are recorded
at the estimated amount at which the obligation could be settled at the consolidated balance sheet date and are charged against earnings
over the life of the operation through the depreciation of the asset and the unwinding of the discount on the provision. The discount rate is
the pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Costs for restoring
subsequent site damage that is created on an ongoing basis during production are provided for at their present values and charged against
earnings as the obligation arises.
Changes in the measurement of a liability relating to the decommissioning of a plant or other site preparation work resulting from changes
in the estimated timing or amount of the cash flow or a change in the discount rate are added to or deducted from the cost of the related
asset in the current year. If a decrease in the liability exceeds the carrying amount of the asset, the excess is recognized immediately in
the consolidated statement of earnings. If the asset value is increased and there is an indication that the revised carrying value is not
recoverable, an impairment test is performed in accordance with the accounting policy for impairment testing.
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2021 Annual Report
EMPLOYEE BENEFITS
The Corporation offers funded and unfunded defined benefit pension plans, defined contribution pension plans and group registered
retirement savings plans (RRSPs) that provide retirement benefit payments for most of its employees. The defined benefit pension plans
are usually contributory and are based on the number of years of service and, in most cases, the average salaries or compensation at the
end of a career. Retirement benefits are not adjusted based on inflation. The Corporation also offers its employees some post-employment
benefit plans, such as a retirement allowance, group life insurance and medical and dental plans. However, these benefits, other than
pension plans, are not funded. Furthermore, the medical and dental plans upon retirement are being phased out and are no longer offered
to the majority of new retirees and the retirement allowance is not offered to those who do not meet certain criteria.
The liability recognized in the consolidated balance sheet in respect of defined benefit pension plans is the present value of the defined
benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated at least
every three years by independent actuaries using the projected unit credit method and updated regularly by Management for any material
transactions and changes in circumstances, including changes in market prices and interest rates up to the end of the reporting period.
As well, when an asset is recorded for a pension plan, its carrying value cannot be greater than the future economic benefit that the
Corporation will get from the asset. The future economic benefit includes the suspension of contribution if the pension plan provisions allow
for it under the minimum funding requirements. When there is a minimum funding requirement, it can increase the liability recorded. All
special contributions legally required to fund a plan deficit are considered. For plans for which an actuarial evaluation is required as at
December 31, 2021, a schedule of contributions is estimated to establish the minimum funding requirement. For other plans, we have used
contributions from the most recent actuarial report.
Actuarial gains and losses that arise in calculating the present value of the defined benefit obligation and the fair value of plan assets are
recorded in the consolidated statement of other comprehensive income and recognized immediately in retained earnings without recycling
to the consolidated statement of earnings. Past service costs are recognized immediately in the consolidated statement of earnings.
When restructuring a plan results in a curtailment and settlement occurring at the same time, the curtailment is accounted for before
the settlement.
Interest costs on pension and other post-employment benefits are recognized in the consolidated statement of earnings as “Interest
expense on employee future benefits”. The measurement date of employee future benefit plans is December 31 of each year. An actuarial
evaluation is performed at least every three years. Based on their balances as at December 31, 2021, 97% of the plans were evaluated on
December 31, 2020 (92% in 2019).
INCOME TAXES
The Corporation uses the liability method to recognize deferred income taxes. According to this method, deferred income taxes are
determined using the difference between the accounting and tax bases of assets and liabilities. Deferred income tax assets and liabilities
are measured using enacted or substantively enacted tax rates at the consolidated balance sheet date that are expected to apply when the
deferred income taxes are expected to be recovered or settled. Deferred income tax assets are recognized when it is probable that the
asset will be realized.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax
liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the
same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
FOREIGN CURRENCY TRANSLATION
Items included in the financial statements of each of the Corporation's entities are measured using the currency of the primary economic
environment in which the business unit operates (the “functional currency”). The Consolidated Financial Statements are presented in
Canadian dollars, which is Cascades' functional currency.
A. FOREIGN CURRENCY TRANSACTIONS
Transactions denominated in currencies other than the business unit's functional currency are recorded at the rate of exchange prevailing
at the transaction date. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange prevailing
at the consolidated balance sheet date. Unrealized gains and losses on translation of monetary assets and liabilities are reflected in the
consolidated statement of earnings.
B. FOREIGN OPERATIONS
The assets and liabilities of foreign operations are translated into Canadian dollars at the exchange rate prevailing at the consolidated
balance sheet date. Revenues and expenses are translated at the average monthly exchange rate. Translation gains or losses are
deferred and included in “Accumulated other comprehensive income”.
99
Leading the way.
SHARE-BASED PAYMENTS
The Corporation uses the fair value method of accounting for stock-based compensation awards granted to officers and key employees.
This method consists in recording expenses to earnings based on the vesting period of each tranche of options granted. The fair value of
each tranche is calculated based on the Black-Scholes option pricing model. This model was developed for use in estimating the fair value
of traded options that have no vesting restrictions and are fully transferable. When stock options are exercised, any considerations paid by
employees, as well as the related stock-based compensation, are credited to capital stock.
DIVIDEND DISTRIBUTION
Dividend distribution to the Corporation's Shareholders is recognized as a liability in the Consolidated Financial Statements in the period in
which the dividends are approved by the Corporation's Board of Directors.
EARNINGS PER COMMON SHARE
Basic earnings per common share are determined using the weighted average number of common shares outstanding during the period.
Diluted earnings per common share are determined by adjusting the weighted average number of common shares outstanding for dilutive
instruments, which are primarily stock options, using the treasury stock method to evaluate the dilutive effect of stock options. Under this
method, instruments with a dilutive effect, which is when the average market price of a share for the period exceeds the exercise price, are
considered to have been exercised at the beginning of the period and the proceeds received are considered to have been used to redeem
common shares of the Corporation at the average market price for the period.
NOTE 3
CHANGES IN ACCOUNTING POLICY AND DISCLOSURES
A. NEW IFRS ADOPTED
LIBOR reform with amendments to IFRS 9, IAS 29, IFRS 7 and IFRS 16
In August 2020, the IASB issued Interest Rate Benchmark Reform-Phase 2, which amends IFRS 9 Financial Instruments, IAS 39 Financial
Instruments: Recognition and Measurement, IFRS 7 Financial Instruments: Disclosures and IFRS 16 Leases. The amendments
complement those issued in 2019 and focus on the effects on financial statements when a company replaces the old interest rate
benchmark with an alternative benchmark rate as a result of the reform.
The standard became effective on January 1, 2021 and had no impact on the Corporation's financial statements.
B. RECENT IFRS PRONOUNCEMENT NOT YET ADOPTED
Amendment to IAS 16
In May 2020, the IASB issued an amendment to IAS 16 Property, Plant and Equipment which seeks to clarify the way entities should
account for the proceeds from sale, and related production costs, of items produced by an asset prior to it being available for its intended
use. The modification requires that sales proceeds recognized before the related asset is available for use are recognized in profit or loss
together with the costs associated with the items sold, rather than by adjusting the cost of the asset under construction. The amendment is
effective for periods commencing on or after January 1, 2022 and must be applied retrospectively to the earliest period presented in the
financial statements. The Corporation does not anticipate a significant retrospective adjustment to its December 31, 2021 financial
statements as there was no significant asset under construction in the testing phase at the end of 2021.
100
2021 Annual Report
NOTE 4
CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of
future events that are believed to be reasonable under the circumstances.
CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported
amounts of assets and liabilities in the financial statements and disclosure of contingencies at the balance sheet date, and the reported
amounts of revenues and expenses during the reporting period. On a regular basis and with the information available, Management
reviews its estimates, including those related to environmental costs, employee future benefits, collectability of accounts receivable,
financial instruments, contingencies, income taxes, useful life and residual value of property, plant and equipment and impairment of
property, plant and equipment and intangible assets. Actual results could differ from those estimates. When adjustments become
necessary, they are reported in earnings in the period in which they occur.
IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT, INTANGIBLE ASSETS AND GOODWILL
A.
In determining the recoverable amount of an asset or CGU, based on the market approach, Management uses the value of comparable
assets on the market. In determining the recoverable amount of an asset or CGU, based on the income approach, Management uses
several key assumptions, including estimated shipment levels, foreign exchange rates, revenue growth rates, operating income before
depreciation (OIBD) margins, discount rates and capital expenditures.
The Corporation believes its assumptions are reasonable. Based on available information at the assessment date, however, these
assumptions involve a high degree of judgment and complexity. Management believes that the following assumptions are the most
susceptible to change and therefore could impact the valuation of the assets in the next year.
DESCRIPTION OF SIGNIFICANT IMPAIRMENT TESTING ASSUMPTIONS (see Note 26)
REVENUES, OPERATING INCOME BEFORE DEPRECIATION (OIBD) MARGINS, CASH FLOWS AND GROWTH RATES
The assumption used for revenues were based on the segment's internal budget and were projected for a period of five years and a long-
term growth rate of 2% was applied thereafter. The assumption used for OIBD margin was based on the segment's historical performance
and was kept constant. In arriving at its forecasts, the Corporation considers past experience, economic trends such as gross domestic
product growth and inflation, as well as industry and market trends.
DISCOUNT RATES
The Corporation assumed a discount rate in order to calculate the present value of its projected cash flows. The discount rate represents a
weighted average cost of capital (WACC) for comparable companies operating in similar industries of the applicable CGU, group of CGUs
or reportable segment based on publicly available information.
FOREIGN EXCHANGE RATES
When estimating the fair value less cost of disposal, foreign exchange rates are determined using the financial institution's average
forecast for the first two years of forecasting. For the following three years, the Corporation uses the last five years' historical average of
the foreign exchange rate. Terminal rate is based on historical data of the last twenty years and adjusted to reflect Management's
best estimate of market participants expectations.
SHIPMENTS
The assumptions used are based on the Corporation's internal budget for the next year and are usually held constant for the established
capacity, for new capacity the ramp up is considered over the forecast period. In arriving at its budgeted shipments, the Corporation
considers past experience, economic, industry and market trends.
Considering the sensitivity of the key assumptions used, there is measurement uncertainty since adverse changes in one or a combination
of the Corporation's key assumptions could cause a significant change in the carrying amounts of these assets.
101
Leading the way.
INCOME TAXES
B.
The Corporation is required to estimate the income taxes in each jurisdiction in which it operates. This includes estimating a value for
existing tax losses based on the Corporation's assessment of its ability to use them against future taxable income before they expire. If the
Corporation's assessment of its ability to use the tax losses proves inaccurate in the future, more or less of the tax losses might be
recognized as assets, which would increase or decrease the income tax expense and, consequently, affect the Corporation's results in the
relevant year.
C. EMPLOYEE BENEFITS
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of
high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity
approximating the terms of the related pension liability.
The cost of pensions and other retirement benefits earned by employees is actuarially determined using the projected benefit method pro-
rated on years of service and Management's best estimate of expected plan investment performance, salary escalations, retirement ages
of employees and expected health care costs. The accrued benefit obligation is evaluated using the market interest rate at the evaluation
date. Due to the long-term nature of these plans, such estimates are subject to significant uncertainty. All assumptions are
reviewed annually.
D. GOODWILL, INTANGIBLE ASSETS AND BUSINESS COMBINATIONS
Goodwill and client lists have arisen as a result of business combinations. The acquisition method, which also requires significant
estimates and judgments, is used to account for these business combinations. As part of the allocation process in a business combination,
estimated fair values are assigned to the net assets acquired. These estimates are based on forecasts of future cash flows, estimates of
economic fluctuations and an estimated discount rate. The excess of the purchase price over the estimated fair value of the net assets
acquired is then assigned to goodwill. In the event that actual net assets fair values are different from estimates, the amounts allocated to
the net assets could differ from what is currently reported. This would then have a direct impact on the carrying value of goodwill.
Differences in estimated fair values would also have an impact on the amortization of definite life intangibles.
CRITICAL JUDGMENTS IN APPLYING THE CORPORATION'S ACCOUNTING POLICIES
CRITICAL JUDGMENTS REGARDING THE PANDEMIC IMPACT
As a response to the effects of the COVID-19 pandemic, the Corporation continues to review the assumptions for operating plans,
valuation of property plant and equipment and accounts receivable. The exercise resulted in no additional expected credit loss for accounts
receivables. However, impairment charges were recorded in the Tissue Papers segment on property, plant and equipment, goodwill and
other intangible assets (see Notes 9, 10 and 26) The Corporation continues to closely monitor the consequences of the COVID-19
situation: the duration, spread or intensity of the pandemic as it continues to evolve, along with the supply chain, market pricing and
customer demand. These factors may further impact the Corporation’s operating plan, its cash flows, its ability to raise funds and the
valuation of its long-lived assets.
102
2021 Annual Report
NOTE 5
DISCONTINUED OPERATIONS AND DISPOSAL
On July 5, 2021, the Corporation announced the monetization of its 57.6% controlling equity interest in Reno de Medici S.p.A. (RDM) for
an amount per share of €1.45, or $462 million including foreign exchange contracts and before related transaction fees of $12 million. The
transaction closed on October 26, 2021. The Corporation recorded a gain of $228 million before income taxes of $24 million. The
Corporation used tax assets to offset this tax expense, resulting in no income tax payable on this transaction.
Assets and liabilities of Reno de Medici S.p.A. (RDM) activities at the time of disposal were as follows:
(in millions of Canadian dollars)
Cash and cash equivalents
Accounts receivable
Inventories
Current income tax assets
Investments in associates and joint ventures
Property, plant and equipment
Intangible assets with finite useful life
Financial assets
Other assets
Deferred income tax assets
Goodwill and other intangible assets with indefinite useful life
Total assets
Bank loans and advances
Trade and other payables
Current portion of long-term debt
Long-term debt
Provisions for contingencies and charges
Financial liabilities
Other liabilities
Deferred income tax liabilities
Total liabilities
Net assets
Non-controlling interests
Net assets attributable to Shareholders
Other items
Financial instruments on currency and cumulated currency translation adjustment of a foreign subsidiary
Gain on disposal, before income taxes
Consideration received on disposal, net of transaction fees
BUSINESS SEGMENT:
Boxboard
Europe
37
211
166
2
1
430
24
6
23
5
135
1,040
40
338
36
196
9
1
51
10
681
359
(151)
208
14
222
228
450
103
Leading the way.
DISCONTINUED OPERATIONS BOXBOARD EUROPE SEGMENT
CONSOLIDATED RESULTS FROM DISCONTINUED OPERATIONS
(in millions of Canadian dollars)
Results from the discontinued operations
Sales
Cost of sales and expenses (excluding depreciation and amortization)
Depreciation and amortization
Gain on acquisitions, disposals and others
Impairment charges and restructuring costs
Foreign exchange loss
Gain on derivative financial instruments
Operating income
Financing expense
Earnings before income taxes
Provision for income taxes
Gain on disposal, net of income tax
Results from discontinued operations
Results from discontinued operations attributable to non-controlling interest
Results from discontinued operations attributable to Shareholders
Results from discontinued operations per common share
Basic
Diluted
CONSOLIDATED CASH FLOWS FROM DISCONTINUED OPERATIONS
(in millions of Canadian dollars)
Net cash flow from discontinued operations
Cash flow from (used for):
Operating activities
Investing activities
Financing activities
Change in cash and cash equivalent during the year
Currency translation on cash and cash equivalents
Cash and cash equivalents - Beginning of year
Cash and cash equivalents at disposal
Change in cash and cash equivalent during the year from discontinued operations
Dividends paid to the Corporation
Consideration received on disposal, net of transaction fees
Change in cash and cash equivalents from discontinued operations
104
2021
894
843
38
(16)
—
—
(6)
859
35
4
31
(1)
204
234
(13)
221
$2.19
$2.18
2020
1,052
922
48
—
9
1
(2)
978
74
4
70
(19)
—
51
(22)
29
$0.30
$0.30
2021
2020
31
(243)
156
(56)
(5)
98
37
(98)
4
450
356
110
(35)
(41)
34
5
59
98
39
2
—
41
2021 Annual Report
NOTE 6
ACCOUNTS RECEIVABLE
(in millions of Canadian dollars)
Accounts receivable - Trade
Receivables from related parties
Less: expected credit loss allowance
Trade receivables - net
Other
NOTE
29
As at December 31, 2021, trade receivables of $115 million (December 31, 2020 - $147 million) were past due.
Movements in the Corporation's expected credit loss allowance are as follows:
(in millions of Canadian dollars)
Balance at beginning of year
Provision for expected credit loss allowance
Receivables written off during the year as uncollectable
Business disposal
Balance at end of year
NOTE
5
2021
461
22
(4)
479
31
510
2021
14
1
(3)
(8)
4
2020
569
33
(14)
588
71
659
2020
12
3
(2)
1
14
The change in the expected credit loss allowance has been included in “Selling and administrative expenses” in the consolidated
statement of earnings.
The maximum exposure to credit risk at the reporting period approximates the carrying value of each class of receivable mentioned above.
NOTE 7
INVENTORIES
(in millions of Canadian dollars)
Finished goods
Raw materials
Supplies and spare parts
2021
204
116
174
494
2020
243
116
210
569
As at December 31, 2021, finished goods, raw materials and supplies and spare parts inventories have been adjusted to their net
realizable value (NRV) requiring a provision of $7 million, $2 million and $5 million, respectively (December 31, 2020 - $9 million, $2 million
and $24 million).
In 2021, the Corporation reversed $2 million (nil in 2020) of provision recorded against spare parts inventories. No reversal of previously
written-down finished goods or raw inventory occurred in 2021 or 2020. The cost of raw materials and supplies and spare parts included in
“Cost of sales” amounted to $1,362 million (2020 - $1,361 million).
105
Leading the way.
NOTE 8
INVESTMENTS IN ASSOCIATES AND JOINT VENTURES AND SUBSIDIARIES WITH NON-
CONTROLLING INTERESTS
A.
INVESTMENTS IN ASSOCIATES AND JOINT VENTURES ARE DETAILED AS FOLLOWS:
(in millions of Canadian dollars)
Investments in associates
Investments in joint ventures
2021
20
67
87
2020
18
64
82
INVESTMENTS IN ASSOCIATES
B.
The Corporation did not hold any significant participation in associates in 2021 and 2020.
INVESTMENT IN JOINT VENTURES
C.
The following are the principal joint ventures of the Corporation and the Corporation's percentage of equity owned:
Cascades Sonoco US Inc.1
Cascades Sonoco inc.1
Maritime Paper Products Limited Partnership (MPPLP)2
Tencorr Holdings Corporation3
1 Joint ventures producing specialty paper packaging products such as headers, rolls and wrappers.
2 MPPLP is a Canadian corporation converting containerboard.
3 Tencorr Holdings Corporation operates as a supplier of corrugated sheet stock.
2021-2020
PERCENTAGE EQUITY
OWNED (%)
50
50
40
33.33
PRINCIPAL ESTABLISHMENT
Birmingham, Alabama and Tacoma, Washington,
United States
Kingsey Falls and Berthierville, Québec, Canada
Dartmouth, Nova Scotia, Canada
Brampton, Ontario, Canada
The Corporation's joint ventures information (100%), translated in millions of Canadian dollars, is as follows:
(in millions of Canadian dollars)
Condensed balance sheet
Cash and cash equivalents
Current assets (other than cash and cash equivalents and current
financial assets)
Long-term assets (other than long-term financial assets)
Current liabilities (other than current financial liabilities)
Current financial liabilities
Long-term liabilities (other than long-term financial liabilities)
Long-term financial liabilities
Condensed statement of earnings
Sales
Depreciation and amortization
Financing expense
Provision for income taxes
Net earnings
Other comprehensive income (loss)
Translation adjustment
Total comprehensive income
Dividends received from joint ventures
CASCADES SONOCO US INC.
CASCADES SONOCO INC.
MARITIME PAPER
PRODUCTS LIMITED
PARTNERSHIP
TENCORR HOLDINGS
CORPORATION
2021
7
25
40
18
2
6
8
95
5
2
1
7
—
7
4
1
31
13
13
—
2
1
91
2
—
3
8
—
8
4
6
27
29
6
—
—
—
116
3
—
—
8
—
8
1
15
29
9
32
4
3
—
150
1
—
3
4
—
4
—
106
2021 Annual Report
(in millions of Canadian dollars)
Condensed balance sheet
Cash and cash equivalents
Current assets (other than cash and cash equivalents and current
financial assets)
Long-term assets (other than long-term financial assets)
Current liabilities (other than current financial liabilities)
Current financial liabilities
Long-term liabilities (other than long-term financial liabilities)
Long-term financial liabilities
Condensed statement of earnings
Sales
Depreciation and amortization
Financing expense
Provision for income taxes
Net earnings
Other comprehensive income (loss)
Translation adjustment
Total comprehensive income
Dividends received from joint ventures
CASCADES SONOCO US INC.
CASCADES SONOCO INC.
MARITIME PAPER
PRODUCTS LIMITED
PARTNERSHIP
TENCORR HOLDINGS
CORPORATION
2020
3
18
39
9
1
6
6
89
5
2
1
2
(1)
1
1
2
22
14
7
1
2
1
79
2
—
2
5
—
5
4
7
23
28
6
—
—
—
97
3
—
—
8
—
8
1
12
19
9
25
1
3
—
128
1
—
1
2
—
2
—
Commitments of the joint ventures are less than a million dollars in 2021 and 2020.
D. NON-SIGNIFICANT ASSOCIATES AND JOINT VENTURES
The carrying value of investments in associates and joint ventures that do not have significant impact on the Corporation is as follows:
(in millions of Canadian dollars)
Non-significant associates
Non-significant joint ventures
The shares of results of non-significant associates and joint ventures for the Corporation are as follows:
(in millions of Canadian dollars)
Non-significant associates
Non-significant joint ventures
2021
20
12
32
2021
3
2
5
2020
18
13
31
2020
3
3
6
The Corporation received dividends of $2 million from these associates and joint ventures as at December 31, 2021 (December 31, 2020 -
$4 million).
The Corporation recorded a fair value revaluation loss on investments of $3 million from a joint venture as at December 31, 2020.
107
Leading the way.
E. SUBSIDIARIES WITH NON-CONTROLLING INTERESTS
The Corporation's information for its subsidiaries with significant non-controlling interests is as follows:
(in millions of Canadian dollars, unless otherwise noted)
NOTE
Principal establishment
Percentage of shares held by non-controlling
interests (accounting basis)
Net earnings attributable to non-controlling interests
Non-controlling interests accumulated at the end of
the year
Dividends paid to non-controlling interests
Condensed balance sheet
Cash and cash equivalents
Current assets (other than cash and cash equivalents and
current financial assets)
Current financial assets
Long-term assets (other than long-term financial assets)
Long-term financial assets
Current liabilities (other than current financial liabilities)
Current financial liabilities
Long-term liabilities (other than long-term financial
liabilities)
Long-term financial liabilities
Condensed statement of earnings
Sales
Depreciation and amortization
Net earnings
Results from discontinued operation
5
Condensed cash flow
Cash flows from operating activities
Cash flows used for investing activities
Cash flows used for financing activities
Cash flow from discontinued operations
5
FALCON
PACKAGING LLC
Ohio,
United States
2021
GREENPAC
HOLDING LLC
New York,
United States
RENO DE MEDICI S.p.A.
Milan, Italy
FALCON
PACKAGING LLC
Ohio,
United States
2020
GREENPAC
HOLDING LLC
New York,
United States
22.00%
13.65%
42.40%
25.00%
13.65%
2
3
2
5
17
—
29
—
13
3
—
—
174
1
9
—
9
—
(8)
—
10
45
12
20
112
—
507
—
51
11
2
111
470
36
78
—
118
(5)
(119)
—
22
153
2
98
292
—
412
—
246
33
77
80
—
—
—
51
—
—
—
34
1
4
1
3
14
—
30
—
10
1
—
4
160
2
6
—
1
—
(5)
—
13
47
13
28
127
3
520
8
60
11
1
126
438
39
95
—
143
(6)
(142)
—
In November 2019, the Corporation exercised its call option and repurchased the CDPQ (Caisse de dépôt et placement du Québec)
20.20% participation in Greenpac of $121 million. The consideration was paid on January 3, 2020.
In 2021, the Corporation also increased its participation in a distributor in the Specialty Products segment for a contribution of $2 million.
On October 26, 2021, the Corporation sold its participation in Reno de Medici S.p.A. (RDM). Please refer to Note 5.
108
2021 Annual Report
NOTE 9
PROPERTY, PLANT AND EQUIPMENT
(in millions of Canadian dollars)
As at January 1, 2020
Cost
Accumulated depreciation and impairment
Net book amount
Year ended December 31, 2020
Opening net book amount
Additions
Disposals
Depreciation
Discontinued operations
Impairment charges
Others
Exchange differences
Closing net book amount
As at December 31, 2020
Cost
Accumulated depreciation and impairment
Net book amount
Year ended December 31, 2021
Opening net book amount
Additions
Disposals
Depreciation
Discontinued operations
Impairment charges
Others
Exchange differences
Closing net book amount
As at December 31, 2021
Cost
Accumulated depreciation and impairment
Net book amount
NOTE
LAND
BUILDINGS
MACHINERY AND
EQUIPMENT
AUTOMOTIVE
EQUIPMENT
OTHERS
RIGHT-OF-USE
ASSETS
(Note 14)
5
26
5
26
181
—
181
181
—
(1)
—
2
—
1
(2)
181
183
2
181
181
1
(2)
—
(68)
—
—
—
112
112
—
112
1,008
403
605
605
31
(1)
(17)
—
—
4
(7)
615
1,023
408
615
615
37
(9)
(17)
(44)
—
(2)
(2)
578
930
352
578
3,901
2,173
1,728
1,728
172
(3)
(140)
2
(18)
(8)
(18)
1,715
3,931
2,216
1,715
1,715
279
(1)
(135)
(229)
(17)
—
(7)
1,605
3,368
1,763
1,605
126
81
45
45
11
—
68
28
40
40
—
—
(12)
(8)
—
—
—
—
44
133
89
44
44
9
—
—
—
4
—
36
68
32
36
36
2
—
(12)
(9)
—
—
2
—
43
132
89
43
—
—
6
—
35
73
38
35
243
72
171
171
52
(3)
(43)
6
—
(1)
(1)
181
285
104
181
181
45
(4)
(50)
(23)
—
—
—
149
277
128
149
TOTAL
5,527
2,757
2,770
2,770
266
(8)
(220)
10
(18)
—
(28)
2,772
5,623
2,851
2,772
2,772
373
(16)
(223)
(364)
(17)
6
(9)
2,522
4,892
2,370
2,522
Property, plant and equipment includes assets in the process of construction or installation with a book value of $269 million
(December 31, 2020 - $188 million) and deposits on purchases of machinery and equipment amounting
to $13 million
(December 31, 2020 - $15 million).
In 2021, $5 million (2020 - $1 million) of interest incurred on qualifying assets was capitalized. The weighted average capitalization rate on
funds borrowed in 2021 was 4.86% (2020 - 4.86%).
109
Leading the way.
NOTE 10
GOODWILL AND OTHER INTANGIBLE ASSETS WITH FINITE AND INDEFINITE USEFUL LIFE
APPLICATION
SOFTWARE
AND ERP
CUSTOMER
RELATIONSHIPS
AND
CLIENT LISTS
NOTE
OTHER
INTANGIBLE
ASSETS WITH
FINITE
USEFUL LIFE
TOTAL
INTANGIBLE
ASSETS WITH
FINITE
USEFUL LIFE
OTHER
INTANGIBLE
ASSETS WITH
INDEFINITE
USEFUL LIFE
TOTAL
INTANGIBLE
ASSETS WITH
INDEFINITE
USEFUL LIFE
GOODWILL
(in millions of Canadian dollars)
As at January 1, 2020
Cost
Accumulated amortization and impairment
Net book amount
Year ended December 31, 2020
Opening net book amount
Additions
Discontinued operations
5
Amortization
Others
Exchange differences
Closing net book amount
As at December 31, 2020
Cost
Accumulated amortization and impairment
Net book amount
Year ended December 31, 2021
Opening net book amount
5
26
Additions
Discontinued operations
Impairment charges
Amortization
Others
Exchange differences
Closing net book amount
As at December 31, 2021
Cost
Accumulated amortization and impairment
Net book amount
NOTE 11
OTHER ASSETS
(in millions of Canadian dollars)
Long-term notes receivable
Other investments
Other assets
Employee future benefits
Less: Current portion, included in accounts receivables
165
84
81
81
7
1
(17)
—
1
73
174
101
73
73
12
(16)
—
(16)
—
—
53
161
108
53
216
118
98
98
—
—
(13)
—
(1)
84
215
131
84
84
—
(3)
(35)
(12)
—
—
34
207
173
34
36
33
3
3
—
(1)
—
1
—
3
9
6
3
3
—
(2)
—
—
—
—
1
4
3
1
417
235
182
182
7
—
(30)
1
—
160
398
238
160
160
12
(21)
(35)
(28)
—
—
88
372
284
88
538
17
521
521
—
1
—
—
(5)
517
526
9
517
517
—
(7)
(36)
—
3
(5)
472
516
44
472
7
1
6
6
—
—
—
(1)
—
5
6
1
5
5
—
(4)
—
—
—
—
1
1
—
1
545
18
527
527
—
1
—
(1)
(5)
522
532
10
522
522
—
(11)
(36)
—
3
(5)
473
517
44
473
NOTE
2021
2020
18
8
2
15
29
54
—
54
7
5
25
15
52
(2)
50
An amortization expense of $1 million (2020 - $1 million) was booked against other assets.
110
2021 Annual Report
NOTE 12
TRADE AND OTHER PAYABLES
(in millions of Canadian dollars)
Trade payables
Payables to related parties
Provisions for volume rebates
Accrued expenses
Movements in the Corporation's provision for volume rebates are as follows:
(in millions of Canadian dollars)
Balance at beginning of year
Provision for volume rebates
Volume rebates payments
Exchange differences
Balance at end of year
NOTE 13
LONG-TERM DEBT
(in millions of Canadian dollars)
NOTE
29
2021
518
6
64
119
707
2021
72
106
(114)
—
64
2020
593
8
72
188
861
2020
70
131
(128)
(1)
72
NOTE
MATURITY
2021
2020
Revolving credit facility, weighted average interest rate of 3.95% as at December 31, 2021
and consists of US$4 million (December 31, 2020 - unused)
5.125% Unsecured senior notes of $175 million
5.125% Unsecured senior notes of US$206 million (December 31, 2020 - US$350 million)
5.375% Unsecured senior notes of US$445 million and $7 million of unamortized premium
(December 31, 2020 - US$600 million and $16 million of unamortized premium)
Term loan of US$160 million, interest rate of 2.21% as at December 31, 2021
(December 31, 2020 - US$165 million)
Lease obligations with recourse to the Corporation
Other debts with recourse to the Corporation
Lease obligations without recourse to the Corporation
Other debts without recourse to the Corporation
Less: Unamortized financing costs
Total long-term debt
Less:
Current portion of lease obligations with recourse to the Corporation
Current portion of other debts with recourse to the Corporation
Current portion of lease obligations without recourse to the Corporation
Current portion of other debts without recourse to the Corporation
2025
2025
2026
2028
2025
13(a)
13(b)
13(b) (c)
13(e)
13(e)
13(d)
6
175
260
570
202
161
35
9
117
1,535
11
1,524
36
23
7
8
74
1,450
—
175
445
780
210
167
39
35
217
2,068
17
2,051
36
23
12
31
102
1,949
a. On April 30, 2021, the Corporation entered into an agreement with its lenders to extend and amend its existing $750 million revolving
credit facility. The amendment extends the term of the facility to July 7, 2025. The financial conditions remain unchanged.
As at December 31, 2021, accounts receivable and inventories totaling approximately $888 million (December 31, 2020 - $798 million)
as well as property, plant and equipment totaling approximately $246 million (December 31, 2020 - $246 million) were pledged as
collateral for the Corporation's revolving credit facility.
111
Leading the way.
b. On November 9, 2021, the Corporation completed the partial redemption of its unsecured senior notes. The transaction was settled on
November 10, 2021 and the Corporation redeemed US$144 million ($180 million) and US$155 million ($192 million) of its 2026 and
2028 unsecured senior notes, respectively, and paid an early repurchase premium totaling US$18 million ($22 million). The Corporation
incurred transaction fees of $2 million, wrote off $4 million of unamortized financing costs and $8 million of unamortized issuance
premium related to these notes. The Corporation also paid US$5 million ($6 million) of interest accrued on these notes.
Partial redemption was used as follows:
(in millions of Canadian dollars)
Transaction fees
Repurchase of 2026 and 2028 Notes
Premium paid on long-term debt redemption
Decrease of credit facility
2021
(2)
(372)
(22)
(396)
c. On August 17, 2020, the Corporation issued unsecured senior notes for US$300 million ($396 million) aggregate principal amount of
5.375% due in 2028 at a price of 104.25% resulting in a US$13 million ($17 million) premium for total proceed of US$313 million
($413 million) and an effective yield of 4.69%. Transaction fees amounted to $4 million. The Corporation used the proceed from this
offering to fund the redemption of its 5.75% US$200 million ($264 million) unsecured senior notes due in 2023 and paid a premium of
US$3 million ($4 million). The Corporation also wrote off $2 million of unamortized financing costs related to these notes.
Issuance proceed was used as follows:
(in millions of Canadian dollars)
Debt issuance
Premium received on debt issuance
Transaction fees
Repurchase of 2023 Notes
Premium paid on long-term debt redemption
Decrease of credit facility and increase in cash and cash equivalent
2020
396
17
(4)
(264)
(4)
141
d. On December 11, 2020, Greenpac entered into an agreement with its lenders to extend and amend its credit facilities. The amended
credit agreement still provides Greenpac with a revolving credit of US$50 million while the principal of the term loan was reduced, with
cash on hand and utilization of the revolving line of credit, to US$75 million, from US$122 million at the time of the amendment. The term
of the amended credit agreement is extended to December 2023. The financing terms and conditions remain essentially unchanged.
e. The Corporation has leases for various items of property, plant and equipment. Lease obligations are secured, as the rights to the
leased asset revert to the lessor in the event of default. For more details on future payments, see Note 16.4 C.
112
2021 Annual Report
NOTE 14
LEASES
a. The consolidated balance sheet includes, in “Property, plant and equipment”, the amounts hereunder as right-of-use assets relating to
leases. 2021 and 2020 right-of-use assets under IFRS 16 are as follows:
(in millions of Canadian dollars)
Buildings
Machinery and equipment
Automotive equipment
Others
Net book amount
Additions to the right-of-use assets during the 2021 financial year were $45 million (2020 - $52 million).
b. The consolidated statements of earnings include the following amounts relating to leases:
(in millions of Canadian dollars)
Depreciation and amortization of right-of-use assets (included in “Cost of sales”)
Buildings
Machinery and equipment
Automotive equipment
Financing expense (included in “Financing expense”)
2021
111
3
34
1
149
2020
129
10
42
—
181
2021
2020
26
3
21
50
6
20
1
22
43
8
Expenses relating to short-term leases, low-value assets and variable lease payments not included in lease obligation were less than a
million dollars in 2021 and 2020.
c. The total cash outflow for leases, including the interest, in 2021 was $54 million (2020 - $50 million).
d. Refer to Note 13 for liabilities and to Note 16.4 C for future contractual payments of lease obligations.
e. The future cash flows arising from leases not yet commenced but already signed are the following as at December 31, 2021 and 2020:
(in millions of Canadian dollars)
No later than one year
Later than one year but no later than five years
More than five years
2021
BUILDINGS
2020
BUILDINGS
5
19
1
25
—
—
—
—
113
Leading the way.
NOTE 15
PROVISIONS FOR CONTINGENCIES AND CHARGES
(in millions of Canadian dollars)
As at January 1, 2020
Additional provision
Payments
Revaluation
Unwinding of discount
Discontinued operations
As at December 31, 2020
Additional provision
Payments
Revaluation
Unwinding of discount
Discontinued operations
As at December 31, 2021
Analysis of total provisions:
(in millions of Canadian dollars)
Long-term
Current
ENVIRONMENTAL
RESTORATION
OBLIGATIONS
NOTE
ENVIRONMENTAL
COSTS
LEGAL CLAIMS
SEVERANCES
OTHERS
TOTAL
PROVISIONS
18
—
—
4
1
—
23
—
—
(4)
1
(2)
18
20
3
(1)
4
—
—
26
4
(6)
—
—
—
24
2
1
—
—
—
—
3
4
—
—
—
(1)
6
6
12
(10)
—
—
1
9
5
(9)
—
—
(2)
3
8
4
(3)
1
—
—
10
2
—
—
—
(4)
8
54
20
(14)
9
1
1
71
15
(15)
(4)
1
(9)
59
5
5
2021
47
12
59
2020
57
14
71
ENVIRONMENTAL RESTORATION
The Corporation uses some landfill sites. A provision has been recognized at fair value for the costs to be incurred for the restoration of
these sites.
ENVIRONMENTAL COSTS
An environmental provision is recorded when the Corporation has an obligation caused by its ongoing or abandoned operations.
LEGAL CLAIMS
In the normal course of operations, the Corporation is party to various legal actions and contingencies, mostly related to contract disputes,
environmental and product warranty claims, and labour issues. While the final outcome with respect to legal actions outstanding or pending
as at December 31, 2021 cannot be predicted with certainty, it is Management's opinion that the outcome will not have a material adverse
effect on the Corporation's consolidated financial position, the results of its operations or its cash flows.
The Corporation is currently working with representatives of the Ontario Ministry of the Environment (MOE) - Northern Region and
Environment Canada - Great Lakes Sustainability Fund in Toronto regarding its potential responsibility for an environmental impact
identified at its former Thunder Bay facility. Both authorities lead the working group and they are developing a site management plan
relating to the sediment quality adjacent to Thunder Bay's lagoon. Several meetings have been held during the past years with the MOE
and Environment Canada and a management plan based on sediment dredging has been proposed by a third party consultant. Both
governments are looking at this proposal with stakeholders to agree on this remediation action plan that would likely be implemented in the
coming years.
The Corporation has recorded an environmental reserve to address its estimated exposure for this matter.
In the third quarter of 2021, the Containerboard Packaging segment had odour problems generated by its water effluent treatment system
of paper machines at our Niagara Falls complex, New York, USA. On August 30, 2021, a class action was filed by two residents of
Niagara Falls (on behalf of themselves and all others similarly situated) for inconvenience related to this issue. On November 16, 2021 the
plaintiffs filed a Stipulation of Plaintiffs’ Voluntary Dismissal resulting in the termination of the lawsuit. Therefore, no liability is to be
recorded as of December 31, 2021.
114
2021 Annual Report
NOTE 16
FINANCIAL INSTRUMENTS
16.1 FAIR VALUE OF FINANCIAL INSTRUMENTS
The classification of financial instruments as at December 31, 2021 and 2020, along with the respective carrying amounts and fair values,
is as follows:
(in millions of Canadian dollars)
NOTE
CARRYING AMOUNT
FAIR VALUE
CARRYING AMOUNT
FAIR VALUE
2021
2020
Financial assets at fair value through profit
or loss
Derivatives
Equity investments
Financial liabilities at fair value through profit
or loss
Derivatives
Financial liabilities at amortized cost
Long-term debt
Derivatives designated as hedge
Asset derivatives
Liability derivatives
16.4
16.4
5
2
(6)
5
2
(6)
21
1
(8)
21
1
(8)
(1,524)
(1,558)
(2,051)
(2,137)
2
—
2
—
—
(7)
—
(7)
16.2 DETERMINING THE FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of a financial instrument is the amount of consideration that would be received upon the sale of an asset or paid to transfer a
liability in an orderly transaction between market participants as at the measurement date.
(i) The fair value of cash and cash equivalents, accounts receivable, notes receivable, bank loans and advances, trade and other payables
and provisions approximates their carrying amounts due to their relatively short maturities.
(ii) The fair value of investment in shares is based on observable market data and is quoted on the Toronto Stock Exchange and classified
as level 1.
(iii) The fair value of long-term debt and some other liabilities is based on observable market data and on the calculation of discounted
cash flows. Discount rates were determined based on local government bond yields adjusted for the risks specific to each of the
borrowings and for the credit market liquidity conditions and are classified as levels 1 and 3.
(iv) The fair value of derivative instruments, which include forward contracts, swap agreements and embedded derivatives accounted for
separately, is calculated as the present value of the estimated future cash flows using an appropriate interest rate yield curve and
forward foreign exchange rate. Assumptions are based on market conditions prevailing at each reporting date and are classified as
level 2. The fair value of derivative instruments reflects the estimated amounts that the Corporation would receive or pay to settle the
contracts at the reporting date.
16.3 HIERARCHY OF FINANCIAL ASSETS AND LIABILITIES MEASURED AT FAIR VALUE
The following table presents information about the Corporation's financial assets and financial liabilities measured at fair value on a
recurring basis as at December 31, 2021 and 2020 and indicates the fair value hierarchy of the Corporation's valuation techniques to
determine such fair value. Three levels of inputs that may be used to measure fair value are:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or
similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market
data for substantially the full term of the assets or liabilities.
Level 3 – Inputs that are generally unobservable and typically reflect Management's estimates of assumptions that market participants
would use in pricing the asset or liability.
115
Leading the way.
(in millions of Canadian dollars)
Financial assets
Equity investments
Derivative financial assets
Financial liabilities
Derivative financial liabilities
(in millions of Canadian dollars)
Financial assets
Equity investments
Derivative financial assets
Financial liabilities
Derivative financial liabilities
CARRYING AMOUNT
QUOTED PRICES IN ACTIVE
MARKETS FOR IDENTICAL
ASSETS (LEVEL1)
SIGNIFICANT
OBSERVABLE INPUTS
(LEVEL 2)
2021
SIGNIFICANT
UNOBSERVABLE INPUTS
(LEVEL 3)
2
7
9
(6)
(6)
2
—
2
—
—
—
7
7
(6)
(6)
—
—
—
—
—
CARRYING AMOUNT
QUOTED PRICES IN ACTIVE
MARKETS FOR IDENTICAL
ASSETS (LEVEL1)
SIGNIFICANT
OBSERVABLE INPUTS
(LEVEL 2)
2020
SIGNIFICANT
UNOBSERVABLE INPUTS
(LEVEL 3)
1
21
22
(15)
(15)
1
—
1
—
—
—
21
21
(15)
(15)
—
—
—
—
—
16.4 FINANCIAL RISK MANAGEMENT
The Corporation's activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash
flow interest rate risk and price risk), credit risk and liquidity risk. The Corporation's overall risk management program focuses on the
unpredictability of the financial market and seeks to minimize potential adverse effects on the Corporation's financial performance. The
Corporation uses derivative financial instruments to hedge certain risk exposures.
Risk management is carried out by a central treasury department and a management committee acting under policies approved by the
Board of Directors. They identify, evaluate and hedge financial risks in close cooperation with the business units. The Board provides
guidance for overall risk management, covering specific areas, such as foreign exchange risk, interest rate risk and credit risk, use of
derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.
Summary
(in millions of Canadian dollars)
ASSETS
LIABILITIES
2021
RISK
Currency risk
Price risk
NOTE
SHORT-TERM
LONG-TERM
TOTAL
SHORT-TERM
LONG-TERM
TOTAL
16.4 A (i)
16.4 A (ii)
—
1
1
5
1
6
5
2
7
—
—
—
(6)
—
(6)
(6)
—
(6)
2020
(in millions of Canadian dollars)
ASSETS
LIABILITIES
NOTE
SHORT-TERM
LONG-TERM
TOTAL
SHORT-TERM
LONG-TERM
TOTAL
16.4 A (i)
16.4 A (ii)
16.4 A (iii)
—
5
—
5
3
13
—
16
3
18
—
21
(8)
—
(1)
(9)
(5)
—
(1)
(6)
(13)
—
(2)
(15)
RISK
Currency risk
Price risk
Interest risk
116
2021 Annual Report
A. MARKET RISK
i.
Currency risk
The Corporation operates internationally and is exposed to foreign exchange risks arising from various currencies as a result of its export
of goods produced in Canada and in the United States. Foreign exchange risk arises from future commercial transactions, recognized
assets and liabilities, and net investments in foreign operations. These risks are partially covered by purchases and debt.
The Corporation manages foreign exchange exposure by entering into various foreign exchange forward contracts and currency option
instruments related to anticipated sales, purchases, interest expense and repayment of long-term debt. Management has implemented a
policy for managing foreign exchange risk against its functional currency. The Corporation's risk management policy is to hedge 25% to
90% of anticipated cash flows in each major foreign currency for the next twelve months and to hedge 0% to 75% for the subsequent
twenty-four months. The Corporation may designate these foreign exchange forward contracts as a cash flow hedge of future anticipated
sales, cost of sales, interest expense and repayment of long-term debt denominated in foreign currencies. Gains or losses from these
derivative financial instruments designated as hedges are recorded in “Accumulated other comprehensive income” net of related income
taxes and are reclassified to earnings as adjustments to sales, cost of sales, interest expense or foreign exchange loss (gain) on long-term
debt in the period in which the respective hedged item affected earnings.
In 2021, approximately 18% of sales from Canadian operations were made to the United States.
The following table summarizes the Corporation's commitments to buy and sell foreign currencies as at December 31, 2021 and 2020:
EXCHANGE RATE
MATURITY
NOTIONAL AMOUNT
(IN MILLIONS)
FAIR VALUE (IN MILLIONS
OF CANADIAN DOLLARS)
2021
Repayment of long-term debt
Derivatives at fair value through profit or loss and classified in
Foreign exchange loss (gain) on long-term debt:
Currency option to sell US$ for CAN$
Foreign exchange forward contracts to buy US$ for CAN$
1.3290
1.3290
July 2023
July 2023
US$122
US$102
5
(6)
(1)
2020
EXCHANGE RATE
MATURITY
NOTIONAL AMOUNT
(IN MILLIONS)
FAIR VALUE (IN MILLIONS
OF CANADIAN DOLLARS)
Repayment of long-term debt and net investment hedge
Derivatives at fair value through profit or loss and classified in
Foreign exchange loss (gain) on long-term debt:
Currency option to buy € for CAN$
Currency option to sell US$ for CAN$
Foreign exchange forward contracts to buy US$ for CAN$
Net investment hedge
1.6000
1.3290
1.3290
December 2021
€1 to €25
July 2023
US$50 to US$122
July 2023
US$102
Foreign exchange forward contracts to sell € for CAN$
1.5273
December 2021
€145
Forecasted sales and purchases
Derivatives at fair value through profit or loss and classified in Loss
on derivative financial instruments:
Foreign exchange forward contracts to buy US$ for CAN$
Currency option instruments to sell US$ for CAN$
Currency option instruments to buy US$ for CAN$
1.2833
1.3350
1.2710
0 to 12 months
0 to 12 months
0 to 12 months
US$42
US$5
US$18.5
(1)
3
(6)
(4)
(6)
—
—
—
—
(10)
The fair values of foreign exchange forward contracts and currency options are determined using the discounted value of the difference
between the value of the contract at expiry, calculated using the contracted exchange rate and the exchange rate the financial institution
would use if it renegotiated the same contract under the same conditions as at the consolidated balance sheet date. The discount rates are
adjusted for the credit risk of the Corporation or of the counterparty, as applicable. When determining credit risk adjustments, the
Corporation considers master netting agreements, if applicable.
117
Leading the way.
In 2021, if the Canadian dollar had strengthened by $0.01 against the US dollar on average for the year with all other variables held
constant, operating income before depreciation and amortization for the year would have been approximately $1 million lower. This is
based on the net exposure of total US sales less US purchases of the Corporation's Canadian operations and operating income before
depreciation and amortization of the Corporation's US operations, but excludes the effect of this change on the denominated working
capital components. The interest expense would have been approximately $1 million higher.
CURRENCY RISK ON TRANSLATION OF SELF-SUSTAINING FOREIGN SUBSIDIARIES
The Corporation has certain investments in foreign operations whose net assets are exposed to foreign currency translation risk. The
Corporation may designate part of its long-term debt denominated in foreign currencies as a hedge of the net investment in self-sustaining
foreign subsidiaries. Gains or losses resulting from the translation to Canadian dollars of long-term debt denominated in foreign currencies
and designated as net investment hedges are recorded in “Accumulated other comprehensive income”, net of related income taxes.
The table below shows the effect on consolidated equity of a 10% change in the value of the Canadian dollar against the US dollar and the
euro as at December 31, 2021 and 2020. The calculation includes the effect of currency hedges of net investment in US foreign entities
and assumes that no changes occurred other than a single currency exchange rate movement.
The exposures used in the calculations are the foreign currency-denominated equity and the hedging level as at December 31, 2021
and 2020, with the hedging instruments being the long-term debt denominated in US dollars.
Consolidated Shareholders' equity: Currency effect before tax of a 10% change:
(in millions of Canadian dollars)
10% change in the CAN$/US$ rate
10% change in the CAN$/euro rate
BEFORE HEDGES
HEDGES
77
—
32
—
2021
NET IMPACT
45
—
BEFORE HEDGES
HEDGES
74
21
70
16
2020
NET IMPACT
4
5
Price risk
ii.
The Corporation is exposed to commodity price risk on old corrugated containers, commercial pulp, electricity and natural gas. The
Corporation uses derivative commodity contracts to help manage its production costs. The Corporation may designate these derivatives as
cash flow hedges of anticipated purchases of energy. Gains or losses from these derivative financial instruments designated as hedges
are recorded in “Accumulated other comprehensive income” net of related income taxes and are reclassified to earnings as adjustments to
“Cost of sales” in the same period, as the respective hedged item affects earnings.
The fair value of these contracts is as follows:
Forecasted purchases
Derivatives designated as held for trading and reclassified in “Cost of sales”
Natural gas:
US portfolio
Derivatives designated as cash flow hedges and reclassified in
“Cost of sales” (effective portion)
Natural gas:
US portfolio
Forecasted purchases
Derivatives designated as cash flow hedges and reclassified in
"Cost of sales" (effective portion)
Natural gas:
US portfolio
118
QUANTITY
MATURITY
2021
FAIR VALUE (IN MILLIONS
OF CANADIAN DOLLARS)
958,750 mmBtu
2022 to 2025
5,009,665 mmBtu
2022 to 2025
—
2
2
QUANTITY
MATURITY
2020
FAIR VALUE (IN MILLIONS
OF CANADIAN DOLLARS)
1,470,923 mmBtu
2021 to 2025
—
—
2021 Annual Report
In 2013, the Corporation entered into an agreement to purchase steam. The agreement includes an embedded derivative and the fair
value as at December 31, 2021 was less than a million dollars (2020 - asset: $7 million). Greenpac also has an agreement to purchase
steam that includes an embedded derivative with a value of less than a million dollars as at December 31, 2021 (2020 - asset: $11 million).
The fair value of derivative financial instruments other than options is established utilizing a discounted future expected cash flows method.
Future expected cash flows are determined by reference to the forward price or rate prevailing on the assessment date of the underlying
financial index (exchange or interest rate or commodity price) according to the contractual terms of the instrument. Future expected cash
flows are discounted at an interest rate reflecting both the maturity of each flow and the credit risk of the party to the contract for which it
represents a liability (subject to the application of relevant credit support enhancements). The fair value of derivative financial instruments
that represent options is established utilizing similar methods that reflect the impact of the potential volatility of the financial index
underlying the option on future expected cash flows.
The table below shows the effect of changes in the price of natural gas and electricity as at December 31, 2021 and 2020. The calculation
includes the effect of price hedges of these commodities and assumes that no changes occurred other than a single change in price.
The exposures used in the calculations are the commodity consumption and the hedging level as at December 31, 2021 and 2020, with
the hedging instruments being derivative commodity contracts.
Consolidated commodity consumption: Price change effect before tax:
(in millions of Canadian dollars1)
US$30/s.t. change in commercial pulp price
US$1/mmBtu. change in natural gas price
US$1/MWh change in electricity price
2021
2020
BEFORE HEDGES
HEDGES
NET IMPACT
BEFORE HEDGES
HEDGES
NET IMPACT
7
10
2
—
2
—
7
8
2
8
11
2
—
2
—
8
9
2
1 Sensitivity calculated with an exchange rate of 1.25 CAN$/US$ for 2021 and 1.30 CAN$/US$ for 2020.
Interest rate risk
iii.
The Corporation has no significant interest-bearing assets.
The Corporation's interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Corporation to cash
flow interest rate risk. Borrowings issued at fixed rates expose the Corporation to fair value interest rate risk.
When appropriate, the Corporation analyzes its interest rate risk exposure. Various scenarios are simulated taking into consideration
refinancing, renewal of existing positions, alternative financing and hedging. Based on these scenarios, the Corporation calculates the
impact on earnings of a defined interest rate shift. For each simulation, the same interest rate shift is used for all currencies. The scenarios
are run only for liabilities that represent the major interest-bearing positions. As at December 31, 2021, approximately 21% (2020 - 18%) of
the Corporation's long-term debt was at variable rates.
Based on the outstanding long-term debt as at December 31, 2021, the impact on interest expense of a 1% change in rate would be
approximately $3 million (impact on net earnings is approximately $2 million).
iv. Loss on derivative financial instruments is as follows:
(in millions of Canadian dollars)
Unrealized loss on derivative financial instruments
2021
17
2020
3
B. CREDIT RISK
Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions. The
Corporation reduces this risk by dealing with credit-worthy financial institutions.
The Corporation is exposed to credit risk on the accounts receivable from its customers. In order to reduce this risk, the Corporation's
credit policies include the analysis of the financial position of its customers and the regular review of their credit limits. In addition, the
Corporation believes there is no particular concentration of credit risk due to the geographic diversity of customers and the procedures for
the management of commercial risks. Derivative financial instruments include an element of credit risk should the counterparty be unable
to meet its obligations.
119
Leading the way.
Trade receivables are recognized initially at fair value and are subsequently measured at amortized cost using the effective interest
method, less loss allowance. An expected credit loss allowance of trade receivables is established when there is objective evidence that
the Corporation will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties
of the debtor, probability that the debtor will enter into bankruptcy or financial reorganization, and default or delinquency in payments are
considered indicators that the trade receivable is impaired. Each trades receivable is evaluated considering the collection historic to identify
impairment. The amount of the expected credit loss allowance represents the estimated credit loss. The carrying amount of the asset is
reduced through the use of an allowance account and the amount of the loss is recorded in the consolidated statement of earnings in
“Selling and administrative expenses”. When a trade receivable is not collectible, it is written off against the loss allowance. Subsequent
recoveries of amounts previously written off are credited against “Selling and administrative expenses” in the consolidated statement
of earnings.
Loans and notes receivables from business disposals are recognized at fair value, there are no past due amounts as at
December 31, 2021.
C. LIQUIDITY RISK
Liquidity risk is the risk that the Corporation will not be able to meet its obligations as they fall due. The following are the contractual
maturities of financial liabilities as at December 31, 2021 and 2020:
(in millions of Canadian dollars)
Non-derivative financial liabilities:
Bank loans and advances
Trade and other payables
Revolving credit facility
Term loan
Unsecured senior notes
Lease obligations with recourse to the Corporation
Other debts with recourse to the Corporation
Lease obligations without recourse to the Corporation
Other debts without recourse to the Corporation
Derivative financial liabilities
(in millions of Canadian dollars)
Non-derivative financial liabilities:
Bank loans and advances
Trade and other payables
Term loan
Unsecured senior notes
Lease obligations with recourse to the Corporation
Other debts with recourse to the Corporation
Lease obligations without recourse to the Corporation
Other debts without recourse to the Corporation
Derivative financial liabilities
CARRYING
AMOUNT
CONTRACTUAL
CASH FLOWS
LESS THAN
ONE YEAR
BETWEEN
ONE AND
TWO YEARS
BETWEEN
TWO AND
FIVE YEARS
1
706
6
202
998
161
35
9
117
6
1
706
6
219
1,307
201
36
9
122
6
1
706
—
11
53
42
17
7
10
—
2,241
2,613
847
—
—
—
10
53
35
6
1
112
6
223
—
—
6
198
581
55
6
1
—
—
847
2021
MORE THAN
FIVE YEARS
—
—
—
—
620
69
7
—
—
—
696
2020
CARRYING
AMOUNT
CONTRACTUAL
CASH FLOWS
LESS THAN
ONE YEAR
BETWEEN
ONE AND
TWO YEARS
BETWEEN
TWO AND
FIVE YEARS
MORE THAN
FIVE YEARS
12
861
210
1,384
167
39
35
217
15
12
861
232
1,888
212
42
36
225
15
12
861
11
73
43
17
12
34
9
—
—
11
73
32
6
6
36
—
2,940
3,523
1,072
164
—
—
210
393
60
12
10
153
6
844
—
—
—
1,349
77
7
8
2
—
1,443
As at December 31, 2021, the Corporation had unused credit facilities of $746 million (December 31, 2020 - $901 million), net of
outstanding letters of credit of $14 million (December 31, 2020 - $22 million).
D. OTHER RISK
STOCK-BASED COMPENSATION
The Corporation entered into an agreement to hedge the share price volatility related to its Deferred Share Units and Performance Share
Unit plans. As at December 31, 2021, the agreement's notional amount was 766,000 shares at a price of $13.43 (December 31, 2020 -
notional amount : 566,000, share price: $14.60). The fair value as at December 31, 2021 was a receivable of less than a million dollars
(December 31, 2020 - liability: less than a million dollars).
120
2021 Annual Report
NOTE 17
OTHER LIABILITIES
(in millions of Canadian dollars)
Employee future benefits
Other
Less: Current portion
NOTE
18
21
2021
118
20
138
(16)
122
2020
189
29
218
(16)
202
As at December 31, 2021, the balance on the line “Other” includes an amount of $4 million (December 31, 2020 - $5 million) pertaining to a
call option granted to the Corporation by one of the minority shareholders of Falcon Packaging LLC.
NOTE 18
EMPLOYEE FUTURE BENEFITS
The Corporation operates various post-employment plans, including both defined benefit and defined contribution pension plans and post-
employment benefit plans, such as retirement allowance, group life insurance and medical and dental plans. The table below outlines
where the Corporation’s post-employment amounts and activity are included in the Consolidated Financial Statements.
(in millions of Canadian dollars)
Consolidated balance sheet obligations for
Defined pension benefits - Assets (Surplus)
Defined pension benefits - Liabilities
Post-employment benefits other than defined benefit pension plans
Net long-term liabilities on consolidated balance sheet
Expenses recorded in consolidated statement of earnings for
Defined pension benefits
Defined contribution benefits
Post-employment benefits other than defined benefit pension plans
Defined pension benefits included in discontinued operations
Consolidated other comprehensive income (loss) remeasurements for
Defined pension benefits
Post-employment benefits other than defined benefit pension plans
Defined pension and post-employment benefits included in discontinued operations
NOTE
18 A
18 B
18 A
18 B
2021
(29)
39
10
79
89
6
35
6
1
48
(24)
(5)
—
(29)
2020
(15)
84
69
105
174
7
33
4
2
46
17
2
3
22
A. DEFINED BENEFIT PENSION PLANS
The Corporation offers funded and unfunded defined benefit pension plans, defined contribution pension plans and group RRSPs that
provide retirement benefit payments for most of its employees. The defined benefit pension plans are usually contributory and are based
on the number of years of service and, in most cases, the average salaries or compensation at the end of a career. Retirement benefits are
not partially adjusted based on inflation.
The majority of benefit payments are payable from trustee administered funds; however, for the unfunded plans, the Corporation meets the
benefit payment obligation as it falls due. Plan assets held in trusts are governed by local regulations and practices in each country.
Responsibility for governance of the plans - overseeing all aspects of the plans, including investment decisions and contribution
schedules - lies with the Corporation. The Corporation has established Investment Committees to assist in the management of the plans
and has also appointed experienced, independent professional experts such as investments managers, investment consultants, actuaries
and custodians.
121
Leading the way.
The movement in the net defined benefit obligation and fair value of plan assets of defined benefit pension plans over the year is
as follows:
PRESENT VALUE
OF OBLIGATION
FAIR VALUE OF
PLAN ASSETS
(474)
—
(13)
—
(13)
TOTAL
39
5
1
1
7
(28)
(28)
—
—
—
—
—
(28)
(1)
(6)
(1)
28
(495)
—
(11)
(11)
1
—
—
1
(1)
(5)
(1)
30
(482)
2
34
4
—
2
14
2
(6)
—
—
56
4
2
6
1
(29)
—
(28)
(36)
(5)
—
—
(7)
IMPACT OF
MINIMUM
FUNDING
REQUIREMENT
(ASSET CEILING)
8
—
—
—
—
—
—
—
—
5
—
5
—
—
—
—
13
—
—
—
—
—
4
4
—
—
—
—
17
TOTAL
47
5
1
1
7
(28)
2
34
4
5
2
19
2
(6)
—
—
69
4
2
6
1
(29)
4
(24)
(36)
(5)
—
—
10
513
5
14
1
20
—
2
34
4
—
2
42
3
—
1
(28)
551
4
13
17
—
(29)
—
(29)
(35)
—
1
(30)
475
(in millions of Canadian dollars)
As at January 1, 2020
Current service cost
Interest expense (income)
Business closures
Impact on consolidated profit or loss
Remeasurements
Return on plan assets, excluding amounts included in interest income
Loss from change in demographic assumptions
Loss from change in financial assumptions
Experience loss
Change in asset ceiling, excluding amounts included in interest expense
Discontinued operations
Impact of remeasurements on consolidated other comprehensive income (loss)
Discontinued operations
Contributions
Employers
Plan participants
Benefit payments
As at December 31, 2020
Current service cost
Interest expense (income)
Impact on consolidated profit or loss
Remeasurements
Return on plan assets, excluding amounts included in interest income
Gain from change in financial assumptions
Change in asset ceiling, excluding amounts included in interest expense
Impact of remeasurements on consolidated other comprehensive income (loss)
Discontinued operations
Contributions
Employers
Plan participants
Benefit payments
As at December 31, 2021
122
2021 Annual Report
The defined benefit obligation and plan assets are composed by country as follows:
(in millions of Canadian dollars)
Present value of funded obligations
Fair value of plan assets
Deficit (surplus) of funded plans
Impact of minimum funding requirement (asset ceiling)
Present value of unfunded obligations
Liabilities on consolidated balance sheet
(in millions of Canadian dollars)
Present value of funded obligations
Fair value of plan assets
Deficit (surplus) of funded plans
Impact of minimum funding requirement (asset ceiling)
Present value of unfunded obligations
Liabilities on consolidated balance sheet
The significant actuarial assumptions are as follows:
Discount rate obligation (ending period)
Discount rate obligation (beginning period)
Discount rate (current service cost)
Salary growth rate
Inflation rate
CANADA
UNITED STATES
432
475
(43)
17
33
7
10
7
3
—
—
3
CANADA
UNITED STATES
EUROPE
469
488
(19)
13
36
30
10
7
3
—
—
3
2021
—
—
—
—
36
36
2021
TOTAL
442
482
(40)
17
33
10
2020
TOTAL
479
495
(16)
13
72
69
2020
CANADA
UNITED STATES
CANADA
UNITED STATES
EUROPE
3.00%
2.50%
3.30%
Between
2.00% and
2.50%
2.00%
2.40%
2.00%
2.40%
N/A
N/A
2.50%
3.10%
2.70%
Between
2.00% and
2.50%
2.00%
2.00%
2.90%
2.00%
N/A
N/A
0.50%
0.90%
0.50%
N/A
1.50%
Assumptions regarding future mortality are set based on actuarial advice in accordance with published statistics and experience in each
territory. For Canadian pension plans, which represent 98% of all pension plans, these assumptions translate into an average life
expectancy in years for a pensioner retiring at age 65:
Retiring at the end of the reporting period
Male
Female
Retiring 20 years after the end of the reporting period
Male
Female
2021
22.0
24.3
23.0
25.3
2020
21.9
24.3
22.9
25.2
The sensitivity of the Canadian defined benefit obligation to changes in assumptions is set out below. The effects on each plan of a change
in an assumption are weighted proportionately to the total plan obligations to determine the total impact for each assumption presented.
Discount rate
Salary growth rate
Life expectancy
IMPACT ON DEFINED BENEFIT OBLIGATION
CHANGE IN ASSUMPTION
INCREASE IN ASSUMPTION
DECREASE IN ASSUMPTION
0.25%
0.25%
(2.80%)
0.30%
3.00%
(0.30%)
INCREASE / DECREASE BY ONE YEAR IN ASSUMPTION
3.00%
123
Leading the way.
Plan assets, which are funding the Corporation’s defined pension plans, are comprised as follows:
(in millions of Canadian dollars)
Cash and short-term investments
Bonds
Canadian bonds
Foreign bonds
Shares
Canadian shares
Foreign shares
Mutual funds
Foreign bond mutual funds
Canadian equity mutual funds
Foreign equity mutual funds
Alternative investments funds
Other
Insured annuities
(in millions of Canadian dollars)
Cash and short-term investments
Bonds
Canadian bonds
Shares
Canadian shares
Foreign shares
Mutual funds
Foreign bond mutual funds
Canadian equity mutual funds
Foreign equity mutual funds
Alternative investments funds
Other
Insured annuities
LEVEL 1
LEVEL 2
LEVEL 3
5
72
72
16
3
19
—
4
—
—
4
—
—
100
—
52
1
53
—
—
—
6
1
50
29
86
243
243
382
—
—
—
—
—
—
—
—
—
—
—
—
—
—
LEVEL 1
LEVEL 2
LEVEL 3
5
55
29
5
34
—
8
—
—
8
—
—
102
—
42
—
—
—
7
1
50
25
83
268
268
393
—
—
—
—
—
—
—
—
—
—
—
—
—
TOTAL
5
124
1
125
16
3
19
6
5
50
29
90
243
243
482
TOTAL
5
2021
%
1.1%
25.9%
3.9%
18.7%
50.4%
2020
%
1.0%
97
19.6%
29
5
34
7
9
50
25
91
268
268
495
6.9%
18.4%
54.1%
The plan assets do not include any shares of the Corporation. The Corporation has purchased annuity contracts of an approximate value
of $243 million to fulfill future benefits payments.
124
2021 Annual Report
B. POST-EMPLOYMENT BENEFITS OTHER THAN DEFINED BENEFIT PENSION PLANS
The Corporation also offers its employees some post-employment benefit plans, such as retirement allowance, group life insurance and
medical and dental plans. However, these benefits, other than pension plans, are not funded. Furthermore, the medical and dental plans
upon retirement are being phased out and are no longer offered to the majority of new retirees and the retirement allowance is not offered
to the majority of employees hired after 2002.
The amounts recognized in the consolidated balance sheet composed by country are determined as follows:
(in millions of Canadian dollars)
Present value of unfunded obligations
Liabilities on consolidated balance sheet
(in millions of Canadian dollars)
Present value of unfunded obligations
Liabilities on consolidated balance sheet
CANADA
UNITED STATES
75
75
4
4
CANADA
UNITED STATES
EUROPE
79
79
4
4
22
22
The movement in the net defined benefit obligation for post-employment benefits over the year is as follows:
(in millions of Canadian dollars)
As at January 1, 2020
Current service cost
Interest expense
Post-employment variation
Impact on consolidated profit or loss
Remeasurements
Loss from change in financial assumptions
Experience gain
Discontinued operations
Impact of remeasurements on consolidated other comprehensive income (loss)
Benefit payments
As at December 31, 2020
Current service cost
Past service cost
Interest expense
Impact on consolidated profit or loss
Remeasurements
Gain from change in demographic assumptions
Gain from change in financial assumptions
Experience gain
Impact of remeasurements on consolidated other comprehensive income (loss)
Discontinued operations
Benefit payments
As at December 31, 2021
PRESENT VALUE OF
OBLIGATION FAIR VALUE OF PLAN ASSET
103
1
2
1
4
3
(1)
1
3
(5)
105
2
2
2
6
(1)
(3)
(1)
(5)
(23)
(4)
79
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2021
TOTAL
79
79
2020
TOTAL
105
105
TOTAL
103
1
2
1
4
3
(1)
1
3
(5)
105
2
2
2
6
(1)
(3)
(1)
(5)
(23)
(4)
79
The method of accounting, assumptions relating to discount rate and life expectancy, and the frequency of valuations for post-employment
benefits are similar to those used for defined benefit pension plans, with the addition of actuarial assumptions relating to the long-term
increase in health care costs of 4.81% a year on average (2020 - 4.81%).
125
Leading the way.
The sensitivity of the defined benefit obligation to changes in assumptions is set out below. The effects on each plan of a change in an
assumption are weighted proportionately to the total plan obligations to determine the total impact for each assumption presented.
Discount rate
Salary growth rate
Health care cost increase
Life expectancy
IMPACT ON OBLIGATION FOR POST-EMPLOYMENT BENEFITS
CHANGE IN ASSUMPTION
INCREASE IN ASSUMPTION
DECREASE IN ASSUMPTION
0.25%
0.25%
1.00%
(2.40%)
0.50%
1.60%
2.30%
(0.50%)
(1.40%)
INCREASE / DECREASE BY ONE YEAR IN ASSUMPTION
1.40%
C. RISKS AND OTHER CONSIDERATIONS RELATIVE TO POST-EMPLOYMENT BENEFITS
Through its defined benefit plans, the Corporation is exposed to a number of risks, the most significant of which are detailed below.
Asset volatility
The plan liabilities are calculated using a discount rate set with reference to corporate bond yields and if plan assets underperform this
yield, it will create an experience loss. Most of the pension plans hold a proportion of equities, which are expected to outperform corporate
bonds in the long term while contributing volatility and risk in the short term.
The Corporation intends to reduce the level of investment risk by investing more in assets that better match the liabilities when the financial
situation of the plans improves and/or the rate of return on bonds used for solvency valuations increases.
As at December 31, 2021, 67% of the plan's invested assets are in fixed income. As at December 31, 2021, the total value of insured
annuities is $243 million.
However, the Corporation believes that due to the long-term nature of the plan liabilities and the strength of the supporting group, a level of
continuing equity investment is an appropriate element of the Corporation’s long-term strategy to manage the plans efficiently. Plan assets
are diversified, so the failure of an individual stock would not have a big impact on the plan assets taken as a whole. The pension plans do
not face a significant currency risk.
Changes in bond yields
A decrease in corporate bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the
plans’ bond holdings.
Inflation risk
The benefits paid are not indexed. Only future benefits for active members are based on salaries. Therefore, this risk is not significant.
Life expectancy
The majority of the plans’ obligations are to provide benefits for the member's lifetime, so increases in life expectancy will result in an
increase in the plans’ liabilities.
Each sensitivity analysis disclosed in this note is based on changing one assumption while holding all other assumptions constant. In
practice, this is unlikely to occur and changes in some of the assumptions may be correlated. When calculating the sensitivity of the
defined benefit obligation to variations in significant actuarial assumptions, the same method (present value of the defined benefit
obligation calculated using the projected unit credit method at the end of the reporting period) has been applied as for calculating the
liability recognized in the consolidated balance sheet.
As at December 31, 2021, the aggregate net surplus of the Corporation’s funded pension plans (mostly in Canada) amounted to
$40 million (a surplus of $16 million as at December 31, 2020). Current agreed expected service contributions amount to $3 million and will
be made in the normal course of business. As for the cash flow requirement, these pension plans are expected to require a net contribution
of approximately $2 million in 2022, since $1 million of employer service contribution will be paid from plan surplus.
The weighted average duration of the defined benefit obligation is 12 years (2020 - 12 years).
126
2021 Annual Report
Expected maturity analysis of undiscounted pension and other post-employment benefits:
(in millions of Canadian dollars)
Pension benefits
Post-employment benefits other than defined benefit pension plans
As at December 31, 2021
ONE YEAR
TWO YEARS
BETWEEN THREE
AND FIVE YEARS
BETWEEN SIX
AND TEN YEARS
31
5
36
31
6
37
92
15
107
635
78
713
TOTAL
789
104
893
These amounts represent all the benefits payable to current members during the following years and thereafter without limitations. The
majority of benefit payments are payable from trustee administered funds. The difference will come from future investment returns
expected on plan assets and future contributions that will be made by the Corporation for services rendered after December 31, 2021.
NOTE 19
INCOME TAXES
a. The provision for income taxes is as follows:
(in millions of Canadian dollars)
Current taxes
Deferred taxes
2021
9
—
9
2020
6
20
26
b. The provision for income taxes based on the effective income tax rate differs from the provision for (recovery of) income taxes based on
the combined basic rate for the following reasons:
(in millions of Canadian dollars)
Provision for (recovery of) income taxes based on the combined basic Canadian and provincial income tax rate
Adjustment for income taxes arising from the following:
Difference in statutory income tax rate of foreign operations
Prior years reassessment
Reversal of deferred income tax assets related to prior year losses
Change in future income taxes resulting from enacted tax rate change
Permanent differences
Change in deferred income tax assets relating to capital tax losses
Other
Provision for income taxes
2021
(10)
—
4
18
—
(2)
—
(1)
19
9
2020
55
(3)
(5)
—
(1)
(12)
(8)
—
(29)
26
Weighted average income tax rate for the year ended December 31, 2021 was 26.03% (2020 - 24.63%).
c. The provision for (recovery of) income taxes relating to components of consolidated other comprehensive income (loss) is as follows:
(in millions of Canadian dollars)
Foreign currency translation related to hedging activities
Foreign currency translation related to hedging activities from discontinued operations
Cash flow hedge
Actuarial gain (loss) on post-employment benefit obligations
Actuarial loss on post-employment benefit obligations from discontinued operations
Provision for (recovery of) income taxes
2021
2020
1
1
1
7
—
10
2
—
—
(5)
(1)
(4)
127
Leading the way.
d. The analysis of deferred tax assets and deferred tax liabilities, without taking into consideration the offsetting of balances within the
same tax jurisdiction, is as follows:
(in millions of Canadian dollars)
Deferred income tax assets:
Deferred income tax assets to be recovered after more than twelve months
Jurisdiction legal entities reclassification
Deferred income tax liabilities:
Deferred income tax liabilities to be used after more than twelve months
Jurisdiction legal entities reclassification
e. The movement of the deferred income tax account is as follows:
(in millions of Canadian dollars)
Balance at beginning of year
Through consolidated statement of earnings
Variance of income tax credit, net of related income tax
Through consolidated statement of comprehensive income (loss)
Through business disposal and discontinued operations
Others
Exchange differences
Balance at end of year
2021
299
(161)
138
353
(161)
192
(54)
2021
(40)
—
11
(10)
(16)
—
1
(54)
2020
331
(161)
170
371
(161)
210
(40)
2020
(45)
(20)
15
4
2
2
2
(40)
NOTE
5
f. The movement in deferred income tax assets and liabilities during the year, without taking into consideration the offsetting of balances
within the same tax jurisdiction, is as follows:
DEFERRED INCOME TAX ASSET
(in millions of Canadian dollars)
NOTE
RECOGNIZED
TAX BENEFIT
ARISING
FROM
INCOME TAX
LOSSES
EMPLOYEE
FUTURE
BENEFITS
EXPENSE ON
RESEARCH
UNUSED TAX
CREDITS
FINANCIAL
INSTRUMENT
S AND OTHER
LIABILITIES
LONG-TERM
DEBT
LONG TERM
DEBT
FINANCE
LEASES
10
—
—
—
—
—
10
52
8
(2)
(8)
15
—
—
—
65
(4)
(4)
—
—
—
6
11
—
(1)
71
—
—
—
—
—
—
—
—
—
—
As at January 1, 2020
Through consolidated statement of
earnings
Variance of income tax credit
Through consolidated statement of
comprehensive income
Others
Exchange differences
As at December 31, 2020
Through consolidated statement of
earnings
Variance of income tax credit
Through consolidated statement of
comprehensive income
Through business disposal and
discontinued operations
As at December 31, 2021
132
6
—
—
—
2
140
12
—
—
5
(25)
127
27
3
—
6
—
—
36
(4)
—
(7)
(2)
23
128
—
—
—
—
—
—
—
3
—
—
—
3
38
—
—
—
—
38
2
—
—
—
40
OTHERS
45
TOTAL
312
(4)
—
—
1
—
42
(8)
—
—
(5)
29
(5)
15
6
1
2
331
(3)
11
(7)
(33)
299
2021 Annual Report
DEFERRED INCOME TAX LIABILITIES
(in millions of Canadian dollars)
As at January 1, 2020
Through consolidated statement of earnings
Through consolidated statement of comprehensive income
Through business disposal and discontinued operation
5
Others
As at December 31, 2020
Through consolidated statement of earnings
Through consolidated statement of comprehensive income
Through business disposal and discontinued operation
5
Exchange differences
As at December 31, 2021
PROPERTY,
PLANT AND
EQUIPMENT
NOTE
LONG-TERM
DEBT
INTANGIBLE
ASSETS
FINANCIAL
INSTRUMENTS
AND OTHER
LIABILITIES
INVESTMENTS
OTHERS
287
25
—
—
—
312
19
—
(17)
(2)
312
2
4
2
—
8
(8)
—
—
—
—
49
(14)
—
—
—
35
—
—
—
—
—
—
17
(1)
—
—
—
16
(12)
(1)
(2)
—
—
—
23
3
—
1
3
—
—
—
14
2
1
—
(2)
(1)
—
1
—
—
—
1
TOTAL
357
15
2
(2)
(1)
371
(3)
3
(17)
(1)
353
g. The Corporation has recognized accumulated losses for income tax purposes amounting to approximately $511 million, which may be
carried forward to reduce taxable income in future years. The future tax benefit of $127 million resulting from the deferral of these losses
has been recognized in the accounts as a deferred income tax asset. Deferred income tax assets are recognized for tax loss carry
forward to the extent that the realization of the related tax benefits through future taxable profits is probable.
NOTE 20
CAPITAL STOCK
A. CAPITAL MANAGEMENT
Capital is defined as long-term debt, bank loans and advances net of cash and cash equivalents and Shareholders' equity, which includes
capital stock.
(in millions of Canadian dollars)
Cash and cash equivalents
Bank loans and advances
Long-term debt, including current portion
Net debt
Total equity
Total capital
2021
(174)
1
1,524
1,351
1,927
3,278
2020
(384)
12
2,051
1,679
1,957
3,636
The Corporation's objectives when managing capital are:
•
•
•
•
to safeguard the Corporation's ability to continue as a going concern in order to provide returns to Shareholders;
to maintain an optimal capital structure and reduce the cost of capital;
to make proper capital investments that are significant to ensure that the Corporation remains competitive; and
to redeem common shares based on an annual redemption program.
The Corporation sets the amount of capital in proportion to risk. The Corporation manages its capital structure and makes adjustments to it
in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital
structure, the Corporation may adjust the amount of dividends paid to Shareholders, return capital to Shareholders, issue new shares and
acquire or sell assets to improve its financial performance and flexibility.
129
Leading the way.
The Corporation monitors capital on a monthly and quarterly basis based on different financial ratios and non-financial performance
indicators. Also, the Corporation must conform to certain financial ratios under its various credit agreements. These ratios are calculated on
an adjusted consolidated basis of restricted subsidiaries only. These are a maximum ratio of funded debt to capitalization of 65% and a
minimum interest coverage ratio of 2.25x. The Corporation must also comply with a consolidated interest coverage ratio to incur additional
debt. Funded debt is defined as liabilities as per the consolidated balance sheet, including guarantees and liens granted in respect of
funded debt of another person but excluding other long-term liabilities, trade accounts payable, obligations under operating leases and
other accrued obligations (2021 - $1,362 million; 2020 - $1,773 million). The capitalization ratio is calculated as “Shareholders' equity” as
shown in the consolidated balance sheet plus the funded debt. Shareholders' equity is adjusted to add back the effect of IFRS adjustments
as at December 31, 2010 in the amount of $208 million. The interest coverage ratio is defined as operating income before depreciation and
amortization (OIBD) to financing expense. The OIBD is defined as net earnings of the last four quarters plus financing expense, income
taxes, amortization and depreciation, expense for stock options and dividends received from a person who is not a credit party (2021 -
$360 million; 2020 - $507 million). Excluded from net earnings are the share of results of equity investments and gains or losses from non-
recurring items. Financing expense is calculated as interest and financial charges determined in accordance with IFRS plus any capitalized
interest, but excluding the amortization of deferred financing costs, up-front and financing costs and unrealized gains or losses arising from
hedging agreements. It also excludes any gains or losses on the translation of long-term debt denominated in a foreign currency.
The consolidated interest coverage ratio to incur additional debt is calculated as defined in the Senior notes indentures dated
November 26, 2019.
As at December 31, 2021, the funded debt-to-capitalization ratio stood at 39.41% and the interest coverage ratio was 4.47x. The
Corporation is in compliance with the ratio requirements of its lenders.
The Corporation's credit facility is subject to terms and conditions for loans of this nature, including limits on incurring additional
indebtedness and granting liens or selling assets without the consent of the lenders.
The unsecured senior notes are subject to customary covenants restricting the Corporation's ability to, among other things, incur additional
debt, pay dividends and make other restricted payments as defined in the Indentures dated November 26, 2019.
In the past five years, the Corporation invests between $150 million and $250 million annually on purchases of property, plant and
equipment, excluding major strategic projects. These amounts are carefully reviewed during the course of the year in relation to operating
results and strategic actions approved by the Board of Directors. These investments, combined with annual maintenance, enhance the
stability of the Corporation's business units and improve cost competitiveness through new technology and improved process procedures.
The Corporation has an annual share redemption program in place to redeem its outstanding common shares when the market price is
judged appropriate by Management. In addition to limitations on the normal course issuer bid, the Corporation's ability to redeem common
shares is limited by its senior notes indenture.
ISSUED AND OUTSTANDING
B.
The authorized capital stock of the Corporation consists of an unlimited number of common shares without nominal value and an unlimited
number of Class A and B shares issuable in series without nominal value. Over the past two years, the common shares have fluctuated
as follows:
NOTE
NUMBER OF
COMMON SHARES
IN MILLIONS OF
CANADIAN DOLLARS
NUMBER OF
COMMON SHARES
IN MILLIONS OF
CANADIAN DOLLARS
2021
2020
Balance at beginning of year
Common shares issued on public offering
Common shares issued on exercise of stock options
Redemption of common shares
Balance at end of year
20 D
20 D
20 C
102,276,230
—
235,732
(1,651,600)
100,860,362
622
—
2
(10)
614
94,245,295
7,441,000
1,225,489
(635,554)
102,276,230
491
125
10
(4)
622
C. REDEMPTION OF COMMON SHARES
In 2021, in the normal course of business, the Corporation renewed its redemption program of a maximum of 2,045,621 common shares
with the Toronto Stock Exchange, said shares representing approximately 2% of issued and outstanding common shares. The redemption
authorization is valid from March 19, 2021 to March 18, 2022. In 2021, the Corporation redeemed 1,651,600 common shares under this
program for an amount of $26 million (2020 - $8 million for 635,554 common shares).
130
2021 Annual Report
D. COMMON SHARE ISSUANCE
On October 5, 2020, the Corporation entered into an agreement with underwriters pursuant to which the Corporation issued and the
underwriters purchased on a bought deal basis 7,441,000 common shares at a price of $16.80 per common share for gross proceeds of
$125 million. Transactions fees amounted to $5 million before income tax recovery of $1 million. The transaction closed on
October 22, 2020.
The Corporation issued 235,732 common shares upon the exercise of options for an amount of $2 million (2020 - $7 million for
1,225,489 common shares issued).
E. NET EARNINGS (LOSS) PER COMMON SHARE
The basic and diluted net earnings (loss) per common share are calculated as follows:
Net earnings (loss) from continuing operations available to Shareholders (in millions of Canadian dollars)
Net earnings available to Shareholders (in millions of Canadian dollars)
Weighted average number of basic common shares outstanding (in millions)
Weighted average number of diluted common shares outstanding (in millions)
Basic net earnings (loss) from continuing operations per common share (in Canadian dollars)
Diluted net earnings (loss) from continuing operations per common share (in Canadian dollars)
Basic net earnings per common share (in Canadian dollars)
Diluted net earnings per common share (in Canadian dollars)
2021
(59)
162
102
103
($0.59)
($0.59)
$1.60
$1.59
2020
169
198
96
97
$1.74
$1.72
$2.04
$2.02
As at December 31, 2021, 382,999 stocks options have an antidilutive effect (2020 - none). As of February 23, 2022, no common share
had been redeemed by the Corporation since the beginning of the 2022 financial year.
F. DETAILS OF DIVIDENDS DECLARED PER COMMON SHARE ARE AS FOLLOWS:
Dividends declared per common share (in Canadian dollars)
NOTE 21
STOCK-BASED COMPENSATION
2021
$0.48
2020
$0.32
A. OPTIONS
Under the terms of a share option plan adopted on December 15, 1998, amended on March 15, 2013, and approved by Shareholders on
May 8, 2013, a remaining balance of 1,382,666 common shares is specifically reserved for issuance to officers and key employees of the
Corporation. Each option will expire at a date not to exceed 10 years following the grant date of the option. The exercise price of an option
shall not be lower than the market value of the share at the date of grant, determined as the average of the closing price of the share on
the Toronto Stock Exchange on the five trading days preceding the date of grant. The terms for exercising the options are 25% of the
number of shares under option within twelve months after the first anniversary date of grant, and up to an additional 25% every twelve
months after the second, third and fourth anniversaries of grant date. Options cannot be exercised if the market value of the share at
exercise date is lower than the book value at the date of grant. Options exercised are settled in shares. The stock-based compensation
cost related to these options amounted to $1 million in 2021 (2020 - $1 million).
Changes in the number of options outstanding as at December 31, 2021 and 2020 are as follows:
NUMBER OF OPTIONS
WEIGHTED AVERAGE
EXERCISE PRICE ($)
NUMBER OF OPTIONS
WEIGHTED AVERAGE
EXERCISE PRICE ($)
2021
2020
Balance at beginning of year
Granted
Exercised
Forfeited
Balance at end of year
Options exercisable - at end of year
2,433,090
189,752
(235,732)
(13,694)
2,373,416
1,920,056
8.42
14.67
6.50
10.76
9.10
8.01
3,476,296
184,193
(1,225,489)
(1,910)
2,433,090
1,981,675
The weighted average share price at the time of exercise of the options was $14.81 (2020 - $13.20).
7.24
13.95
5.89
12.39
8.42
7.36
131
Leading the way.
The following options were outstanding as at December 31, 2021:
YEAR GRANTED
NUMBER OF OPTIONS
OPTIONS OUTSTANDING
WEIGHTED AVERAGE
EXERCISE PRICE ($)
NUMBER OF OPTIONS
OPTIONS EXERCISABLE
WEIGHTED AVERAGE
EXERCISE PRICE ($)
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
354,686
304,203
297,030
271,986
244,654
194,810
149,981
188,702
179,175
188,189
2,373,416
4.46
5.18
6.10
7.66
9.75
14.28
12.39
11.97
13.95
14.67
354,686
304,203
297,030
271,986
244,654
194,810
112,475
95,228
44,984
—
1,920,056
4.46
5.18
6.10
7.66
9.75
14.28
12.39
11.97
13.95
14.67
EXPIRATION DATE
2022
2022 - 2023
2022 - 2024
2022 - 2025
2022 - 2026
2022 - 2027
2022 - 2028
2022 - 2029
2023 - 2030
2031
FAIR VALUE OF THE SHARE OPTIONS GRANTED
Options were priced using the Black-Scholes option pricing model. Expected volatility is based on the historical share price volatility over
the past six years. The following weighted average assumptions were used to estimate the fair value of $4.09 (2020 - $4.01) as at the date
of grant of each option issued to employees:
Grant date share price
Exercise price
Risk-free interest rate
Expected dividend yield
Expected life of options
Expected volatility
2021
$14.94
$14.67
1.07%
3.21%
6 years
39%
2020
$14.13
$13.95
0.50%
2.26%
6 years
37%
B. SHARE PURCHASE PLAN
The Corporation offers its Canadian employees a share purchase plan for its common shares. Employees can voluntarily contribute up to a
maximum of 5% of their salary and, if certain conditions are met, the Corporation will contribute 25% of the employee's contribution to
the plan.
The shares are purchased on the market on a predetermined date each month. For the year ended December 31, 2021, the Corporation's
contribution to the plan amounted to $2 million (2020 - $1 million).
C. PERFORMANCE SHARE UNIT PLAN
The Corporation has a Performance Share Unit (PSU) Plan for the benefit of officers and key employees, allowing them to receive a
portion of their annual compensation in the form of PSUs. A PSU is a notional unit equivalent in value to the Corporation's common share.
Periodically, the number of PSUs forming part of the award shall be adjusted depending upon the three-year average return on capital
employed of the Corporation (ROCE). Such adjusted number shall be obtained by multiplying the number of PSUs forming part of the
award by the applicable multiplier based on the ROCE level. Participants are entitled to receive the payment of their PSUs in the form of
cash based on the average price of the Corporation's common shares as traded on the open market during the five days before the
vesting date.
The PSUs vest over a period of two years starting on the award date. The expense and the related liability are recorded during the vesting
period. The liability is adjusted periodically to reflect any variation in the market value of the common shares, the expected average ROCE
and the passage of time. As at December 31, 2021, the Corporation had a total of 611,847 PSUs outstanding (2020 - 626,324 PSUs), for a
fair value of $2 million (2020 - $3 million). In 2021, the Corporation made payment of $2 million in relation to PSUs (2020 - less than a
million dollars).
132
2021 Annual Report
D. DEFERRED SHARE UNIT PLAN
The Corporation has a Deferred Share Unit Plan for the benefit of its external directors, officers and key employees, allowing them to
receive all or a portion of their annual compensation in the form of Deferred Share Units (DSUs). A DSU is a notional unit equivalent in
value to the Corporation's common share. Upon resignation from the Board of Directors or the Corporation, participants are entitled to
receive the payment of their cumulated DSUs in the form of cash based on the average price of the Corporation's common shares as
traded on the open market during the five days before the date of the participant's resignation.
The DSU expense and the related liability are recorded at the grant date. The liability is adjusted periodically to reflect any variation in the
market value of the common shares. As at December 31, 2021, the Corporation had a total of 759,927 DSUs outstanding (2020 -
684,454 DSUs), representing a liability of $13 million (2020 - $12 million). In 2021, the Corporation made payment of $2 million in relation
to DSUs (2020 - $2 million). On January 15, 2022, the Corporation issued 79,040 DSUs.
NOTE 22
ACCUMULATED OTHER COMPREHENSIVE LOSS
TRANSLATION
ADJUSTMENTS
NET CHANGES IN CASH
FLOW HEDGES
TOTAL
(in millions of Canadian dollars)
Year ended December 31, 2020
Opening net book amount
Other comprehensive income (loss)
Other comprehensive income (loss) from discontinued operations
Closing net book amount
Year ended December 31, 2021
Opening net book amount
Other comprehensive income
Other comprehensive income from discontinued operations
Closing net book amount
NOTE 23
COST OF SALES BY NATURE
(in millions of Canadian dollars)
Raw materials
Wages and employee benefits expenses
Energy
Delivery
Depreciation and amortization
Other
SELLING AND ADMINISTRATIVE EXPENSES BY NATURE
(in millions of Canadian dollars)
Wages and employee benefits expenses
Information technology
Publicity and marketing
Other
(15)
(12)
(1)
(28)
(28)
3
1
(24)
(2)
2
—
—
—
1
—
1
2021
1,338
696
191
462
252
526
3,465
2021
285
51
16
4
356
(17)
(10)
(1)
(28)
(28)
4
1
(23)
2020
1,333
710
182
454
251
514
3,444
2020
293
48
15
11
367
133
Leading the way.
NOTE 24
EMPLOYEE BENEFITS EXPENSES
(in millions of Canadian dollars)
Wages and employee benefits expenses
Share options granted to directors and employees
Pension costs - defined benefit plans
Pension costs - defined contribution plans
Post-employment benefits other than defined benefit pension plans
NOTE
23
21 A
18
18
18
2021
981
1
6
35
6
1,029
2020
1,003
1
7
33
4
1,048
In 2021, the Corporation received $1 million (2020 - $3 million) from the “Canada Emergency Wage Subsidy” grant program, that was
accounted for in “Wages and employee benefits expenses”.
KEY MANAGEMENT COMPENSATION
Key management includes the members of the Board of Directors, Presidents and Vice Presidents of the Corporation. The compensation
paid or payable to key management for their services is shown below:
(in millions of Canadian dollars)
Salaries and other short-term benefits
Post-employment benefits
Share-based payments
2021
14
2
3
19
NOTE 25
GAIN ON ACQUISITIONS, DISPOSALS AND OTHERS
(in millions of Canadian dollars)
Gain on disposal of assets
(in millions of Canadian dollars)
Gain on disposal of an equity investment
Gain on disposal of assets
Environmental provisions
PACKAGING PRODUCTS
CONTAINER-
BOARD
SPECIALTY
PRODUCTS
SUB-TOTAL
TISSUE PAPERS
CORPORATE
ACTIVITIES
—
—
—
(40)
—
PACKAGING PRODUCTS
CONTAINER-
BOARD
SPECIALTY
PRODUCTS
SUB-TOTAL
TISSUE PAPERS
CORPORATE
ACTIVITIES
—
(45)
—
(45)
(3)
—
5
2
(3)
(45)
5
(43)
—
(2)
2
—
—
—
—
—
2020
14
2
7
23
2021
TOTAL
(40)
2020
TOTAL
(3)
(47)
7
(43)
134
2021 Annual Report
2021
The Tissue Papers segment recorded a $40 million gain from the sale of buildings related to closed plants in the USA and in Canada.
2020
The Containerboard Packaging segment recorded a $40 million gain from the sale of a building and the land of Etobicoke, Ontario,
Canada, Containerboard Packaging facility.
The Containerboard Packaging segment also recorded a $5 million gain following the release of the escrow amount pertaining to the sale
of a building in 2018 located in Maspeth, New York, USA.
The Specialty Products segment recorded a $5 million environmental provision related to plants in Canada that were closed in
previous years.
The Specialty Products segment also recorded a $3 million gain on the sale of a non-significant associate investment.
The Tissue Papers segment recorded a $2 million gain from the sale of assets and a $2 million environmental provision related to closed
plants in the USA.
NOTE 26
IMPAIRMENT CHARGES AND RESTRUCTURING COSTS
IMPAIRMENT CHARGES
A.
The Corporation recorded impairment charges totaling $89 million in 2021 and $30 million in 2020. Impairments are detailed as follows:
(in millions of Canadian dollars)
Spare parts
Property, plant and equipment
Customer relationships and client list
Goodwill and other intangible assets with indefinite useful life
(in millions of Canadian dollars)
Spare parts
Property, plant and equipment
PACKAGING PRODUCTS
CONTAINER-
BOARD
SPECIALTY
PRODUCTS
SUB-TOTAL
TISSUE PAPERS
CORPORATE
ACTIVITIES
—
1
—
—
1
—
—
—
—
—
PACKAGING PRODUCTS
—
1
—
—
1
1
16
35
36
88
—
—
—
—
—
CONTAINER-
BOARD
SPECIALTY
PRODUCTS
SUB-TOTAL
TISSUE PAPERS
CORPORATE
ACTIVITIES
—
6
6
—
—
—
—
6
6
12
11
23
—
1
1
2021
TOTAL
1
17
35
36
89
2020
TOTAL
12
18
30
The recoverable amount was determined using a fair value less cost of disposal model using level 2 inputs.
2021
The Containerboard Packaging segment recorded an impairment charge of $1 million on an asset that became idle following the
introduction of a new technology. The recoverable amount was lower than its carrying amount which was based on its fair value less cost
of disposal determined using the market approach of comparable assets on the market.
The Tissue Papers segment recorded an impairment charge of $1 million on spare parts related to closed plants.
135
Leading the way.
The COVID-19 pandemic has led to lower than usual volumes in the Tissue Papers segment. Specifically, volume impacts in the Away-
from-Home market began in the second quarter of 2020, while lower volumes in the Consumer Products market started in the second
quarter of 2021 following higher than usual demand in the prior year. The current market dynamic led the Corporation to record an
impairment charge of $35 million on customer relationships and client lists and of $36 million on the goodwill of this segment, reflecting
uncertainty of the recoverable amount of the segment compared to its carrying value. The recoverable amount for the customer
relationship and client lists was determined using a market approach. The most significant assumption used was the OIBD multiple of 7x.
The recoverable amount of goodwill was determined using an income approach. The most significant assumptions used were the discount
rate, shipment levels, foreign exchange rates, revenue growth rate, OIBD margins and capital expenditures.
The Tissue Papers segment also recorded an impairment charge of $16 million on property, plant and equipment of one of its
United States CGUs due to sustained difficult market conditions and assets underperformance. The recoverable amount of these assets
was determined using the market approach of comparable assets on the market.
2020
The Containerboard Packaging segment recorded an impairment charge of $6 million on some equipment as part of the network
optimization and profitability improvement initiatives.
The Tissue Papers segment recorded an impairment charge of $13 million on the assets of certain plants as their recoverable amount was
lower than the carrying amount due to the lower demand in the Away-from-Home market due to the COVID-19 pandemic.
The Tissue Papers segment also recorded an impairment charge of $10 million on some assets as part of the network optimization and
profitability improvement initiatives.
The Corporate Activities recorded an impairment charge of $1 million related to renewable energy assets.
B. GOODWILL AND OTHER INDEFINITE USEFUL LIFE INTANGIBLE ASSETS IMPAIRMENT TEST
Allocation of goodwill and other indefinite useful life intangible assets is as follows:
• Containerboard Packaging segment goodwill of $470 million is allocated to the Containerboard segment;
• Specialty Products segment goodwill is allocated to the partitioning activities sub-segment for $3 million.
Annually, the Corporation must test all of its goodwill for impairment. However, reliance can be put on the quantitative calculation
previously done if following criteria are met:
•
•
the assets and liabilities making up the unit have not changed significantly since the most recent recoverable amount calculation;
the most recent recoverable amount calculation resulted in an amount that exceeded the carrying amount of the unit by a substantial
margin; and
based on an analysis of events that have occurred and circumstances that have changed since the most recent recoverable amount
calculation, the likelihood that a current recoverable amount determination would be less than the current carrying amount of the unit
is remote.
•
All three conditions were met for the Containerboard Packaging segment.
136
2021 Annual Report
C. RESTRUCTURING COSTS
Restructuring costs are detailed as follows:
(in millions of Canadian dollars)
Restructuring costs
(in millions of Canadian dollars)
Restructuring costs
PACKAGING PRODUCTS
CONTAINER-
BOARD
SPECIALTY
PRODUCTS
SUB-TOTAL
TISSUE PAPERS
CORPORATE
ACTIVITIES
4
—
4
17
—
PACKAGING PRODUCTS
CONTAINER-
BOARD
SPECIALTY
PRODUCTS
SUB-TOTAL
TISSUE PAPERS
CORPORATE
ACTIVITIES
4
—
4
7
2
2021
TOTAL
21
2020
TOTAL
13
2021
The Containerboard Packaging segment recorded severance charges totaling $3 million as part of the margin improvement program.
The Containerboard Packaging segment also recorded closure costs totaling $1 million related to the closure of plants in Ontario, Canada.
The Tissue Papers segment recorded additional restructuring charges and closure costs totaling $17 million related to closed plants.
2020
The Containerboard Packaging segment recorded restructuring charges totaling $3 million as part of the network optimization and
profitability improvement initiatives.
The Containerboard Packaging segment also recorded restructuring charges totaling $3 million following the announcement of the closure
of its Etobicoke, Ontario, Canada, converting facility, which was permanently closed in mid-September 2021.
The Containerboard Packaging segment also recorded a gain of $2 million as a reversal of a contingency related to a plant sold in
prior years.
The Tissue Papers segment recorded restructuring charges totaling $4 million as part of the network optimization and profitability
improvement initiatives.
The segment also recorded restructuring charges totaling $3 million following the announcement of the closure of plants in Pittson and
Ransom, Pennsylvania, and Waterford, New York, USA.
The Corporate Activities recorded restructuring charges totaling $2 million as part of profitability improvement initiatives.
137
Leading the way.
NOTE 27
ADDITIONAL INFORMATION
A. CHANGES IN NON-CASH WORKING CAPITAL COMPONENTS ARE DETAILED AS FOLLOWS:
(in millions of Canadian dollars)
Accounts receivable
Current income tax assets
Inventories
Trade and other payables
Current income tax liabilities
2021
17
4
(91)
46
(12)
(36)
2020
(64)
10
19
69
(15)
19
B. FINANCING EXPENSE AND INTEREST EXPENSE (REVENUE) ON EMPLOYEE FUTURE BENEFITS AND OTHER LIABILITIES
(in millions of Canadian dollars)
Interest on long-term debt (including lease obligations interests)
Interest income
Amortization of financing costs
Other interest and banking fees
Interest expense on employee future benefits
Interest expense (revenue) other liabilities
NOTE
14(b)
2021
79
(1)
3
3
4
1
89
2020
93
(1)
4
5
4
(11)
94
Interest expense (revenue) on employee benefits and other liabilities
In 2021, the Corporation recorded an unrealized loss of $1 million, compared to an unrealized loss of $2 million in 2020, pertaining to a call
option granted to the Corporation by one of the minority shareholders of Falcon Packaging LLC.
In 2020, the Corporation recorded an unrealized gain of $13 million on the fair value revaluation of a one-time option granted to White
Birch to purchase an interest of up to 10% in the Bear Island containerboard mill project, that was not exercised.
138
2021 Annual Report
C. TOTAL NET DEBT FROM FINANCING ACTIVITIES
(in millions of Canadian dollars)
As at January 1, 2020
Cash flow
Change in cash and cash equivalents
Bank loans and advances
Change in credit facilities
Issuance of unsecured senior notes, net of financing costs
Repurchase of unsecured senior notes
Increase in other long-term debt
Payments of other long-term debt, including lease
obligations
Discontinued operations
Non-cash changes
Discontinued operations
Foreign exchange translation on long-term debt and
financial instruments
Right-of-use assets acquisitions and of property, plant and
equipment included in other debts
Right-of-use assets disposals
Amortization of financing costs in long-term debt
Write off of unamortized financing costs following
repurchase of unsecured senior notes
Other
Exchange differences
As at December 31, 2020
Cash flow
Change in cash and cash equivalents
Bank loans and advances
Change in credit facilities
Repurchase of unsecured senior notes
Increase in other long-term debt
Payments of other long-term debt, including lease
obligations
Business disposal included in discontinued operations
Non-cash changes
Business disposal included in discontinued operations
Foreign exchange translation on long-term debt and
financial instruments
Right-of-use assets acquisitions and of property, plant and
equipment included in other debts
Right-of-use assets disposals
Amortization of financing costs in long-term debt
Write off of unamortized financing costs following
repurchase of unsecured senior notes
Other
Exchange differences
As at December 31, 2021
NOTE
CASH AND
CASH EQUIVALENT
BANK LOANS
AND ADVANCES
13
13
5
5
13
5
5
(155)
(192)
—
—
—
—
—
—
(41)
—
—
—
—
—
—
—
4
(384)
565
—
—
—
—
—
(454)
98
—
—
—
—
—
—
1
(174)
11
—
1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
12
—
(11)
—
—
—
—
—
—
—
—
—
—
—
—
—
1
LONG-TERM DEBT
2,107
NET DEBT
1,963
—
—
(131)
409
(264)
31
(117)
(37)
18
(17)
55
(3)
3
2
7
(12)
2,051
—
—
5
(372)
5
(75)
—
(111)
(10)
45
(4)
2
(4)
(2)
(6)
(192)
1
(131)
409
(264)
31
(117)
(78)
18
(17)
55
(3)
3
2
7
(8)
1,679
565
(11)
5
(372)
5
(75)
(454)
(13)
(10)
45
(4)
2
(4)
(2)
(5)
1,524
1,351
139
Leading the way.
NOTE 28
COMMITMENTS
CAPITAL EXPENDITURES, INTANGIBLE ASSETS AND SERVICE AGREEMENTS
Capital expenditures, intangible assets and service agreements contracted at the end of the reporting period but not yet incurred are
presented in the following table:
(in millions of Canadian dollars)
No later than one year
Later than one year but no later than five years
More than five years
PROPERTY,
PLANT AND
EQUIPMENT
INTANGIBLE
ASSETS
104
—
—
104
8
—
—
8
2021
SERVICE
AGREEMENTS
AND EXEMPTED
LEASES
29
9
1
39
PROPERTY,
PLANT AND
EQUIPMENT
INTANGIBLE
ASSETS
50
2
—
52
8
1
—
9
2020
SERVICE
AGREEMENTS
AND EXEMPTED
LEASES
17
10
1
28
NOTE 29
RELATED PARTY TRANSACTIONS
The Corporation entered into the following transactions with related parties:
(in millions of Canadian dollars)
For the year ended December 31, 2021
Sales to related parties
Purchases from related parties
For the year ended December 31, 2020
Sales to related parties
Purchases from related parties
These transactions occurred in the normal course of operations and are measured at fair value.
The following balances were outstanding at the end of the reporting period:
(in millions of Canadian dollars)
Receivables from related parties
Joint ventures
Associates
Payables to related parties
Joint ventures
Associates
JOINT VENTURES
ASSOCIATES
263
40
191
34
61
36
55
50
December 31,
2021
December 31,
2020
14
8
5
1
10
23
5
3
The receivables from related parties arise mainly from sale transactions. The receivables are unsecured in nature and bear no interest.
There are no provision held against receivables from related parties. The payables to related parties arise mainly from purchase
transactions. The payables bear no interest.
140
2021 Annual Report
Alain Lemaire
ExecutiveChairman
oftheBoard
KingseyFalls,QuébecCanada
Directorsince1967
Non-independent
Sylvie Lemaire
DirectorofCompanies
OtterburnPark,QuébecCanada
Directorsince1999
Non-independent
Élise Pelletier
DirectorofCompanies
Sutton,QuébecCanada
Director since 2012
Independent
Sylvie Vachon
DirectorofCompanies
Longueuil,QuébecCanada
Director since 2013
Independent
Board of Directors
Cascades’ Board of Directors (BoD) and management
believe that quality corporate governance helps ensure
that the Corporation is run efficiently and that investor
confidence is maintained. In order to stay the course in
this regard, Cascades regularly reviews its governance
practices to remain in compliance with applicable legis-
lation and to improve efficiency.
Mario Plourde
PresidentandChiefExecutiveOfficer,
CascadesInc.
KingseyFalls,QuébecCanada
Director since 2014
Non-independent
the
twelve Board members were
The composition of the Board of Directors must be care-
fully determined since its responsibilities include ensur-
ing good corporate governance, among other things.
Cascades draws on the expertise of a highly experienced
team of directors and recognizes the importance of
independent directors. As of December 31, 2021, eight
of
independent.
They meet without
the presence of management
following each scheduled Board meeting, and meet for a
special meeting of the Independent Directors once
a year. New Board members are also offered an orienta-
tion and training program, to familiarize themselves with
Cascades’activities as well as the issues and challenges
it faces.
Martin Couture
ChiefExecutiveOfficer
SanimaxInc.(Canada)
Montréal,QuébecCanada
Director since 2016
Independent
Hubert T. Lacroix
StrategicCounsel,Blake,
Cassels&GraydonLLP
Westmount,QuébecCanada
Directorsince2019
Independent
Mélanie Dunn
PresidentandCEO,Cossette
Montréal,QuébecCanada
Directorsince2019
Independent
141
141
Michelle Cormier
OperatingPartner,Wynnchurch
CapitalCanada
Montréal,QuébecCanada
Director since 2016
Independent
Patrick Lemaire
DirectorofCompanies
KingseyFalls,QuébecCanada
Director since 2016
Non-independent
Nelson Gentiletti
DirectorofCompanies
Kirkland,QuébecCanada
Directorsince2019
Independent
Elif Lévesque
ChiefFinancialOfficer,Nomad
RoyaltyCompanyLtd
Montréal,QuébecCanada
Directorsince2019
Independent
Leading the way. Raw
Materials
%
2 4
~3.0 million s.t.
%
6
4 %
4 %
8 %
%
3
1
~2.3 million s.t.
7 0 %
7 5 %
Fibre Consumed,
Purchased and Brokered
by Cascades1
Recycled fibre used
by Cascades
Pulp used by Cascades
Fibre sold externally
Fibre Consumed
by Cascades
Brown recycled fibre
White recycled fibre
Pulp
Groundwood recycled
fibre
1 Including associates and joint ventures.
142
142
2021 Annual Report
2021 Annual Report Overview of
our Results
Y
T
S - 1 4 %
L
T
C I A
C
U
E
D
P
O
S
P R
C
A
N
A
D
A
-
4
5
%
C
O
N
T
A
I
N
E
R
B
O
A
R
D
P
A
C
K
A
GIN
G - 53%
SALES
5%
S – 5
E
T
A
T
S
D
E
T
I
N
U
%
3
3
-
S
R
E
P
A
P
E
U
S
S
I
T
B Y SEGMENT1
TO
F ROM
%
C
A
$3,956 M
N
A
D
A
- 5
1%
S – 4 9
E
T
A
T
S
D
E
T
I
N
U
B Y SEGMENT1
U C T S - 1 5 %
FROM
D
O
R
SPECIAL T Y P
TES - 3 7 %
A
T
D S
I
E
T
N
U
%
E - 6
U
S
TIS
%)
E - (10
U
S
S
T
I
1 Before inter-segment and excluding corporate
activities.
2 Please refer to the “Supplemental Information
on Non-IFRS Measures and Other Financial Measures”
section for a complete reconciliation.
ADJUSTED
OIBD2
$389 M
C
A
N
A
D
A - 6
3%
CONTAIN E R B O A R
C
A
D P
%
K A GIN G - 79
B Y SEGMENT1
L T Y
S - 1 9 %
T
C I A
C
U
E
D
P
O
S
P R
FROM
7 %
$302 M
TES - 3
A
T
S
D
E
T
I
N
U
C
A
N
A
D
A - 6
3%
A
O
B
R
CON T A I N E
%
1
9
-
G
GIN
A
R D PACK
OIBD
R
Edmonton, AB
C
R
Calgary, AB
R
Kelowna, BC
Prince George, BC
R
Nanaimo, BC
Victoria, BC
R
R
R
Vancouver, BC
Surrey, BC
R
C
Richmond, BC
Tacoma, WA
C
St. Helens, OR
Scappoose, OR
M
C
C
C
R
Winnipeg, MB
Kingsey Falls, QC
Eau Claire, WI
CM
Grand Rapids, MI
C
Clarion, IA
C
Aurora, IL
C
C
Brook, IN
Warrenton, MO
C
UC
Ashland, VA (Bear Island)
C
Brownsville, TN
C
Memphis, TN
M
Rockingham, NC
C M
C
C
Kinston, NC
Wagram, NC
CM
Pryor, OK
Barnwell, SC
CM
Birmingham, AL
C
Ottawa
R R
Belleville
C
Trenton
M
Vaughan
C
RC
C
Scarborough
C
R
Etobicoke
Mississauga
C
M
F
Burlington
C
St. Marys
Guelph
C
R
Putnam
R
Brantford
Ontario
North America
Our
Facilities1
Legend
Head Office
Containerboard
Packaging
Specialty
Products
Tissue Papers
Recovery and
Recycling
M Manufacturing facility
C Converting facility
CM Converting and
manufacturing facility
R
Recovery facility
UC Under construction facility
1 Including main associates and joint ventures.
Prince George, BC
R
R
Edmonton, AB
C
R
Calgary, AB
Nanaimo, BC
Victoria, BC
Vancouver, BC
R
Surrey, BC
R
C
R
R
Richmond, BC
R
Kelowna, BC
Tacoma, WA
C
St. Helens, OR
Scappoose, OR
M
C
C
C
R
Winnipeg, MB
Kingsey Falls, QC
Cabano
M
Eau Claire, WI
CM
Grand Rapids, MI
C
Clarion, IA
C
Aurora, IL
C
C
Brook, IN
Warrenton, MO
C
C
Brownsville, TN
Memphis, TN
C
M
Rockingham, NC
C M
C
C
Kinston, NC
Wagram, NC
Barnwell, SC
CM
CM
Pryor, OK
Birmingham, AL
C
Lachute
CM
Vaudreuil
C
C
Montréal
CM
Candiac
C C C
Drummondville
C
Saint-Césaire
R
Lachine
C Granby
C
Victoriaville
M M
FT
C C C
Kingsey Falls
Québec
UC
Ashland, VA (Bear Island)
Berthierville
C C
Niagara Falls, NY
M M
R
Depew, NY
R
Lancaster, NY
C
Rochester, NY
M
Mechanicville, NY
Schenectady, NY
C
C
Newtown, CT
C
Piscataway, NJ
761
facilities across
Canada and the US
10,000
employees
in 2 countries
Production
Facilities1
B Y S EGMENT
S - 1
R
TISSUE P A P E
ATES - 27
T
D S
I
E
T
N
U
R
E
C
O
V
E
R
Y
A
N
D
R
E
C
Y
C
LIN
G - 18
5
F ROM
CONTAIN
E
R
B
O
A
R
D
P
A
C
K
A
G
I
N
G
-
2
5
9
A - 4
D
C ANA
T S - 18
C
U
D
O
SPEC I A L T Y P R
Northeastern United States
1 Including associates and joint ventures.
T
R
O
P
E
R
L
A
U
N
N
A
1
2
0
2
I
S
E
D
A
C
S
A
C
cascades.com
Printed on Rolland EnviroTM Satin, 60 lb. Text and Rolland EnviroTM Print, 80 lb. The cover is certified
Processed Chlorine Free and is made from 100% post-consumer fibre. All papers are certified FSC®
and EcoLogo and are made using renewable biogas energy.
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Prepress and printing: Héon & Nadeau — Photography: Brühmüller photographe
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