Cascades reports third quarter results

KINGSEY FALLS, QC, Nov 12, 2010 /PRNewswire via COMTEX/ -- Cascades Inc. (CAS on the Toronto stock exchange), a leader in the recovery of recyclable materials and the manufacturing of green packaging and tissue paper products, announces its financial results for the three months ended September 30, 2010.

(All amounts in this press release are in Canadian dollars unless otherwise indicated.) Third quarter highlights ------------------------ - Net earnings per share excluding specific items of $0.29 compared to $0.22 in the previous quarter and $0.36 in the same period of last year. Including specific items, net earnings per share of $0.31 compared to $0.22 in the previous quarter and $0.35 in the corresponding period of last year.

- Operating income before depreciation and amortization (EBITDA) excluding specific items of $115 million, up 7% in comparison to Q2 2010. EBITDA excluding specific items amounted to $127 million in the third quarter of 2009.

- Cash flow from operations (adjusted) of $82 million compared to $71 million in the second quarter of 2010 and $94 million in the same period of last year.

- Net debt down $37 million and $54 million in comparison to the previous period and to the third quarter of last year respectively. Debt-to- capitalization ratio at its lowest level in 6 years.

- Total shipments up 5% compared to the third quarter of 2009 (excluding the impact of acquisitions).

- Highest quarterly EBITDA of containerboard operations since 2006.

------------------------------------------------------------------------- ------------------------------------------------------------------------- Financial Summary ----------------- Selected consolidated information (in millions of Canadian dollars, except ---------------------------- amounts per share) Q3/2010 Q3/2009 Q2/2010 ------------------------------------------------------------------------- Sales 1,028 974 998 Excluding specific items(1) Operating income before depreciation and amortization (OIBD or EBITDA) 115 127 107 Operating income 62 74 56 Net earnings attributable to shareholders for the period 28 35 21 per common share $0.29 $0.36 $0.22 Cash flow from operations (adjusted) 83 95 71 As reported Operating income before depreciation and amortization (OIBD or EBITDA)(1) 111 129 101 Operating income 58 76 50 Net earnings attributable to shareholders for the period 30 34 21 per common share $0.31 $0.35 $0.22 Cash flow from operations (adjusted)(1) 82 94 71 ------------------------------------------------------------------------- Note 1 - see the supplemental information on non-GAAP measures.

Commenting on the third quarter results, Mr. Alain Lemaire, President and Chief Executive Officer stated: "As anticipated, our results continued to recover sequentially after hitting a soft patch in the first three months of the year.

Demand remained solid, in line with the usual seasonality and a moderate and uncertain economic recovery. Our North American and European packaging operations benefited from selling price increases implemented during or prior to the third quarter. Of particular note is the fact that our containerboard segment posted its highest quarterly EBITDA since we acquired the full ownership of Norampac in 2006. This achievement is significant considering that the Canadian dollar was around 88 U.S. cents and recycled fibre costs were more than 30% lower in 2006.

In our tissue operations, as a result of very competitive retail markets, we were unable to fully offset the cost inflation through better selling prices.

However, all in all, given our diversified business mix and the numerous restructuring measures realized over the years, I am pleased that Cascades continues to generate good net earnings and free cash flow to pay down debt despite high recycled fibre costs and a strong Canadian dollar." Results analysis for the three-month period ended Sept 30, 2010 (compared ------------------------------------------------------------------------- to the previous year) --------------------- In comparison with the same period last year, sales rose by 6% to $1,028 million resulting from higher selling prices, business acquisitions and a 5% increase in shipments (excluding the impact of the acquisition of the tissue assets of Atlantic Packaging). This was partly offset by the 6% appreciation of the Canadian dollar.

The operating income excluding specific items amounted to $62 million compared to $74 million in Q3 2009. Improved volumes and selling prices were more than offset by the rise of raw material costs and the Canadian dollar. When including specific items, operating income amounted to $58 million in comparison to $76 million in the same period of last year. The improved results in our containerboard segment were more than offset by a lower operating income in our tissue and corporate segments.

Net earnings excluding specific items amounted to $28 million ($0.29 per share) in the third quarter of 2010 compared to $35 million ($0.36 per share) for the same period of last year. Including specific items, net earnings amounted to $30 million ($0.31 per share) compared to $34 million ($0.35 per share) for the same quarter in 2009. Net earnings of the third quarter of 2010 include a $3 million favorable adjustment for income tax provisions of prior periods.

As a result of the appreciation of the Canadian dollar and free cash flow generation, net debt decreased by $37 million compared to June 30th 2010 and by $54 million year-over-year.

In the third quarter of 2010, these specific items impacted our operating income and/or net earnings (before tax): - $4 million in unrealized loss on financial instruments (impact on operating income and net earnings); - $2 million gain on disposal and others (impact on operating income and net earnings); - $1 million impairment loss (impact on operating income and net earnings); - $1 million in closure and restructuring costs (impact on operating income and net earnings); - $9 million gain resulting mainly from our share of the gain realized by Boralex following its acquisition of Boralex Power Income Fund (impact on net earnings).

- $4 million foreign exchange loss on long-term debt and financial instruments (impact on net earnings).

For further details, see the two following tables on GAAP and non-GAAP measures reconciliation.

Results analysis for the three-month period ended Sept 30, 2010 (compared ------------------------------------------------------------------------- to the previous quarter) ------------------------ In comparison to the previous quarter, sales, operating income as well as net earnings improved mostly due to higher selling prices. Total shipments remained relatively stable mainly as a result of lower seasonal demand in our boxboard operations and raw material costs continued to negatively impact profitability.

Fourth quarter outlook ---------------------- Mr. Alain Lemaire, President and Chief Executive Officer added: "Looking ahead to the fourth quarter, despite selling price inflation in some of our sectors, we expect a sequential decrease in profitability as a result of lower volumes due to normal seasonality and planned maintenance downtimes. In addition, recycled fibre costs and the Canadian dollar have recently begun to trend up and might remain higher than in the previous quarter until the end of the year." Dividend on common shares and normal course issuer bid ------------------------------------------------------ The Board of Directors of Cascades declared a quarterly dividend of $0.04 per share to be paid December 17, 2010 to shareholders of record at the close of business on December 3, 2010. This dividend paid by Cascades is an "eligible dividend" as per the Income Tax Act (Bill C-28, Canada). In addition, in the third quarter of 2010, in accordance with its normal course issuer bid program, Cascades purchased for cancellation 70,000 shares at an average price of $6.28 representing an aggregate amount of approximately $0.4 million. After nine months in 2010, Cascades purchased for cancellation 633,181 shares at an average price of $7.18 representing an aggregate amount of approximately $4.5 million Supplemental information on non-GAAP measures --------------------------------------------- Operating income before depreciation and amortization, earnings before interests, taxes, depreciation and amortization, operating income and cash flow from operations are not measures of performance under Canadian GAAP. The Company includes operating income before depreciation and amortization, earnings before interests, taxes, depreciation and amortization, operating income and cash flow from operations because they are measures used by management to assess the operating and financial performance of the Company's operating segments.

Additionally, the Company believes that these items provide additional measures often used by investors to assess a company's operating performance and its ability to meet debt service requirements. However, operating income before depreciation and amortization, earnings before interests, taxes, depreciation and amortization, operating income and cash flow from operations do not represent, and should not be used as a substitute for net earnings or cash flows from operating activities as determined in accordance with Canadian GAAP, and they are not necessarily an indication of whether cash flow will be sufficient to fund our cash requirements. In addition, our definition of operating income before depreciation and amortization, earnings before interests, taxes, depreciation and amortization, operating income and cash flow from operations may differ from those of other companies. Cash flow from operations is defined as cash flow from operating activities as determined in accordance with Canadian GAAP excluding the change in working capital components.

Operating income before depreciation and amortization excluding specific items, earnings before interests, taxes, depreciation and amortization excluding specific items, operating income excluding specific items, net earnings excluding specific items, net earnings per common share excluding specific items and cash flow from operations excluding specific items are non-GAAP measures.

The Company believes that it is useful for investors to be aware of specific items that have adversely or positively affected its GAAP measures, and that the above mentioned non-GAAP measures provide investors with a measure of performance with which to compare its results between periods without regard to these specific items. The Company's measures excluding specific items have no standardized meaning prescribed by GAAP and are not necessarily comparable to similar measures presented by other companies and therefore should not be considered in isolation.

Specific items are defined to include charges for impairment of assets, charges for facility or machine closures, debt restructuring charges, gains or losses on sale of business unit, unrealized gains or losses on derivative financial instruments that do not qualify for hedge accounting, foreign exchange gains or losses on long-term debt and other significant items of an unusual or non-recurring nature.

Net earnings attributable, which is a performance measure defined by Canadian GAAP is reconciled below to operating income, operating income excluding specific items and operating income before depreciation excluding specific items or earnings before interests, taxes, depreciation and amortization excluding specific items: ---------------------------- (in millions of Canadian dollars) Q3/2010 Q3/2009 Q2/2010 ------------------------------------------------------------------------- Net earnings attributable to shareholders for the period 30 34 21 Non-controlling interest - - 1 Share of results of significantly influenced companies (11) (3) - Provision for income taxes 8 17 7 Foreign exchange loss (gain) on long-term debt and financial instruments 4 3 (6) Financing expense 27 25 27 ---------------------------- Operating income 58 76 50 Specific items : Gain on disposal and others (2) - - Impairment loss 1 1 - Closure and restructuring costs 1 5 - Unrealized loss (gain) on financial instruments 4 (8) 6 ---------------------------- 4 (2) 6 ---------------------------- Operating income - excluding specific items 62 74 56 Depreciation and amortization 53 53 51 ---------------------------- Operating income before depreciation and amortization (OIBD or EBITDA) - excluding specific items 115 127 107 ------------------------------------------------------------------------- The following table reconciles net earnings attributable to shareholders for the period and net earnings per share attributable to shareholders for the period to net earnings attributable to shareholders for the period excluding specific items and net earnings per share attributable to shareholders for the period excluding specific items: -------------------------- -------------------------- (in millions of Net earnings (loss) Net earnings (loss) Canadian dollars, attributable to per share attributable except amounts shareholders for to shareholders for per share) the period the period(1) ------------------------------------------------------------------------- Q3/2010 Q3/2009 Q2/2010 Q3/2010 Q3/2009 Q2/2010 -------------------------- -------------------------- As per GAAP 30 34 21 $0.31 $0.35 $0.22 Specific items : Gain on disposal and others (2) - - $(0.01) $ - $ - Impairment loss 1 1 - $0.01 $0.01 $ - Closure and restructuring costs 1 5 - $0.01 $0.03 $ - Unrealized loss (gain) financial instruments 4 (8) 6 $0.04 $(0.06) $0.05 Foreign exchange loss (gain) on long-term debt and financial instruments 4 3 (6) $0.03 $0.03 $(0.05) Share of results of significantly influenced companies (9) - - $(0.10) $ - $ - Tax effect on specific items (1) - - -------------------------- -------------------------- (2) 1 - $(0.02) $0.01 $ - -------------------------- -------------------------- Excluding specific items 28 35 21 $0.29 $0.36 $0.22 ---------------------------------------------- -------------------------- ---------------------------------------------- -------------------------- Note 1 - specific amounts per share are calculated on an after-tax basis.

The following table reconciles cash flow provided by operating activities to cash flow (adjusted) from operations excluding specific items: ---------------------------- Cash flow from operations ---------------------------- (in millions of Canadian dollars) Q3/2010 Q3/2009 Q2/2010 ------------------------------------------------------------------------- Cash flow provided by operating activities 73 117 22 Changes in non-cash working capital components 9 (23) 49 ---------------------------- Cash flow (adjusted) from operations 82 94 71 Specific item : Closure and restructuring costs, net of current income tax 1 1 - ---------------------------- Excluding specific items 83 95 71 ------------------------------------------------------------------------- Founded in 1964, Cascades produces, converts and markets packaging and tissue products that are composed mainly of recycled fibres. The Company employs close to 12,500 employees, who work in more than 100 units located in North America and Europe. Its management philosophy, its more than 45 years of experience in recycling and its continued efforts in research and development are strengths that enable Cascades to create new products for its customers. Cascades' shares trade on the Toronto Stock Exchange, under the ticker symbol CAS.

Certain statements in this release, including statements regarding future results and performance, are forward-looking statements (as such term is defined under the Private Securities Litigation Reform Act of 1995) based on current expectations. The accuracy of such statements is subject to a number of risks, uncertainties and assumptions that may cause actual results to differ materially from those projected, including, but not limited to, the effect of general economic conditions, decreases in demand for the Company's products, increases in raw material costs, fluctuations in selling prices and adverse changes in general market and industry conditions and other factors listed in the Company's Securities and Exchange Commission filings.

Consolidated Balance Sheets (in millions of Canadian dollars) As at As at September 30, December 31, 2010 2009 --------------------------- Assets (unaudited) Current assets Cash and cash equivalents 21 19 Accounts receivable 633 543 Inventories 533 520 ------------------------------------------------------------------------- 1,187 1,082 Property, plant and equipment 1,843 1,912 Intangible assets 152 165 Other assets 353 317 Goodwill 316 316 ------------------------------------------------------------------------- 3,851 3,792 --------------------------- --------------------------- Liabilities and Equity Current liabilities Bank loans and advances 79 83 Accounts payable and accrued liabilities 567 505 Current portion of long-term debt 11 10 ------------------------------------------------------------------------- 657 598 Long-term debt 1,447 1,459 Other liabilities 418 410 ------------------------------------------------------------------------- 2,552 2,467 --------------------------- Commitments and Contingencies Equity attributable to the Shareholders Capital stock 496 499 Contributed surplus 14 14 Retained earnings 739 700 Accumulated other comprehensive income 58 91 ------------------------------------------------------------------------- 1,307 1,304 Non-controlling interest 22 21 ------------------------------------------------------------------------- Total equity 1,329 1,325 ------------------------------------------------------------------------- 3,851 3,792 --------------------------- --------------------------- The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

Consolidated Statements of Earnings (in millions of Canadian dollars, except per share amounts) (unaudited) For the 3-month For the 9-month periods ended periods ended September 30, September 30, 2010 2009 2010 2009 ----------------------------------------------- Sales 1,028 974 2,968 2,925 Cost of sales and expenses Cost of sales (excluding depreciation and amortization) 814 752 2,371 2,254 Depreciation and amortization 53 53 159 162 Selling and administrative expenses 99 93 298 309 Loss (gain) on disposal and others (2) - (2) 1 Impairment and other restructuring costs 2 6 2 14 Loss (gain) on financial instruments 4 (6) 5 (15) ------------------------------------------------------------------------- 970 898 2,833 2,725 ------------------------------------------------------------------------- Operating income 58 76 135 200 Financing expense 27 25 82 77 Loss on refinancing of long-term debt - - 3 - Gain on purchases of senior notes - - - (14) Foreign exchange loss (gain) on long-term debt and financial instruments 4 3 (1) 8 ------------------------------------------------------------------------- 27 48 51 129 Provision for income taxes 8 17 12 39 Share of results of significantly influenced companies (11) (3) (13) (10) ------------------------------------------------------------------------- Net earnings including non-controlling interest for the period 30 34 52 100 Non-controlling interest - - 1 (1) ------------------------------------------------------------------------- Net earnings attributable to Shareholders for the period 30 34 51 101 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net earnings from continuing operations per common share Basic $0.31 $0.35 $0.53 $1.03 ----------------------------------------------- ----------------------------------------------- Diluted $0.30 $0.34 $0.52 $1.02 ----------------------------------------------- ----------------------------------------------- Weighted average number of common shares outstanding 96,645,061 97,430,683 96,874,069 97,781,928 ----------------------------------------------- ----------------------------------------------- The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

Consolidated Statements of Equity (in millions of Canadian dollars) (unaudited) For the 9-month period ended September 30, 2010 -------------------------------------------------------------- Total Accu- equity mulated attribu- Non- Re- other table control- Contri- tained compre- to the ling Capital buted ear- hensive share- inte- Total stock surplus nings income holders rest equity -------------------------------------------------------------- Balance - Beginning of period 499 14 700 91 1,304 21 1,325 Compre- hensive income (loss): Net earnings for the period - - 51 - 51 1 52 Change in other compre- hensive income (loss) - - - (33) (33) - (33) -------------------------- Compre- hensive income (loss) for the period 18 1 19 -------------------------- Dividends - - (12) - (12) - (12) Stock options - 1 - - 1 - 1 Redemption of common shares (3) (1) - - (4) - (4) -------------------------------------------------------------- Balance - End of period 496 14 739 58 1,307 22 1,329 -------------------------------------------------------------- -------------------------------------------------------------- For the 9-month period ended September 30, 2009 -------------------------------------------------------------- Total Accu- equity mulated attribu- Non- Re- other table control- Contri- tained compre- to the ling Capital buted ear- hensive share- inte- Total stock surplus nings income holders rest equity -------------------------------------------------------------- Balance - Beginning of period 506 9 656 85 1,256 22 1,278 Compre- hensive income: Net earnings (loss) for the period - - 101 - 101 (1) 100 Change in other compre- hensive income (loss) - - - (8) (8) - (8) -------------------------- Compre- hensive income (loss) for the period 93 (1) 92 -------------------------- Dividends - - (12) - (12) - (12) Stock options - 1 - - 1 - 1 Redemption of common shares (6) 3 - - (3) - (3) -------------------------------------------------------------- Balance - End of period 500 13 745 77 1,335 21 1,356 -------------------------------------------------------------- -------------------------------------------------------------- The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

Consolidated Statements of Comprehensive Income (Loss) (in millions of Canadian dollars) (unaudited) For the 3-month For the 9-month periods ended periods ended September 30, September 30, 2010 2009 2010 2009 ----------------------------------------------- Net earnings including non-controlling interest for the period 30 34 52 100 ----------------------------------------------- Other comprehensive income (loss) Translation adjustments Foreign currency translation of self-sustaining foreign subsidiaries (6) (61) (21) (105) Change in foreign currency translation related to hedging activities 17 48 9 73 Income taxes (3) (7) (2) (10) Cash flow hedges Change in fair value of foreign exchange forward contracts 3 23 1 52 Change in fair value of interest rate swaps - - (3) - Change in fair value of commodity derivative financial instruments (13) (1) (24) (1) Income taxes 2 (7) 7 (17) ----------------------------------------------- - (5) (33) (8) ----------------------------------------------- Comprehensive income (loss) including non-controlling interest for the period 30 29 19 92 ----------------------------------------------- Less: Comprehensive income (loss) attributable to non-controlling interest - - 1 (1) ----------------------------------------------- Comprehensive income (loss) attributable to Shareholders 30 29 18 93 ----------------------------------------------- ----------------------------------------------- The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

Consolidated Statements of Cash Flows (in millions of Canadian dollars) (unaudited) For the 3-month For the 9-month periods periods 2010 2009 2010 2009 ----------------------------------------------- (restated - note 1a) OPERATING ACTIVITIES FROM CONTINUING OPERATIONS Net earnings attributable to Shareholders for the period 30 34 51 101 Adjustments for Depreciation and amortization 53 53 159 162 Loss (gain) on disposal and others (2) - (2) 1 Impairment and other restructuring costs 1 5 1 8 Unrealized loss (gain) on financial instruments 4 (8) 6 (22) Gain on purchases of senior notes - - - (14) Foreign exchange loss (gain) on long-term debt and financial instruments 4 3 (1) 8 Future income taxes 4 12 (8) 11 Share of results of significantly influenced companies (11) (3) (13) (10) Non-controlling interest - - 1 (1) Others (1) (2) (3) (1) ------------------------------------------------------------------------- 82 94 191 243 Change in non-cash working capital components (9) 23 (62) 23 ------------------------------------------------------------------------- 73 117 129 266 ------------------------------------------------------------------------- INVESTING ACTIVITIES FROM CONTINUING OPERATIONS Purchases of property, plant and equipment (25) (52) (81) (122) Increase in other assets (16) (1) (27) (9) Business acquisitions - (61) (3) (64) ------------------------------------------------------------------------- (41) (114) (111) (195) ------------------------------------------------------------------------- FINANCING ACTIVITIES FROM CONTINUING OPERATIONS Bank loans and advances (2) (3) (2) (22) Change in revolving credit facilities (26) 14 175 (31) Purchases of senior notes - - (165) (18) Change in other long-term debt - 2 - 27 Payments of other long-term debt (1) (3) (6) (8) Early settlement of foreign exchange contracts - - - 8 Redemption of common shares - (1) (4) (3) Dividends (4) (4) (12) (12) ------------------------------------------------------------------------- (33) 5 (14) (59) ------------------------------------------------------------------------- Change in cash and cash equivalents during the period from continuing operations (1) 8 4 12 Change in cash and cash equivalents from discontinued operations - - (2) (3) ------------------------------------------------------------------------- Net change in cash and cash equivalents during the period (1) 8 2 9 Translation adjustments on cash and cash equivalents - - - - Cash and cash equivalents - Beginning of period 22 12 19 11 ------------------------------------------------------------------------- Cash and cash equivalents - End of period 21 20 21 20 ----------------------------------------------- ----------------------------------------------- The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

Selected Segmented Information (in millions of Canadian dollars) (unaudited) As at June 30, 2010, the Company has modified its segmented information disclosure for its Specialty Products segments in order to reflect how management analyses this information. The Specialty Products segment is divided into four subsectors: Industrial packaging, Consumer packaging, Specialty papers and Recovery and recycling. The Company has reclassified comparative figures to conform to the presentation adopted.

For the 3-month For the 9-month periods ended periods ended September 30, September 30, 2010 2009 2010 2009 ----------------------------------------------- Sales Packaging products Boxboard Manufacturing 181 170 538 528 Converting 160 170 475 532 Intersegment sales (22) (19) (65) (67) ----------------------------------------------- 319 321 948 993 Containerboard Manufacturing 155 132 437 393 Converting 227 222 638 652 Intersegment sales (90) (82) (257) (235) ----------------------------------------------- 292 272 818 810 Specialty products Industrial packaging 51 45 146 137 Consumer packaging 20 21 58 62 Specialty papers 74 78 230 239 Recovery and recycling 77 53 228 137 Intersegment sales (2) (2) (7) (6) ----------------------------------------------- 220 195 655 569 Intersegment sales (28) (17) (85) (45) ----------------------------------------------- 803 771 2,336 2,327 Tissue papers Manufacturing and converting 227 210 645 628 Intersegment sales and other (2) (7) (13) (30) ------------------------------------------------------------------------- Total 1,028 974 2,968 2,925 ------------------------------------------------------------------------- ------------------------------------------------------------------------- For the 3-month For the 9-month periods ended periods ended September 30, September 30, 2010 2009 2010 2009 ----------------------------------------------- Operating income (loss) before depreciation and amortization Packaging products Boxboard Manufacturing 2 8 24 33 Converting 18 14 50 42 Others (2) - (4) (2) ----------------------------------------------- 18 22 70 73 Containerboard Manufacturing 29 20 54 81 Converting 24 22 71 40 Others - - (3) (5) ----------------------------------------------- 53 42 122 116 Specialty products Industrial packaging 7 5 20 15 Consumer packaging 2 3 5 9 Specialty papers 5 9 15 29 Recovery and recycling 7 4 19 4 Others - - - (1) ----------------------------------------------- 21 21 59 56 ----------------------------------------------- 92 85 251 245 Tissue papers Manufacturing and converting 25 38 67 119 Corporate (6) 6 (24) (2) ------------------------------------------------------------------------- Operating income before depreciation and amortization 111 129 294 362 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Depreciation and amortization Boxboard (15) (19) (44) (57) Containerboard (18) (16) (54) (48) Specialty products (8) (8) (26) (25) Tissue papers (11) (9) (31) (27) Corporate and eliminations (1) (1) (4) (5) ----------------------------------------------- (53) (53) (159) (162) ----------------------------------------------- Operating income 58 76 135 200 ------------------------------------------------------------------------- ------------------------------------------------------------------------- For the 3-month For the 9-month periods ended periods ended September 30, September 30, 2010 2009 2010 2009 ----------------------------------------------- Purchases of property, plant and equipment Packaging products Boxboard Manufacturing 5 7 11 20 Converting 4 10 10 23 ----------------------------------------------- 9 17 21 43 Containerboard Manufacturing - 3 10 10 Converting 4 3 12 7 ----------------------------------------------- 4 6 22 17 Specialty products Industrial packaging 1 - 1 1 Consumer packaging 2 1 4 2 Specialty papers 2 3 5 6 Recovery and recycling 1 2 3 14 ----------------------------------------------- 6 6 13 23 ----------------------------------------------- 19 29 56 83 Tissue papers Manufacturing and converting 12 13 23 28 Corporate 8 11 14 13 ------------------------------------------------------------------------- Total purchases 39 53 93 124 Disposal of property, plant and equipment (4) (2) (7) (5) Acquisition under capital-lease agreement (4) - (4) - ------------------------------------------------------------------------- 31 51 82 119 Purchases of property, plant and equipment included in accounts payable Beginning of period 8 12 13 14 End of period (14) (11) (14) (11) ------------------------------------------------------------------------- Total investing activities 25 52 81 122 ------------------------------------------------------------------------- ------------------------------------------------------------------------- SOURCE CASCADES INC.

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