Cascades Inc. (CAS) Earnings Call Transcript & Summary

Ladies and gentlemen, good morning, and welcome to our Annual General Meeting of Shareholders. My name is Alain Lemaire, Executive Chairman of the Board of Cascade. As you can see, this year, we are owning this assembly in a virtual format for the very first time in our history because of the COVID-19 pandemic and its repercussions of unprecedented magnitude. While we feel it is important to meet our shareholders in person, the decision to go virtual this year proved necessary. Your help as well as that of our employees, our customers and our partners must come first and ours, too, of course. Even if we can't meet in person, our goal today is to ensure that you can fully participate in our annual meeting. I invite you to ask questions and vote on each of the topics as if you were participating in person, thank you for joining us. This meeting will be conducted in French, but simultaneous translation in English is available, as you may have noticed when you log on to the platform. I hereby declare the meeting open. I will act as Chair of this virtual meeting. I am accompanied today by Mario Plourde, President and Chief Executive Officer; Allan Hogg, Vice President and Chief Financial Officer; and Robert Hall, Chief Strategy, Legal Affairs and Corporate Secretary, who will act as secretary of the meeting. I would now like to ask the secretary to explain some of the procedures related to the meeting.

Thank you, Alain. Thank you. Since the meeting is being held virtually via a live audio webcast, we think it is necessary to establish a few rules to ensure the smooth running of the meeting. Registered shareholders and duly appointed proxy holders who wish to communicate with members of the management team or who wish to submit or ask a question about a proposal may do so by using the instant messaging feature of the virtual interface. Only registered shareholders or their duly appointed proxy holders may participate, ask questions and vote during the meeting. As described in our management proxy circular, duly appointed proxy holders were required to register with our transfer agent and obtain a control number prior to this meeting in order to participate, vote and ask questions. All other proxy holders may attend the meeting as guests. Questions may be submitted by any registered shareholder or duly appointed proxy holder who uses the instant messaging facility of the virtual interface. Questions will be dealt with only during the question period at the end of the meeting. Questions or comments that contain inappropriate language or interfere with the proper conduct of the meeting will not be answered. We will not repeat questions that have already been answered or that are redundant. At today's meeting, all questions will be voted on through a single electronic vote. Registered shareholders and duly appointed proxy holders will be invited to vote on each item of business after all such items have been presented. Therefore, at one time only in due course you will receive a message on the virtual interface asking you to vote. You will have sufficient time to vote on each item, but please note that there will be a time limit for voting. It is important to mention that shareholders who have already voted in advance, do not have to vote again and can simply ignore the online ballot.

Thank you, Robert. I would now ask the secretary to file the notice of meeting before the assembly, as well as the management, proxy circular, the voting proxy form and the certificate of transmittal of these documents and to keep them in the assembly's file. The documents are tabled.

Thank you, Mr. Hogg. Representatives of Computershare investor services, the transfer agent and register of the corporation are acting as scrutineers for this meeting. They will count the votes cast by proxy and those cast online today. I'm advised that the report is now ready and I would invite Mr. Steve Gilbert to read it to us.

Hello, Mr. Chairman, we, the undersigned scrutineers from Computershare Investor Services Inc. hereby report that at least 6 shareholders and/or proxy attending this meeting representing in personal or by proxy share [ 76,689.280 ] million shares of the total outstanding shares of Cascades. I have a report signed by Claire Girard and Steve Gilbert Scrutineers. Thank you.

Thank you, Mr. Gilbert. I hereby declare that the meeting is duly convened and validly constituted to deal with the matters on the agenda. As mentioned by the secretary earlier, voting rights may be exercised on all questions by means of the single electronic ballot. At the appropriate time, you will receive a message on the virtual interface asking you to vote. You will have a limited amount of time to do so. Once all items of business have been voted on, the scrutineers will tabulate the votes for each item. The next item on the agenda is the receipt of the company's consolidated financial statements for the year ended December 31, 2019, together with the independent auditor's report. I would ask the secretary to file the company's consolidated financial statements for the year ended December 31, 2019, together with the independent auditor's report thereon and the affidavit of transmittal certifying that a copy of these documents was sent on May 29, 2020 to shareholders who requested them. I'm tabling the documents.

Thank you, Mr. Hall. The next item on the agenda is the election of the 13 nominees proposed by management for election as directors of the corporation. The Board has established at 13, the number of nominees proposed for election as directors of the corporation. You've noticed from the proxy circular that Mr. Georges Kobrynsky and Mr. Laurence Sellyn are retiring from the Board of Directors after having served as directors of Cascades since 2010 and 2013, respectively. On behalf of the shareholders, the Board of Directors, management and employees of Cascades, I would like to express our gratitude for the work accomplished by George and Lawrence throughout their years of service and to highlight their invaluable contribution to the development of Cascades. Thank you very much, gentlemen. Can a registered holder of common shares or a proxy holder of a shareholder now make a proposal for the nomination of each of the 13 individuals.

My name is Robert Hall, stockholder. Mr. Chairman, I nominate each of the following persons for election as directors of the corporation. Mr. Alain Lemaire, Mr. Louis Garneau, Mrs. Sylvie Lemaire, Ms. Elise Pelletier, Mrs. Sylvie Vachon, Mr. Mario Plourde, Mrs. Michelle Cormier, Mr. Martin Couture, Mr. Patrick Lemaire, Mr. Hubert T. Lacroix; Mrs. Melanie Dunn, Mr. Nelson Gentiletti and Ms. Elif Levesque.

Thank you, Robert. Are there any other candidates to propose? Since there are no other nominees may have registered holder of common shares or a proxy holder of a shareholder now make a proposal for the election of each of these 13 persons.

My name is Allan Hogg, shareholder. Mr. Chairman, I move that each of the 13 nominees be elected to the Board of Directors of the corporation until the next Annual General Meeting or until their successors are elected.

Thank you Allan. Is this motion seconded?

My name is Robert Hall, I am a shareholder and I support this proposal.

Thank you, Robert. The notion has been made and seconded. Again, as was mentioned at the beginning of the meeting, for all of the proposals, the voting today will be done with one electronic ballot. The next item on the agenda is the appointment of the independent auditor for the financial year 2020. The Board of Directors on the advice of the Audit and Finance Committee recommends that PricewaterhouseCoopers, a firm of chartered professional accountants, be appointed as the company's independent auditor and that the directors be authorized to set its remuneration. I see that Mr. Robert Hall wishes to make a proposal to this effect.

Mr. President, my name is Robert Hall, shareholder, and I propose that PricewaterhouseCoopers, a firm of chartered professional accountants, be appointed as independent auditors of the company for the next fiscal year and that the Board of Directors be authorized to fix their remuneration.

Thank you, Robert. Does anyone wish to second the motion?

My name is Allan Hogg, shareholder. Mr. Chairman, I second this motion.

Thank you, Allan. The motion has been made and seconded. The next item on the agenda is the approval of the advisory resolution accepting the company's approach to executive compensation as described in the proxy circular. I see that Mr. Robert Hall wishes to present a proposal to this effect.

Mr. Chairman, my name is Robert Hall, a shareholder. I am proposing the adoption of the advisory resolution expecting the corporation's approach to executive compensation.

Thank you, Robert. Would Allan Hogg support the motion?

My name is Allan Hogg, stockholder. Mr. Speaker, I second this motion.

Thank you, Allan. The motion has been duly made and seconded. The next item on the agenda is the proposal submitted by MÉDAC and described in Appendix A of the proxy circular. Following discussions with representatives of MÉDAC, we agreed that we would present their demand that Cascade adopt a written policy on the representation of women on its Board of Directors and senior management. However, since we have already adopted a written policy on the representation of women on our Board of Directors. That includes gender parity and the written policy on diversity and inclusion in the workplace for the entire organization, it was agreed with the MÉDAC representatives not to submit the proposal to a vote at the meeting. The text proposed by Mr. Willie Gagnon will be read by Mr. Robert Hall. Robert, you have the floor.

"Mr. Chairman, good morning, and good morning, everyone. My name is Willie Gagnon, and I'm acting on behalf of the Mouvement d'éducation et de défense des actionnaires, MÉDAC, which is a shareholder of Cascade. MÉDAC has submitted 2 shareholder proposals to Cascade this year of these and with our consent, only 1 proposal is included in the circular, and none will be submitted to a vote. Indeed, MÉDAC is satisfied with the response given last year to its proposal to align the corporation's ESG policies with its compensation policy as indicated in the circular, under Item 2.6 on Page 16. The proposal has been withdrawn. MÉDAC is also satisfied with the policy in place regarding gender parity on the Board of Directors. Cascade goes much further than most other companies on this important issue. The reasons that led us to agree not to hold a vote on this proposal are also printed in Item 2.6 on Page 16 of the circular and are detailed in the company's response to the proposal on Page 38. We are pleased with this situation."

Thank you, Robert. The next item on the agenda is the approval of the shareholders' resolution to make amendments to the rules of procedure. It will allow the holding of virtual meetings. This is further described in the corporate management proxy circular. So Robert Hall would like to present a proposal to that effect.

Mr. Chairman, my name is Robert Hall, a shareholder, and I move that the amendments to the corporation's bylaws described in the corporation's management proxy circular dated May 1, 2020, and adopted by the corporation's Board of Directors on March 26, 2020 be ratified, confirmed and approved and that any Director or Officer of the corporation be authorized to sign and deliver all documents and take all actions that may be necessary or desirable to implement the provisions of this ordinary resolution.

Thank you, Robert. Would Allan Hogg support the motion?

My name is Allan Hogg, stockholder. Mr. Chairman, I second this motion.

Thank you, Allan. The motion has been duly made and seconded. We are now voting on all of the items on the agenda, namely the election of directors, the appointment of the independent auditor, the approval of the advisory resolution accepting Cascades approach to executive compensation and the adoption of an ordinary resolution ratifying, confirming and approving certain amendments to the company's bylaws. I remind you that shareholders who have already voted in advance do not have to vote again and can simply ignore the online ballot. In a few moments, you will be invited to vote on each of the 4 items on the agenda. When you are invited, go to the voting page. First, press either in favor or obtained button next to the name of each Director nominee. Second, press either for or abstain but next to the resolution regarding the appointment of PricewaterhouseCoopers as the company's independent auditor. Third, press either For or Against button next to the advisory resolution accepting Cascades approach to executive compensation. Fourth, press either the For or Against button next to the resolution approving and ratifying the amendments to the bylaws. Once the electronic ballot is complete, the voting page will disappear and your votes will be automatically recorded. We will allow registered shareholders and proxyholders approximately 2 minutes to complete the electronic ballots. Once the voting is complete, I would invite the scrutineers to compile a report of the results of the vote on all items on the agenda. We will soon be back for the unveiling. [Voting]

Thank you for your patience. I will now invite Mr. Steve Gilbert of Computershare to read the scrutineers report on the preliminary results of the vote.

Thank you, Mr. Chairman, with respect to the election of Directors, I can confirm that all 13 candidates have been duly elected as directors of the corporation. I am also in a position to announce that the resolution regarding the appointment of PricewaterhouseCoopers as independent auditor of the company, the advisory resolution accepting Cascades approach to executive compensation and the resolution ratifying, confirming and approving certain amendments to the company's bylaws have all been adopted. Thank you, Mr. Chairman.

Thank you, Mr. Gilbert. I can confirm that the final results of the vote will be available on SEDAR tomorrow. I would now like to invite Mario Plourde, President and Chief Executive Officer, to take the floor.

Thank you, Alain. Dear shareholders and partners, welcome to your meeting. I'm happy to see you here again this year. Of course, like Alain, I would have much preferred to me to in person rather than through technology. But everyone's health is our priority. Given the exceptional context in which this meeting is being held this year, we will be -- I will be briefer than usual. You've already seen the 2019 results, record results for a second consecutive year. They confirm the significant progress that we have made in terms of growth, optimization and strategic initiatives. But the focus is more on 2020. The impact of the COVID-19 pandemic was as unexpected as it was significant. And yet, within what we've just gone through, I have never been more confident in the future of our company. Over the past 3 years, we have been put to the test. Governments successively adopted measures to slow down economic activity in their jurisdictions. Our activities and products had been recognized as essential in each of the jurisdictions where we operate. While many companies ceased operations and implemented massive layoffs, we asked our employees to redouble their efforts. But with the privilege of operating during the pandemic, with that came heavy responsibilities. The responsibility to protect the health and safety of our employees and the responsibility to meet the demands of our consumers and customers who relied on our product more than ever to keep their supply chains afloat or meet their hygienic needs. One need only recall the craze for hygiene product at the beginning of the pandemic to understand the pressures we faced. But our employees made all the difference. They secured production, put contingency plans in place and delivered the goods. Despite the fear, the unknown and the pressure, they were diligent, dedicated, methodical and responsible. Today, I would like to sincerely thank our managers and all Cascade employees for their efforts and the quality of their work during this difficult time. I would like to pay tribute to all of them, and my hat comes off to them. Our plant employees have quickly adapted to a multitude of new constraints that not only complicate their work but also help to enhance their safety and maintain operations. Our office employees have to perfect their mastery of technological tools in record time to perform their tasks from home. Our sales force maintained close contact with our clients and reassured many of them in a context where face-to-face meetings were no longer possible. Our truck drivers courageously continued to ensure the vital link with our clients, while a majority of citizens were confined to their homes. And finally, our management team mobilized to give the best of itself. Members made the right decisions to maintain our cruising speed. It is the surpassing of all these people and many others. That has allowed Cascade to continue to improve its customers and provide customers with product they need. The past few months have been unprecedented on many levels, and I am very proud of the way that we manage the situation. But all of this was possible because health and safety of our employees was our #1 priority. In both normal times and in times of crisis, we are committed to providing all with a safe and healthy working environment. Thus, from the onset of the crisis in March, in line with the recommendations of public health authorities and our center of health expertise, several additional health and organizational measures were implemented. These include the following: restricting work related travel and encouraging telework, remote work where possible, introducing more frequent and recognized disinfection procedures at our facilities, introducing social distancing measures in the workplace, providing masks and visors to all our plant workers, allowing visits to facilities only for essential activities. Maintaining constant communication with our employees, providing updates, instructions and psychological support when necessary. But despite all these measures, despite all of these measures, a few of our employees were infected by COVID-19. In HK, a specific protocol was implemented with the help of our health center. In order to stop the spread of the disease and to avoid any other consequence on our activities. Fortunately, all infected employees were made better and came back to work. As I mentioned, we did not have any significant upsets in operations since the beginning of the crisis. We were therefore, able to be able to maintain constant communication with all of our partners. We maintained effective links with our customers to ensure service and we made the adjustments necessary as needs changed. And finally, in difficult times, we continued to commit to communities. In addition to local efforts made by -- across North America. Our company contributed to making more than 1 million medical visors. We installed mobile toilets in key sectors in Quebec to help truck drivers. And we provided boxes and transportation to deliver food to those in need. Helping communities where we are present has always been part of our culture and our values. And this commitment was never dismantled during the pandemic. Despite the tragic character of this crisis that we are going through. And despite the numerous challenges, it has been an opportunity for us to shine. We demonstrated our generosity and our dedication, our employees from Cascade have been able to stand out. We worked in favor of the society. Our packaging, hygiene products, recovery services, play essential roles in our fellow citizens' lives now more than ever. We have been aware of what we've been able to do and all are very proud of how we participated. The crisis allowed us to confirm our flexibility and be solid. Very quickly, we have been able to show how strong we can be such as in human resources. And our strategic directions that we took over the past few years, not only hold water, but allow us to continue to create value. We are very reassured by our reaction. Clearly, it's still hard to measure the full impact that this pandemic will have on our economy and on our company. That's why we have decided to self-assess all of our operations to identify potential savings. Furthermore, some see the opportunity to be able to contribute further and to increase sustainable development operations for the next coming -- upcoming years, ensuring our prosperity. In conclusion, I can assure you that Cascade is ready for economic start-up and ready to participate fully. The pandemic has caused many challenges, but also many opportunities for our business, even if it is difficult to understand what the next few months have in store for us, we remain optimistic; careful but optimistic. We will be able to continue to create value and respect our values and all this is possible, thanks to your support. Thank you very much.

Congratulations, Mario, and thank you to the entire organization. Such a challenge. We do need to appreciate the challenge, but it's not over. We will now move into our question period. We will answer questions from all registered shareholders or any appointed -- duly appointed proxy holders wishing to bring to attention to this meeting. For each question, we will summarize the question and read aloud the name of the person who asked the question, and if applicable, the name of the entity they represent. Mr. Hall, you will be the spokesperson for questions.

Thank you, Alain. We received the first question from Mr. Willie Gagnon from the Mouvement d'éducation et de défense des actionnaires, the MÉDAC. This is the question. For more than 20 years, we have been in the habit of, and it is our strict right as shareholders -- we've been in the habit of speaking verbally at shareholder meetings, in support of shareholder proposals and motions that we submit to the corporation each year and at various other times during the meeting. These oral presentations were not made possible this year with Cascade, even though other publicly traded businesses, including BCE, did so. Here's another question. We are keenly aware of the very exceptional situation the world has faced with respect to this global pandemic of the 2019 coronavirus, otherwise known as COVID-19. In these circumstances, we understand the reasons including government directives, why this annual meeting of the company's shareholders is being held virtually. We also understand the reasons why the measures put in place to ensure the holding of this meeting are, in many cases, binding and why decisions regarding these measures had to be made very quickly. However, we agree with the Canadian Securities Administrators at CSA, ISS and Glass Lewis on this issue. Virtual annual meetings should scrupulously preserve the rights of shareholders as guaranteed by custom, doctrine, case law, as well as by the act and its regulations, both in letter and in spirit. The very numerous annual meetings of shareholders that are being held virtually this year exceptionally should in no way set the standard in this regard. It goes without saying that this is what can be done in a normal meeting in person, which should preside over what should be made possible by a virtual meeting and nothing else, especially not technical considerations or questions of cost. In any case, the main justifications for the current measures lie in the exceptional nature of the current health crisis. Normally, the situation would be quite different, and today's events cannot serve as a precedent to justify things in the future. We will be scrupulously vigilant in the interest of all shareholders and for society in general. Question. What would be different in the organization of our virtual annual meeting if the company had prepared it in the normal course of business without a health crisis or emergency? Will it be possible to make a verbal comment or question in upcoming virtual meetings? If not, why not? We believe that this should be made possible, Alain. I will turn the floor over to you to answer this question.

Thank you, Robert. Thank you, Mr. Gagnon, for presenting this question. Very clearly, in normal context, we would have been meeting physically, and we would be conducting a question-and-answer session with microphones, of course. This meeting now is virtual. So it's not possible, as we mentioned. The COVID-19 context changed the situation. And in order to protect the health of our shareholders, we decided to proceed using technology. It is to anticipate this type of situation that a proposal to amend our bylaws was submitted. In future years, of course, we hope that we will be able to meet face by face -- face-to-face. That is indeed our firm intention. If we have to hold a virtual meeting again, rest assured that we will take your comments into account. Not just the comments from the MÉDAC, but from every shareholder in the same way that our past AGMs had been done. We are committed to being transparent. Are there any other questions that have appeared on the screen, Mr. Hall?

For now, there are no other questions.

Do we give ourselves a few more seconds? No. Therefore, given that there are no other questions, we have concluded our question period during the meeting. Given that we have exhausted all topics, I declare the adjournment of the meeting. Any journalist wishing to have individual interviews after the meeting are invited to communicate with Hugo D'Amours, Public Affairs and Communications Vice President, his information is on the screen. Thank you very much for your attention and we hope to see you next year, in person. Thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]