EXHIBIT
13.3


MANAGEMENT’S
DISCUSSION & ANALYSIS





FINANCIAL
OVERVIEW - 2014


The
start of 2014 was marked by slower-than-usual business activities in January and
February, combined with harsh weather conditions prevailing in Québec, Ontario
and the U.S. Northeast. This led to lower-than-expected sales volumes and higher
energy, transportation and logistics costs in the first quarter. However, our
results for the year benefited from the depreciation of the Canadian dollar
against the U.S. dollar and the euro, as well as higher selling prices in our
Containerboard segment, but these factors were more than offset by higher raw
materials costs compared to the previous year due to increased use of virgin
pulp and external purchases of containerboard parent rolls, mainly from
Greenpac. In 2014, we completed several business transactions with the intention
of focusing our efforts and resources on strategic core businesses that we want
to grow in the future. Please refer to the 2014 Annual Report for all the
details.








FINANCIAL
OVERVIEW - 2015


Led
by past years’ efforts and initiatives, our operating results of 2015 were the
highest ever achieved on a comparable asset base as we benefited from favourable
exchange rates, higher volumes and lower fibre costs. The first two quarters
have been challenging for our Tissue Papers activities given the ramp-up of two
new sites in the U.S., destocking efforts and production downtimes for equipment
maintenance and upgrades. However, this sector showed solid results in the
second half as sales and operational improvement initiatives led to better
profit margins. Our Containerboard Group improved its results with higher
average selling prices and lower fibre costs, and the Greenpac mill continues to
improve its performance and is positively contributing to our net earnings. Our
Boxboard Europe sector’s profitability decreased mainly because of higher raw
materials costs for this market while our Specialty Products Group achieved
strong results compared to last year resulting from lower fibre costs and
favourable currency impact.





Sales
increased by 8% , or $300
million ,
to reach $3,861
million in 2015, compared to $3,561
million in 2014. The 14% average depreciation of the Canadian dollar against the U.S. dollar largely
explains this increase. Higher volumes in all of our sectors also increased
sales in 2015 compared to 2014. As well, the strong average selling prices
favourable impact in our containerboard activities, surpassing the negative
impact of the other segments of the Corporation, also contributed to this
increase in sales.





The
following graphics show the breakdown of sales, before intercompany
eliminations, and operating income before depreciation and amortization by
business segment:


SALES
      BREAKDOWN1
    OPERATING
      INCOME BEFORE DEPRECIATION AND AMORTIZATION BREAKDOWN2





1
Excluding inter-segment sales and Corporate activities.


2
Excluding specific items and Corporate activities. Please refer to
’’Supplemental Information on Non-IFRS Measures’’ for a complete reconciliation.











1


---




For
the year, the Corporation posted a net loss of $65
million ,
or $0.69 per
common share, compared to a net loss of $147
million ,
or $1.57 per
common share in 2014. Excluding specific items, which are discussed in detail on
pages 41
to 44 ,
we posted net earnings of $112
million during the period, or $1.18 per
common share, compared to net earnings of $20
million or $0.21 per
common share in 2014. The Corporation recorded an operating income of $153
million during the year, compared to $137
million in 2014. Excluding specific items, operating income stood at $236
million during the year, compared to $166
million in 2014 (see the “Supplemental Information on Non-IFRS Measures” section for
reconciliation of these amounts).





The
increase of $0.88 in
our net earnings per share in 2015 compared to 2014, including specific items,
can be explained by the following factors:


(in
      Canadian dollars)Change
      in specific items (see reconciliation in Supplemental information on
      non-IFRS measures on page 12)
    $
    (0.09
    )Change
      in net loss from continuing operations including non-controlling interest
      and normalized at a 30% income tax rate
    $
    0.60Withholding
      tax provision - North American capital structure optimization done in
      2014
    $
    0.15Change
      in tax provision - Other items (see other items analysis on
      p.61)
    $
    0.09Change
      in share of results of associates and joint ventures - net of income taxes
      and change in non-controlling interest
    $
    0.18Change
      in net earnings (loss) from discontinued operations - net of income
      taxes
    $
    (0.05
    )Increase
      in net earnings per share
    $
    0.88





FORWARD-LOOKING STATEMENTS AND SUPPLEMENTAL INFORMATION ON
NON-IFRS MEASURES





The
following 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 consolidated financial statements and
accompanying notes for the years ended December 31, 2015 and 2014. Information
contained herein includes any significant developments as at March
10, 2016 ,
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.





This
MD&A is intended to provide readers with the information that Management
believes is required to gain an understanding of Cascades’ current results and
to assess the Corporation’s future prospects. Accordingly, 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,
the prices and availability of raw materials, changes in the 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 analyses that are intended to provide the
reader with a better understanding of the trends related to our business
activities. These items are based on the best estimates available to the
Corporation.





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 (IFRS). Unless otherwise
indicated or if required in the context, the terms “we”, “our” and “us” refer to
Cascades Inc. and all of its subsidiaries, joint ventures and associates. The
financial information included in this analysis also contains certain data that
are not measures of performance under IFRS (“non-IFRS measures”). For example,
the Corporation uses net debt, working capital and working capital as a
percentage of sales, return on capital employed, consolidated return on assets,
operating income, operating income before depreciation and amortization and
operating income before depreciation and amortization excluding specific items
(OIBD or OIBD excluding specific items) as these are the measures used by
Management to assess the operating and financial performance of the
Corporation’s operating segments. Moreover, we believe that OIBD is a measure
often used by investors to assess a corporation’s operating performance and its
ability to meet debt service requirements. OIBD has limitations as an analytical
tool, and should not be considered in isolation or as a substitute for an
analysis of our results as reported under IFRS. These limitations include the
following:





|  |                                                                                                              
|- | -------------------------------------------------------------------------------------------------------------
|• | OIBD
      excludes certain income tax payments that may represent a reduction in
      cash available to us.

|  |                                                                                                                                     
|- | ------------------------------------------------------------------------------------------------------------------------------------
|• | OIBD
      does not reflect our cash expenditures, or future requirements for capital
      expenditures or contractual commitments.

|  |                                                                                                   
|- | --------------------------------------------------------------------------------------------------
|• | OIBD
      does not reflect changes in, or cash requirements for, our working capital
      needs.

|  |                                                                                                                                                   
|- | --------------------------------------------------------------------------------------------------------------------------------------------------
|• | OIBD
      does not reflect the interest expense, or the cash requirements necessary
      to service interest or principal payments on our
  debt

|  |                                                                                                                                                                                                                                                              
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | Although
      depreciation and amortization expenses are non-cash charges, the assets
      being depreciated and amortized will often have to be replaced in the
      future, and OIBD does not reflect any cash requirements for such
      replacements.

|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | The
      specific items excluded from OIBD, operating income, financing expense,
      net earnings (loss) and cash flow from operating activities from
      continuing operations mainly include charges for (reversals of) impairment
      of assets, restructuring gains or costs, accelerated depreciation of
      assets due to restructuring measures, loss on refinancing of long-term
      debt, deferred tax assets reversals, premiums paid on long-term debt
      refinancing, 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, foreign exchange gains or losses on long-term debt,
      specific items of discontinued operations and other significant items of
      an unusual or non-recurring nature. Although we consider these items to be
      non-recurring and less relevant to evaluating our performance, some of
      them might take place in the future and will reduce the cash available to
      us.




Due
to these limitations, OIBD should not be used as a substitute for net earnings
(loss) or cash flow from operating activities from continuing operations as
determined in accordance with IFRS, nor is it necessarily indicative of whether
or not cash flow will be sufficient to fund our cash requirements. In addition,
our definitions of OIBD may differ from those of other corporations. Any such
modification or reformulation may be significant. A reconciliation of OIBD to
net earnings (loss) from continuing operations and to net cash flow from
operating activities from continuing operations, which we believe to be the
closest IFRS performance and liquidity measure to OIBD, is outlined in the
“Supplemental Information on Non-IFRS Measures” section.


2


---




BUSINESS
DRIVERS





Cascades’
results are impacted by the fluctuations of the U.S. dollar and euro against the
Canadian dollar, as well as by energy prices and the cost of raw
materials.


SALES
      +
    
    COSTS
      --
      Selling prices
    
    -
      Freight-
      Demand for packaging products and tissue papers
    
    -
      Energy prices, mainly electricity and natural gas-
      Trend towards sustainable products, mainly made of recycled
      fibres
    
    -
      Fibre prices and availability (recycled papers, virgin pulp and woodchips)
      and production recipes-
      Foreign exchange rates
    
    -
      Foreign exchange rates-
      Population growth
    
    -
      Labour-
      Industrial production
    
    -
      Chemical product prices-
      Product mix, substitution and innovation
    
    -
      Capacity utilization rates and production downtimeEXCHANGE
      RATES
    
    ENERGY
      COSTSCascades’
      results are impacted by fluctuations of the Canadian dollar against the
      U.S. dollar and euro. Please refer to the "Sensitivity Table" section for
      more details on these impacts.
      
      For
      the year 2015, the average value of the Canadian dollar lost 14% against
      the U.S. dollar compared to 2014. Each $0.01 change in the U.S. dollar
      against its Canadian counterpart has an impact of approximately $3 million
      on our annual OIBD.
      
      Against
      the euro, the Canadian currency appreciated by 3% in 2015 compared to
      2014. Each €0.02 change of the euro against the Canadian dollar has an
      impact of approximately $1 million on our annual OIBD.
    
    The
      variation of energy costs directly impacts our results as illustrated in
      the "Sensitivity Table" section. It can also indirectly impact our results
      through its influence on other costs, such as chemical product prices,
      freight and other costs that are sensitive to energy prices.
      
      With
      regard to energy costs, the average price of natural gas decreased by 40%
      in 2015 compared to the previous year.
      
      In
      the case of crude oil, the average price was 49% lower in 2015 than in
      2014. This decrease was caused by the oversupply on the global
      market.





















































3


---




SENSITIVITY
TABLE 1





The
following table provides a quantitative estimate of the impact on Cascades’
annual OIBD of potential changes in the prices of our main products, the costs
of certain raw materials and energy, as well as the CAN$/US$ exchange rate,
assuming, for each price change, that all other variables remain constant. This
is based on Cascades’ 2015 manufacturing and converting external shipments and
consumption quantities. However, it is important to note that this table does
not consider the risk management from hedging instruments used by the
Corporation. In fact, Cascades’ 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.





With
regards to the CAN$/US$ exchange rate, we do not consider Cascades’ indirect
sensitivity. This sensitivity refers to the fact that some of Cascades’ selling
prices and raw materials costs in Canada are based on reference prices and costs
in U.S. dollars converted into Canadian dollars. In other words, the exchange
rate fluctuation can have a direct influence on sales and purchases in Canada
from Canadian facilities. However, because this fluctuation is difficult to
measure precisely, we do not include it in the following table. It also excludes
the impact of the exchange rate on the Corporation’s Canadian units’ working
capital items and cash positions denominated in other currency than CAN$. The
foreign exchange rates also have an impact on the translation in CAN$ of the
results of our non-Canadian units.


SHIPMENTS/CONSUMPTION
      (’000 SHORT TONS, ’000 MMBTU FOR NATURAL GAS)
    
    INCREASE
    OIBD
      IMPACT                              (IN MILLIONS OF CAN$)SELLING
      PRICE (MANUFACTURING AND CONVERTING)2North
      AmericaContainerboard
    1,120
    
    US$25/s.t.
    36Specialty
      Products (Industrial Packaging only)
    170
    
    US$25/s.t.
    6Tissue
      Papers
    600
    
    US$25/s.t.
    191,890
    
    
    61EuropeBoxboard
    1,110
    
    €25/s.t.
    393,000
    
    
    100RAW
      MATERIALS2Recycled
      PapersNorth
      AmericaBrown
      grades (OCC and others)
    1,010
    
    US$15/s.t.
    (20
    )Groundwood
      grades (ONP and others)
    60
    
    US$15/s.t.
    (1
    )White
      grades (SOP and others)
    540
    
    US$15/s.t.
    (10
    )1,610
    
    
    (31
    )EuropeBrown
      grades (OCC and others)
    770
    
    €15/s.t.
    (16
    )Groundwood
      grades (ONP and others)
    170
    
    €15/s.t.
    (4
    )White
      grades (SOP and others)
    90
    
    €15/s.t.
    (2
    )1,030
    
    
    (22
    )2,640
    
    
    (53
    )Virgin
      pulpNorth
      America
    140
    
    US$30/s.t.
    (6
    )Europe
    90
    
    €30/s.t.
    (4
    )230
    
    
    (10
    )Natural
      gasNorth
      America
    8,500
    
    US1.00/mmBtu
    (12
    )Europe
    4,500
    
    €1.00/mmBtu
    (6
    )13,000
    
    
    (18
    )Exchange
      rate3Sales
      less purchases in US$ from Canadian operations
    
    CAN$/US$0.01
      change
    2U.S.
      subsidiaries translation
    
    CAN$/US$0.01
      change
    1European
      subsidiaries translation
    
    CAN$/€0.02
      change
    1


1
 Sensitivity calculated according to 2015 volumes or consumption, excluding
discontinued operations, with an exchange rate of CAN$/US$ 1.28 and CAN$/€ 1.42,
excluding hedging programs and


the impact of related expenses such as discounts, commissions on sales and
profit-sharing.


2
 Based on 2015 external manufacturing and converting shipments, as well as 2015
fibre and pulp consumption. Including purchases from our subsidiary Cascades
Recovery.


3
 As an example, from CAN$/US$ 1.28 to CAN$/US$ 1.29 and from CAN$/€ 1.42 to
CAN$/€ 1.44.


4


---




KEY
PERFORMANCE INDICATORS





In
order to achieve our long-term objectives while also monitoring our action plan,
we use several key performance indicators, including the following: 2013
    
    2014
    
    2015TOTAL
    
    Q1
    
    Q2
    
    Q3
    
    Q4
    
    TOTAL
    
    Q1
    
    Q2
    
    Q3
    
    Q4
    
    TOTALOPERATIONALTotal
      shipments (in ’000 s.t.)1Packaging
      ProductsContainerboard
    1,063
    
    254
    
    286
    
    287
    
    277
    
    1,104
    
    268
    
    282
    
    296
    
    268
    
    1,114Boxboard
      Europe
    1,085
    
    290
    
    283
    
    257
    
    263
    
    1,093
    
    296
    
    286
    
    266
    
    263
    
    1,111Specialty
      Products2
    168
    
    41
    
    41
    
    41
    
    37
    
    160
    
    41
    
    44
    
    45
    
    40
    
    1702,316
    
    585
    
    610
    
    585
    
    577
    
    2,357
    
    605
    
    612
    
    607
    
    571
    
    2,395Tissue
      Papers
    583
    
    130
    
    140
    
    153
    
    144
    
    567
    
    137
    
    152
    
    163
    
    145
    
    597Total
    2,899
    
    715
    
    750
    
    738
    
    721
    
    2,924
    
    742
    
    764
    
    770
    
    716
    
    2,992Integration
      rate3Containerboard
    55
    %
    55
    %
    50
    %
    54
    %
    49
    %
    52
    %
    52
    %
    50
    %
    51
    %
    54
    %
    51
    %Tissue
      Papers
    70
    %
    71
    %
    70
    %
    69
    %
    69
    %
    70
    %
    68
    %
    64
    %
    65
    %
    70
    %
    67
    %Manufacturing
      capacity utilization rate4Packaging
      ProductsContainerboard
    89
    %
    85
    %
    93
    %
    94
    %
    90
    %
    91
    %
    91
    %
    91
    %
    95
    %
    90
    %
    92
    %Boxboard
      Europe
    95
    %
    101
    %
    98
    %
    89
    %
    91
    %
    95
    %
    101
    %
    97
    %
    91
    %
    89
    %
    94
    %Tissue
      Papers
    97
    %
    90
    %
    95
    %
    100
    %
    89
    %
    93
    %
    84
    %
    90
    %
    95
    %
    89
    %
    90
    %Consolidated
      total
    93
    %
    93
    %
    96
    %
    93
    %
    90
    %
    93
    %
    93
    %
    93
    %
    93
    %
    89
    %
    92
    %Energy
      cons.5-
      GJ/ton
    11.22
    
    11.92
    
    11.07
    
    10.36
    
    10.69
    
    11.03
    
    11.19
    
    10.29
    
    10.14
    
    10.18
    
    10.45Work
      accidents6-
      OSHA frequency rate
    3.2
    
    3.3
    
    3.5
    
    3.5
    
    2.9
    
    3.3
    
    3.0
    
    1.9
    
    3.1
    
    2.6
    
    2.6FINANCIALReturn
      on assets7Packaging
      ProductsContainerboard
    11
    %
    12
    %
    13
    %
    13
    %
    13
    %
    13
    %
    15
    %
    16
    %
    18
    %
    19
    %
    19
    %Boxboard
      Europe
    7
    %
    9
    %
    10
    %
    11
    %
    10
    %
    10
    %
    10
    %
    10
    %
    10
    %
    10
    %
    10
    %Specialty
      Products
    12
    %
    12
    %
    12
    %
    14
    %
    13
    %
    13
    %
    14
    %
    14
    %
    15
    %
    17
    %
    17
    %Tissue
      Papers
    18
    %
    17
    %
    15
    %
    13
    %
    12
    %
    12
    %
    11
    %
    11
    %
    12
    %
    13
    %
    13
    %Consolidated
      return on assets
    9.3
    %
    9.5
    %
    9.7
    %
    9.9
    %
    9.4
    %
    9.4
    %
    9.7
    %
    10.0
    %
    10.8
    %
    11.2
    %
    11.2
    %Return
      on capital employed8
    4.0
    %
    4.1
    %
    4.2
    %
    4.4
    %
    4.1
    %
    4.1
    %
    4.4
    %
    4.8
    %
    5.5
    %
    5.6
    %
    5.6
    %Working
      capital9In
      millions of $, at end of period
    455
    
    526
    
    469
    
    460
    
    379
    
    379
    
    409
    
    428
    
    472
    
    406
    
    406%
      of sales10
    12.9
    %
    12.9
    %
    12.7
    %
    12.6
    %
    12.3
    %
    12.3
    %
    11.9
    %
    11.6
    %
    11.3
    %
    11.3
    %
    11.3
    %





1
  Shipments do not take into account the elimination of business sector
inter-company shipments.


2
  Industrial Packaging shipments only, for all periods.


3
  Defined as: Percentage of manufacturing shipments transferred to our
converting operations. Containerboard excludes manufacturing shipments from our
North American boxboard operations.


4
  Defined as: Manufacturing internal and external shipments/practical capacity.
Excluding discontinued operations and Specialty Products Group manufacturing
activities.


5
  Average energy consumption for manufacturing mills only, excluding RdM. Not
adjusted for discontinued operations.


6
  Excluding RdM for all periods and Djupafors starting in Q2 2014. Including
Greenpac. Not adjusted for discontinued operations.


7
  Return on assets is a non-IFRS measure defined as the last twelve months’
(“LTM”) OIBD excluding specific items/LTM quarterly average of total assets. It
includes or excludes significant business


acquisitions and disposals, respectively, of the last twelve months. Not
adjusted for discontinued operations.


8
  Return on capital employed is a non-IFRS measure and is defined as the
after-tax (30%) amount of the LTM operating income, including our share of core
joint ventures, excluding specific items, divided by the


LTM quarterly average of capital employed. Capital employed is defined as
the total assets less trade and other payables. It includes or excludes
significant business acquisitions and disposals, respectively,


of the last twelve months. Not adjusted for assets of disposal group
classified as held for sale. Starting in Q1 2015, it includes our investment in
Greenpac on an LTM basis. Not adjusted for discontinued


operations.


9
  Working capital includes accounts receivable (excluding the short-term portion
of other assets) plus inventories less trade and other payables. Not adjusted
for assets of disposal group classified as held for sale.


Not adjusted for discontinued operations.


10
% of sales = Average LTM working capital/LTM sales. It includes or excludes
significant business acquisitions and disposals, respectively, of the last
twelve months. Not adjusted for assets of disposal group


classified as held for sale. Not adjusted for discontinued
operations.


5


---




HISTORICAL
FINANCIAL INFORMATION 2013
    
    2014
    
    2015(in
      millions of Canadian dollars, unless otherwise noted)
    TOTAL
    
    Q1
    
    Q2
    
    Q3
    
    Q4
    
    TOTAL
    
    Q1
    
    Q2
    
    Q3
    
    Q4
    
    TOTALSalesPackaging
      ProductsContainerboard
    1,095
    
    271
    
    305
    
    310
    
    295
    
    1,181
    
    300
    
    322
    
    353
    
    326
    
    1,301Boxboard
      Europe
    786
    
    232
    
    220
    
    193
    
    196
    
    841
    
    216
    
    202
    
    205
    
    202
    
    825Specialty
      Products
    548
    
    140
    
    146
    
    145
    
    137
    
    568
    
    135
    
    146
    
    151
    
    147
    
    579Inter-segment
      sales
    (50
    )
    (13
    )
    (13
    )
    (10
    )
    (13
    )
    (49
    )
    (12
    )
    (13
    )
    (15
    )
    (15
    )
    (55
    )2,379
    
    630
    
    658
    
    638
    
    615
    
    2,541
    
    639
    
    657
    
    694
    
    660
    
    2,650Tissue
      Papers
    1,033
    
    245
    
    257
    
    282
    
    270
    
    1,054
    
    274
    
    299
    
    341
    
    322
    
    1,236Inter-segment
      sales and Corporate activities
    (42
    )
    (12
    )
    (5
    )
    (11
    )
    (6
    )
    (34
    )
    (3
    )
    (6
    )
    (9
    )
    (7
    )
    (25
    )Total
    3,370
    
    863
    
    910
    
    909
    
    879
    
    3,561
    
    910
    
    950
    
    1,026
    
    975
    
    3,861Operating
      income (loss)Packaging
      ProductsContainerboard
    104
    
    22
    
    29
    
    34
    
    23
    
    108
    
    39
    
    41
    
    58
    
    32
    
    170Boxboard
      Europe
    11
    
    15
    
    11
    
    4
    
    (1
    )
    29
    
    9
    
    9
    
    5
    
    (51
    )
    (28
    )Specialty
      Products
    16
    
    4
    
    (4
    )
    8
    
    (2
    )
    6
    
    5
    
    9
    
    6
    
    11
    
    31131
    
    41
    
    36
    
    46
    
    20
    
    143
    
    53
    
    59
    
    69
    
    (8
    )
    173Tissue
      Papers
    106
    
    9
    
    11
    
    20
    
    8
    
    48
    
    2
    
    10
    
    30
    
    22
    
    64Corporate
      activities
    (61
    )
    (14
    )
    (10
    )
    (15
    )
    (15
    )
    (54
    )
    (27
    )
    (8
    )
    (22
    )
    (27
    )
    (84
    )Total
    176
    
    36
    
    37
    
    51
    
    13
    
    137
    
    28
    
    61
    
    77
    
    (13
    )
    153OIBD
      excluding specific items1Packaging
      ProductsContainerboard
    150
    
    31
    
    43
    
    46
    
    44
    
    164
    
    52
    
    55
    
    68
    
    56
    
    231Boxboard
      Europe
    57
    
    24
    
    20
    
    14
    
    14
    
    72
    
    17
    
    19
    
    14
    
    13
    
    63Specialty
      Products
    41
    
    8
    
    10
    
    12
    
    10
    
    40
    
    10
    
    14
    
    18
    
    16
    
    58248
    
    63
    
    73
    
    72
    
    68
    
    276
    
    79
    
    88
    
    100
    
    85
    
    352Tissue
      Papers
    133
    
    20
    
    23
    
    32
    
    21
    
    96
    
    15
    
    23
    
    43
    
    38
    
    119Corporate
      activities
    (39
    )
    (8
    )
    (6
    )
    (11
    )
    (7
    )
    (32
    )
    (9
    )
    (8
    )
    (9
    )
    (19
    )
    (45
    )Total
    342
    
    75
    
    90
    
    93
    
    82
    
    340
    
    85
    
    103
    
    134
    
    104
    
    426Net
      earnings (loss)
    11
    
    (1
    )
    (83
    )
    (16
    )
    (47
    )
    (147
    )
    (35
    )
    24
    
    22
    
    (76
    )
    (65
    )Excluding
      specific items1
    29
    
    1
    
    7
    
    4
    
    8
    
    20
    
    17
    
    24
    
    49
    
    22
    
    112Net
      earnings (loss) per common share (in dollars)Basic
    $
    0.11
    
    $
    (0.01
    )
    $
    (0.88
    )
    $
    (0.17
    )
    $
    (0.51
    )
    $
    (1.57
    )
    $
    (0.37
    )
    $
    0.25
    
    $
    0.24
    
    $
    (0.81
    )
    $
    (0.69
    )Basic,
      excluding specific items1
    $
    0.31
    
    $
    0.01
    
    $
    0.08
    
    $
    0.04
    
    $
    0.08
    
    $
    0.21
    
    $
    0.18
    
    $
    0.25
    
    $
    0.52
    
    $
    0.23
    
    $
    1.18Net
      earnings (loss) from continuing operations per basic common share (in
      dollars)
    $
    0.44
    
    $
    (0.02
    )
    $
    (0.23
    )
    $
    (0.20
    )
    $
    (0.23
    )
    $
    (0.68
    )
    $
    (0.39
    )
    $
    0.27
    
    $
    0.24
    
    $
    (0.82
    )
    $
    (0.70
    )Cash
      flow from continuing operations
    231
    
    57
    
    34
    
    82
    
    71
    
    244
    
    35
    
    70
    
    110
    
    107
    
    322Net
      debt2
    1,612
    
    1,708
    
    1,645
    
    1,640
    
    1,613
    
    1,613
    
    1,691
    
    1,693
    
    1,741
    
    1,721
    
    1,721US$/CAN$
      - Average
    $
    0.97
    
    $
    0.91
    
    $
    0.92
    
    $
    0.92
    
    $
    0.88
    
    $
    0.91
    
    $
    0.81
    
    $
    0.81
    
    $
    0.76
    
    $
    0.75
    
    $
    0.78EURO€/CAN$
      - Average
    $
    0.73
    
    $
    0.66
    
    $
    0.67
    
    $
    0.69
    
    $
    0.70
    
    $
    0.68
    
    $
    0.72
    
    $
    0.74
    
    $
    0.69
    
    $
    0.68
    
    $
    0.70Natural
      Gas Henry Hub - US$/mmBtu
    $
    3.65
    
    $
    4.94
    
    $
    4.67
    
    $
    4.06
    
    $
    4.00
    
    $
    4.42
    
    $
    2.98
    
    $
    2.64
    
    $
    2.77
    
    $
    2.27
    
    $
    2.67





Sources:
Bloomberg and Cascades.


1
 See “Forward-looking statements and supplemental information on non-IFRS
measures” on page 2.


2
 Defined as total debt less cash and cash equivalents. Refer to ’’Supplemental
information on non-IFRS measures’’ for a reconciliation of this amount for
current and comparative periods.





6


---




BUSINESS
HIGHLIGHTS





In
2015 and 2014, the Corporation completed transactions in order to optimize its
asset base and streamline its cost structure. The following transactions and
announcements, which occurred in both years, should be taken into consideration
when reviewing the overall or segmented analysis of the Corporation’s
results.





BUSINESS
CLOSURES, RESTRUCTURING AND DISPOSALS


BOXBOARD
EUROPE GROUP


|  |                                                                                                                                                                                                                                                                                                                                                                                 
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | On
      April 9, 2014, following a consultation process with the unions, the
      Corporation announced the closure of its subsidiary Cascades Djupafors,
      located in Ronneby, Sweden, which definitively ceased its operations on
      June 15, 2014. Results and cash flows are classified as discontinued
      operations for the current and comparative
  periods.

SPECIALTY
PRODUCTS GROUP


|  |                                                                                                                                                                                                                                                                                                                                             
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | On
      July 9, 2014, we announced the permanent closure of our kraft paper
      manufacturing activities located in East Angus, Québec. On September 26,
      2014, we definitively ceased operations of the mill. Results and cash
      flows are classified as discontinued operations for the current and
      comparative periods.

|  |                                                                                                                                                                                                                                                   
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | On
      June 30, 2014, we sold our fine papers activities to Les Entreprises
      Rolland, a subsidiary of H.I.G. Capital. Results and cash flows are
      classified as discontinued operations for the current and comparative
      periods.

CONTAINERBOARD
GROUP


|  |                                                                                                                                                                                                                                                                                                                                                             
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | On
      December 11, 2014, the Corporation announced that it had reached an
      agreement for the sale of its North American boxboard manufacturing and
      converting assets and the transaction was closed on February 4, 2015.
      Results and cash flows are classified as discontinued operations for the
      current and comparative periods.

|  |                                                                                                                                                                                                                                                                                                            
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | On
      November 27, 2013, the Corporation announced the creation of a new joint
      venture with Maritime Paper Products Limited in the Atlantic provinces
      related to our plants in St. John’s, Newfoundland, and Moncton, New
      Brunswick. The transaction was closed on January 31,
  2014.




SIGNIFICANT
FACTS AND DEVELOPMENTS


i . On
November 27, 2015, the Corporation entered into an agreement for the acquisition
of the 27% minority interest of Cascades Recovery for a cash consideration of
$32 million, payable over a 10-year period. This transaction consolidates our
leading position in the recovery and recycling activities in Canada.


ii . On
July 7, 2015, the Corporation entered into an agreement with its lenders to
extend and amend its existing $750 million credit facility. The amendment
provides that the term of the facility is extended to July 2019. The applicable
pricing grid is slightly lowered to better reflect market conditions. The other
existing financial conditions are essentially unchanged.


iii . On
May 19, 2015, the Corporation issued US$250 million ($305 million) aggregate
principal amount of 5.75% senior notes due in 2023. The Corporation used the
proceeds from this offering of notes to repurchase a total of US$250 million
aggregate principal amount of 7.875% senior notes due in 2020 for a total
consideration of US$250 million ($305 million). The Corporation also paid
premiums of US$11 million    ($13 million) to repurchase the 2020 notes as well
as fees and expenses in connection with the offering and the tender offer
totalling $5 million. The refinancing of these notes will reduce our future
interest expense by approximately US$6 million annually.


iv . On
April 17, 2015, we announced the installation of a new state-of-the-art
converting line in the Candiac plant, located in Québec, for the manufacturing
of high-quality paper towels. In addition, we upgraded two converting lines in
Candiac and Kingsey Falls, Québec. The new line in Candiac started production in
July 2015, while the improved converting lines are scheduled to begin production
in the second quarter of 2016.


v. During
the fourth quarter of 2014, we announced the acquisition and installation, for
$13 million, of two new printing presses for the Containerboard activities in
our Vaudreuil and Drummondville, Québec plants, which specialize in
manufacturing corrugated packaging products. In addition, we invested $14
million in 2015, part of a global project of $26 million announced on November
3, 2015 in our Drummondville plant, for the expansion of the building and
installation of a new corrugator. It officially started operating at the
beginning of 2016, and should positively contribute to our results during the
year.


vi. In
2014, we refinanced our 7.75% unsecured senior notes of US$500 million ($540
million) and $200 million, due in 2017 and in 2016, respectively. The
Corporation issued 5.50% unsecured senior notes of US$550 million ($596
million), due in 2022, and 5.50% unsecured senior notes of $250 million, due in
2021. We allocated the proceeds of these new notes to repurchase the US$500
million ($540 million) notes due in 2017 and the $200 million notes due in
2016. The remaining amounts (US$50 million ($56 million) and $50 million) were
used to pay a premium totalling $31 million plus refinancing costs of $13
million and to reduce our credit facility utilization. The refinancing of these
notes reduces our future interest expense by approximately US$8 million and $6
million annually.


7


---




SPECIFIC
ITEMS INCLUDED IN OPERATING INCOME AND NET EARNINGS (LOSS)





The
Corporation incurred some specific items in
2015 and 2014 that adversely or positively affected its operating results. We believe it is
useful for readers to be aware of these items, as they provide a measure of
performance with which to compare the Corporation’s results between periods,
notwithstanding these specific items.





The
reconciliation of the specific items included in operating income (loss) by
business segment is as follows:


2015(in
      millions of Canadian dollars)
    Containerboard
    Boxboard
      Europe
    Specialty
      Products
    Tissue
      Papers
    Corporate
      Activities
    ConsolidatedOperating
      income (loss)
    170
    (28)
    31
    64
    (84)
    153Depreciation
      and amortization
    63
    34
    21
    55
    17
    190Operating
      income (loss) before depreciation and amortization
    233
    6
    52
    119
    (67)
    343Specific
      items:Gain
      on acquisitions, disposals and others
    (1)
    —
    —
    —
    —
    (1)Impairment
      charges
    —
    56
    11
    —
    2
    69Restructuring
      costs (gain)
    —
    1
    (5)
    —
    1
    (3)Unrealized
      loss (gain) on financial instruments
    (1)
    —
    —
    —
    19
    18(2)
    57
    6
    —
    22
    83Operating
      income (loss) before depreciation and amortization - excluding specific
      items
    231
    63
    58
    119
    (45)
    426Operating
      income (loss) - excluding specific items
    168
    29
    37
    64
    (62)
    236





2014(in
      millions of Canadian dollars)
    Containerboard
    Boxboard
      Europe
    Specialty
      Products
    Tissue
      Papers
    Corporate
      Activities
    ConsolidatedOperating
      income (loss)
    108
    29
    6
    48
    (54)
    137Depreciation
      and amortization
    56
    35
    20
    47
    16
    174Operating
      income (loss) before depreciation and amortization
    164
    64
    26
    95
    (38)
    311Specific
      items :Impairment
      charges
    —
    7
    14
    —
    —
    21Restructuring
      costs
    —
    1
    —
    1
    —
    2Unrealized
      loss on financial instruments
    —
    —
    —
    —
    6
    6—
    8
    14
    1
    6
    29Operating
      income (loss) before depreciation and amortization - excluding specific
      items
    164
    72
    40
    96
    (32)
    340Operating
      income (loss) - excluding specific items
    108
    37
    20
    49
    (48)
    166



























































8


---




LOSS
(GAIN) ON ACQUISITIONS, DISPOSALS AND OTHERS


In
2015 and 2014 ,
the Corporation recorded the following items:


(in
      millions of Canadian dollars)
    2015
    
    2014Gain
      on disposal of property, plant and equipment
    (1
    )
    —Class
      action settlement
    —
    
    5Gain
      on a joint-venture contribution
    —
    
    (5
    )(1
    )
    —





2015


In
the third quarter, the Containerboard Group sold a warehouse in Québec City and
recorded a gain of $1 million .





2014


On
January 31, the Corporation concluded the creation of a new joint venture for
converting corrugated board activities in the Atlantic provinces with Maritime
Paper Products Limited (MPPL).This transaction resulted in a gain of
$5 million.





In
the fourth quarter, the Corporation settled a class action lawsuit that was
filed against it and other North American containerboard manufacturers. Under
the terms of the settlement agreement, the Corporation agreed to pay US $4.8
million into a settlement fund in return for the release of all claims of the
alleged class without any admission of wrong-doing on the part of the
Corporation.





IMPAIRMENT
CHARGES AND RESTRUCTURING COSTS (GAIN)


In
2015 and 2014 ,
the Corporation recorded the following impairment charges and restructuring
costs (gain):


2015
    
    2014(in
      millions of Canadian dollars)
    Impairment
      charges
    
    Restructuring
      costs (gain)
    
    Impairment
      charges
    
    Restructuring
      costs (gain)Boxboard
      Europe Group
    56
    
    1
    
    7
    
    1Specialty
      Products Group
    11
    
    (5
    )
    14
    
    —Tissue
      Papers Group
    —
    
    —
    
    —
    
    1Corporate
      activities
    2
    
    1
    
    —
    
    —69
    
    (3
    )
    21
    
    2





2015


In
the fourth quarter, the Boxboard Europe Group reviewed the recoverable value of
its virgin boxboard mill located in France and recorded impairment charges of
$42 million on fixed assets and $11 million on spare parts. In 2015,
the Group also recorded impairment charges of $3 million and severance provision
of $1 million related to plants closed over the past years.





Also
in the fourth quarter, Corporate activities reviewed the recoverable amount of a
note receivable related to the sale of a plant in 2014 and recorded an
impairment charge of $2 million.





In
the third quarter, the Specialty Products Group reviewed the recoverable value
of one of its plant and recorded impairment charges of $10 million on fixed
assets and $1 million on spare parts. Sustained difficult market conditions
led to insufficient profitability to support the carrying value of these
assets. As well in the third quarter,this Group proceeded with the legal restructuring
of its Norcan Flexible Packaging subsidiary, which was owned at 62.1%. As a
result of the restructuring, the Corporation now owns 100% of the net assets of
this business through its Cascades Flexible Packaging subsidiary. The
Corporation recorded a gain of $5 million on the extinguishment of some
liabilities following the transaction (including $2 million attributable to
non-controlling interest).





The
Corporate activities segment incurred $1 million of severance costs in relation
to the reorganization of its activities.





2014


In
the fourth quarter, the Boxboard Europe Group reviewed the recoverable amount of
its Iberica, Spain, recycled boxboard manufacturing mill and recorded impairment
charges on property, plant and equipment totaling $7 million. The slow
recovery of the European economic environment since the 2009 financial crisis
negatively impacted the profitability of this mill. The
Boxboard Europe Group also recorded severances of $1 million in relation to
previous years’ plant closures.

















9


---




In
the second quarter, the Specialty Products Group recorded impairment charges of
$2 million on property, plant and equipment, and the amount of $3 million on
spare parts due to sustained challenging business conditions for a plant
manufacturing consumer goods made from recovered plastics in its consumer
products sub-segment. On September 30, the plant was sold to Laurent Lemaire, a
director and major shareholder of the Corporation, at a value determined to be
fair by the independent members of the Board. The independent directors of the
Board reviewed all options for this business and determined that the sale to Mr.
Lemaire was in the best interests of the Corporation and the employees of the
consumer plastics business. In the second quarter, the Group also recorded
impairment charges of $3 million on other assets.





In
the fourth quarter, the Specialty Products Group reviewed the recoverable amount
of its flexible film activities CGU and recorded an impairment charge of
$6 million on property, plant and equipment. Sustained low shipments in
this sector do not generate enough profitability to support the carrying value
of property plant and equipment (see section 2015 above for the description of
Norcan’s restructuring).





The
Tissue Papers Group recorded severances of $1 million as part of its consumer
products activities restructuring.








DERIVATIVE
FINANCIAL INSTRUMENTS


In
2015, the Corporation recorded an unrealized loss of $18
million ,
compared to an unrealized loss of $6
million on certain financial instruments not designated for hedge accounting. The 2015
unrealized loss is mainly attributable to foreign exchange contracts’ fair value
variation following the sharp depreciation of the Canadian dollar.








LOSS
ON REFINANCING OF LONG-TERM DEBT


Following
the refinancing of the Corporation’s 2020 unsecured senior notes on May 19,
2015, we recorded premiums of $13 million to repurchase and redeem our notes
before their maturities. We also wrote-off financing costs and discounts related
to the redeemed notes for a total amount of $6 million.





Following
the refinancing of the Corporation’s 2016 and 2017 unsecured senior notes on
June 19, 2014, we recorded premiums of $30 million to repurchase and redeem our
notes before their maturities. We also wrote-off financing costs and discounts
related to the existing notes, in the amount of $14 million.








INTEREST
RATE SWAPS


In
2015, the Corporation recorded an unrealized loss of $1 million on interest rate
swaps (nil in 2014) which is included in financing expense.








FOREIGN
EXCHANGE LOSS ON LONG-TERM DEBT AND FINANCIAL INSTRUMENTS


In
2015, the Corporation recorded a loss of $91
million ,
compared to a loss of $30
million in 2014, on its US$-denominated debt and related financial instruments. This is
composed of a loss of $76
million in 2015, compared to a loss of $27
million in 2014, on our US$-denominated long-term debt net of our net investment hedge
in the U.S. and forward exchange contracts designated as hedging instruments, if
any. It also includes a loss of $15
million in 2015, compared to a loss of $3
million in 2014, on foreign exchange forward contracts not designated for hedge
accounting.








SHARE
OF RESULTS OF ASSOCIATES AND JOINT VENTURES


In
September 2015, Boralex redeemed or converted all of its 6.75% convertible
unsecured subordinated debentures. As a result, the Corporation’s participation
in Boralex decreased to 20.29% from 27.43%, which resulted in a dilution gain of
$15 million for the Corporation.





In
February 2015, Boralex acquired the non-controlling interest in Boralex Europe
and became its sole shareholder. The excess of amount paid over carrying value
totalling $51 million was accounted for by Boralex as a decrease in net assets
and retained earnings. Our $14 million share of the decrease is recorded as a
loss under share of results of associates and joint ventures in the consolidated
statement of earnings.





In
January 2015, our associate Boralex proceeded with a public offering of common
shares to repay in full a bridge loan in connection with its acquisition of Enel
Green Power France SAS in December 2014. The Corporation’s participation in
Boralex decreased to 27.44%, compared to 34.23% as at December 31, 2014, which
resulted in a dilution gain of $9 million for the Corporation.

















10


---




Our
share of results of associates and joint ventures also includes our share of
unrealized gain or loss on financial instruments of associates and joint
ventures. In 2015 and in 2014, we recorded an unrealized gain of $1 million
related to our associate Greenpac.  I n
2015, the Corporation reviewed the recoverable amount of some of its other
investments and recorded impairment charges of $2 million in the share of
results of associates and joint ventures in the consolidated statement of
earnings (loss).





In
2014, our share of results of associates and joint ventures includes a $1
million impairment charge on assets from our joint venture Maritime Paper. Additionally,
it includes $2 million in acquisition costs from our associate Boralex following
its acquisition of Enel Green Power France in 2014.








PROVISION
FOR INCOME TAXES





In
2015, the provision for incomes taxes includes $18 million of deferred tax
assets reversal following the impairment charge on our virgin boxboard mill in
France.








DISCONTINUED
OPERATIONS





2015


On
December 11, 2014, the Containerboard Group announced that it had reached an
agreement for the sale of its boxboard activities in North America to Graphic
Packaging Holding Company. The sale was completed on February 4, 2015, and the
Corporation received $46 million in the first quarter. A selling price
adjustment of $8 million was agreed on, of which $6 million was paid in 2015.
The Corporation recorded a loss of $4 million before related income tax of $1
million in 2015.





The
Containerboard Group also recorded a $4 million gain in the first quarter of
2015 on the reversal of a post-employment benefit liability, which was not part
of the boxboard activities transaction, but settled as a consequence of the
sale.





On
June 30, 2014, we sold our fine papers activities of the Specialty Products
Group to Les Entreprises Rolland, a subsidiary of H.I.G. Capital.   The
Corporation finalized the working capital selling price adjustment related to
this transaction and recorded a $ 1 million gain in the second quarter of 2015 by reducing its final selling price
adjustment provision to $ 2 million, which was paid during the third quarter. The Corporation also sold a
piece of land which was not part of the transaction and recorded a $ 1 million reversal of impairment in the second quarter of 2015.





2014


Following
the announcement of its North American boxboard activities (see above), the
Containerboard Group recorded impairment charges of $2 million on
intangible assets, $23 million on property, plant and equipment, and $6 million
on spare parts.





In
the second quarter, the Containerboard Group reviewed the recoverable value of
one boxboard mill and recorded impairment charges of $12 million on property,
plant and equipment, and $5 million on spare parts. In the same quarter, we also
recorded impairment charges of $16 million on notes receivable related to the
2011 disposal of our U.S. boxboard activities.





In
the third quarter, the Containerboard Group sold a building in connection with a
closed plant and recorded a gain of $1 million. Also during the third quarter,
in connection with our boxboard plants sold in 2011, we recorded a loss of $2
million related to an onerous lease contract following the bankruptcy of Fusion
Paperboard.





On
June 15, following the announcement made in 2013, we definitively ceased the
operation of our virgin boxboard mill located in Sweden. Following the closure,
we recorded an impairment charge of $4 million on spare parts and severances of
$7 million. An environmental  provision of $1 million was recorded as well.





On
June 30, we sold our fine papers activities of the Specialty Products Group, for
a cash consideration of $39 million before transaction fees of $1 million, of
which $37 million was received on closing and $2 million during the third
quarter. Also during the third quarter, the Corporation recorded and paid a
preliminary working capital adjustment of $2 million. As a result, a loss on
disposal of $43 million was recorded during the year.





On
September 26, we ceased the operation of our kraft papers manufacturing
activities of the Specialty Products Group located in East Angus, Québec. The
closure was announced on July 9, and an impairment charge of $2 million on spare
parts and restructuring costs of $4 million were recorded in the second quarter.
At the same time, a curtailment gain of $9 million was recorded on the pension
plan. In the fourth quarter, we recorded $1 million of closure costs for the
mill.





11


---




SUPPLEMENTAL
INFORMATION ON NON-IFRS MEASURES





Net
loss, a performance measure defined by IFRS, is reconciled below with operating
income, operating income excluding specific items and operating income before
depreciation and amortization excluding specific items:


(in
      millions of Canadian dollars)
    2015
    
    2014Net
      loss attributable to Shareholders for the year
    (65
    )
    (147
    )Net
      earnings attributable to non-controlling interest
    9
    
    4Net
      loss (earnings) from discontinued operations
    (1
    )
    83Provision
      for income taxes
    40
    
    16Share
      of results of associates and joint ventures
    (37
    )
    —Foreign
      exchange loss on long-term debt and financial instruments
    91
    
    30Financing
      expense, interest expense on employee future benefits and loss on
      refinancing of long-term debt
    116
    
    151Operating
      income
    153
    
    137Specific
      items:Gain
      on acquisitions, disposals and others
    (1
    )
    —Impairment
      charges
    69
    
    21Restructuring
      costs (gain)
    (3
    )
    2Unrealized
      loss on financial instruments
    18
    
    683
    
    29Operating
      income - excluding specific items
    236
    
    166Depreciation
      and amortization
    190
    
    174Operating
      income before depreciation and amortization - excluding specific
      items
    426
    
    340








The
following table reconciles net loss and net loss per common share with net
earnings excluding specific items and net earnings per common share excluding
specific items:


NET
      EARNINGS (LOSS)
    NET
      EARNINGS (LOSS) PER COMMON SHARE1(in
      millions of Canadian dollars, except amount per common
    share)
    2015
    
    2014
    
    2015
    
    2014As
      per IFRS
    (65
    )
    (147
    )
    $
    (0.69
    )
    $
    (1.57
    )Specific
      items:Gain
      on acquisitions, disposals and others
    (1
    )
    —
    
    $
    (0.01
    )
    —Impairment
      charges
    69
    
    21
    
    $
    0.67
    
    $
    0.13Restructuring
      costs (gain)
    (3
    )
    2
    
    $
    (0.03
    )
    $
    0.02Unrealized
      loss on financial instruments
    18
    
    6
    
    $
    0.14
    
    $
    0.05Loss
      on refinancing of long-term debt
    19
    
    44
    
    $
    0.15
    
    $
    0.35Unrealized
      loss on interest rate swaps
    1
    
    —
    
    $
    0.01
    
    —Foreign
      exchange loss on long-term debt and financial instruments
    91
    
    30
    
    $
    0.83
    
    $
    0.28Share
      of results of associates and joint ventures
    (9
    )
    2
    
    $
    (0.07
    )
    $
    0.01Included
      in discontinued operations, net of tax
    (2
    )
    87
    
    $
    (0.02
    )
    $
    0.94Tax
      effect on specific items, other tax adjustments and attributable to
      non-controlling interest1
    (6
    )
    (25
    )
    $
    0.20
    
    —177
    
    167
    
    $
    1.87
    
    $
    1.78Excluding
      specific items
    112
    
    20
    
    $
    1.18
    
    $
    0.21


1
 Specific amounts per common share are calculated on an after-tax basis and net
of the portion attributable to non-controlling interest. The $0.20 impact in
2015 is related to the $18 million deferred tax assets reversal following the
revaluation of our virgin boxboard mill in France.





























12


---




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)
    2015
    
    2014Cash
      flow from operating activities from continuing operations
    284
    
    231Changes
      in non-cash working capital components
    38
    
    13Depreciation
      and amortization
    (190
    )
    (174
    )Net
      income taxes paid (received)
    14
    
    (14
    )Net
      financing expense paid
    89
    
    73Premium
      paid on long-term debt refinancing
    13
    
    31Gain
      on acquisitions, disposals and others
    1
    
    —Impairment
      charges and restructuring costs
    (64
    )
    (21
    )Unrealized
      loss on financial instruments
    (18
    )
    (6
    )Dividend
      received, employee future benefits and others
    (14
    )
    4Operating
      income
    153
    
    137Depreciation
      and amortization
    190
    
    174Operating
      income before depreciation and amortization
    343
    
    311








The
following table reconciles cash flow from operating activities from continuing
operations with cash flow from operating activities from continuing operations
(adjusted) and cash flow from operating activities from continuing operations
excluding specific items:


(in
      millions of Canadian dollars)
    2015
    
    2014Cash
      flow from continuing operations
    284
    
    231Changes
      in non-cash working capital components
    38
    
    13Cash
      flow from continuing operations (adjusted)
    322
    
    244Specific
      items, net of current income taxes:Restructuring
      costs
    2
    
    2Premium
      paid on long-term debt refinancing
    13
    
    31Excluding
      specific items
    337
    
    277








The
following table reconciles the total debt and the net debt with the net debt on
operating income before depreciation and amortization (OIBD) excluding specific
items ratio:


(in
      millions of Canadian dollars)
    December
      31, 2015
    
    December
      31, 2014Long-term
      debt
    1,710
    
    1,556Current
      portion of long-term debt
    34
    
    40Bank
      loans and advances
    37
    
    46Total
      debt
    1,781
    
    1,642Less:
      Cash and cash equivalents
    60
    
    29Net
      debt
    1,721
    
    1,613OIBD
      excluding specific items on a last twelve months basis
    426
    
    340Net
      debt / OIBD excluding specific items ratio
    4.0
    
    4.7








13


---




FINANCIAL
RESULTS FOR THE YEAR ENDED DECEMBER 31, 2015, COMPARED TO THE YEAR ENDED
DECEMBER 31, 2014





SALES


Sales
increased by 8% , or $300
million ,
to reach $3,861
million  in
2015 ,
compared to $3,561
million in 2014. The 14% average depreciation of the Canadian dollar against the U.S. dollar, offset in
part by the 3% average appreciation against the euro, explains $ 205 million
of this increase. Higher volumes, especially from the tissue papers and boxboard
Europe segments, increased sales by $ 93 million,
compared to 2014. As well, higher average selling prices with the strong
favourable impact in our containerboard activities, despite the negative impact
of all the other segments of the Corporation, had a $ 15 million
positive impact on sales.





Sales
by geographic segment are as follows, along with the location of our plants and
property, plant and equipment around the world:





Sales
      from (in %):
    
    Sales
      to (in %):


Production
      units and sorting facilities (in %)1
    
    Property,
      plant and equipment by geographic segment (in %)


1
Excluding sales offices, distribution and transportation hubs and corporate
offices.


Including the main associates and joint ventures.








OPERATING
INCOME FROM CONTINUING OPERATIONS


The
Corporation generated an operating income of $153
million  in
2015 ,
compared to $137
million in 2014, representing an $16
million increase. The 14% depreciation of the Canadian dollar against the U.S. dollar and higher volumes
positively contributed to operating income by $ 32 million and $31
million ,
respectively. The higher average selling price, as explained above, also
contributed $15
million .
Lower raw materials and energy costs also both contributed $ 12 million to the operating income. These factors were partially offset by $17
million by the other production costs, mainly higher shared-based compensation, expenses
related to management employment contracts and by start-up costs for our shared
services activities. Higher
negative specific items recorded in 2015, compared to 2014, as explained on
pages 41 to 44, and a higher depreciation expense due to the depreciation of the
Canadian dollar against the US dollar, as well as the review of the estimated
remaining useful life of assets which have been or will be removed from
operations following recent capital investments, both negatively impacted the
operating income in 2015 compared to 2014.





Excluding
specific items, the operating income stood at $236
million  in
2015 ,
compared to $166
million in 2014 (see the “Supplemental Information on Non-IFRS Measures” and ’’Specific
Items Included in Operating Income and Net Earnings (Loss)’’ sections for
reconciliation of these amounts).











14


---




The
main variances in sales and operating income in
2015 , compared
to 2014 ,
are shown below:


Sales
      ($M)
    
    Operating
      income ($M)





1
Raw materials: 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, and purchase and transfer prices. In addition to market pulp and
recycled fibre, they include purchases of external boards and parent rolls for
the converting sector, and other raw materials such as plastics and
woodchips.


2
F/X CAN$: The
estimated impact of the exchange rate is based on the Corporation’s Canadian
ex port
sales less purchase s,
denominated in US$, that are impacted by exchange rate fluctuations


and by our non-Canadian subsidiaries OIBD translation into CAN$. It also
includes the impact of the exchange rate variation on the Corporation’s Canadian
units in currency other than the CAN$


working capital items and cash positions, as well as our hedging transactions.
It excludes indirect sensitivity (please refer to page 37 for more
details).


3
Other costs: Other
costs include the impact of variable and fixed costs based on production costs
per unit shipped externally, which are affected by downtimes, efficiencies and
product mix changes.


4  OIBD :
Excluding specific items.


5
Recovery and Recycling activities: Given
the integration of this segment among the other segments of the Corporation, our
results variances are presented excluding the impact of this segment.The


results variations of this segment are presented globally and separately in
the waterfalls.








The
operating income variance analysis by segment is shown in each business segment
review (refer to pages 16 to 27).








15


---




BUSINESS
SEGMENT REVIEW





PACKAGING
PRODUCTS - CONTAINERBOARD





Our
Industry


U.S.
      containerboard industry production and capacity utilization rate1
    
    U.S.
      containerboard inventories at box plants and mills2In
      2015, the U.S. containerboard production grew by 1% compared to 2014.
      Despite new capacity additions coming to the market during the year, the
      capacity utilization rate remained close to 96%.
    
    In
      2015, the average inventory level was 7% higher than in 2014 as major
      producers chose to increase inventories to reduce logistics costs. Weeks
      of supply averaged 4.3 for the year.





Canadian
      corrugated box industry shipments3
    
    Reference
      prices - recovered papers (brown grade)1Canadian
      corrugated box shipments increased for a second consecutive year. The 2%
      increase in 2015 compared to 2014 was mainly due to the depreciation of
      the Canadian dollar, which boosted demand for Canadian corrugated boxes
      from U.S. customers.
    
    The
      average reference price of old corrugated containers no.11 (usually
      referred to as OCC) decreased by as much as 17% in 2015 due to a
      five-month West Coast port congestion and increased domestic generation,
      which resulted in oversupply in the domestic market.





Reference
      prices - containerboard1The
      linerboard reference price remained stable for a second consecutive year
      in 2015. As for the corrugating medium reference price, it decreased by 3%
      during 2015 due to new corrugating medium production capacity coming to
      market in the Northeast.1
       Source: RISI2
       Source: Fibre Box Association3
       Source: Canadian Corrugated and Containerboard Association





16


---




Our
Performance























The
main variances in sales and operating income for the Containerboard Group in
2015 , compared
to 2014 ,
are shown below: Sales
      ($M)
    
    Operating
      income ($M)





For
Notes 1 to 4, see definitions on page 15.





The
Corporation incurred some specific items in 2015 and 2014 that adversely or
positively affected its operat ing
results. Please refer to pages
8 to 11 for m ore
details and reconciliation.


17


---




2014
    2015
    
    Change
      in %Shipments1(’000
      s.t.)
    
    1%1,104
    1,114Average
      Selling Price(CAN$/unit)1,070
    1,169
    
    9%(US$/unit)969
    914
    
    -6%Sales
      ($M)
    
    10%1,181
    1,301Operating
      income ($M)(as
      reported)108
    170
    
    57%(excluding
      specific items)
    
    56%108
    168OIBD
      ($M)(as
      reported)164
    233
    
    42%%
      of sales14%
    18%(excluding
      specific items)164
    231
    
    41%%
      of sales14%
    18%1
      Shipments do not take into account the elimination of business sector
      inter-company shipments.2
      Since our participation in Greenpac is accounted for using the equity
      method, all transactions are accounted for as external.
  Shipments increased by 1%, or 10,000 s.t., to 1,114,000 s.t. in 2015, compared to
1,104,000 s.t. in 2014. The containerboard mills’ external shipments went up by
7,000 s.t., or 2%. If not for the 14-day shutdown in the first quarter of 2014
at our Trenton mill and the fire at our Niagara Falls mill in the third quarter
of 2014 and with the shipping problems that occurred in our Niagara Falls mill
in the last quarter of 2015, shipments would have been lower of around 3,000
s.t. On the converting segment, shipment went up by 1% or 3,000 s.t.. Therefore,
year over year, total shipments remained similar in the containerboard
Group.
 Also,
the containerboard mills sold fewer tons internally since Greenpac
mill 2 is
now fulfilling an important portion of our internal linerboard converting
needs.
 
 The
total average
selling price went
up by $99, or 9%, to $1,169 per s.t. in 2015, compared to $1,070 per s.t. in
2014. The containerboard mills’ and our corrugated products plants average
selling price went up respectively by 9%. Our average consolidated selling price
converted in US dollar decreased by 6% since the timing of the implementation of
selling price hike in the converting sub-segment did not perfectly match the
variation of Canadian currency versus US dollar.
 
 As a
result, the Containerboard Group’s sales increased by $120 million, or 10%, to $1,301 million in 2015, compared to
$1,181 million in 2014. Notwithstanding the sale of our two plants located
in the Maritimes in the first quarter of 2014, which subtracted $1 million, all
factors were positive. The 14% depreciation of the Canadian dollar added
$70  million
to sales and the higher average selling price and volume increase added $38
million and $13 million of sales respectively.
 
 Excluding
specific items, operating
income stood at $168 million in 2015, compared to $108 million in 2014, an increase of
$60 million or a 56% improvement. The improved results are mainly explained by a
better average selling price denominated in Canadian dollars, which positively
impacted our results by $38  million,
combined with lower fibre cost and the weakness of the Canadian dollar, which
added respectively $16 million and $8 million to operating income. Also, the
rise of volume highlighted previously added another $3 million to operating
income. Energy and freight positively impacted results by $10 million mostly
because of lower fuel costs and better logistics of delivery combined with the
negative impact of bad weather conditions prevailing in Québec, Ontario and the
US Northeast in the first quarter of 2014. Higher d epreciation
and amortization subtracted $7 million of operating income compared to last year
following the review of the estimated remaining useful life of assets which have
been or will be removed from operations following recent capital
investments. Also, higher
administrative expenses mainly due to our best results and repair & maintenance negatively impacted both operating income by $5 million
and $3 million respectively. Finally, when excluding the two fires at our
Niagara Falls mill and Etobicoke converting plant as well as the first quarter
14-day shutdown at our Trenton mill, operating income would have been higher by
approximately $6 million in 2014.
 
 In
2015, the Containerboard Group recorded an unrealized gain of $ 1 million (nil in 2014) on certain financial instruments not designated for hedge
accounting and a gain of $ 1 million on the sale of a warehouse in Québec City.
 
 Finally,
we are also recording our share
of results of our associate Greenpac 2 mill
(59.7%). In 2015, Greenpac had a positive contribution of $ 20 million,
compared to a $3
million negative contribution in 2014, to the share of results of associates and joint
ventures.


18


---




PACKAGING
PRODUCTS - BOXBOARD EUROPE





Our
Industry





European
industry’s order inflow of coated boxboard from Europe 1


In
Europe, order inflows of white-lined chipboard (WLC) increased by 10% in 2015
compared to 2014. Order inflows of WLC experienced strong growth in the first
eight months of the year. The WLC price was successfully increased by €20 to €30
per tonne during the summer as a result of a strong market environment and a
good supply and demand balance. The first quarter of 2015 was the best quarter
in the last ten years with orders of approximately 835,000 tonnes. However, WLC
order inflows were lower for the latter part of the year and reached the level
of 2014. For folding boxboard, order inflows were 5% higher than in 2014. Demand
in all segments was good, except for the tobacco business.


Coated
      recycled boxboard industry’s order inflow from Europe
      (White-lined
      chipboard (WLC) - 5-week weekly moving average)
    
    Virgin
      coated duplex boxboard industry’s order inflow from Europe(Folding
      boxboard (FBB) - 5-week weekly moving average)


Reference
      prices - boxboard in Europe4
    
    Reference
      prices - recovered papers in Europe4After
      a decrease at the beginning of 2015, recycled WLC reference prices
      improved throughout 2015 in major Western European countries to reach an
      average price slightly below the level of 2014. Virgin coated duplex
      reference prices dropped by€20
      in January 2015 in some European countries, and then remained stable for
      the remainder of the year. In 2015, the average price was 3% lower than in
      2014.
    
    In
      2015, recovered paper prices were more volatile than in 2014. As a result,
      our recovered paper reference index in Europe was about 6% higher than in
      2014, with higher average prices for brown grades and lower average prices
      for white and groundwood grades.1
      Source: CEPI Cartonboard2
      The Cascades recycled white-lined chipboard selling prices index
      represents an approximation of Cascades’ recycled grade selling prices in
      Europe. It is weighted by country. For each country, we use an average of
      PPI Europe prices for white-lined chipboard.3
      The Cascades virgin coated duplex boxboard selling prices index represents
      an approximation of Cascades’ virgin grade selling prices in Europe. It is
      weighted by country. For each country, we use an average of PPI Europe
      prices for coated duplex boxboard.4
      Source: RISI5
      The Recovered paper index represents an approximation of Cascades’
      recovered paper purchase prices in Europe. It is weighted by country. For
      each country, we use an average of PPI Europe prices for recovered papers.
      This index should only be used as a trend indicator and may differ from
      our actual purchasing costs and our purchase mix.


19


---







Our
Performance




















The
main variances in sales and operating income (loss) for the Boxboard Europe
Group in
2015 , compared
to 2014 ,
are shown below:


Sales
      ($M)
    
    Operating
      income (loss) ($M)





For
Notes 1 to 4, see definitions on page 15.





The
Corporation incurred some specific items in 2015 and 2014 that adversely or
positively affected its operat ing
results. Please refer to pages
8 to 11 for m ore
details and reconciliation.


20


---




2014
    2015
    
    Change
      in %Shipments1(’000
      s.t.)
    
    2%1,093
    1,111Average
      Selling Price2(CAN$/unit)770
    743
    
    -4%(euro€/unit)525
    523
    
    —Sales
      ($M)
    
    -2%841
    825Operating
      income (loss) ($M)(as
      reported)29
    (28)
    
    -197%(excluding
      specific items)
    
    -22%37
    29OIBD
      ($M)(as
      reported)64
    6
    
    -91%%
      of sales8%
    1%(excluding
      specific items)72
    63
    
    -13%%
      of sales9%
    8%
 1
Shipments do not take into account the elimination of business sector
inter-company shipments.
 2
Average selling price is a weighted average of virgin and recycled boxboard
shipments.
  Shipments increased by 18,000 s.t., or 2%, to 1,111,000 s.t. in 2015, compared to
1,093,000 s.t. in 2014. The recycled boxboard activities increased their
shipments by 5,000 s.t., or 1%, to 947,000 s.t. in 2015, compared to 942,000 in
2014. The virgin boxboard activities increased their shipments by 13,000 s.t.,
or 9%, to 164,000 s.t. in 2015, compared to 151,000 in 2014.
 The
total average
selling price went down by $27, or 4%, to $743 per s.t. in 2015, compared to $770 in 2014,
resulting mainly from the 3% appreciation of the Canadian dollar against the
euro. The average selling price in euros decreased by €2, to €523, in 2015,
compared to €525 in 2014. The recycled boxboard activities’ average selling
price is down by €2, while the virgin boxboard activities’ average selling price
is down by €10 in 2015 compared to 2014. However, as the group sales had a
higher proportion of virgin boxboard in 2015, which sold at a higher price per
s.t., the decrease in average selling price was limited to €2.
 As a
result, the Boxboard Europe Group sales decreased by $16 million, or 2%, to $825 million in 2015 compared to $841
million in 2014. The 3% appreciation of the Canadian dollar against the euro
explains $30 million of the decrease in sales. On the other hand, higher
volumes, mostly from our virgin boxboard activities, generated $18 million in
additional sales, but were partly offset by a lower average selling price of $4
million.
 Excluding
specific items, operating
income stood at $29 million in 2015, compared to $37 million in 2014, a decrease of $8
million. In 2014, we recorded a $9 million gain resulting from energy
savings certificates (’’white certificates’’) awarded by Italian authorities to
our European recycled boxboard operations following an energy efficiency
improvement program for the year 2013. Although we did not receive any white
certificates in 2015, energy costs were only $1 million higher compared to 2014,
as we benefited from lower energy prices in France and Italy. Higher raw
materials costs in Europe for virgin fibres and for recycled fibres, which went
up sharply in 2015, reduced the operating income by $9 million. The 3%
appreciation of the Canadian dollar against the euro also impacted the operating
income by $3 million. On the other hand, the higher volumes, mostly from our
virgin boxboard activities and lower production costs, partly counterbalanced
the decrease by $5 million and $3 million, respectively.
 In
the fourth quarter, the Boxboard Europe Group reviewed the recoverable value of
its virgin boxboard mill located in France and recorded impairment charges of
$42 million on fixed assets and $11 million on spare parts. In 2015,
the Group also recorded impairment charges of $3 million and severance provision
of $1 million related to plants closed over the past years.
 In
the fourth quarter of 2014, the Boxboard Europe Group reviewed the recoverable
amount of its Iberica, Spain, recycled boxboard manufacturing mill and recorded
impairment charges on property, plant and equipment totaling $7 million.
This mill was sold at the beginning of 2016 for a total consideration of €4
million. The
Boxboard Europe Group also recorded severances of $1 million in relation to
previous years’ plant closures.


21


---




PACKAGING
PRODUCTS - SPECIALTY PRODUCTS





Our
Industry


Reference
      prices - market pulp1
    
    Reference
      prices - uncoated recycled boxboard1In
      2015, the reference price for NBSK decreased by 5% compared to 2014 due to
      a strong U.S. dollar and high inventories. As for the NBHK reference
      price, it increased by 2% in 2015 on tight supply. Finally, the reference
      price for deinked pulp remained stable in 2015 compared to
      2014.
    
    In
      2015, the reference price for uncoated recycled boxboard increased by 2%
      compared to 2014. This increase was driven by changes in supply and better
      demand in cartons, tubes and cores.





U.S.
recycled fibre exports to China 1


The
relationship between recovered paper supply and demand, particularly from Asia,
plays an important role in pricing dynamics. After two consecutive years of
decline, U.S. exports to China rose by 4% in 2015. Old corrugated containers and
mixed groundwood grades increased by 10% and 4% respectively over 2014 while
white grades and old newspapers exports decreased by 41% and 2% in 2015 compared
to the previous year. The percentage of total U.S exports to China decreased by
approximately 3% for a second consecutive year in 2015.


Total
      U.S. exports of recycled papers to China - all grades
    
    Major
      grades exported by the U.S.





Chi nese
imports of recycled fibre  1


After
a 6% decrease in 2014, total Chinese imports rebounded in 2015 with a 6%
increase, as prices for recovered paper declined progressively during the second
half of 2015. Chinese mills seized the opportunity and stepped up purchases.
Compared to 2014, all major grades were up between 3% and 20% in 2015.


Total
      Chinese imports of recycled papers - all grades
    
    Major
      grades imported by China1
       Source: RISI

















22


---




Our
Performance























The
main variances in sales and operating income for the Specialty Products Group in
2015 , compared
to 2014 ,
are shown below:


Sales
      ($M)
    
    Operating
      income ($M)





For
Notes 1 to 5, see definitions on page 15.





The
Corporation incurred some specific items in 2015 and 2014 that adversely or
positively affected its operat ing
results. Please refer to pages
8 to 11 for m ore
details and reconciliation.


23


---




2014
    2015
    
    Change
      in %Shipments1(’000
      s.t.)
    
    6%160
    170Sales
      ($M)
    
    2%568
    579Operating
      income ($M)(as
      reported)6
    31
    
    417%(excluding
      specific items)
    
    85%20
    37OIBD
      ($M)(as
      reported)26
    52
    
    100%%
      of sales5%
    9%(excluding
      specific items)40
    58
    
    45%%
      of sales7%
    10%
 1
Industrial packaging shipments only. Shipments do not take into account the
elimination of business
 sector inter-company shipments.
 2
Recovery and Recycling activities: Given the integration of this segment among
the other segments
 of the Corporation, our results variances are presented excluding the impact
of that segment.
 The results variations of this segment are presented globally and
separately.
  Shipments increased by 10,000 s.t., or 6%, to 170,000 s.t. in 2015 compared to 160,000
s.t. in 2014.
 
 Specialty
Products Group sales increased by $11 million to $579 million in 2015 compared to
$568 million in 2014. The
slight increase was mainly due to the 14% depreciation of the Canadian dollar
against the U.S. dollar and higher volume in most of our sectors, which
contributed positively by $28 million and $3 million, respectively. On the
other hand, the lower average selling price in most of our sectors and the
decrease in sales of our Recovery and Recycling activities 2 partly offset the increase by $7 million and $6 million
respectively.
 
 Excluding
specific items, operating
income stood at $37 million in 2015, compared to $20 million in 2014, an increase of
$17 million. A
favourable exchange rate and lower raw materials costs accounted both for $10
million of the increase. As well, higher volumes in most of our sectors
accounted for $3 million. These were partly offset by lower average selling
price in most of our sectors for $7 million.
 
 In
the third quarter of 2015, the Specialty Products Group reviewed the recoverable
value of one of its plants, and recorded impairment charges of $10 million on
fixed assets and $1 million on spare parts. Also in the third quarter, the
Specialty Products Group restructured its Norcan Flexible Packaging subsidiary,
which was owned at 62.1%. As a result of the restructuring, the Corporation now
owns 100% of the net assets of this business through its Cascades Flexible
Packaging subsidiary and recorded a gain of $5 million on the
extinguishment of some liabilities following the transaction (including $2
million attributable to non-controlling interest).
 
 In
2014, the Specialty Products Group recorded impairment charges of $2 million on
property, plant and equipment, and $3 million on spare parts. The Group also
recorded impairment charges of $3 million on other assets. Also in 2014,
the Group recorded impairment charges of $6 million on property, plant and
equipment for a plant manufacturing flexible packaging in our Consumer Packaging
sector.


24


---




TISSUE
PAPERS





Our
Industry


U.S.
      tissue paper industry production (parent rolls) and capacity utilization
      rate1
    
    U.S.
      tissue paper industry converted product shipments1Total
      parent roll production increased by 2% in 2015 compared to 2014. The
      average capacity utilization rate during the year remained close to the
      level of 2014 and 2013 at 94%, as higher demand offset the new capacity in
      the market.
    
    In
      2015, shipments for the retail and the away-from-home markets increased by
      2% and 3%, respectively, compared to 2014.





Reference
      prices - parent rolls1
    
    Reference
      prices - recovered papers (white grade)1In
      2015, the reference price for recycled parent rolls decreased by 5%
      compared to 2014, mainly due to favourable recovered paper prices. The
      reference price for virgin parent rolls declined by 1% during the year due
      to lower virgin pulp prices for NBSK.
    
    The
      reference price of Sorted office papers no.37 (usually referred to as SOP)
      decreased by 3% in 2015 compared to 2014 due to a strong U.S. dollar that
      reduced exports and increased usage of virgin pulp by some tissue paper
      mills.





U.S.
      producer price index - yearly changes in converted tissue
      prices2In
      the U.S., prices for retail toilet tissue remained stable in 2015 compared
      to 2014.  Prices for industrial paper towels were slightly up while prices
      for retail paper towels were down on average by about 3% during the year,
      indicative of increased promotional activities.1
       Source: RISI2
       Source: U.S. Bureau of Labor Statistics











25


---




Our
Performance























The
main variances in sales and operating income for the Tissue Papers Group in
2015 , compared
to 2014 ,
are shown below:


Sales
      ($M)
    
    Operating
      income ($M)





For
Notes 1 to 4, see definitions on page 15.





The
Corporation incurred some specific items in 2015 and 2014 that adversely or
positively affected its operat ing
results. Please refer to pages
8 to 11 for m ore
details and reconciliation.


26


---




2014
    2015
    
    Change
      in %Shipments1(’000
      s.t.)
    
    5%567
    597Average
      Selling Price(CAN$/unit)2,004
    2,069
    
    3%(US$/unit)1,615
    1,618
    
    —Sales
      ($M)
    
    17%1,054
    1,236Operating
      income ($M)(as
      reported)48
    64
    
    33%(excluding
      specific items)
    
    31%49
    64OIBD
      ($M)(as
      reported)95
    119
    
    25%%
      of sales9%
    10%(excluding
      specific items)96
    119
    
    24%%
      of sales9%
    10%
 1
Shipments do not take into account the elimination of business sector
inter-company
 shipments.
  Shipments increased by 30,000 s.t., or 5%, to 597,000 s.t. in 2015, compared to 567,000
s.t. in 2014. External manufacturing shipments increased by 36,000 s.t., or 22%,
to 197,000 s.t. in 2015, compared to 161,000 s.t. in 2014, largely driven
by the increase of paper-making capacity, which occurred during the last quarter
of 2014 with the gradual start-up of our new Oregon production line. Converting
shipments decreased by 6,000 s.t., or 1%, to 400,000 s.t. in 2015, compared to
406,000 s.t. in 2014. The converted shipments decrease is largely driven by the
US Away-from-Home segment.
 
 The
total average selling price went up by $65, or 3%, to $2,069 per s.t. in 2015, compared to $2,004 per s.t.
in 2014. The 14% depreciation of the Canadian dollar against the U.S. dollar
contributed to an increase in the average selling price. This significant
favourable impact was partially offset by a lower selling price for parent rolls
and a higher proportion of parent rolls sold. The Retail segment was also
negatively impacted by an unfavourable product mix.
 
 As a
result, the Tissue Paper Group’s sales increased by $182 million, or 17%, to $1,236 million in 2015, compared to
$1,054 million in 2014. The increase in total sales was largely driven by
the $136 million favourable impact of the depreciation of the Canadian dollar
against the U.S. dollar combined with a positive $59 million impact of
volume. The lower average selling price, as explained above, resulted in an
$11  million
negative impact on sales.
 
 Excluding
specific items, operating
income stood at $64 million in 2015, compared to $49 million in 2014, an increase of
$15 million. The performance improvement compared to 2014 was largely driven by
the volume increase for $20 million and the favourable impact of the Canadian
dollar depreciation for $16 million. The reduction in energy price resulted in a
favourable impact of $6 million, However, the group experienced a reduction of
spread of $19 million (average selling price and raw materials costs). As well,
higher d epreciation
and amortization subtracted $8 million of operating income compared to last year
following the depreciation of the Canadian dollar and the review of the
estimated remaining useful life of assets which have been or will be removed
from operations following recent capital investments.
 
 As
well, in 2014, the Tissue Papers Group recorded severances of $1 million as
part of its consumer products activities restructuring.


27


---




CORPORATE
ACTIVITIES





The
operating loss in 2015 includes an unrealized loss of $19 million on financial
instruments. Our results include $6 million of insurance reimbursements related
to the 2014 fire at our Niagara Falls containerboard mill and a $9 million
foreign exchange loss. Consequently
to our good results and share performance in 2015, we incurred higher variable
and share-based compensation expenses for $11 million .
We also entered into employment contracts with some of our Senior Management
members and recorded a total liability of $3 million. Finally, we incurred $1
million of severance costs in relation to the reorganization of their
activities.








OTHER
ITEMS ANALYSIS





DEPRECIATION
AND AMORTIZATION


The
depreciation and amortization expense increased by $16
million ,
to $190
million in 2015, compared to $174
million in 2014. The impairment charges recorded in the last twelve months decreased the
depreciation and amortization expense for 2015, but have been more than offset
by capital investments completed during the last twelve months and the
depreciation of the Canadian dollar against the U.S. dollar, partially
counterbalanced by the appreciation against the euro, which increased the
depreciation expense by $5 million in 2015. Also, as a consequence of our
capital investments projects and strategic initiatives, we reviewed the useful
life of some assets which increased amortization by approximately $11 million in 2015.








FINANCING
EXPENSE AND INTEREST ON EMPLOYEE FUTURE BENEFITS


The
financing expense and interest on employee future benefits decreased by $10
million to $97
million ,
compared to $107
million in 2014. The depreciation of the Canadian dollar against the U.S. dollar
increased the interest expense by approximately $7 million, but this factor was
more than offset by the refinancing of senior notes completed in 2014 and 2015
(see the ’’Business Highlights’’ section for more details) at lower interest
rates, which decreased our interest expense by approximately $12 million in
2015.





Interest
expense on the employee future benefits obligation remained stable at $6
million in 2015 compared to 2014. Despite a decrease in discount rates, good investment
returns in 2014 allowed interest expense on employee future benefits to remain
stable in 2015.





In
2015, the Corporation recorded an unrealized loss of $1 million on interest rate
swaps (nil in 2014) which is included in financing expense.





Following
the refinancing of the Corporation’s unsecured senior notes due in 2020 on May
19, 2015, we recorded premiums of $13 million to repurchase and redeem our
existing notes before their maturities. We also wrote-off financing costs and
discounts related to the redeemed notes in the amount of $6 million. Following
the refinancing of the Corporation’s unsecured senior notes on June 19, 2014, we
recorded premiums of $30 million to repurchase and redeem our existing notes
before their maturities. We also wrote-off financing costs and discounts related
to the redeemed notes in the amount of $ 14 million.





PROVISION
FOR INCOME TAXES


In
2015, the Corporation recorded an income tax provision of $40
million ,
compared to $16
million in 2014. The provision for income taxes based on the effective income tax rate
differs from the recovery of income taxes based on the combined basic rate for
the following reasons:


(in
      millions of Canadian dollars)
    2015
    
    2014Recovery
      of income taxes based on the combined basic Canadian and provincial income
      tax rate
    (4
    )
    (12
    )Adjustment
      of recovery of income taxes arising from the following:Difference
      in statutory income tax rate of foreign operations
    (4
    )
    1Reassessment
    5
    
    3Reversal
      of deferred tax assets on tax losses
    18
    
    —Permanent
      differences - others
    7
    
    22Change
      in temporary differences
    18
    
    244
    
    28Provision
      for income taxes
    40
    
    16





In
2015, we did not record any deferred tax on the $53 million impairment charge of
our Boxboard mill in France. In addition we had to reverse deferred tax assets
of $18 million following our reassessment of the value of the mill. The tax
provision or recovery on the foreign exchange gain or loss on long-term debt and
related financial instruments, and some of our share of results of Canadian
associates and joint ventures, is calculated at the rate of capital
gains.





28


---




As
for our United States-based joint ventures and associates, which are mostly
composed of the Greenpac mill, our share of results is taxed based on the
statutory tax rate. Moreover, as Greenpac is a limited liability company (LLC),
partners have agreed to account for it as a disregarded entity. As such, income
taxes at the United States statutory tax rate are fully integrated into each
partner’s consolidated income tax provision based on its respective share in the
LLC, and no income tax provision is included in Greenpac’s net earnings.





The
effective tax rate and income taxes are affected by the results of certain
subsidiaries and joint ventures located in countries, notably the United States,
France and Italy, where the income tax rate is higher than in Canada. The normal
effective tax rate is expected to be in the range of 26% to 39%. In fact, the
weighted-average applicable tax rate was 26.8% in
2015.





During
the third quarter of 2014, we optimized our North American capital structure and
incurred a one-time withholding tax, negatively affecting our provision for
income taxes and net earnings by $14 million or $0.15 per share.








SHARE
OF RESULTS OF ASSOCIATES AND JOINT VENTURES


The
share of results of associates and joint ventures is partly represented by our 20.29 %
interest in Boralex Inc. (“Boralex”), a Canadian public corporation that is a
major producer of electricity and whose core business is the development and
operation of power stations that generate renewable energy, with operations in
the North-eastern United States, Canada and France. To finance its acquisition
of Enel Green Power France SAS in December 2014, Boralex proceeded with the
issuance of common shares in January 2015, which diluted our participation from
34.23% to 27.44 %.
In September 2015, Boralex redeemed or converted all of its 6.75% convertible
unsecured subordinated debentures. As a result, the Corporation’s participation
in Boralex decreased from 27,43% to 20.29%.





We
are also recording our share (59.7%) of the results of our associate, Greenpac
mill. In
2015, Greenpac had a $ 20 million
positive contribution  to our share of results of associates and joint ventures,
compared to a $3
million negative contribution in 2014. No provision for income taxes is included in our
Greenpac share of results, as it is a disregarded entity for tax purposes (see
the ’’Provision for income taxes’’ section for more details).








LIQUIDITY
AND CAPITAL RESOURCES





CASH
FLOWS FROM OPERATING ACTIVITIES FROM CONTINUING OPERATIONS


Continuing
operating activities generated $284
million of operating cash flow in 2015, compared to $231
million in 2014. Changes in non-cash working capital components used $38
million in liquidity in 2015, compared to $13
million in 2014. The first half of the year normally requires cash for working capital
purposes, due to seasonal variations. During the first quarter of the year, we
always notice an increase in pre-paid expenses and payments of year-end volume
rebates. Moreover, inventory build-up normally takes place during the first half
of the year for the forthcoming summer. Higher sales in 2015, especially in the
second half of the year, increased the level of accounts receivable. However,
actions taken since 2012 to improve our working capital of the last twelve
months (LTM) as a percentage of sales continue to show positive results. As at December 31,
2015 ,
the level of working capital as a percentage of LTM sales stands at 11.3% compared to 12.3% at
the end of 2014 (14.4% at the end of 2012).





Cash
flow from operating activities from continuing operations, excluding the change
in non-cash working capital components, stood in 2015 at $322
million ,
compared to $244
million in 2014. This increase is mostly due to the increase in profitability. It also
includes payments of premiums on the long-term debt refinancing of $13 million
in 2015 ($31 million in 2014). Furthermore, we made tax payments of
$ 14 million
in 2015 compared to a tax reimbursement of $ 14 million in 2014. This cash flow measurement is significant, since it positions
the Corporation to pursue its capital expenditures program and reduce its
indebtedness.








INVESTING
ACTIVITIES FROM CONTINUING OPERATIONS


Investment
activities required total cash resources of $153
million in 2015, compared to $173
million in 2014. Capital expenditure payments accounted for $163
million in 2015, compared to $178
million in 2014. We also had proceeds from disposal totaling $4
million in 2015, compared to $7
million in 2014. Also, investments in intangible and other assets and in associated and
joint ventures generated $6
million in 2015, compared to $2
million used in 2014.








29


---




PAYMENTS
FOR PROPERTY, PLANT AND EQUIPMENT





Capital
expenditure projects paid for in 2015 amounted to $163
million ,
compared to $178
million in 2014. New capital expenditure projects amounted to $165
million in 2015, compared to $179
million in 2014. The remaining amounts are related to the variation in purchases of
property, plant and equipment included in ’’Trade and Other Payables’’ and to
capital-lease acquisitions and other debt financing.





New
capital expenditure projects by sector were as follows in 2015 (in
$M):











The
major capital projects initiated, in progress or completed in 2015 are as
follows:





CONTAINERBOARD
GROUP


|  |                                                                                                                                                                                                                                            
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | $14
      million investment for the expansion of the building and the installation
      of a new corrugator at our Drummondville, Québec, plant which will improve
      the quality of our products and the efficiency of the
    plant.

|  |                                                                                                                                                                                                                                                   
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | $9
      million for which grants were awarded, at our Cabano, Québec, mill, for
      the installation of a new water pulp process, which will increase our
      return on wood-chips and reduce chemical usage and atmospheric
      emissions.

|  |                                                                                                                                                                         
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | $7million for new converting equipment at our Vaughan, Ontario, plant that
      will allow shorter set-up time, better productivity and improved product
      quality.

|  |                                                                                                                                                                                               
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | $4
      million at our containerboard mill in Niagara Falls, New York to replace
      the recycled brown grades reception building following the fire incidents
      that happened in 2014.




TISSUE
PAPERS GROUP


|  |                                                                                                                                                                                           
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | $17million for a new building and new converting lines, part of the Wagram
      project started in 2014 in North Carolina, which will allow us to increase
      our production capacity.

|  |                                                                                            
|- | -------------------------------------------------------------------------------------------
|• | $11million to complete the installation of a second paper machine at our
      Oregon mill.

|  |                                                                                                                                                             
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | $7
      million for the new state-of-the-art converting line at the Candiac,
      Québec, plant, for the manufacturing of high-quality paper
      towels.




INVESTMENTS
IN INTANGIBLE, OTHER ASSETS AND ASSOCIATES AND JOINT VENTURES





The
investments in intangible and other assets and in associated and joint ventures
generated $6
million in 2015, compared to $2
million required in 2014. The main items associated with these amounts were as
follows:





2015


|  |                                                                                 
|- | --------------------------------------------------------------------------------
|• | Greenpac
      repaid $18 million on its bridge loan from the
      Corporation.

|  |                                                                                                                                   
|- | ----------------------------------------------------------------------------------------------------------------------------------
|• | $8
      million invested for the modernization of our financial information system
      to an ERP information technology system.

|  |                                                                                                                                                            
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|• | $2
      million invested in our Greenpac associate following the reception of
      investment tax credits as required by the partnership
      agreement.

2014


|  |                                                                               
|- | ------------------------------------------------------------------------------
|• | Greenpac
      repaid $2million
      on its bridge loan from the Corporation.

|  |                                                                                                                            
|- | ---------------------------------------------------------------------------------------------------------------------------
|• | $5million invested for the modernization of our financial information system
      to an ERP information technology system.

|  |                                                                                                         
|- | --------------------------------------------------------------------------------------------------------
|• | $1
      million received from the reimbursement of notes receivable from a
      business sold in 2011.

30


---




FINANCING
ACTIVITIES FROM CONTINUING OPERATIONS





DEBT
REFINANCING


On
May 19, 2015, the Corporation issued US$ 250 million ($305 million) aggregate principal amount of 5.75% senior notes due in
2023. The Corporation used the proceeds from this offering of notes to
repurchase a total of US$ 250 million aggregate principal amount of 7.875% senior notes due in 2020 for a
total consideration of US$ 250 million ($ 305 million). The Corporation also paid premiums of US$ 11 million ($ 13 million) to repurchase the 2020 notes, as well as fees and expenses in
connection with the offering and the tender offer totalling $ 5 million.





Issuance
proceeds and credit facility were used as follows:


(in
      millions of Canadian dollars)
    2015Debt
      issuance
    305Offering
      and tender offer fees
    (5
    )Refinanced
      debt repurchase
    (305
    )Premium
      paid on refinanced debt
    (13
    )Increase
      of credit facility
    18





On
July 7, 2015, the Corporation entered into an agreement with its lenders to
extend and amend its existing $750 million credit facility. The amendment
provides that the term of the facility is extended to July 2019, and that the
applicable pricing grid is slightly lowered to better reflect market conditions.
The other existing financial conditions are essentially unchanged.





In
2015, we entered into agreements to acquire the 37.9% and 27% minority interests
of Norcan Flexible Packaging and Cascades Recovery, respectively, for a total
amount of $5 million. The $30 million purchase price balance of Cascades
Recovery is payable over a ten year period.





The
Corporation redeemed 43,900 of
its common shares on the open market in 2015, pursuant to a normal-course issuer
bid. The Corporation also issued 1,168,349 common shares following the exercise of stock options, for an amount of $5
million .
Including the $15
million in dividends paid out in 2015, financing activities from continuing operations,
including debt repayment and the change in our revolving facility, required $129
million in liquidity in 2015, compared to $105
million in 2014.








CASH
FLOWS FROM DISCONTINUED OPERATIONS





In
2015, the Corporation generated cash flows of $30 million from discontinued
operations compared to $54 million in 2014. In 2015, the Containerboard Group
sold its North American boxboard activities and received $40 million. The
Specialty Products Group  paid $6 million for the settlement of the pension plan
of its East Angus, Québec, kraft paper mill closed in 2014. This Group also paid
$2 million for the final selling price adjustment related to its fine paper
activities sold in 2014 for an amount of $36 million. In 2014, all discontinued
operations generated $19 million of operating cash flows before their respective
sale or closure.


31


---




CONSOLIDATED
FINANCIAL POSITION


AS
AT DECEMBER 31, 2015, 2014 AND 2013





The
Corporation’s financial position and ratios are as follows: (in
      millions of Canadian dollars, unless otherwise noted)
    December
      31, 2015
    
    December
      31, 2014
    
    December
      31, 2013Cash
      and cash equivalents
    60
    
    29
    
    23Working
      capital1
    406
    
    379
    
    455%
      of sales2
    11.3
    %
    12.3
    %
    12.9
    %Bank
      loans and advances
    37
    
    46
    
    56Current
      portion of long-term debt
    34
    
    40
    
    39Long-term
      debt
    1,710
    
    1,556
    
    1,540Total
      debt
    1,781
    
    1,642
    
    1,635Net
      debt (total debt less cash and cash equivalents)
    1,721
    
    1,613
    
    1,612Equity
      attributable to Shareholders
    867
    
    893
    
    1,081Non-controlling
      interest
    96
    
    110
    
    113Total
      equity
    963
    
    1,003
    
    1,194Total
      equity and net debt
    2,684
    
    2,616
    
    2,806Ratio
      of net debt/(total equity and net debt)
    64.1
    %
    61.7
    %
    57.4
    %Shareholders’
      equity per common share (in dollars)
    $
    9.09
    
    $
    9.48
    
    $
    11.52


1
  Working capital includes accounts receivable (excluding the short-term portion
of other assets) plus inventories less trade and other payables. Not adjusted
for assets of disposal group classified as held for sale.


2
  % of sales = Average LTM working capital/LTM sales. It includes or excludes
significant business acquisitions and disposals, respectively, of the last
twelve months. Not adjusted for assets of disposal group


classified as held for sale. Not adjusted for discontinued
operations.








NET
DEBT RECONCILIATION


The
variances in the net debt (total debt less cash and cash equivalents) in 2015
are shown below (in M$), with the applicable financial ratios included (see the
“Supplemental Information on Non-IFRS Measures” section for reconciliation of
these figures):





340
    OIBD
      excluding specific items (last twelve months)
    4264.7
    Net
      debt/OIBD excluding specific items
    4.0





Liquidity
available via the Corporation’s credit facilities, along with the expected cash
flow generated by its operating activities, will provide sufficient funds to
meet our financial obligations and to fulfill the capital expenditure program
for at least the next twelve months. Capital expenditure requests for 2016 are
initially approved at $186 million. This amount is subject to change, depending
on the Corporation’s operating results and on general economic conditions. As at December 31,
2015 ,
the Corporation had $499
million (net of letters of credit in the amount of $ 13 million)
available through its $ 750 million credit facility.








32


---




EMPLOYEE
FUTURE BENEFITS





The
Corporation’s employee future benefits assets and liabilities amounted to $454
million and $589 million respectively as at December  31,  2015,
including an amount of $105 million for post-retirement benefits other than
pension plans. The pension plans include an amount of $61 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 as  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 balances as at December 31, 2015, 17 % of
the Corporation pension plans have been evaluated on December 31, 2014 (100% in
2013). Where applicable, Cascades used the measurement relief allowed by law in
order to reduce the impact of its increased current contributions.





Considering
the assumptions used and the asset ceiling limit, the deficit status for
accounting purposes of its pension plans amounted to $36 million as at
December 31, 2015, compared to $59 million in 2014. The 2015 pension plan
expense was $9 million and the cash outflow was $14 million, including $7
million for closed and sold plans. Due to the good investment returns in 2015
and the change in the assumptions, the expected expense for these pension plans
is $7 million in 2016. As for the cash flow requirements, these pension plans
are expected to require a net contribution of approximately $7 million in 2016.
Finally, on a consolidated basis, the solvency ratio of the Corporation’s
pension plans has remained stable at around 100%.








COMMENTS
ON THE FOURTH QUARTER OF 2015





Sales
increased by $96
million ,
or 11% , to $975
million in the fourth quarter of 2015, compared to $879
million in the same period of 2014, resulting mainly from the 15% decrease of the Canadian dollar against the U.S. dollar and the higher average
selling prices in our containerboard and tissue papers activities and accounted
for $73
million and $25
million respectively.





The
Corporation generated an operating loss of $13
million in the fourth quarter of 2015, compared to an operating income of $13
million in the same period of 2015, a decrease of $26
million .
The reduction in operating income mainly comes from the higher specific items
recorded in the fourth quarter of 2015, compared to the same period of 2014, as
explained on pages 41 to 44, and higher depreciation expense due to the review
of the estimated useful life of certain assets as explained on page 61. The
higher average selling prices, the 15% average depreciation of the Canadian dollar against the U.S. dollar and the
lower fibre costs generated a favourable impact of $25
million , $11
million and $9
million ,
respectively. Lower energy costs also added $5
million to the operating income. These factors were partially offset by the higher
shared-based compensation, expense related to management employment contracts
and by start-up costs for our shared services activities. Excluding specific
items, the operating income stood at $47
million in the fourth quarter of 2015, compared to $38
million in the same period of 2014.





In
the fourth quarter of 2015, the following specific items before income taxes
impacted our results:





|  |                                                                                                                                                                             
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | a
      $75 million impairment charge (including $18 million of deferred income
      tax assets reversal) mainly on the assets of our virgin boxboard mill in
      France;

|  |                                                                                  
|- | ---------------------------------------------------------------------------------
|• | a
      $1 million gain related to restructuring measures charges
      reversal;

|  |                                                                              
|- | -----------------------------------------------------------------------------
|• | a
      $4 million unrealized loss on derivative financial
      instruments;

|  |                                                                                             
|- | --------------------------------------------------------------------------------------------
|• | a
      $23 million foreign exchange loss on long-term debt and financial
      instruments;

|  |                                                                                             
|- | --------------------------------------------------------------------------------------------
|• | a
      $3 million loss related to the share of results of associates,
      joint-ventures.




Net
earnings excluding specific items amounted to $22
million ,
or $0.23 per
share, in the fourth quarter of 2015, compared to $8
million ,
or $0.08 per
share, for the same period of 2014. Including specific items, the net loss stood
at $76
million ,
or $0.81 ,
per share in the fourth quarter of 2015, compared to a net loss of $47
million ,
or $0.51 per
share, for the same period of 2014.























33


---




The
reconciliation of the specific items included in operating income (loss) by
business segment is as follows:


For
      the 3-month period ended December 31, 2015(in
      millions of Canadian dollars)
    Containerboard
    Boxboard
      Europe
    Specialty
      Products
    Tissue
      Papers
    Corporate
      Activities
    ConsolidatedOperating
      income (loss)
    32
    (51)
    11
    22
    (27)
    (13)Depreciation
      and amortization
    23
    9
    5
    16
    4
    57Operating
      income (loss) before depreciation and amortization
    55
    (42)
    16
    38
    (23)
    44Specific
      items :Impairment
      charges
    —
    55
    —
    —
    2
    57Restructuring
      gain
    —
    —
    —
    —
    (1)
    (1)Unrealized
      loss on financial instruments
    1
    —
    —
    —
    3
    41
    55
    —
    —
    4
    60Operating
      income (loss) before depreciation and amortization - excluding specific
      items
    56
    13
    16
    38
    (19)
    104Operating
      income (loss) - excluding specific items
    33
    4
    11
    22
    (23)
    47


For
      the 3-month period ended December 31, 2014(in
      millions of Canadian dollars)
    Containerboard
    Boxboard
      Europe
    Specialty
      Products
    Tissue
      Papers
    Corporate
      Activities
    ConsolidatedOperating
      income (loss)
    23
    (1)
    (2)
    8
    (15)
    13Depreciation
      and amortization
    15
    7
    6
    12
    4
    44Operating
      income (loss) before depreciation and amortization
    38
    6
    4
    20
    (11)
    57Specific
      items :Loss
      on acquisitions, disposals and others
    5
    —
    —
    —
    —
    5Impairment
      charges
    —
    7
    6
    —
    —
    13Restructuring
      costs
    —
    1
    —
    1
    —
    2Unrealized
      loss on financial instruments
    1
    —
    —
    —
    4
    56
    8
    6
    1
    4
    25Operating
      income (loss) before depreciation and amortization - excluding specific
      items
    44
    14
    10
    21
    (7)
    82Operating
      income (loss) - excluding specific items
    29
    7
    4
    9
    (11)
    38








The
main variances in sales and operating income (loss) in the fourth quarter of
2015, compared to the same period of 2014, are shown below:


Sales
      ($M)
    
    Operating
      income (loss) ($M)


For
Notes 1 to 5, see definitions on page 15.








34


---




NEAR-TERM
OUTLOOK





The
year 2015
was better than the previous year in all respects. Moreover, the favourable
environment that contributed to these results still prevails and should allow us
to deliver a similar performance during the coming year .





We
do not foresee a significant strengthening of the Canadian dollar and we are not
expecting major increases in the price of recycled fibres. In addition to this,
the decrease in the cost of certain of our inputs such as gas, oil and chemical
products remains positive for us. These favourable conditions will allow us to
accelerate initiatives to continue improving our asset base. Accordingly, we
will slightly increase our capital expenditures this year. In the containerboard
and tissue paper markets, we want to expand our converting operations south of
the border. It is also our intention to increase our consumer product packaging
capacity in the Specialty Products Group. In addition, we will pursue
initiatives to improve our internal processes and reinforce our customer-centric
approach. Notwithstanding the slight increase in capital expenditures, we will
continue to direct a significant portion of our free cash flow to debt
reduction.








CAPITAL
STOCK INFORMATION





As
at December 31,
2015 ,
issued and outstanding capital stock consisted of 95,310,923 common shares ( 94,186,474 as
at December 31, 2014), and 5,262,796 stock options were issued and outstanding ( 6,432,328 as
at December 31, 2014). In
2015, the Corporation redeemed 43,900 common shares, 462,644 options were granted, 1,168,349 options were exercised and 463,827 options expired or were forfeited. As at March 10,
2016 ,
issued and outstanding capital stock consisted of 95,358,629 common shares and 5,215,090 stock options.








CONTRACTUAL
OBLIGATIONS AND OTHER COMMITMENTS





The
Corporation’s principal contractual obligations and commercial commitments
relate to outstanding debt, operating-leases and obligations for its pension and
post-employment benefit plans. The following table summarizes these obligations
as at December 31, 2015:





CONTRACTUAL
OBLIGATIONS Payment
      due by period (in millions of Canadian dollars)
    TOTAL
    
    LESS
      THAN A YEAR
    
    BETWEEN
      1-2 YEARS
    
    BETWEEN
      2-5 YEARS
    
    OVER
      5 YEARSLong-term
      debt and capital-leases, including capital and interest
    2,298
    
    122
    
    119
    
    547
    
    1,510Operating
      leases
    74
    
    24
    
    15
    
    24
    
    11Pension
      plans and other post-employment benefits1
    1,142
    
    36
    
    36
    
    113
    
    957Total
      contractual obligations
    3,514
    
    182
    
    170
    
    684
    
    2,478


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,
2015.








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 $145
million and $136
million for 2015 and 2014 respectively. Aggregate sales to the Corporation from its
joint-venture partners and other affiliates came to $197
million and $181
million for 2015 and 2014 respectively.





Starting
in June 2013, the Corporation entered into a take-or-pay agreement with its
associate Greenpac. For a period of eight years, the Corporation has the
obligation to purchase a minimum quantity of 340,000 short tons per year from
Greenpac. If the Corporation fails to purchase the minimum quantity, it must
compensate Greenpac for the lost gross margin on those short tons. Included in
commitments in Note 27 is the minimum amount to be paid to Greenpac, which
corresponds to the potential lost gross margin on 340,000 tons.





On
September 30, 2014, the Corporation sold a plant manufacturing consumer goods
made from recovered plastics in its Specialty Products Group, to Laurent
Lemaire, a director and major shareholder of the Corporation, at a value
determined to be fair by the independent members of the Board. The independent
directors of the Board reviewed all options for this business and determined
that the sale to Mr. Lemaire was in the best interests of the Corporation and
the employees of the consumer plastics business.


35


---




CHANGES
IN ACCOUNTING POLICY AND DISCLOSURES





RECENT
IFRS PRONOUNCEMENTS NOT YET ADOPTED





IFRS
15 — REVENUE RECOGNITION


In
May 2014, the International Accounting Standards Board  (IASB) issued IFRS 15 -
Revenue from Contracts with Customers. IFRS 15 replaces all previous revenue
recognition standards, including IAS 18 - Revenue, and related interpretations
such as IFRIC 13 - Customer Loyalty Programs. The standard sets out the
requirements for recognizing revenue. Specifically, the new standard introduces
a comprehensive framework with the general principle being that an entity
recognizes revenue to depict the transfer of promised goods and services in an
amount that reflects the consideration to which the entity expects to be
entitled in exchange for those goods or services. The standard introduces more
prescriptive guidance than was included in previous standards and may result in
changes in classification and disclosure in addition to changes in the timing of
recognition for certain types of revenues. The new standard is effective for
annual periods beginning on or after January 1, 2018 with early adoption
permitted. At this time, the Corporation is reviewing the impact that this
standard will have on its consolidated financial statements.





IFRS
9 — FINANCIAL INSTRUMENTS


In
July 2014, the IASB released the final version of IFRS 9, Financial Instruments.
This standard addresses classification and measurement of financial assets and
replaces the multiple category and measurement models for debt instruments in
IAS 39, Financial Instruments: Recognition and Measurement, with a new mixed
measurement model having only two categories: amortized cost and fair value
through profit or loss. IFRS 9 also replaces the models for measuring equity
instruments, and such instruments are recognized either at fair value through
profit or loss or at fair value through other comprehensive income. Where such
equity instruments are measured at fair value through other comprehensive
income, dividends are recognized in profit or loss insofar as they do not
clearly represent a return on investment; however, other gains and losses
(including impairments) associated with such instruments remain in accumulated
comprehensive income indefinitely. Requirements for financial liabilities carry
forward existing requirements in IAS 39, except that fair value changes due to
credit risk for liabilities designated at fair value through profit and loss
would generally be recorded in the statement of other comprehensive income. It
also includes guidance on hedge accounting. The standard is effective for annual
periods beginning on or after January 1, 2018, with earlier application
permitted. The Corporation is currently evaluating the impact of the standard on
its consolidated financial statements.





IFRS
16 — LEASES


In
January 2016, the IASB released IFRS 16, Leases, which supersedes IAS 17,
Leases, and the related interpretations on leases: IFRIC 4, Determining whether
an arrangement contains a lease, SIC 15, Operating Leases - Incentives and SIC
27, Evaluating the substance of transactions in the legal form of a lease. The
standard is effective for annual periods beginning on or after January 1, 2019,
with earlier application permitted for companies that also apply IFRS 15,
Revenue from Contracts with Customers. The Corporation is currently evaluating
the impact of the standard on its consolidated financial
statements.





IAS
1 - PRESENTATION OF FINANCIAL STATEMENTS


In
December 2014, the IASB issued amendments to IAS 1, Presentation of Financial
Statements (IAS 1 amendments). The IAS 1 amendments provide guidance on the
application of judgment in the preparation of financial statements and
disclosures. The IAS 1 amendments are effective for annual periods beginning on
or after January 1, 2016, and therefore the Corporation will apply these
amendments in the first quarter of 2016. The Corporation does not expect any
significant impact on its consolidated financial statements disclosures as a
result of adopting these amendments.





IAS
7 - STATEMENT OF CASH FLOWS


In
January 2016, the IASB published amendments to IAS 7, Statement of Cash Flows.
The amendments are intended to clarify IAS 7 to improve information provided to
users of financial statements about an entity’s financing activities. They are
effective for annual periods beginning on or after January 1, 2017, with earlier
application being permitted. The Corporation is currently evaluating the impact
of IAS 7 on its consolidated financial statements.





IAS
12 - INCOME TAXES


In
February 2016, the IASB issued amendments to IAS 12, Income Taxes regarding the
recognition of deferred tax assets for unrealized losses, effective for annual
periods beginning on or after January 1, 2017. The amendments clarify how to
account for deferred tax assets related to debt instruments measured at fair
value. The Corporation is currently evaluating the impact of these amendments on
its consolidated financial statements.








36


---




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.





A.
   IMPAIRMENT OF LONG-LIVED ASSETS, INTANGIBLE ASSETS AND GOODWILL


In
determining the recoverable amount of an asset or a CGU, the Corporation uses
several key assumptions, based on external information on the industry when
available, and including estimated production levels, selling prices, volume,
raw materials costs, foreign exchange rates, growth rates, discounting rates and
capital spending.





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 Notes 5 and 24)





GROWTH
RATES


The
assumptions used were based on the Corporation’s internal budget. Revenues,
operating margins and cash flows were projected for a period of five years, and
a perpetual long-term growth rate was applied thereafter. In arriving at its
forecasts, the Corporation considered 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


Foreign
exchange rates are determined using the financial institutions’ 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 20 years and
adjusted to reflect management’s best estimate.





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.





B.
   INCOME TAXES


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 healthcare 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.


37


---




CRITICAL
JUDGMENTS IN APPLYING THE CORPORATION’S ACCOUNTING POLICIES





SUBSIDIARIES
AND EQUITY ACCOUNTED INVESTMENTS


Significant
judgment is applied in assessing whether certain investment structures result in
control, joint control or significant influence over the operations of the
investment. Management’s assessment of control, joint control or significant
influence over an investment will determine the accounting treatment for the
investment. The Corporation has a 59.7% interest in an associate ("Greenpac").
Greenpac’s Shareholders agreement requires a majority of 80% for all
decision-making related to relevant activities. Consequently, the Corporation
does not have the power over relevant activities of Greenpac and its
participation is accounted for as an associate.








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”, in
order to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with IFRS.





The
DC&P have been designed to provide reasonable assurance that material
information relating to the Corporation is made known to the President and Chief
Executive Officer, and the Vice-President and Chief Financial Officer by others,
and that information required to be disclosed by the Corporation in its annual
filings, interim filings or other reports filed or submitted by the Corporation
under securities legislation is recorded, processed, summarized and reported
within the time periods specified in securities legislation. The President and
Chief Executive Officer and the Vice-President and Chief Financial Officer have
concluded, based on their evaluation, that the Corporation’s DC&P were
effective as at December 31,
2015 ,
providing reasonable assurance that material information related to the issuer
is made known to them by others within the Corporation.





The
President and Chief Executive Officer, and the Vice-President and Chief
Financial Officer have assessed the effectiveness of the ICFR as at December 31,
2015 ,
based on the control framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 COSO Framework). Based on this
assessment, they have concluded that the Corporation’s ICFR were effective as at December 31,
2015 and expect to certify the Corporation’s annual filings with the U.S. Securities
and Exchange Commission on Form 40-F, as required by the United States
Sarbanes-Oxley Act.





In
July 2015, we initiated the first phase of the centralization of the accounting
function within our Shared Services Centre and we ensured that appropriate
internal control measures had been established and maintained with respect to
financial reporting. With the exception of the above, during the quarter ended December 31,
2015 ,
no changes to the Corporation’s ICFR have materially affected, or are reasonably
likely to materially affect, its ICFR.








38


---




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 materials, 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.





|   |                                                                                                                                                                                                                                                                                                                              
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|a) | 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 materials 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 and
boxboard, are highly 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 by
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. 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 wasn’t able 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.





To
mitigate price risk, our strategies include the use of various derivative
financial instrument transactions, whereby it sets the price for notional
quantities of old corrugated containers, electricity and natural
gas.





Additional
information on our North American electricity and natural gas hedging programs
as at December 31, 2015 is set out below:





NORTH
AMERICAN ELECTRICITY HEDGING


UNITED
      STATES
    
    CANADAElectricity
      consumption
    40
    %
    60
    %Electricity
      consumption in a regulated market
    56
    %
    66
    %%
      of consumption hedged in a de-regulated market (2016)
    28
    %
    —
    %Average
      prices (2016 - 2017) (in US$, per KWh)
    $
    0.04
    
    $
    —Fair
      value as at December 31, 2015 (in millions of CAN$)
    $
    (1
    )
    $
    —























39


---




NORTH
AMERICAN NATURAL GAS HEDGING


UNITED
      STATES
    
    CANADANatural
      gas consumption
    44
    %
    56
    %%
      of consumption hedged (2016)
    36
    %
    61
    %Average
      prices (2016 - 2020) (in US$, per mmBTU) (in CAN$, per GJ)
    $
    3.96
    
    $
    3.91Fair
      value as at December 31, 2015 (in millions of CAN$)
    $
    (6.9
    )
    $
    (9.6
    )





|   |                                                                                                                                                                                                                                                                                                                                                                 
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|b) | Cascades
      faces significant competition and some of its competitors may have greater
      cost advantages or 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 vinyl, 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:





|  |                                                                                                           
|- | ----------------------------------------------------------------------------------------------------------
|• | its
      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, and 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 does. For example, fully integrated manufacturers,
which are 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 materials 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.





To
mitigate competition risk, Cascades’ targets are to offer quality products that
meet customers’ needs at competitive prices and to provide good customer
service.





|   |                                                                                                                                                                                                                               
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|c) | Because
      of the Corporation’s international operations, it faces political, social
      and exchange rate risks that can negatively affect its business, operating
      results, profitability and financial
condition.




Cascades
has customers and operations located outside Canada. In 2015, sales outside
Canada, in Canadian dollars, represented approximately 63% of
the Corporation’s consolidated sales, including 40% in
the United States. In 2015, 28% of
sales from Canadian operations were made to the United States.





The
Corporation’s international operations present it with a number of risks and
challenges, including:





|  |                                                                   
|- | ------------------------------------------------------------------
|• | the
      effective marketing of its products in other
  countries

|  |                                            
|- | -------------------------------------------
|• | tariffs
      and other trade barriers, and

|  |                                                                                                                                                                                                      
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | different
      regulatory schemes and political environments applicable to the
      Corporation’s operations, in areas such as environmental
                     and health and safety
compliance.



















40


---




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 and the euro. The appreciation of the Canadian dollar
against the U.S. dollar over the last few years has adversely affected the
Corporation’s reported operating results and financial condition. This had a
direct impact on export prices and also contributed to reducing Canadian dollar
prices in Canada, because several of the Corporation’s product lines are priced
in U.S. dollars. However, a substantial portion of the Corporation’s debt is
also denominated in currencies other than the Canadian dollar. The Corporation
has senior notes outstanding and also some borrowings under its credit facility
that are denominated in U.S. dollars and in euros, in the amounts of
US $956
million and €97
million respectively as at December 31, 2015.





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 U.S. dollar and the
euro, 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. To
mitigate the risk of currency rises from future commercial transactions,
recognized assets and liabilities, and net investments in foreign operations,
which are partially covered by purchases and debt, Management has implemented a
policy for managing foreign exchange risk against the relevant functional
currency.





The
Corporation uses various foreign exchange forward contracts and related currency
option instruments to anticipate sales net of purchases, interest expenses and
debt repayment. Gains or losses from the derivative financial instruments
designated as hedges are recorded under “Other comprehensive income (loss)” and
are reclassified under earnings in accordance with the hedge items.





Additional
information on our North American foreign exchange hedging program is set out
below:





NORTH
AMERICAN FOREIGN EXCHANGE HEDGING 1


Sell
      contracts and currency options on net exposure to $US:
    2016
    
    2017
    
    2018Total
      amount (in millions of US$)
    $
                           45 to 90
    $
                           35 to 60
    
    $
                             5 to 20Estimated
      % of sales, net of expenses from Canadian operations (excluding
      subsidiaries with non-controlling interest)
    27%
      to 54%
    
    21%
      to 36%
    
    3%
      to 12%Average
      rate (US$/CAN$)
    0.875
      to 0.855
    
    0.789
      to 0.779
    
    0.730
      to 0.704Fair
      value as at December 31, 2015 (in millions of CAN$)
    $
    (19
    )
    $
    (6
    )
    $
    (1
    )


|  |                                                                                                          
|- | ---------------------------------------------------------------------------------------------------------
|1 | See
      Note 26 of the audited consolidated financial statements for more details
      on derivatives.




d)
  The Corporation’s operations are subject to comprehensive environmental
regulations and involve expenditures that 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:





|  |                    
|- | -------------------
|• | 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, Canada and Europe that holds
companies accountable for the investigation and remediation of hazardous
substances. The Corporation’s European subsidiaries are also subject to the
Kyoto Protocol, aimed at reducing worldwide CO 2 emissions. Each unit has been allocated emission rights (“CO 2 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


41


---




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:





|  |                                                                                                                                             
|- | --------------------------------------------------------------------------------------------------------------------------------------------
|• | 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 person, property or the
      environment.




Either
of these 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, we expect to incur
ongoing capital and operating expenses in order to achieve and maintain
compliance with applicable environmental requirements.





EMISSIONS
MARKET


The
Corporation is exposed to the emissions trading market and has to hold carbon
credits equivalent to its emissions. Depending on circumstances, the Corporation
may have to buy credits on the market or could sell some in the future. These
transactions would have no significant effect on the financial position of the
Corporation and it is not anticipated that it will change in the
future.





e)
 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 most of
its facilities, with policy specifications and insured limits customarily
carried in its industry for similar properties. The cost of the Corporation’s
insurance policies has increased over the past few years. 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.





To
mitigate the risk subject to insurance coverage, the Corporation reviews its
strategy annually with the Board of Directors and is seeking different
alternatives to achieve more efficient forms of insurance coverage at the lowest
costs possible.





f)
 Labour disputes could have a material adverse effect on the Corporation’s cost
structure and ability to run its mills and plants.





As
at December 31, 2015, the Corporation had approximately 10,700 employees, of
whom approximately 9,000 were employees of its Canadian and United States
operations. Approximately 29% of the Corporation’s Canadian and United States
employees are unionized under 26 separate collective bargaining agreements. In
addition, in Europe, some of the Corporation’s operations are subject to
national industry collective bargaining agreements that are renewed on an annual
basis. The Corporation’s inability to negotiate acceptable contracts with these
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 Corporation’s 26 collective bargaining agreements in North
America, 2 are expired and are currently under negociation, 4 will expire in
2016 and 6 more in 2017.





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.














42


---




g)
 Cascades may make investments in entities that it does not 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 participations in subsidiaries in order to increase its vertical
integration, enhance customer service and increase efficiencies 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:





|  |                                                                                                                                                                                                                                  
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | three
      50%-owned joint ventures with Sonoco Products Corporation, of which two
      are in Canada and one in the United States, that produce specialty paper
      packaging products such as headers, rolls and
  wrappers

|  |                                                                                                                                                                                                                                                                                                        
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | a
      20.29% interest in Boralex Inc., a Canadian public corporation and a major
      electricity producer whose core business is the development and operation
      of power stations that generate renewable energy, with operations in
      Canada, the North-eastern United States and France.

|  |                                                                                              
|- | ---------------------------------------------------------------------------------------------
|• | a
      57.61%-owned subsidiary, RdM, a European manufacturer of recycled
      boxboard, and

|  |                                                                                                                                                       
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------
|• | a
      59.7% interest in Greenpac Mill LLC, an American corporation that
      manufactures a light-weight linerboard made with 100% recycled fibres.




Apart
RdM, Cascades does not have effective control over these entities. The
Corporation’s inability to control entities in which it invests may affect its
ability to receive distributions from those 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 fails to
observe its 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 the notes 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. 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.





h)
 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:





|  |                                                                                                                          
|- | -------------------------------------------------------------------------------------------------------------------------
|• | difficulty
      in integrating and managing newly acquired operations, and in improving
      their operating efficiency

|  |                                                                                                                                      
|- | -------------------------------------------------------------------------------------------------------------------------------------
|• | difficulty
      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
      corporation

|  |                                                             
|- | ------------------------------------------------------------
|• | 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.











43


---




Although
Cascades generally 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.





|   |                                                                                                                                                                           
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|i) | 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 regularly undertake 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.





j)
 Certain Cascades insiders collectively own a substantial percentage of the
Corporation’s common shares.





Messrs.
Bernard, Laurent and Alain Lemaire (“the Lemaires”) collectively own 29.9 % of
the common shares as at December 31, 2015, and there may be situations in which
their interests and the interests of other holders of common shares will not be
aligned. Because the Corporation’s remaining common shares are widely held, the
Lemaires may be effectively able to:





|  |                                                                                                                
|- | ---------------------------------------------------------------------------------------------------------------
|• | elect
      all of the Corporation’s directors and, as a result, control matters
      requiring Board approval

|  |                                                                                                                                                                                                                      
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | control
      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

|  |                                                                                              
|- | ---------------------------------------------------------------------------------------------
|• | otherwise
      control or influence the Corporation’s business direction and
      policies.




In
addition, the Lemaires may have an interest in pursuing acquisitions,
divestitures or other transactions that, in their judgment, could enhance the
value of their equity investment, even though the transactions might involve
increased risk to the holders of the common shares.





k)
 If Cascades is not successful in retaining or replacing its key personnel,
particularly if the Lemaires do not stay active in the


Corporation’s business, its business, financial condition or operating
results could be adversely affected.





Although
Cascades believes that the Lemaires 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 Lemaires or on any other members of its senior
management.





|   |                                                                        
|-- | -----------------------------------------------------------------------
|l) | Risks
      relating to the Corporation’s indebtedness and
  liquidity.




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 of December 31, 2015, it
had $1,721
million in outstanding total debt on a consolidated basis, including capital-lease
obligations. The Corporation also had $499
million available under its revolving credit facility. On the same basis, its
consolidated ratio of net debt to total equity as of December 31, 2015 was 64.1% .
The Corporation’s actual financing expense, including interest on employees’
future benefits, was $97
million ,
excluding the loss on refinancing of long-term debt, for 2015. Cascades also has
significant obligations under operating leases, as described in its audited
consolidated financial statements that are incorporated by reference
herein.





On
July 7, 2015, the Corporation entered into an agreement with its lenders to
extend and amend its existing $750 million credit facility. The amendment
provides that the term of the facility is extended to July 2019, and that the
applicable pricing grid is slightly lowered to better reflect market conditions.
The other existing financial conditions were essentially unchanged.





In
2015, the Corporation issued US$250 million ($305 million) aggregate principal
amount of 5.75% senior notes due in 2023. The Corporation used the proceeds from
this offering of notes to repurchase a total of US$250 million aggregate
principal amount of 7.875% senior notes due in 2020 for a total consideration of
US$250 million ($305 million). The Corporation also paid premiums of US$11
million ($13 million) to repurchase the 2020 notes as well as fees and expenses
in connection with the offering and the tender offer totalling $5 million. The
refinancing of these notes reduces our future interest expense by approximately
US$6 million annually.





44


---




In
2014, we refinanced our 7.75% unsecured senior notes of US$500 million ($540
million) and $200 million, due in 2017 and in 2016, respectively. The
Corporation issued 5.50% unsecured senior notes of US$550 million ($596
million), due in 2022, and 5.50% unsecured senior notes of $250 million, due in
2021. We allocated the proceeds of these new notes to repurchase the US$500
million ($540 million) notes due in 2017 and the $200 million notes due in
2016. The remaining amounts (US$50 million ($56 million) and $50 million) were
used to pay a premium totalling $31 million plus refinancing costs of $13
million and to reduce our credit facility utilization. The refinancing of these
notes reduces our future interest expense by approximately US$8 million and $6
million annually.





The
Corporation has outstanding senior notes rated by Moody’s Investor Service
(“Moody’s”) and Standard & Poor’s (“S&P”).





The
following table reflects the Corporation’s secured debt rating/corporate
rating/unsecured debt rating as at the date on which this MD&A was approved
by the Board of Directors, and the evolution of these ratings compared to past
years:


Credit
      rating (outlook)
    MOODY’S
    STANDARD
      & POOR’S2004
    Ba1/Ba2/Ba3
      (stable)
    BBB-/BB+/BB+
      (negative)2005
      - 2006
    Ba1/Ba2/Ba3
      (stable)
    BB+/BB/BB-
      (negative)2007
    Baa3/Ba2/Ba3
      (stable)
    BBB-/BB/BB-
      (stable)2008
    Baa3/Ba2/Ba3
      (negative)
    BB+/BB-/B+
      (negative)2009
      - 2010
    Baa3/Ba2/Ba3
      (stable)
    BB+/BB-/B+
      (stable)2011
    Baa3/Ba2/Ba3
      (stable)
    BB+/BB-/B+
      (positive)2012
    Baa3/Ba2/Ba3
      (stable)
    BB+/BB-/B+
      (negative)2013
    Baa3/Ba2/Ba3
      (stable)
    BB/B+/B
      (stable)2014
    Baa3/Ba2/Ba3
      (stable)
    BB/B+/B+
      (stable)2015
    Baa3/Ba2/Ba3
      (stable)
    BB/B+/B+
      (stable)





This
facility is in place with a core group of highly rated international banks. The
Corporation may decide to enter into certain derivative instruments to reduce
interest rates and foreign exchange exposure.





The
Corporation’s leverage could have major consequences for holders of its common
shares. For example, it could:





|  |                                                                                                                   
|- | ------------------------------------------------------------------------------------------------------------------
|• | 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.




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 we are substantially leveraged, we and our subsidiaries will be able
to incur substantial additional indebtedness in the future. Although our credit
facility and the indentures governing the notes restrict us and our restricted
subsidiaries from incurring additional debt, these restrictions are subject to
important exceptions and qualifications. If we or our subsidiaries incur
additional debt, the risks that we and they now face as a result of our leverage
could intensify.





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:





|  |                   
|- | ------------------
|• | borrow
      money

|  |                                                                    
|- | -------------------------------------------------------------------
|• | pay
      dividends on stock or redeem stock or 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

|  |                                              
|- | ---------------------------------------------
|• | enter
      into transactions with affiliates

|  |                             
|- | ----------------------------
|• | create
      or assume liens

|  |                                                 
|- | ------------------------------------------------
|• | enter
      into sale and leaseback transactions

|  |                                               
|- | ----------------------------------------------
|• | engage
      in mergers or consolidations, and

|  |                                                                     
|- | --------------------------------------------------------------------
|• | enter
      into a sale of all or substantially all of our
  assets.




45


---




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 subsidiaries
with non-controlling interest.





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 may
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 its covenants, and could require it to take actions to
reduce its debt or to act in a manner contrary to its current business
objectives.





m)
 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 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 or minority investments. The limitations are
also subject to important exceptions and qualifications. 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 re-financing 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 any 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.





n)
 Risks related to the common shares.





The
market price of the common shares may fluctuate, and purchasers may not be able
to re-sell the common shares at or above the purchase 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. 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.











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|   |                                                    
|-- | ---------------------------------------------------
|o) | Cash-flow
      and fair-value interest rate risks.




As
the Corporation has no significant interest-bearing assets, its earnings and
operating cash flows are substantially independent of changes in market interest
rates.





The
Corporation’s interest rate risk arises from long-term borrowings. Borrowings
issued at variable rates expose the Corporation to a cash-flow interest rate
risk. Borrowings issued at a fixed rate expose the Corporation to a fair-value
interest rate risk.





p)
 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 creditworthy financial institutions.





The
Corporation is exposed to credit risk on accounts receivable from its customers.
In order to reduce this risk, the Corporation’s credit policies include the
analysis of a customer’s financial position and a regular review of its credit
limits. The Corporation also believes that no particular concentration of credit
risks exists due to the geographic diversity of its customers and the procedures
in place for managing commercial risks. Derivative financial instruments include
an element of credit risk, should the counterparty be unable to meet its
obligations.





q)
 Enterprise Resource Planning (ERP) implementation.





The
Corporation decided to modernize its financial information system with the
implementation of an integrated Enterprise Resource Planning (ERP) system. The
Corporation identified the risks associated with said project and adopted a
step-by-step plan to address any risks related to the implementation process.
The Corporation dedicated a project team, required corporate oversight with the
appropriate skills and knowledge, and retained the services of consultants to
provide expertise and training. Supported by senior management and key
personnel, the Corporation undertook a detailed analysis of its requirements
during 2010 and, in November of 2010, successfully completed a pilot project in
one of its plants. The project team then finalized a detailed blueprint for its
manufacturing and some of its converting operations, and began  implementing the
solution in its business units in 2012. The implementation stage is still
ongoing as the Corporation reviews its internal processes at the same time, to
maximize the realization of benefits and reduce risks.








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