KP Tissue Releases its Financial Results and those of Kruger Products L.P. for the First Quarter of 2013 and Declares Quarterly Dividend

MISSISSAUGA, ON, May 14, 2013 /CNW Telbec/ - KP Tissue Inc. ("KPT") (TSX: KPT), which holds a limited partnership interest in Kruger Products L.P. ("KPLP"), releases the financial results for KPT and KPLP for the first quarter of 2013. KPLP is Canada's leading manufacturer of quality tissue products for household and commercial use.

KP Tissue Inc. and Kruger Products L.P.
KPT was created to acquire, and its business is limited to holding, a limited partnership interest in KPLP. As of March 31, 2013, KPT held a 16.9% interest in KPLP, accounted for as an investment on the equity basis. The financial results presented for KPT represent its holding in KPLP during the first quarter of 2013. The following discussion and analysis, unless identified specifically as representing the financial results of only KPT, relates entirely to the financial results of KPLP. Accordingly, the results of KPLP apply to KPT only to the extent of its holding in KPLP.

On April 15, 2013, KPLP paid a distribution to its partners. Following the reinvestment by the partners of KPLP of a portion of such distribution pursuant to KPLP's distribution reinvestment plan, KPT held a 16.9% interest in KPLP.

KPLP Highlights

Q1 2013 Highlights

• Revenue of $221.8 million in Q1 2013, compared to $216.2 million in Q1 2012, an increase of 2.6 percent year over year
• EBITDA of $25.1 million in Q1 2013 (including $1.8 million of TAD Project start-up costs) compared to $27.2 million in Q1 2012 (including $0.8 million of TAD Project start-up costs), a decrease of 7.8 percent year over year
• Net income of $11.7 million in Q1 2013 compared to $0.4 million in Q1 2012, an increase of $11.3 million year over year
• Cash balance of $92.4 million as of March 31, 2013 compared to $121.5 million as of December 31, 2012

"The first quarter of 2013 was highlighted by the completion of the construction phase of our TAD Project, and we began our first customer deliveries. We are carrying out our strategy to gradually ramp up TAD product sales in 2013, which should generate a modest positive contribution to EBITDA for the year as a whole, " said Mario Gosselin, CEO of KP Tissue and KPLP.

"Revenue for the first quarter 2013 was $221.8 million, up 2.6% over 2012. We benefited from additional days of sales in the quarter and solid growth in the U.S. business. This was partially offset by our decision last year to cease production of parent rolls for sale. While our private label revenue was strong, sales in our Canadian branded business were somewhat soft in Q1 primarily due to the timing of our promotional activities. We expect revenue to improve in Q2 over Q1.

"First quarter EBITDA of $25.1 million decreased compared to the same period in 2012, but increased compared to the EBITDA we achieved in the fourth quarter of 2012. Q1 EBITDA benefited year-over-year from the business rationalization program we implemented last year along with reduced management fees. These gains were impacted by start-up costs for the TAD Project and higher fibre and energy costs. In addition, our Away-From-Home Segment EBITDA returned to a more normalized level in the first quarter.

"We look ahead to the rest of 2013 with confidence in our business model considering the positioning of our brands and the strong initial reaction of customers to our TAD products in the premium private label market," Mr. Gosselin concluded.

KPLP Q1 2013 Financial Results
Revenue in Q1 2013 was $221.8 million, an increase of 2.6 percent compared to Q1 2012. Compared to Q1 2012, revenue was positively impacted by volume and mix increases primarily related to an additional 5 days of sales in Q1 2013 compared to Q1 2012. The increases in revenue compared to Q1 2012 were driven by increases in Consumer and AFH segment revenues, partially offset by declines in Other segment revenue primarily as a result of the decision to cease production of parent rolls for sale at the New Westminster plant in Q1 2012.

Cost of sales in Q1 2013 was $157.2 million, compared to $151.6 million in Q1 2012. As a percentage of revenue, cost of sales increased to 70.9 percent in Q1 2013 from 70.1 percent in Q1 2012 primarily due to increases in commodity prices, particularly pulp fibre.

Operating expenses in Q1 2013 were $47.9 million, compared to $43.0 million in Q1 2012. Compared to Q1 2012, operating expenses increased primarily due to higher sales, logistics and marketing related expenses, public company costs paid on behalf of KPT and the unfavourable impact of foreign exchange.

EBITDA in Q1 2013 was $25.1 million, compared to $27.2 million in Q1 2012. EBITDA in Q1 2013 included $1.8 million of TAD Project start-up costs compared to $0.8 million in Q1 2012. Compared to Q1 2012, EBITDA decreased primarily due to increased fibre costs and operating expenses, partially offset by higher sales volumes.

Net income in Q1 2013 was $11.7 million, compared to $0.4 million in Q1 2012. Compared to Q1 2012, net income increased primarily due to a deferred tax credit related to the U.S. operations in Q1 2013, partially offset by an increase in interest expense related to the TAD Project and lower EBITDA.

The cash balance as of March 31, 2013 was $92.4 million, down from $121.5 million as of December 31, 2012. The decrease in cash was primarily driven by cash used in operations related to a higher inventory balance at the end of Q1 2013 required to meet expected Q2 2013 demand and a decline in accounts payable due to timing. The cash balance was also impacted by capital expenditures of $22.7 million, of which $19.7 million related to the TAD Project and $3.0 million related to existing sites. This compared to capital expenditures in Q1 2012 of $33.4 million, of which $28.8 million related to the TAD Project and $4.6 million related to existing sites. The decreases in the cash balance were partially offset by proceeds of $12.3 million from the issuance of partnership units related to the partial exercise of the overallotment option in Q1 2013.

KPT Highlights

• Net loss of $0.7 million in Q1 2013
• Loss per share of $0.08 in Q1 2013
• Declared quarterly dividend of $0.18 per share, payable July 15, 2013

KPT Q1 2013 Financial Results

Included in the net loss of $0.7 million in Q1 2013 was $2.0 million representing KPT's share of KPLP's profit. The profit was more than offset by depreciation of $2.7 million related to adjustments to carrying amounts on acquisition, and income tax expense of $0.3 million.

KPLP Distribution
KPLP will pay a distribution of $0.18 per KPLP unit to its partners on or prior to July 15, 2013.

Dividends on Common Shares
The Board of Directors of KP Tissue Inc. declared a quarterly dividend of $0.18 per share to be paid on July 15, 2013 to shareholders of record at the close of business on June 28, 2013.

Conference Call Information
KPT will hold its conference call on Tuesday, May 14, 2013 at 8:30 a.m. Eastern Time.

Details of conference call:
Via telephone:  [phone] or 647-427-7450
Via the internet at: www.kptissueinc.com

Presentation material referenced during the conference call will be available at www.kptissueinc.com.

Conference Call Rebroadcast
A rebroadcast of the conference call will be available until midnight, June 14, 2013 by dialing 1-855-859-2056 or 416-849-0833 and entering passcode 36940226.

The replay of the webcast will remain available on the web site until midnight, June 14, 2013.

About KP Tissue Inc.
KPT was created to acquire, and its business is limited to holding, a limited partnership interest in KPLP. For more information visit www.kptissueinc.com.

About Kruger Products L.P.
KPLP is Canada's leading manufacturer of quality tissue products for household, industrial and commercial use. KPLP serves the Canadian consumer market with such well-known brands as Cashmere®, Purex®, SpongeTowels®, Scotties®' and White Swan®. In the U.S., KPLP manufactures the White Cloud® brand, as well as many private label products. The Away-From-Home division manufactures and distributes high-quality, cost-effective product solutions to a wide range of commercial and public entities. KPLP has approximately 2,300 employees across North America and operates five FSC® CoC- certified mills (FSC® C104904), four of which are located in Canada and one in the US. For more information visit www.krugerproducts.ca.

Non-IFRS Measures
This press release uses certain non-IFRS financial measures and ratios which KPLP believes provide useful information to both management of KPLP and the readers of the financial information in measuring the financial performance and financial condition of KPLP. These measures do not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similarly titled measures presented by other companies. An example of such measures is EBITDA. EBITDA is not a measurement of operating performance computed in accordance with IFRS and should not be considered as a substitute for operating income, net income or cash flows from operating activities computed in accordance with IFRS. "EBITDA" is calculated by KPLP as net income (loss) before (i) interest expense, (ii) income taxes, (iii) depreciation, (iv) amortization, (v) impairment of non-financial assets, (vi) loss (gain) on disposal of property, plant and equipment, (vii) unrealized foreign exchange loss (gain), and (viii) one-time costs related to restructuring activities. A reconciliation of EBITDA to the relevant reported results can be found in the Management's Discussion and Analysis ("MD&A") of KPT and KPLP for the 13-week period ended March 31, 2013 available on SEDAR at www.sedar.com.

Forward-Looking Statements
Certain statements in this press release about KPT's and KPLP's current and future plans, expectations and intentions, results, levels of activity, performance, goals or achievements or any other future events or developments constitute forward-looking statements. The words "may", "will", "would", "should", "could", "expects", "plans", "intends", "trends", "indications", "anticipates", "believes", "estimates", "predicts", "likely" or "potential" or the negative or other variations of these words or other comparable words or phrases, are intended to identify forward-looking statements. The forward-looking information is based on certain key expectations and assumptions made by KPT, including expectations and assumptions concerning the impact of the start-up of the TAD Project on EBITDA, the benefits of the business rationalization program and the funding of remaining capital expenditures relating to the TAD Project. Although KPT believes that the expectations and assumptions on which such forward-looking information is based are reasonable, undue reliance should not be placed on the forward-looking information since no assurance can be given that such expectations and assumptions will prove to be correct.

Many factors could cause KPLP's actual results, level of activity, performance or achievements or future events or developments (which could in turn affect the economic benefits derived from the Corporation's economic interest in KPLP) to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, the following factors, which are discussed in greater detail in the "Risk Factors - Risks Related to KPLP's Business" section of the KPT Annual Information Form dated March 28, 2013 available on SEDAR at www.sedar.com: Kruger Inc.'s influence over KPLP; KPLP's reliance on Kruger Inc.; consequences of an event of insolvency relating to Kruger Inc.; risks associated with the TAD Project; operational risks; Gatineau Plant land lease; significant increases in prices; reduction in supply of fibre; increased pricing pressure and intense competition; KPLP's inability to innovate effectively; adverse economic conditions; dependence on key retail trade customers; damage to the reputation of KPLP or KPLP's brands; KPLP's sales being less than anticipated; KPLP's failure to implement its business and operating strategies; KPLP's obligation to make regular capital expenditures; KPLP's entering into unsuccessful acquisitions; KPLP's dependence on key personnel; KPLP's inability to retain its existing customers or obtain new customers; KPLP's loss of key suppliers; KPLP's failure to adequately protect its intellectual property rights; KPLP's reliance on third party intellectual property licenses; adverse litigation and other claims affecting KPLP; material expenditures due to comprehensive environmental regulation affecting KPLP's cash flow; KPLP's pension obligations are significant and can be materially higher than predicted if KPLP Management's underlying assumptions are incorrect; labour disputes adversely affecting KPLP's cost structure and KPLP's ability to run its plants; exchange rate and U.S. competitors; KPLP's inability to service all of its indebtedness; exposure to potential consumer product liability, restrictive covenants; interest rate and refinancing risk; information technology and innovation; insurance; and internal controls.

Readers should not place undue reliance on forward-looking statements made herein. The forward-looking information contained herein is expressly qualified in its entirety by this cautionary statement. The forward-looking information contained herein is made as of the date of press release and KPT undertakes no obligation to publicly update such forward-looking information to reflect new information, subsequent or otherwise, unless required by applicable securities laws.

Kruger Products L.P.
Unaudited Condensed Consolidated Statements of Financial Position
(thousands of Canadian dollars)

		March 31, 2013		December 31, 2012
		$		$
Assets
Current assets
	Cash and cash equivalents	92,421		121,489
	Trade and other receivables	94,823		94,308
	Receivables from related parties	794		668
	Inventories	127,873		116,873
	Income tax recoverable	11,061		2,872
	Prepaid expenses	5,426		4,413
		332,398		340,623
Non-current assets
	Property, plant & equipment	594,620		580,814
	Other long-term assets	6,634		6,236
	Goodwill	152,021		152,021
	Intangible assets	13,699		13,828
	Deferred income taxes	6,489		1,178
Total assets		1,105,861		1,094,700
Liabilities
Current liabilities
	Trade and other payables	165,430		186,309
	Payables to related parties	3,693		9,057
	Distribution payable	11,232		-
	Current portion of provisions	2,266		3,719
	Current portion of long-term debt	7,820		3,802
		190,441		202,887
Non-current liabilities
	Long-term debt	331,851		323,885
	Other long-term liabilities	485		544
	Provisions	6,349		5,506
	Pensions	133,743		148,989
	Post-retirement benefits	48,597		48,302
	Liabilities to non-unitholders	711,466		730,113
	Partnership units	118,562		118,562
Total Liabilities		830,028		848,675
Equity
	Partnership units	269,806		257,516
	Accumulated deficit	(1,757)		(14,736)
	Accumulated other comprehensive loss	7,784		3,245
Total equity		275,833		246,025
Total equity and liabilities		1,105,861		1,094,700

 

Kruger Products L.P.
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)
(thousands of Canadian dollars)

		13-week		12-week
		period ended		period ended
		March 31, 2013		March 25, 2012
		$		$
Revenue		221,785		216,246
Expenses
	Cost of sales	157,161		151,586
	Operating expenses	47,871		43,050
	Impairment of non-financial assets	-		5,900
	Restructuring costs	-		9,100
Operating income		16,753		6,610
Interest expense		9,890		6,088
Income before income taxes		6,863		522
Income taxes		(4,853)		163
Net income for the period		11,716		359
Other comprehensive income (loss)
	Items that will not be reclassified to net income:
	Remeasurements of pensions	12,495		(11,248)
	Remeasurements of post-retirement benefits	-		(1,637)
	Items that may be subsequently reclassified to net income:
	Cumulative translation adjustment	4,539		(2,781)
Total other comprehensive income (loss) for the period		17,034		(15,666)
Comprehensive income (loss) for the period		28,750		(15,307)

 

Kruger Products L.P.
Unaudited Condensed Consolidated Statements of Cash Flows
(thousands of Canadian dollars)

		13-week		12-week
		period ended		period ended
		March 31, 2013		March 25, 2012
		$		$
Cash flows from (used in) operating activities
Net income for the period		11,716		359
Items not affecting cash
	Depreciation	7,333		5,990
	Amortization	132		150
	Gain on sale of fixed assets	(4)		-
	Unrealized foreign exchange (gain) loss	855		(565)
	Interest expense	9,890		6,088
	Pension and post retirement benefits	2,708		2,283
	Provisions	262		9,427
	Income taxes	(4,853)		163
	Impairment of non-financial assets	-		5,900
	Total items not affecting cash	16,323		29,436
Net change in non-cash working capital		(34,442)		(10,928)
Contributions to pension and post-retirement benefit plans		(7,328)		(8,283)
Provisions paid		(1,490)		-
Income tax payments		(994)		(9)
Net cash from (used in) operating activities		(16,215)		10,575
Cash flows used in investing activities
Purchase of property, plant & equipment		(3,017)		(4,589)
Purchases of through-air-dried (TAD) expansion		(19,661)		(28,849)
Purchases of software		(3)		-
Proceeds on sale of property, plant and equipment		4		-
Net cash used in investing activities		(22,677)		(33,438)
Cash flows from financing activities
Proceeds from credit facilities		4,571		37,553
Repayment of credit facilities		(76)		(5,000)
Payment of deferred financing fees		-		(2)
Transfer of assets to related parties		-		(661)
Interest paid on credit facilities		(7,216)		(7,579)
Proceeds from issuing partnership units, net		12,290		-
Net cash from financing activities		9,569		24,311
Effect of exchange rate changes on cash and cash
equivalents held in foreign currency		255		(168)
Increase (decrease) in cash and cash equivalents during the period		(29,068)		1,280
Cash and cash equivalents - Beginning of period		121,489		31,797
Cash and cash equivalents - End of period		92,421		33,077

 

Kruger Products L.P.
Segment and Geographic Results
(thousands of Canadian dollars)

		13-week		12-week
		period ended		period ended
		March 31, 2013		March 25, 2012
		$		$
Segment Information
Segment Revenue
	Consumer	184,403		176,375
	AFH	35,281		33,347
	Other	2,101		6,524
Total segment revenue		221,785		216,246
Segment EBITDA
	Consumer	23,923		28,049
	AFH	1,463		1,920
	Other	(317)		(2,784)
Total segment EBITDA		25,069		27,185
Reconciliation to Net Income:
Depreciation and amortization		7,465		6,140
Interest expense		9,890		6,088
Gain on sale of fixed assets		(4)		-
One-time costs related to the
Business Rationalization Project		-		9,100
Impairment of non-financial assets		-		5,900
Unrealized foreign exchange (gain) loss		855		(565)
Income before income taxes		6,863		522
Income taxes		(4,853)		163
Net income for the period		11,716		359
Geographic Revenue
Canada		157,562		154,914
U.S.		57,134		54,495
Mexico		7,089		6,837
Total Revenue		221,785		216,246

KP Tissue Inc.
Unaudited Condensed Statement of Financial Position
(thousands of Canadian dollars)

		March 31, 2013		December 31, 2012
		$		$
Assets
Current assets
	Distribution receivable	1,898		-
Non-current assets
	Deferred income taxes	-		123
	Investment in associate	153,075		139,364
Total Assets		154,973		139,487
Liabilities
Current liabilities
	Dividend payable	1,898		-
	Income taxes payable	213		-
		2,111		-
Non-current liabilities
	Deferred income taxes	354		-
Total liabilities		2,465		-
Equity
	Common shares	153,125		140,000
	Accumulated deficit	(1,349)		(583)
	Accumulated other comprehensive income	732		70
Total equity		152,508		139,487
Total liabilities and equity		154,973		139,487

 

KP Tissue Inc.
Unaudited Condensed Statement of Comprenhensive Income
(thousands of Canadian dollars, except share and per share amounts)

		13-week
		period ended
		March 31, 2013
		$
Equity loss		(747)
Gain on remeasurement of over-allotment option		375
Loss before income taxes		(372)
Income taxes
	Current	213
	Deferred	106
		319
Net loss for the period		(691)
Other comprehensive income
	Items that will not be reclassified to net income:
	Remeasurements of pensions (net of tax of $272)	1,823
	Items that may be subsequently reclassified to net income:
	Cumulative translation adjustment (net of tax of $99)	662
Total other comprehensive income for the period		2,485
Comprehensive income for the period		1,794
Basic loss per share		(0.08)
Weighted average number of shares outstanding		8,667,583

 

KP Tissue Inc.
Unaudited Condensed Statement of Cash Flows
(thousands of Canadian dollars)

		13-week
		period ended
		March 31, 2013
		$
Cash flows from (used in) operating activities
Net loss for the period		(691)
Items not affecting cash
	Equity loss	747
	Gain on remeasurement of over-allotment option	(375)
	Current income taxes	213
	Deferred income taxes	106
Net cash from (used in) operating activities		-
Cash flows used in investing activites
Investment in associate		(13,125)
Net cash used in investing activities		(13,125)
Cash flows from financing activities
Issuance of common shares		13,125
Net cash from financing activities		13,125
Increase (decrease) in cash and cash equivalents during the period		-
Cash and cash equivalents - Beginning of period		-
Cash and cash equivalents - End of period		-

 

 

 

 

SOURCE: KP Tissue Inc.

INFORMATION:

Wendy Kelley
General Counsel and Corporate Secretary
KP Tissue Inc.
Tel.: [phone]
[email protected]

INVESTORS: 
Mike Baldesarra
Director of Investor Relations
KP Tissue Inc.
Tel.: [phone]
[email protected]