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

MISSISSAUGA, ON, Aug. 13, 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 second 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 June 30, 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 second 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 July 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 16.8% interest in KPLP.

KPLP Highlights

Q2 2013 Highlights

• Revenue of $246.8 million in Q2 2013, compared to $231.3 million in Q2 2012, an increase of 6.7 percent year over year
• EBITDA of $31.7 million in Q2 2013 (including $2.4 million of TAD Project start-up costs) compared to $29.3 million in Q2 2012 (including $0.9 million of TAD Project start-up costs), an increase of 8.1 percent year over year
• Net income of $15.4 million in Q2 2013 compared to $15.6 million in Q2 2012, a decrease of $0.2 million year over year
• Cash balance of $78.4 million as of June 30, 2013 compared to $92.4 million as of March 31, 2013

"Our results for the second quarter were very solid, and we are particularly pleased that our EBITDA reached $31.7 million. Moreover, as we expected, our Canadian branded businesses reported higher sales when compared to the first quarter of 2013 due to a shift in promotional activities. Our market share increased in all consumer product categories. The market's acceptance of our TAD products is as we have anticipated, and the start-up phase of our TAD facility is progressing as planned.  Margins have been somewhat impacted by rising commodity prices, fibre in particular, but these were not unforeseen," said Mario Gosselin, CEO and of KP Tissue and KPLP.

"Demand for our TAD products in the Private Label market in the U.S. is strong, and interest continues to build. From the TAD project, we continue to expect a modest positive contribution to EBITDA for the year as whole.

"Looking forward, we anticipate the higher commodity prices for pulp and energy to further impact our third quarter results and we are currently working on various initiatives to mitigate the effect," concluded Mr. Gosselin.

KPLP Q2 2013 Financial Results
Revenue in Q2 2013 was $246.8 million, an increase of 6.7 percent compared to Q2 2012. Compared to Q2 2012, revenue was positively impacted by an increase in sales volume resulting primarily from additional promotional activities in Q2 2013 compared to Q2 2012 and new business related to the TAD Project. The increase in revenue compared to Q2 2012 was driven by an increase in Consumer segment revenue, partially offset by a slight decrease in AFH segment revenue and a decline in Other segment revenue as a result of the decision to cease production of parent rolls for sale at the New Westminster plant in 2012.

Cost of sales in Q2 2013 was $173.3 million, compared to $161.3 million in Q2 2012. As a percentage of revenue, cost of sales increased to 70.2 percent in Q2 2013 from 69.7 percent in Q2 2012 primarily due to increases in commodity prices, particularly pulp fibre.

Operating expenses in Q2 2013 were $52.4 million, compared to $47.5 million in Q2 2012. Compared to Q2 2012, operating expenses increased primarily due to higher sales, logistics and marketing related expenses, and public company costs paid on behalf of KPT.

EBITDA in Q2 2013 was $31.7 million, compared to $29.3 million in Q2 2012. EBITDA in Q2 2013 included $2.4 million of TAD Project start-up costs compared to $0.9 million in Q2 2012. Compared to Q2 2012, EBITDA increased primarily due to an increase in revenue, partially offset by higher cost of sales resulting primarily from increased fibre costs and higher operating expenses.

Net income in Q2 2013 was $15.4 million, compared to $15.6 million in Q2 2012. Compared to Q2 2012, net income decreased primarily due to increases in interest and depreciation expenses related to the TAD Project, almost offset by an increase in EBITDA and a deferred tax credit in Q2 2013 related to U.S. operations.

The cash balance as of June 30, 2013 was $78.4 million, down from $92.4 million as of March 31, 2013. The decrease in cash was primarily driven by capital expenditures of $9.1 million related to the TAD Project and an increase in working capital as inventories returned to more normalized levels and accounts payable decreased due to timing.

KPT Highlights

• Net income of $0.6 million in Q2 2013
• Earnings per share of $0.07 in Q2 2013
• Declared quarterly dividend of $0.18 per share, payable October 15, 2013

KPT Q2 2013 Financial Results
Included in the net income of $0.6 million in Q2 2013 was $2.6 million representing KPT's share of KPLP's profit. The profit was partially offset by depreciation of $1.3 million related to adjustments to carrying amounts on acquisition, and income tax expense of $0.7 million.

KPLP Distribution
KPLP will pay a distribution of $0.18 per KPLP unit to its partners on or prior to October 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 October 15, 2013 to shareholders of record at the close of business on September 30, 2013.

Conference Call Information
KPT will hold its second quarter conference call on Tuesday, August 13, 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, September 13, 2013 by dialing 1-855-859-2056 or 416-849-0833 and entering passcode 18506708.

The replay of the webcast will remain available on the web site until midnight, September 13, 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 and 26-week periods ended June 30, 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)
		June 30, 2013		December 31, 2012
		$		$
Assets
Current assets
	Cash and cash equivalents	78,364		121,489
	Trade and other receivables	94,584		94,308
	Receivables from related parties	1,910		668
	Inventories	138,400		116,873
	Income tax recoverable	932		2,872
	Prepaid expenses	8,468		4,413
		322,658		340,623
Non-current assets
	Property, plant & equipment	604,329		580,814
	Other long-term assets	8,280		6,236
	Goodwill	152,021		152,021
	Intangible assets	13,643		13,828
	Income tax recoverable	11,575		-
	Deferred income taxes	10,687		1,178
Total assets		1,123,193		1,094,700
Liabilities
Current liabilities
	Trade and other payables	166,596		186,309
	Payables to related parties	2,935		9,057
	Distribution payable	9,367		-
	Current portion of provisions	1,991		3,719
	Current portion of long-term debt	7,960		3,802
		188,849		202,887
Non-current liabilities
	Long-term debt	333,484		323,885
	Other long-term liabilities	427		544
	Provisions	6,595		5,506
	Pensions	109,407		148,989
	Post-retirement benefits	47,391		48,302
Liabilities to non-unitholders		686,153		730,113
	Partnership units	118,562		118,562
Total Liabilities		804,715		848,675
Equity
	Partnership units	274,899		257,516
	Retained earnings (deficit)	26,960		(14,736)
	Accumulated other comprehensive income	16,619		3,245
Total equity		318,478		246,025
Total equity and liabilities		1,123,193		1,094,700

 

Kruger Products L.P.
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)
(thousands of Canadian dollars)
		13-week		13-week		26-week		25-week
		period ended		period ended		period ended		period ended
		June 30, 2013		June 24, 2012		June 30, 2013		June 24, 2012
		$		$		$		$
Revenue		246,769		231,336		468,554		447,582
Expenses
	Cost of sales	173,308		161,315		330,469		312,901
	Operating expenses	52,351		47,533		100,222		90,583
	Impairment (recovery) of non-financial assets	(1,789)		-		(1,789)		5,900
	Restructuring costs	-		(500)		-		8,600
Operating income		22,899		22,988		39,652		29,598
Interest expense		11,007		7,087		20,897		13,175
Income before income taxes		11,892		15,901		18,755		16,423
Income taxes		(3,485)		269		(8,338)		432
Net income for the period		15,377		15,632		27,093		15,991
Other comprehensive income (loss)
	Items that will not be reclassified to net income:
	Remeasurements of pensions	21,203		(19,818)		33,698		(31,066)
	Remeasurements of post-retirement benefits	1,504		27		1,504		(1,610)
	Items that may be subsequently reclassified to net income:
	Cumulative translation adjustment	8,835		4,154		13,374		1,373
Total other comprehensive income (loss) for the period		31,542		(15,637)		48,576		(31,303)
Comprehensive income (loss) for the period		46,919		(5)		75,669		(15,312)
Kruger Products L.P.
Unaudited Condensed Consolidated Statements of Cash Flows
(thousands of Canadian dollars)
		13-week		13-week		26-week		25-week
		period ended		period ended		period ended		period ended
		June 30, 2013		June 24, 2012		June 30, 2013		June 24, 2012
		$		$		$		$
Cash flows from (used in) operating activities
Net income for the period		15,377		15,632		27,093		15,991
Items not affecting cash
	Depreciation	8,856		5,633		16,189		11,623
	Amortization	144		159		276		309
	Loss (gain) on sale of fixed assets	-		70		(4)		70
	Unrealized foreign exchange loss	1,638		1,026		2,493		461
	Interest expense	11,007		7,087		20,897		13,175
	Pension and post retirement benefits	2,456		2,593		5,164		4,876
	Provisions	223		(279)		485		9,148
	Income taxes	(3,485)		269		(8,338)		432
	Impairment (recovery) of non-financial assets	(1,789)		-		(1,789)		5,900
	Total items not affecting cash	19,050		16,558		35,373		45,994
Net change in non-cash working capital		(9,774)		4,989		(44,216)		(5,939)
Contributions to pension and post-retirement benefit plans		(7,389)		(8,035)		(14,717)		(16,318)
Provisions paid		(312)		(1,623)		(1,802)		(1,623)
Income tax payments		(743)		(569)		(1,737)		(578)
Net cash from (used in) operating activities		16,209		26,952		(6)		37,527
Cash flows used in investing activities
Purchase of property, plant & equipment		(4,573)		(6,345)		(7,590)		(10,934)
Purchases of through-air-dried (TAD) expansion		(9,112)		(41,548)		(28,773)		(70,397)
Purchases of software		(87)		-		(90)		-
Proceeds on sale of property, plant and equipment		-		-		4		-
Net cash used in investing activities		(13,772)		(47,893)		(36,449)		(81,331)
Cash flows from financing activities
Proceeds from credit facilities		-		28,090		4,571		65,643
Repayment of credit facilities		(3,654)		(22,863)		(3,730)		(27,863)
Payment of deferred financing fees		(453)		2		(453)		-
Transfer of assets to related parties		-		(45)		-		(706)
Interest paid on credit facilities		(6,755)		(1,856)		(13,971)		(9,435)
Distribution paid		(11,232)		-		(11,232)		-
Proceeds from issuing partnership units, net		5,093		-		17,383		-
Net cash from financing activities		(17,001)		3,328		(7,432)		27,639
Effect of exchange rate changes on cash and cash
equivalents held in foreign currency		507		250		762		82
Decrease in cash and cash equivalents during the period		(14,057)		(17,363)		(43,125)		(16,083)
Cash and cash equivalents - Beginning of period		92,421		33,077		121,489		31,797
Cash and cash equivalents - End of period		78,364		15,714		78,364		15,714
Kruger Products L.P.
Segment and Geographic Results
(thousands of Canadian dollars)
		13-week		13-week		26-week		25-week
		period ended		period ended		period ended		period ended
		June 30, 2013		June 24, 2012		June 30, 2013		June 24, 2012
		$		$		$		$
Segment Information
Segment Revenue
	Consumer	205,358		182,832		389,761		359,207
	AFH	40,004		41,132		75,285		74,479
	Other	1,407		7,372		3,508		13,896
Total segment revenue		246,769		231,336		468,554		447,582
Segment EBITDA
	Consumer	29,104		29,968		53,027		58,025
	AFH	2,677		3,167		4,140		5,079
	Other	(33)		(3,759)		(350)		(6,543)
Total segment EBITDA		31,748		29,376		56,817		56,561
Reconciliation to Net Income:
Depreciation and amortization		9,000		5,792		16,465		11,932
Interest expense		11,007		7,087		20,897		13,175
Loss (gain) on sale of fixed assets		-		70		(4)		70
Restructuring costs		-		(500)		-		8,600
Impairment (recovery) of non-financial assets		(1,789)		-		(1,789)		5,900
Unrealized foreign exchange loss		1,638		1,026		2,493		461
Income before income taxes		11,892		15,901		18,755		16,423
Income taxes		(3,485)		269		(8,338)		432
Net income for the period		15,377		15,632		27,093		15,991
Geographic Revenue
Canada		183,087		165,454		340,649		320,368
U.S.		56,331		58,715		113,465		113,210
Mexico		7,351		7,167		14,440		14,004
Total Revenue		246,769		231,336		468,554		447,582

 

KP Tissue Inc.
Unaudited Condensed Statement of Financial Position
(thousands of Canadian dollars)
		June 30, 2013		December 31, 2012
		$		$
Assets
Current assets
	Distribution receivable	1,579		-
Non-current assets
	Deferred income taxes	-		123
	Investment in associate	158,596		139,364
Total Assets		160,175		139,487
Liabilities
Current liabilities
	Dividend payable	1,579		-
	Income taxes payable	599		-
		2,178		-
Non-current liabilities
	Deferred income taxes	1,400		-
Total liabilities		3,578		-
Equity
	Common shares	8,750		140,000
	Contributed surplus	144,819		-
	Retained earnings (deficit)	1,001		(583)
	Accumulated other comprehensive income	2,027		70
Total equity		156,597		139,487
Total liabilities and equity		160,175		139,487
KP Tissue Inc.
Unaudited Condensed Statement of Comprehensive Income
(thousands of Canadian dollars, except share and per share amounts)
		13-week		26-week
		period ended		period ended
		June 30, 2013		June 30, 2013
		$		$
Equity income		1,228		481
Gain on remeasurement of over allotment option		-		375
Dilution gain		112		112
Earnings before income taxes		1,340		968
Income taxes
	Current	386		599
	Deferred	354		460
		740		1,059
Net income (loss) for the period		600		(91)
Other comprehensive income
	Items that will not be reclassified to net income:
	Remeasurements of pensions (net of tax of $465 and $737)	3,109		4,932
	Remeasurements of post-retirement benefits (net of tax of nil and $33)	220		220
	Items that may be subsequently reclassified to net income:
	Cumulative translation adjustment (net of tax of $194 and $293)	1,295		1,957
Total other comprehensive income for the period		4,624		7,109
Comprehensive income for the period		5,224		7,018
Basic earnings (loss) per share		0.07		(0.01)
Weighted average number of shares outstanding		8,770,427		8,718,721
KP Tissue Inc.
Unaudited Condensed Statement of Cash Flows
(thousands of Canadian dollars)
		13-week		26-week
		period ended		period ended
		June 30, 2013		June 30, 2013
		$		$
Cash flows from (used in) operating activities
Net income (loss) for the period		600		(91)
Items not affecting cash
	Equity income	(1,228)		(481)
	Gain on remeasurement of over-allotment option	-		(375)
	Dilution gain	(112)		(112)
	Current income taxes	386		599
	Deferred income taxes	354		460
Net cash from (used in) operating activities		-		-
Cash flows from (used in) investing activites
Investment in associate		(444)		(13,569)
Distribution received		1,898		1,898
Net cash from (used in) investing activities		1,454		(11,671)
Cash flows from (used in) financing activities
Issuance of common shares		444		13,569
Dividend paid		(1,898)		(1,898)
Net cash from (used in) financing activities		(1,454)		11,671
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.

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]