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

/NOT FOR DISTRIBUTION IN THE U.S.A. OR OVER U.S. WIRE SERVICES/

MISSISSAUGA, ON, Nov. 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 third 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 September 29, 2013, KPT held a 16.8% 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 third 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 October 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 16.7% interest in KPLP.

KPLP Highlights

Q3 2013 Highlights

• Continued to expand overall market share in Canada and maintained our number one position
• TAD Project progressing well, EBITDA contribution of $1.7 million in the quarter
• Revenue of $243.8 million in Q3 2013, compared to $232.4 million in Q3 2012, an increase of 4.9 percent year over year
• EBITDA of $31.1 million in Q3 2013 compared to $31.3 million in Q3 2012, a decrease of 0.6 percent year over year
  
  

"Third quarter results were solid, highlighted by EBITDA of $31.1 million. We were able to build on the momentum we generated with the successful promotional activities we undertook in the Canadian consumer market during the second quarter of 2013 and to further increase our overall market share," said Mario Gosselin, CEO of KP Tissue and KPLP.

"The TAD project is progressing well, with capacity ramp-up and product quality meeting or exceeding expectations. After two quarters of full TAD operations, we are happy to report positive EBITDA of $1.7 million in the third quarter with no additional start-up costs incurred. We remain on our game plan and continue to expect a low single digit contribution to EBITDA for the year as a whole.

"Finally, the Company is continuing to execute on its plan to mitigate higher commodity and energy prices. This started in the fourth quarter, and we expect to see the full effect of this ongoing strategy in the first quarter of 2014," concluded Mr. Gosselin.

KPLP Q3 2013 Financial Results
Revenue in Q3 2013 was $243.8 million, an increase of 4.9 percent compared to Q3 2012. Revenue was positively impacted by an increase in sales volume resulting primarily from the Consumer segment, which included new business related to the TAD Project. This increase was partially offset by 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 Q3 2013 was $172.2 million, compared to $160.8 million in Q3 2012. As a percentage of revenue, cost of sales increased to 70.6 percent in Q3 2013 from 69.2 percent in Q3 2012 primarily due to increases in commodity prices, particularly pulp fibre and natural gas.

Operating expenses in Q3 2013 were $47.4 million, compared to $44.7 million in Q3 2012. Operating expenses increased primarily due to higher sales, logistics and marketing related expenses, and costs related to KPT being a public company.

EBITDA in Q3 2013 was $31.1 million, compared to $31.3 million in Q3 2012. There were no TAD Project start-up costs in EBITDA in Q3 2013, compared to $0.1 million in Q3 2012. The slight decrease in EBITDA was due to lower margins as a result of increased commodity costs and higher operating expenses. TAD Project EBITDA was $1.7 million in Q3 2013.

Net income in Q3 2013 was $14.2 million, compared to $20.0 million in Q3 2012. Net income decreased primarily due to increases in interest and depreciation expenses related to the TAD Project, partially offset by a deferred tax credit in Q3 2013 related to U.S. operations.

The cash balance as of September 29, 2013 was $87.8 million, compared to $78.4 million as of June 30, 2013. The increase in cash was primarily driven by cash from operating activities, partially offset by capital expenditures and financing activities.

KPT Highlights

• Net income of $0.5 million in Q3 2013
• Earnings per share of $0.06 in Q3 2013
• Declared quarterly dividend of $0.18 per share, payable January 15, 2014
  
  

KPT Q3 2013 Financial Results
Included in the net income of $0.5 million in Q3 2013 was $2.4 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 $0.6 million.

KPLP Distribution
KPLP will pay a distribution of $0.18 per KPLP unit to its partners on or prior to January 15, 2014.

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 January 15, 2014 to shareholders of record at the close of business on December 31, 2013.

Conference Call Information
KPT will hold its third quarter conference call on Wednesday, November 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, December 13, 2013 by dialing 1-855-859-2056 or 416-849-0833 and entering passcode 75016579.

The replay of the webcast will remain available on the web site until midnight, December 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 39-week periods ended September 29, 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)
		September 29, 2013		December 31, 2012
		$		$
Assets
Current assets
	Cash and cash equivalents	87,814		121,489
	Trade and other receivables	95,083		94,308
	Receivables from related parties	896		668
	Inventories	137,555		116,873
	Current portion of income tax recoverable	710		2,872
	Prepaid expenses	7,140		4,413
		329,198		340,623
Non-current assets
	Property, plant & equipment	598,657		580,814
	Other long-term assets	9,072		6,236
	Income tax recoverable	11,537		-
	Goodwill	152,021		152,021
	Intangible assets	13,506		13,828
	Deferred income taxes	12,210		1,178
Total assets		1,126,201		1,094,700
Liabilities
Current liabilities
	Trade and other payables	159,524		186,309
	Payables to related parties	5,059		9,057
	Distribution payable	9,411		-
	Current portion of provisions	1,882		3,719
	Current portion of long-term debt	10,834		3,802
		186,710		202,887
Non-current liabilities
	Long-term debt	338,152		323,885
	Other long-term liabilities	427		544
	Provisions	6,769		5,506
	Pensions	97,803		148,989
	Post-retirement benefits	47,700		48,302
	Liabilities to non-unitholders	677,561		730,113
	Partnership units	118,562		118,562
Total liabilities		796,123		848,675
Equity
	Partnership units	278,590		257,516
	Retained earnings (deficit)	40,297		(14,736)
	Accumulated other comprehensive income	11,191		3,245
Total equity		330,078		246,025
Total equity and liabilities		1,126,201		1,094,700

Kruger Products L.P.
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)
(thousands of Canadian dollars)
		13-week period ended September 29, 2013		13-week period ended September 23, 2012		39-week period ended September 29, 2013		38-week period ended September 23, 2012
		$		$		$		$
Revenue		243,848		232,389		712,402		679,971
Expenses
	Cost of sales	172,184		160,788		502,653		473,689
	Operating expenses	47,413		44,694		147,635		135,277
	Impairment (recovery) of non-financial assets	-		-		(1,789)		5,900
	Restructuring costs	-		-		-		8,600
Operating income		24,251		26,907		63,903		56,505
Interest expense		11,403		6,381		32,300		19,556
Income before income taxes		12,848		20,526		31,603		36,949
Income taxes		(1,315)		520		(9,653)		952
Net income for the period		14,163		20,006		41,256		35,997
Other comprehensive income (loss)
	Items that will not be reclassified to net income:
	Remeasurements of pensions	8,580		(21,446)		42,278		(52,512)
	Remeasurements of post-retirement benefits	5		(3,185)		1,509		(4,795)
	Items that may be subsequently reclassified to net income:
	Available-for-sale investment	78		-		78		-
	Cumulative translation adjustment	(5,506)		(8,587)		7,868		(7,214)
Total other comprehensive income (loss) for the period		3,157		(33,218)		51,733		(64,521)
Comprehensive income (loss) for the period		17,320		(13,212)		92,989		(28,524)

Kruger Products L.P.
Unaudited Condensed Consolidated Statements of Cash Flows
(thousands of Canadian dollars)
		13-week period ended September 29, 2013		13-week period ended September 23, 2012		39-week period ended September 29, 2013		38-week period ended September 23, 2012
		$		$		$		$
Cash flows from operating activities
Net income for the period		14,163		20,006		41,256		35,997
Items not affecting cash
	Depreciation	7,675		5,953		23,864		17,576
	Amortization	139		75		415		384
	Loss (gain) on sale of fixed assets	-		368		(4)		438
	Unrealized foreign exchange (gain) loss	(927)		(2,011)		1,566		(1,550)
	Interest expense	11,403		6,381		32,300		19,556
	Pension and post retirement benefits	2,422		2,377		7,586		7,253
	Provisions	212		311		697		9,459
	Income taxes	(1,315)		520		(9,653)		952
	Impairment (recovery) of non-financial assets	-		-		(1,789)		5,900
	Total items not affecting cash	19,609		13,974		54,982		59,968
Net change in non-cash working capital		(885)		16,239		(45,101)		10,300
Contributions to pension and post-retirement benefit plans		(7,251)		(5,820)		(21,968)		(22,138)
Provisions paid		(207)		(3,286)		(2,009)		(4,909)
Income tax payments		(382)		(149)		(2,119)		(727)
Net cash from operating activities		25,047		40,964		25,041		78,491
Cash flows used in investing activities
Purchase of property, plant & equipment		(3,964)		(561)		(11,554)		(11,495)
Purchases of through-air-dried (TAD) expansion		(4,294)		(36,702)		(33,067)		(107,099)
Interest paid on credit facilities related to TAD		-		(1,805)		-		(1,805)
Available-for-sale investment		(836)		-		(836)		-
Government grants received		1,078		-		1,078		-
Purchases of software		(3)		-		(93)		-
Proceeds on sale of property, plant and equipment		-		183		4		183
Net cash used in investing activities		(8,019)		(38,885)		(44,468)		(120,216)
Cash flows from (used in) financing activities
Proceeds from credit facilities		6,242		28,484		10,813		94,127
Repayment of credit facilities		(366)		(10,041)		(4,096)		(37,904)
Payment of deferred financing fees		(159)		-		(612)		-
Transfer of assets to related parties		-		(1,503)		-		(2,209)
Interest paid on credit facilities		(7,210)		(4,995)		(21,181)		(14,430)
Settlement of interest rate swap contract		-		(413)		-		(413)
Distribution paid		(9,367)		-		(20,599)		-
Equity issuance costs		(1,206)		-		(1,206)		-
Proceeds from issuing partnership units		4,897		-		22,280		-
Net cash from (used in) financing activities		(7,169)		11,532		(14,601)		39,171
Effect of exchange rate changes on cash and cash equivalents held in foreign currency		(409)		(578)		353		(496)
Decrease in cash and cash equivalents during the period		9,450		13,033		(33,675)		(3,050)
Cash and cash equivalents - Beginning of period		78,364		15,714		121,489		31,797
Cash and cash equivalents - End of period		87,814		28,747		87,814		28,747

Kruger Products L.P.
Segment and Geographic Results
(thousands of Canadian dollars)
		13-week		13-week		39-week		38-week
		period ended		period ended		period ended		period ended
		September 29, 2013		September 23, 2012		September 29, 2013		September 23, 2012
		$		$		$		$
Segment Information
Segment Revenue
	Consumer	200,802		187,242		590,563		546,449
	AFH	40,321		40,445		115,606		114,924
	Other	2,725		4,702		6,233		18,598
Total segment revenue		243,848		232,389		712,402		679,971
Segment EBITDA
	Consumer	30,087		31,027		83,116		89,052
	AFH	1,193		1,624		5,333		4,765
	Other	(142)		(1,359)		(494)		(5,964)
Total segment EBITDA		31,138		31,292		87,955		87,853
Reconciliation to Net Income:
Depreciation and amortization		7,814		6,028		24,279		17,960
Interest expense		11,403		6,381		32,300		19,556
Loss (gain) on sale of fixed assets		-		368		(4)		438
Restructuring costs		-		-		-		8,600
Impairment (recovery) of non-financial assets		-		-		(1,789)		5,900
Unrealized foreign exchange loss (gain)		(927)		(2,011)		1,566		(1,550)
Income before income taxes		12,848		20,526		31,603		36,949
Income taxes		(1,315)		520		(9,653)		952
Net income for the period		14,163		20,006		41,256		35,997
Geographic Revenue
Canada		175,290		166,050		515,939		486,049
U.S.		62,170		59,817		175,635		173,397
Mexico		6,388		6,522		20,828		20,525
Total Revenue		243,848		232,389		712,402		679,971

KP Tissue Inc.
Unaudited Condensed Statement of Financial Position
(thousands of Canadian dollars)
		September 29, 2013		December 31, 2012
		$		$
Assets
Current assets
	Distribution receivable	1,581		-
Non-current assets
	Deferred income taxes	-		123
	Investment in associate	158,765		139,364
Total Assets		160,346		139,487
Liabilities
Current liabilities
	Dividend payable	1,581		-
	Income taxes payable	892		-
		2,473		-
Non-current liabilities
	Deferred income taxes	1,744		-
Total liabilities		4,217		-
Equity
	Common shares	8,900		140,000
	Contributed surplus	144,819		-
	Retained earnings (deficit)	1,190		(583)
	Accumulated other comprehensive income	1,220		70
Total equity		156,129		139,487
Total liabilities and equity		160,346		139,487

KP Tissue Inc.
Unaudited Condensed Statement of Comprenhensive Income
(thousands of Canadian dollars, except share and per share amounts)
		13-week		39-week
		period ended		period ended
		September 29, 2013		September 29, 2013
		$		$
Equity income		1,016		1,497
Gain on remeasurement of over allotment option		-		375
Dilution gain		69		181
Earnings before income taxes		1,085		2,053
Income taxes
	Current	293		892
	Deferred	277		737
		570		1,629
Net income for the period		515		424
Other comprehensive income
	Items that will not be reclassified to net income:
	Remeasurements of pensions (net of tax of $187 and $924)	1,254		6,186
	Remeasurements of post-retirement benefits (net of tax of nil and $33)	1		221
	Items that may be subsequently reclassified to net income:
	Cumulative translation adjustment (net of tax of $(120) and $173)	(807)		1,150
Total other comprehensive income for the period		448		7,557
Comprehensive income for the period		963		7,981
Basic earnings per share		0.06		0.05
Weighted average number of shares outstanding		8,781,433		8,739,702

KP Tissue Inc.
Unaudited Condensed Statement of Cash Flows
(thousands of Canadian dollars)
		13-week		39-week
		period ended		period ended
		September 29, 2013		September 29, 2013
		$		$
Cash flows from (used in) operating activities
Net income for the period		515		424
Items not affecting cash
	Equity income	(1,016)		(1,497)
	Gain on remeasurement of over-allotment option	-		(375)
	Dilution gain	(69)		(181)
	Current income taxes	293		892
	Deferred income taxes	277		737
Net cash from (used in) operating activities		-		-
Cash flows from (used in) investing activites
Investment in associate		(150)		(13,719)
Distribution received		1,579		3,477
Net cash from (used in) investing activities		1,429		(10,242)
Cash flows from (used in) financing activities
Issuance of common shares		150		13,719
Dividend paid		(1,579)		(3,477)
Net cash from (used in) financing activities		(1,429)		10,242
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]