March 10, 2016

KP Tissue Releases Fourth Quarter and Full Year 2015 Financial Results

Solid Performance despite FX Headwinds

MISSISSAUGA, ONTARIO--(Marketwired - March 10, 2016) - KP Tissue Inc. ("KPT") (TSX:KPT) reports the Q4 and full year 2015 financial and operational results of KPT and Kruger Products L.P. (KPLP). Kruger Products is Canada's leading manufacturer of quality tissue products for the Consumer market (Cashmere(R), Purex(R), SpongeTowels(R), Scotties(R), and White Swan(R)) and the Away-From-Home market, and continues to grow in the U.S. Consumer tissue business with the White Cloud(R) brand and premium private label products. KPT currently holds a 16.3% interest in KPLP.

KPLP Q4 2015 Business and Financial Highlights




--  Revenue increased by 7.9% to $300.6 million in Q4 2015 compared to Q4

    2014

--  Adjusted EBITDA was $30.3 million in Q4 2015, consistent with Q4 2014

    despite significant cost pressures

--  TAD Product Q4 2015 Adjusted EBITDA increased by $4.1 million year-over-

    year to $13.2 million

--  #1 market share leader in Canada with Q4 growth

--  Declared a quarterly dividend of $0.18 per share to be paid on April 15,

    2016



KPLP Full Year 2015 Business and Financial Highlights




--  Revenue increased by 8.9% to $1,138.9 million in 2015 compared to

    $1,046.2 million in 2014

--  Adjusted EBITDA of $126.4 million in 2015, up from $121.6 million in

    2014

--  TAD Product 2015 Adjusted EBITDA increased by $18.4 million year-over-

    year to $45.3 million

--  Redeemed $175 million of senior notes by increasing existing credit

    facility to $300 million, resulting in interest expense savings of

    approximately $8 million annually at expected interest rates



"In Fiscal 2015, the solid performance of our U.S. Business combined with cost reduction initiatives, was masked by the significant negative impact of the lower Canadian dollar. This is reflected in higher commodity prices which impacted our Canadian business results," said Mario Gosselin, CEO of KP Tissue and Kruger Products L.P."

"We are pleased with the progress of our TAD Products for their third full year of commercialization considering Adjusted EBITDA of $45 million. We remain confident that North American industry demand will absorb incremental capacity in upcoming years and provide us with solid growth opportunities in the private label market.

"The Away-from-Home segment reported a solid Adjusted EBITDA improvement over the prior year reflecting improved volume in the base business combined with cost reduction initiatives and also benefits from the Metro Paper acquisition.

"From a market share perspective in the Canadian Consumer segment, we maintained our momentum and continued to be the clear overall industry leader. Despite efforts to mitigate higher input costs, the pressure exercised by the weak Canadian dollar on commodity prices has had a significant and increasing negative impact on our Adjusted EBITDA over the past several quarters. In the context of a competitive and price sensitive environment, we recently announced a price increase effective at the end of April 2016 to our Canadian retailers to partially offset the rise of raw material prices.

"We expect first quarter Adjusted EBITDA for Fiscal 2016 to be below the same quarter last year, reflecting the ongoing impact of the weak Canadian dollar. In 2016, we plan to significantly invest in our operations to improve manufacturing costs with CAPEX in the range of $65-$70 million. Despite some important headwinds, we have an action plan in place to improve manufacturing costs and support growth opportunities," concluded Mr. Gosselin.

KPLP Q4 2015 Financial Results

Revenue in Q4 2015 was $300.6 million, compared to $278.6 million in Q4 2014, an increase of $22.0 million or 7.9%. The increase in revenue was primarily due to additional sales volume in the U.S consumer business from our TAD products and organic growth in the Away-From-Home (AFH) business. In addition, U.S. sales were favourably impacted by foreign exchange.

Cost of sales in Q4 2015 increased to $259.8 million compared to $234.0 million in Q4 2014 primarily due to the negative impact of foreign exchange, slightly offset by a decline in USD pulp and natural gas prices. Freight and warehousing costs increased due to higher sales volumes and inventory levels. Cost reduction initiatives partially offset the above increases in cost of sales. As a percentage of revenue, cost of sales were 86.4% in Q4 2015 compared to 84.0% in Q4 2014.

Selling, general and administrative (SG&A) expenses in Q4 2015 were $23.5 million, compared to $24.5 million in Q4 2014 primarily due to lower advertising & promotion and selling expenses and the benefit of cost reduction initiatives, partially offset by higher selling expenses resulting from increased sales volume and the unfavourable impact of foreign exchange. As a percentage of revenue, SG&A expenses were 7.8% in Q4 2015 compared to 8.8% in Q4 2014.

Adjusted EBITDA in Q4 2015 was $30.3 million compared to $30.4 million in Q4 2014 as the net unfavourable impact of foreign exchange and higher warehousing costs were almost offset by the positive impact of higher sales volumes and lower SG&A. TAD Product EBITDA increased to $13.2 million in Q4 2015 from $9.1 million in Q4 2014 due to increased sales volume, favourable foreign exchange and the continued ramp-up in manufacturing efficiencies.

Net income in Q4 2015 was a loss of $0.5 million, compared to income of $0.1 million in Q4 2014. The decrease was primarily due to a change in the tax expense of $5.9 million resulting from a $5.5 million reversal of previously recognized deferred tax assets in our U.S. subsidiary, higher depreciation expense of $2.0 million and restructuring costs of $0.9 million, partially offset by the change in the amortized costs of the Partnership unit liability of $8.9 million.

The cash balance as of December 31, 2015 was $25.5 million compared to $38.5 million as of September 27, 2015. Cash generated from operating activities resulting from Adjusted EBITDA in Q4 2015 was more than offset by higher working capital, pension funding, capital spending and interest payments in the quarter.

KPLP 2015 Financial Results

Revenue was $1,138.9 million in Fiscal 2015 compared to $1,046.2 million in Fiscal 2014, an increase of 8.9% or $92.7 million. The increase in revenue was primarily due to additional sales volume across all regions and in both the Consumer and AFH segments, including a significant increase in AFH segment revenue resulting from the acquisition of Metro Paper. In the Consumer and AFH U.S. businesses, sales were favourably impacted by foreign exchange on U.S. dollar sales.

Adjusted EBITDA was $126.4 million in Fiscal 2015 compared to $121.6 million in Fiscal 2014. Higher sales volumes in both the Consumer and AFH segments, lower costs (in U.S. dollars) for pulp and natural gas and cost reduction initiatives were partially offset by higher SG&A from increased sales and the net negative impact of foreign exchange. TAD Product Adjusted EBITDA was $45.3 million in Fiscal 2015 compared to $26.9 million in Fiscal 2014.

Net income was $1.5 million in Fiscal 2015 compared to $21.1 million in Fiscal 2014. The decrease in net income was primarily due to increases in interest and tax expense of $13.5 million and $9.2 million, respectively, the Q2 pension revaluation related to past service costs of $3.4 million, an increase in the unrealized foreign exchange loss of $3.4 million, and higher depreciation expense of $4.9 million. These increases were partially offset by higher Adjusted EBITDA of $4.8 million.

KPT Q4 2015 Financial Results

KPT incurred a net loss of $27.8 million in Q4 2015. Included in the net loss was $0.1 million representing KPT's share of KPLP's loss. The loss was increased by the net of depreciation expense of $1.4 million related to adjustments to carrying amounts on acquisition, partially offset by an income tax recovery of $1.8 million.

Also included in the loss was an impairment of KPT's investment in KPLP of $28.0 million. KPT performed an impairment test at December 31, 2015 as a result of the market value decline in KPT's publicly traded common shares during Fiscal 2015.

KPT 2015 Financial Results

KPT incurred a net loss of $31.3 million in 2015. Included in the net loss was $0.2 million representing KPT's share of KPLP's income. The income was reduced by the net of depreciation expense of $5.7 million related to adjustments to carrying amounts on acquisition, partially offset by an income tax recovery of $2.1 million.

Amendment to Senior Credit Facility

Subsequent to the year-end, an amendment was obtained under the Senior Credit Facility to increase the Ratio of Funded Debt to EBITDA covenant for the entire 2016 fiscal year, which is expected to allow for the impact of foreign exchange fluctuations and the implementation of a significantly expanded 2016 capital spending program.

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 April 15, 2016 to shareholders of record at the close of business on March 31, 2016.

Additional Information

For additional information please refer to Management's Discussion and Analysis ("MD&A") of KPT and KPLP for the fourth quarter and year ended December 31, 2015 available on SEDAR at www.sedar.com or our website at www.kptissueinc.com.

Fourth Quarter Results Conference Call Information

KPT will hold its fourth quarter conference call on Thursday, March 10, 2016 at 8:30 a.m. Eastern Time.

Via telephone: 1-877-223-4471 or 647-788-4922

Via the internet at: www.kptissueinc.com

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

A rebroadcast of the conference call will be available until midnight, April 9, 2016 by dialing 800-585-8367 or 416-621-4642 and entering passcode 40967664.

About KP Tissue Inc. (KPT)

KPT was created to acquire, and its business is limited to holding, a limited partnership interest in KPLP, which is accounted for as an investment on the equity basis. KPT currently holds a 16.3% interest in KPLP. For more information visit www.kptissueinc.com.

About Kruger Products L.P. (KPLP)

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(R), Purex(R), SpongeTowels(R), Scotties(R)' and White Swan(R). In the U.S., KPLP manufactures the White Cloud(R) 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 2,500 employees across North America and operates five FSC(R) CoC- certified mills (FSC(R) 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. Examples of such measures are Adjusted EBITDA and TAD Product Adjusted EBITDA. Beginning with Q4 2015 in accordance with Canadian Securities Administrators Staff Notice 52-306 (Revised), we reference Adjusted EBITDA and TAD Product Adjusted EBITDA as non-IFRS financial measures. These terms replace the previously referenced non-IFRS financial measures EBITDA and TAD Product EBITDA. Our definition of Adjusted EBITDA and TAD Product Adjusted EBITDA are unchanged from our former definition of EBITDA and TAD Product EBITDA respectively. Accordingly, this change in terminology has no impact on our reported financial results for prior periods. Adjusted EBITDA and TAD Product Adjusted EBITDA are not measurements 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. "Adjusted 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), (viii) one-time costs related to restructuring activities, (ix) change in the amortized cost of the Partnership unit liability, and (x) one-time costs due to pension revaluations related to past service. A reconciliation of Adjusted EBITDA to the relevant reported results can be found in the Management's Discussion and Analysis ("MD&A") of KPT and KPLP for the fourth quarter ended December 31, 2015 available on SEDAR at www.sedar.com. "TAD Product Adjusted EBITDA" represents the portion of KTG Adjusted EBITDA generated by the sale of TAD products.

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 TAD Project on Adjusted EBITDA, the expectation of continued growth in sales of TAD products in the U.S. and stable interest rates. 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.

The outlook provided in respect of Adjusted EBITDA for Q1 2016 is forward-looking information and is subject to the risk and uncertainties referred to below. The purpose of the outlook is to provide the reader with an indication of management's expectations, at the date of this press release, regarding KPLP's future financial performance. Readers are cautioned that this information may not be appropriate for other purposes.

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 10, 2016 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 input costs; 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.

                Consolidated Statement of Financial Position

                       (thousands of Canadian dollars)



                                                December 31,    December 31,

                                                        2015            2014

                                                           $               $

                                              ------------------------------

Assets

Current assets

  Cash and cash equivalents                           25,455          51,788

  Trade and other receivables                        108,720         107,092

  Receivables from related parties                       185             301

  Current portion of advances to partners              2,630           3,474

  Inventories                                        184,985         150,328

  Income tax recoverable                                 772           1,302

  Prepaid expenses and other current assets            8,429           7,351

                                              ------------------------------

                                                     331,176         321,636

Non-current assets

  Advances to partners                                 4,234               -

  Property, plant & equipment                        737,708         652,762

  Other long-term assets                               8,107           7,738

  Goodwill                                           160,939         160,939

  Intangible assets                                   15,853          14,052

  Deferred income taxes                               39,411          34,874

                                              ------------------------------

Total assets                                       1,297,428       1,192,001

                                              ------------------------------

                                              ------------------------------



Liabilities

Current liabilities

  Trade and other payables                           180,329         173,228

  Payables to related parties                          3,775           4,387

  Distributions payable                                9,871           9,781

  Current portion of provisions                        3,096           2,967

  Current portion of long-term debt                   10,183           8,879

                                              ------------------------------

                                                     207,254         199,242

Non-current liabilities

  Long-term debt                                     425,859         358,646

  Other long-term liabilities                             48             156

  Provisions                                           6,180           6,441

  Pensions                                            87,164          98,533

  Post-retirement benefits                            57,346          53,357

                                              ------------------------------

  Liabilities to non-unitholders                     783,851         716,375

  Current portion of Partnership units

   liability                                           2,630           6,949

  Long-term portion of Partnership units

   liability                                         122,546         121,174

                                              ------------------------------

  Total Partnership units liability                  125,176         128,123

                                              ------------------------------

Total liabilities                                    909,027         844,498

                                              ------------------------------



Equity

  Partnership units                                  318,012         299,616

  Retained earnings (deficit)                        (29,416)          4,424

  Accumulated other comprehensive income              99,805          43,463

                                              ------------------------------

Total equity                                         388,401         347,503

                                              ------------------------------

Total equity and liabilities                       1,297,428       1,192,001

                                              ------------------------------

                                              ------------------------------







                            Kruger Products L.P.

               Consolidated Statement of Comprehensive Income

                      (thousands of Canadian dollars)





                            13-week       13-week

                       period ended  period ended   Year ended   Year ended

                       December 31,  December 31, December 31, December 31,

                               2015          2014         2015         2014

                                  $             $            $            $

                       -----------------------------------------------------



Revenue                     300,583       278,647    1,138,870    1,046,168



Expenses

 Cost of sales              259,842       234,002      970,759      879,139

 Selling, general and

  administrative

  expenses                   23,452        24,500       87,978       82,625

 Gain on sale of non-

  financial assets               12             -       (1,119)           -

 Restructuring costs            989             -        2,824        2,835

                       -----------------------------------------------------



Operating income             16,288        20,145       78,428       81,569



 Interest expense            10,095         9,807       58,164       44,730

 Other expense                  561         9,990       11,331       17,612

                       -----------------------------------------------------



Income before income

 taxes                        5,632           348        8,933       19,227



Income taxes                  6,157           278        7,439       (1,840)

                       -----------------------------------------------------



Net income (loss) for

 the period                    (525)           70        1,494       21,067

                       -----------------------------------------------------



Other comprehensive

 income (loss)

 Items that will not be

  reclassified to net

  income:

 Remeasurements of

  pensions                   11,217         5,822        7,094      (25,689)

 Remeasurements of

  post-retirement

  benefits                   (1,965)           45       (2,667)      (3,466)

 Items that may be

  subsequently

  reclassified to net

  income:

 Available-for-sale

  investment                    513           336          207           15

 Cumulative translation

  adjustment                 13,242        10,740       56,135       23,779

                       -----------------------------------------------------



Total other

 comprehensive income

 (loss) for the year         23,007        16,943       60,769       (5,361)

                       -----------------------------------------------------



Comprehensive income

 for the year                22,482        17,013       62,263       15,706

                       -----------------------------------------------------

                       -----------------------------------------------------







                            Kruger Products L.P.

                    Consolidated Statement of Cash Flows

                      (thousands of Canadian dollars)





                             13-week      13-week

                        period ended period ended   Year ended   Year ended

                        December 31, December 31, December 31, December 31,

                                2015         2014         2015         2014

                                   $            $            $            $

                        ----------------------------------------------------

Cash flows from (used

 in) operating

 activities

Net income (loss) for

 the year                       (525)          70        1,494       21,067

Items not affecting cash

 Depreciation                 12,189       10,475       41,643       37,049

 Amortization                    318          170          881          649

 Loss (gain) on sale of

  fixed assets                   450          144          734         (135)

 Change in amortized

  cost of Partnership

  units liability             (1,010)       7,852        4,003       13,759

 Unrealized foreign

  exchange loss                1,578        1,643        6,906        3,522

 Interest expense             10,095        9,807       58,164       44,730

 Pension and post

  retirement benefits          2,685        2,435       14,146        9,874

 Provisions                      229          271        3,034        3,762

 Income taxes                  6,157          278        7,439       (1,840)

 Gain on sale of non-

  financial assets                12            -       (1,119)           -

                        ----------------------------------------------------

 Total items not

  affecting cash              32,703       33,075      135,831      111,370



Net change in non-cash

 working capital              (4,382)      17,209      (24,540)     (12,454)

Contributions to pension

 and post-retirement

 benefit plans               (11,553)      (2,154)     (23,084)     (22,414)

Provisions paid               (2,580)        (653)      (3,558)      (2,562)

Income tax payments             (557)        (480)      (2,107)      (2,102)

                        ----------------------------------------------------



Net cash from operating

 activities                   13,106       47,067       84,036       92,905

                        ----------------------------------------------------



Cash flows from (used

 in) investing

 activities

Purchases of property,

 plant & equipment           (21,552)     (13,850)     (54,701)     (41,034)

Purchases of software           (722)        (229)      (2,682)      (1,218)

Available-for-sale

 investment                        -         (277)           -         (277)

Proceeds on sale of

 property, plant and

 equipment                         -            -          736          578

Acqusition of business             -            -            -      (23,360)

                        ----------------------------------------------------



Net cash used in

 investing activities        (22,274)     (14,356)     (56,647)     (65,311)

                        ----------------------------------------------------



Cash flows from (used

 in) financing

 activities

Proceeds from long-term

 debt                        206,000            -      206,000            -

Repayment of long-term

 debt                       (179,976)      (4,243)    (184,856)      (8,577)

Payment of deferred

 financing fees               (1,248)           -       (1,388)           -

Interest paid on long-

 term debt                   (22,603)      (7,193)     (44,978)     (28,389)

Distributions and

 advances paid                (7,156)      (6,639)     (31,811)     (29,054)

Proceeds from issuing

 partnership units                 -          192          195        1,070

                        ----------------------------------------------------



Net cash used in

 financing activities         (4,983)     (17,883)     (56,838)     (64,950)

                        ----------------------------------------------------



Effect of exchange rate

 changes on cash and

 cash equivalents held

 in foreign currency           1,059          621        3,116        1,470

                        ----------------------------------------------------



Increase (decrease) in

 cash and cash

 equivalents during the

 year                        (13,092)      15,449      (26,333)     (35,886)



Cash and cash

 equivalents - Beginning

 of year                      38,547       36,339       51,788       87,674

                        ----------------------------------------------------



Cash and cash

 equivalents - End of

 year                         25,455       51,788       25,455       51,788

                        ----------------------------------------------------

                        ----------------------------------------------------







                            Kruger Products L.P.

                       Segment and Geographic Results

                      (thousands of Canadian dollars)



                             13-week      13-week

                        period ended period ended   Year ended   Year ended

                        December 31, December 31, December 31, December 31,

                                2015         2014         2015         2014

                                   $            $            $            $

                        ----------------------------------------------------



Segment Information



Segment Revenue

 Consumer                    240,583      217,862      897,959      842,635

 AFH                          54,799       53,904      220,320      184,263

 Other                         5,201        6,881       20,591       19,270

                        ----------------------------------------------------



Total segment revenue        300,583      278,647    1,138,870    1,046,168

                        ----------------------------------------------------

                        ----------------------------------------------------



Segment EBITDA

 Consumer                     30,726       31,371      122,483      123,606

 AFH                             621          307        5,407        1,687

 Other                        (1,094)      (1,239)      (1,505)      (3,657)

                        ----------------------------------------------------



Total segment EBITDA          30,253       30,439      126,385      121,636



Reconciliation to Net

 Income (Loss):



Depreciation and

 amortization                 12,507       10,645       42,524       37,698

Interest expense              10,095        9,807       58,164       44,730

Change in amortized cost

 of Partnership units

 liability                    (1,010)       7,852        4,003       13,759

Gain (loss) on sale of

 fixed assets                    450          144          734         (135)

Gain (loss) on sale of

 non-financial assets             12            -       (1,119)           -

Restructuring costs              989            -        2,824        2,835

Pension revaluation -

 past service cost                 -            -        3,416            -

Unrealized foreign

 exchange loss                 1,578        1,643        6,906        3,522

                        ----------------------------------------------------



Income before income

 taxes                         5,632          348        8,933       19,227



Income taxes                   6,157          278        7,439       (1,840)

                        ----------------------------------------------------



Net income (loss)               (525)          70        1,494       21,067

                        ----------------------------------------------------

                        ----------------------------------------------------



Geographic Revenue



Canada                       184,512      183,595      711,881      699,996

U.S.                         103,384       85,912      389,154      316,738

Mexico                        12,687        9,140       37,835       29,434

                        ----------------------------------------------------



Total Revenue                300,583      278,647    1,138,870    1,046,168

                        ----------------------------------------------------

                        ----------------------------------------------------







                               KP Tissue Inc.

                      Statement of Financial Position

                      (thousands of Canadian dollars)



                                               December 31,    December 31,

                                                       2015            2014

                                                          $               $

                                            --------------------------------

Assets



Current assets

  Distributions receivable                            1,613           1,601

  Income tax recoverable                                828               -

                                            --------------------------------

                                                      2,441           1,601



Non-current assets

  Investment in associate                           126,643         153,732

                                            --------------------------------



Total Assets                                        129,084         155,333

                                            --------------------------------

                                            --------------------------------



Liabilities



Current liabilities

  Dividend payable                                    1,613           1,601

  Payable to Partnership                                108              53

  Current portion of advances from

   Partnership                                          432             584

  Income tax payable                                      -             495

                                            --------------------------------

                                                      2,153           2,733

Non-current liabilities

  Advances from Partnership                             709               -

  Deferred income taxes                               1,007           2,005

                                            --------------------------------



Total liabilities                                     3,869           4,738

                                            --------------------------------



Equity



  Common shares                                      11,577          10,138

  Contributed surplus                               144,819         144,819

  Deficit                                           (49,291)        (12,220)

  Accumulated other comprehensive income             18,110           7,858

                                            --------------------------------



Total equity                                        125,215         150,595

                                            --------------------------------



Total liabilities and equity                        129,084         155,333

                                            --------------------------------

                                            --------------------------------







                               KP Tissue Inc.

                  Statement of Comprehensive Income (Loss)

    (thousands of Canadian dollars, except share and per share amounts)



                             13-week      13-week

                        period ended period ended   Year ended   Year ended

                        December 31, December 31, December 31, December 31,

                                2015         2014         2015         2014

                                   $            $            $            $

                        ----------------------------------------------------



Equity loss                   (1,516)      (1,435)      (5,480)      (2,379)



Dilution gain (loss)             (59)           7           70          102



Impairment in investment

 in associate                (28,000)           -      (28,000)           -

                        ----------------------------------------------------



Loss before income taxes     (29,575)      (1,428)     (33,410)      (2,277)



Income taxes                  (1,796)        (177)      (2,066)         241

                        ----------------------------------------------------



Net loss for the year        (27,779)      (1,251)     (31,344)      (2,518)

                        ----------------------------------------------------



Other comprehensive

 income (loss)

 net of tax expense

  (recovery)

 Items that will not be

  reclassified to net

  loss:

 Remeasurements of

  pensions                     1,603          872        1,013       (3,692)

 Remeasurements of post-

  retirement benefits           (196)           5         (267)        (351)

 Items that may be

  subsequently

  reclassified to net

  loss:

 Available-for-sale

  investment                      72           49           29            2

 Cumulative translation

  adjustment                   2,376        2,020       10,223        4,481

                        ----------------------------------------------------



Total other

 comprehensive income

 for the year                  3,855        2,946       10,998          440

                        ----------------------------------------------------



Comprehensive income

 (loss) for the year         (23,924)       1,695      (20,346)      (2,078)

                        ----------------------------------------------------

                        ----------------------------------------------------



Basic loss per share           (3,12)       (0,14)       (3,52)       (0,29)

                        ----------------------------------------------------

                        ----------------------------------------------------



Weighted average number

 of shares outstanding     8,952,820    8,859,731    8,910,948    8,834,508

                        ----------------------------------------------------

                        ----------------------------------------------------







                               KP Tissue Inc.

                          Statement of Cash Flows

                      (thousands of Canadian dollars)



                              13-week     13-week

                         period endedperiod ended   Year ended   Year ended

                         December 31,December 31, December 31, December 31,

                                 2015        2014         2015         2014

                                    $           $            $            $

                        ----------------------------------------------------

Cash flows from (used

 in) operating

 activities

Net loss for the period      (27,779)      (1,251)     (31,344)      (2,518)

Items not affecting cash

 Equity loss                    1,516       1,435        5,480        2,379

 Dilution (gain) loss              59          (7)         (70)        (102)

 Impairment in

  investment in

  associate                    28,000           -       28,000            -

 Income taxes                 (1,796)        (177)      (2,066)         241

                        ----------------------------------------------------

 Total items not

  affecting cash               27,779       1,251       31,344        2,518



Tax payments                    (307)        (175)      (1,712)      (1,043)

Tax distribution

 received                           -           -          571          459

Advances received                 307         175        1,141          584

                        ----------------------------------------------------



Net cash from (used in)

 operating activities               -           -            -            -

                        ----------------------------------------------------



Cash flows from (used

 in) investing activites

Investment in associate             -        (193)        (195)      (1,070)

Partnership unit

 distributions received         1,205       1,593        5,217        6,350

                        ----------------------------------------------------



Net cash from investing

 activities                     1,205       1,400        5,022        5,280

                        ----------------------------------------------------



Cash flows from (used

 in) financing

 activities

Issuance of common

 shares                             -         193          195        1,070

Dividends paid                (1,205)      (1,593)      (5,217)      (6,350)

                        ----------------------------------------------------



Net cash used in

 financing activities         (1,205)      (1,400)      (5,022)      (5,280)

                        ----------------------------------------------------



Increase (decrease) in

 cash and cash

 equivalents during the

 year                               -           -            -            -



Cash and cash

 equivalents - Beginning

 of year                            -           -            -            -

                        ----------------------------------------------------



Cash and cash

 equivalents - End of

 year                               -           -            -            -

                        ----------------------------------------------------

                        ----------------------------------------------------







FOR FURTHER INFORMATION PLEASE CONTACT:

INFORMATION:

Francois Paroyan

General Counsel and Corporate Secretary

KP Tissue Inc.

905.812.6936

francois.paroyan@krugerproducts.ca





INVESTORS:


Mike Baldesarra

Director of Investor Relations

KP Tissue Inc.

905.812.6962

IR@KPTissueinc.com









Source: KP Tissue Inc.

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