May 5, 2016

KP Tissue Releases First Quarter 2016 Financial Results

Continued Revenue and Market Share Growth

MISSISSAUGA, ONTARIO--(Marketwired - May 5, 2016) - KP Tissue Inc. (KPT) (TSX:KPT) reports the Q1 2016 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 16.2% interest in KPLP.

KPLP Q1 2016 Business and Financial Highlights




--  Revenue increased by 5.4% to $279.7 million in Q1 2016 compared to Q1

    2015

--  Adjusted EBITDA was $28.1 million in Q1 2016 compared to $31.1 million

    in Q1 2015

--  Continued negative impact of foreign exchange estimated at approximately

    $2 million on Adjusted EBITDA over the previous year

--  Market share leader in Canada with overall Q1 growth

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

    2016



"Despite revenue growth supported by the Consumer segment, the weak Canadian dollar continued to have a measurable impact on our Adjusted EBITDA for the seasonally lower first quarter," said Mario Gosselin, CEO of KPT and KPLP.

"TAD Product Adjusted EBITDA for the quarter increased to $10.5 million from $9.7 million last year. We continue to expect progress over the next few quarters allowing us to achieve our $60 million TAD Product Adjusted EBITDA goal for Fiscal 2017.

"Starting last year, we expanded our CAPEX program to dedicate more funds to high-return projects. In 2016, CAPEX is expected to reach $65 to $85 million. The benefits of these projects on manufacturing cost reductions and capacity improvements will begin in Fiscal 2017. In the first quarter, two new modern converting lines began production in our Away-From-Home (AFH) business and we incurred higher operating costs due to the start-up and the continued implementation of our AFH growth plan.

"As indicated before, to offset part of the rise of raw material costs, price increases to our Canadian retailers will take effect in the second quarter and will have a full impact in the third quarter. We expect second quarter 2016 Adjusted EBITDA to be slightly higher than the same quarter last year, mainly driven by higher promotional activity in our U.S. market. However, we will continue to be impacted by the unfavourable exchange rate," concluded Mr. Gosselin.

KPLP Q1 2016 Financial Results

Revenue in Q1 2016 was $279.7 million, compared to $265.4 million in Q1 2015, an increase of $14.3 million or 5.4%. The increase in revenue was primarily due to the favourable impact of foreign exchange on U.S. dollar sales.

Cost of sales in Q1 2016 increased to $240.6 million compared to $222.5 million in Q1 2015 primarily due to the negative impact of foreign exchange fluctuations and increased warehousing costs due to higher inventory levels, somewhat offset by a decline in USD pulp and natural gas prices. As a percentage of revenue, cost of sales were 86.0% in Q1 2016 compared to 83.9% in Q1 2015.

Selling, general and administrative (SG&A) expenses in Q1 2016 were $21.7 million, compared to $21.6 million in Q1 2015. The increase was primarily due to slightly higher advertising & promotion expenses and the unfavourable impact of foreign exchange, partially offset by cost reduction initiatives. As a percentage of revenue, SG&A expenses decreased to 7.8% in Q1 2016 from 8.1% in Q1 2015.

Adjusted EBITDA in Q1 2016 was $28.1 million compared to $31.1 million in Q1 2015 as the net unfavourable impact of foreign exchange of approximately $2.0 million and higher warehousing costs were the primary drivers of the decrease in Adjusted EBITDA, as all other factors combined were relatively neutral. TAD Product Adjusted EBITDA was $10.5 million in Q1 2016 compared to $9.7 million in Q1 2015.

Net income in Q1 2016 was $6.4 million compared to $4.7 million in Q1 2015 primarily due to an increase in unrealized foreign exchange (gain) loss of $5.0 million and no restructuring costs compared to $1.1 million in Q1 2015, partially offset by lower Adjusted EBITDA of $3.0 million and higher interest and depreciation expense of $0.8 million and $0.5 million, respectively, and an increase in the tax expense of $0.3 million.

Total liquidity, representing cash and cash equivalents and availability under the credit line within covenant limitations, was $58.5 milion as of March 27, 2016 compared to $36.4 million as of December 31, 2015.

KPT Q1 2016 Financial Results

KPT incurred a net loss of $1.5 million in Q1 2016. Included in the net loss was $1.0 million representing KPT's share of KPLP's income. The income was reduced by depreciation expense of $1.4 million related to adjustments to carrying amounts on acquisition and income tax expense of $0.9 million.

Dividends on Common Shares

The Board of Directors of KPT declared a quarterly dividend of $0.18 per share to be paid on July 15, 2016 to shareholders of record at the close of business on June 30, 2016.

Additional Information

For additional information please refer to Management's Discussion and Analysis (MD&A) of KPT and KPLP for the first quarter ended March 27, 2016 available on SEDAR at www.sedar.com or our website at www.kptissueinc.com.

First Quarter Results Conference Call Information

KPT will hold its first quarter conference call on Thursday, May 5, 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, June 6, 2016 by dialing 800-585-8367 or 416-621-4642 and entering passcode 86330180.

The replay of the webcast will remain available on the website until midnight, June 6, 2016.

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 16.2% 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 U.S. 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 (recovery) of non-financial assets, (vi) loss (gain) on disposal of property, plant and equipment, (vii) unrealized foreign exchange loss (gain), (viii) costs related to restructuring activities, (ix) changes in the amortized cost of the Partnership units 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 MD&A of KPT and KPLP for the first quarter ended March 27, 2016 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 Q2 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.

      Unaudited Condensed Consolidated Statement of Financial Position

                       (thousands of Canadian dollars)



                                                 March 27,     December 31,

                                                      2016             2015

                                                         $                $

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

Assets

Current assets

  Cash and cash equivalents                          3,980           25,455

  Trade and other receivables                      122,527          108,720

  Receivables from related parties                     284              185

  Current portion of advances to partners            1,234            2,630

  Inventories                                      184,224          184,985

  Income tax recoverable                               629              772

  Prepaid expenses                                  12,221            8,429

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

                                                   325,099          331,176

Non-current assets

  Advances to partners                               4,234            4,234

  Property, plant & equipment                      725,596          737,708

  Other long-term assets                             6,809            8,107

  Goodwill                                         160,939          160,939

  Intangible assets                                 15,638           15,853

  Deferred income taxes                             38,858           39,411

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

Total assets                                     1,277,173        1,297,428

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

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



Liabilities

Current liabilities

  Trade and other payables                         185,892          180,329

  Payables to related parties                        9,430            3,775

  Distributions payable                              9,951            9,871

  Current portion of provisions                      2,561            3,096

  Current portion of long-term debt                  9,619           10,183

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

                                                   217,453          207,254

Non-current liabilities

  Long-term debt                                   411,844          425,859

  Other long-term liabilities                           30               48

  Provisions                                         6,428            6,180

  Pensions                                         101,829           87,164

  Post-retirement benefits                          57,332           57,346

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

  Liabilities to non-unitholders                   794,916          783,851

  Current portion of Partnership units

   liability                                         2,630            2,630

  Long-term portion of Partnership units

   liability                                       121,148          122,546

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

  Total Partnership units liability                123,778          125,176

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

 Total liabilities                                 918,694          909,027

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



Equity

  Partnership units                                322,424          318,012

  Deficit                                          (49,479)         (29,416)

  Accumulated other comprehensive income            85,534           99,805

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

Total equity                                       358,479          388,401

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

Total equity and liabilities                     1,277,173        1,297,428

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

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







                            Kruger Products L.P.

  Unaudited Condensed Consolidated Statement of Comprehensive Income (Loss)

                      (thousands of Canadian dollars)



                                                   13-week          13-week

                                              period ended     period ended

                                            March 27, 2016   March 29, 2015

                                                         $                $

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



Revenue                                            279,690          265,376



Expenses

  Cost of sales                                    240,647          222,540

  Selling, general and administrative

   expenses                                         21,652           21,619

  Restructuring costs                                    -            1,054

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



Operating income                                    17,391           20,163



  Interest expense                                  11,214           10,342

  Other (income) expense                              (829)           4,782

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



Income before income taxes                           7,006            5,039



Income taxes                                           616              329

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



Net income for the period                            6,390            4,710

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



Other comprehensive income (loss)

  Items that will not be reclassified to

   net income:

  Remeasurements of pensions                       (16,769)         (17,406)

  Remeasurements of post-retirement

   benefits                                            121           (3,652)

  Items that may be subsequently reclassified to net

   income:

  Available-for-sale investment                       (290)            (251)

  Cumulative translation adjustment                (13,981)          23,877

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



Total other comprehensive income (loss)

 for the period                                    (30,919)           2,568

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



Comprehensive income (loss) for the

 period                                            (24,529)           7,278

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

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







                            Kruger Products L.P.

          Unaudited Condensed Consolidated Statement of Cash Flows

                      (thousands of Canadian dollars)



                                                   13-week          13-week

                                              period ended     period ended

                                            March 27, 2016   March 29, 2015

                                                         $                $

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

Cash flows from (used in) operating

 activities

Net income for the period                            6,390            4,710

Items not affecting cash

  Depreciation                                      10,087            9,744

  Amortization                                         284              163

  Loss on sale of fixed assets                           1              165

  Change in amortized cost of Partnership

   units liability                                   1,234            1,312

  Gain on sale of investment                          (324)               -

  Unrealized foreign exchange (gain) loss           (1,739)           3,298

  Interest expense                                  11,214           10,342

  Pension and post-retirement benefits               2,659            2,680

  Provisions                                           141            1,333

  Income taxes                                         616              329

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

  Total items not affecting cash                    24,173           29,366



Net change in non-cash working capital             (16,639)         (23,409)

Contributions to pension and post-

 retirement benefit plans                           (5,843)          (3,634)

Provisions paid                                       (476)            (265)

Income tax payments                                   (865)            (555)

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



Net cash from operating activities                   6,740            6,213

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



Cash flows from (used in) investing

 activities

Purchases of property, plant & equipment           (16,189)          (9,462)

Proceeds on sale of investment                       1,439                -

Government assistance received                       1,209                -

Purchases of software                                  (69)            (165)

Proceeds on sale of property, plant and

 equipment                                               -              186

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



Net cash used in investing activities              (13,610)          (9,441)

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



Cash flows from (used in) financing

 activities

Proceeds from long-term debt                           791                -

Repayment of long-term debt                         (7,204)            (204)

Payment of deferred financing fees                    (330)               -

Interest paid on long-term debt                     (1,019)          (7,215)

Distributions and advances paid                     (6,547)         (10,411)

Proceeds from issuing Partnership units                  -              195

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



Net cash used in financing activities              (14,309)         (17,635)

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



Effect of exchange rate changes on cash

 and cash equivalents held in foreign

 currency                                             (296)           1,032

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



Decrease in cash and cash equivalents

 during the period                                 (21,475)         (19,831)



Cash and cash equivalents - Beginning of

 period                                             25,455           51,788

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



Cash and cash equivalents - End of period            3,980           31,957

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

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







                            Kruger Products L.P.

                       Segment and Geographic Results

                      (thousands of Canadian dollars)



                                                   13-week          13-week

                                              period ended     period ended

                                            March 27, 2016   March 29, 2015

                                                         $                $

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



Segment Information



Segment Revenue

  Consumer                                         228,151          210,150

  AFH                                               49,051           48,559

  Other                                              2,488            6,667

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



Total segment revenue                              279,690          265,376

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

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



Segment Adjusted EBITDA

  Consumer                                          28,003           30,297

  AFH                                                 (166)             968

  Other                                                250             (148)

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



Total segment Adjusted EBITDA                       28,087           31,117



Reconciliation to Net Income:



Depreciation and amortization                       10,371            9,907

Interest expense                                    11,214           10,342

Change in amortized cost of Partnership

 units liability                                     1,234            1,312

Loss on sale of fixed assets                             1              165

Restructuring costs                                      -            1,054

Unrealized foreign exchange (gain) loss             (1,739)           3,298

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



Income before income taxes                           7,006            5,039



Income taxes                                           616              329

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



Net income                                           6,390            4,710

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

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



Geographic Revenue



Canada                                             165,885          163,393

U.S.                                               101,673           93,378

Mexico                                              12,132            8,605

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



Total revenue                                      279,690          265,376

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

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










                               KP Tissue Inc.

             Unaudited Condensed Statement of Financial Position

                       (thousands of Canadian dollars)



                                                 March 27,     December 31,

                                                      2016             2015

                                                         $                $

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

Assets



Current assets

  Distributions receivable                           1,620            1,613

  Income tax recoverable                               983              828

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

                                                     2,603            2,441



Non-current assets

  Investment in associate                          118,799          126,643

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



Total Assets                                       121,402          129,084

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

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



Liabilities



Current liabilities

  Dividend payable                                   1,620            1,613

  Payable to Partnership                               108              108

  Current portion of advances from

   Partnership                                         205              432

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

                                                     1,933            2,153

Non-current liabilities

  Advances from Partnership                            709              709

  Deferred income taxes                              1,154            1,007

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



Total liabilities                                    3,796            3,869

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



Equity



  Common shares                                     11,992           11,577

  Contributed surplus                              144,819          144,819

  Deficit                                          (54,743)         (49,291)

  Accumulated other comprehensive income            15,538           18,110

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



Total equity                                       117,606          125,215

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



Total liabilities and equity                       121,402          129,084

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

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







                               KP Tissue Inc.

             Unaudited Condensed Statement of Comprehensive Loss

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



                                                   13-week          13-week

                                              period ended     period ended

                                            March 27, 2016   March 29, 2015

                                                         $                $

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



Equity loss                                           (378)            (658)



Dilution gain (loss)                                  (171)              85

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



Loss before income taxes                              (549)            (573)



Income taxes                                           929               64

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



Net loss for the period                             (1,478)            (637)

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



Other comprehensive income (loss)

  net of tax expense (recovery)

  Items that will not be reclassified to

   net loss:

  Remeasurements of pensions                        (2,380)          (2,495)

  Remeasurements of post-retirement

   benefits                                             12             (367)

  Items that may be subsequently

   reclassified to net loss:

  Available-for-sale investment                        (41)             (36)

  Cumulative translation adjustment                 (2,531)           3,411

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



Total other comprehensive income (loss)

 for the period                                     (4,940)             513

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



Comprehensive loss for the period                   (6,418)            (124)

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

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



Basic loss per share                                 (0.16)           (0.07)

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

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



Weighted average number of shares

 outstanding                                     8,993,554        8,871,820

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

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







                               KP Tissue Inc.

                 Unaudited Condensed Statement of Cash Flows

                      (thousands of Canadian dollars)



                                                   13-week          13-week

                                              period ended     period ended

                                            March 27, 2016   March 29, 2015

                                                         $                $

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

Cash flows from (used in) operating

 activities

Net loss for the period                             (1,478)            (637)

Items not affecting cash

  Equity loss                                          378              658

  Dilution (gain) loss                                 171              (85)

  Income taxes                                         929               64

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

  Total items not affecting cash                     1,478              637



Tax payments                                          (205)            (790)

Tax Distribution received                                -              571

Advances received                                      205              219

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



Net cash from (used in) operating

 activities                                              -                -

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



Cash flows from (used in) investing

 activites

Investment in associate                                  -             (195)

Partnership unit distributions received              1,613            1,595

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



Net cash from investing activities                   1,613            1,400

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



Cash flows from (used in) financing

 activities

Issuance of common shares                                -              195

Dividends paid                                      (1,613)          (1,595)

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



Net cash used in financing activities               (1,613)          (1,400)

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



Increase (decrease) in cash and cash

 equivalents during the period                           -                -



Cash and cash equivalents - Beginning of

 period                                                  -                -

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



Cash and cash equivalents - End of period                -                -

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

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







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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