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

MISSISSAUGA, ON, March 19, 2014 /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 fourth quarter of 2013 and full year 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 December 31, 2013, KPT held a 16.7% 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 fourth quarter of 2013 and during full year 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 January 15, 2014, 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

Q4 2013 Highlights

• Continued to expand overall market share in Canada and maintained number one position
• Revenue of $242.9 million in Q4 2013, the same as in Q4 2012
• EBITDA of $28.3 million in Q4 2013 compared to $23.0 million in Q4 2012, an increase of 22.5 percent
• TAD Project progressing well, EBITDA contribution of $4.1 million in Q4 2013

Full Year Highlights

• Revenue of $955.3 million in fiscal 2013, compared to $922.9 million in fiscal 2012, an increase of 3.5 percent
• EBITDA of $116.2 million in fiscal 2013, compared to $110.9 million in fiscal 2012, an increase of 4.8 percent
• Net income of $48.9 million in fiscal 2013 compared to $41.4 million in fiscal 2012, an increase of 18.2 percent

"In 2013, we realized a number of achievements. First, we completed the extensive construction phase of our TAD Project in the U.S. on-time and on-budget, and then successfully began the ramp up of the manufacturing and sales of our TAD products. In addition, I'm pleased to report that we again strengthened our market share position and continued to be the leader in the Canadian tissue market. Finally, our EBITDA for the year reached $116.2 million, despite significantly higher commodity costs," said Mario Gosselin, CEO of KP Tissue and KPLP.

"Late in 2013, our business was impacted by extreme weather conditions. We also began to implement programs designed to offset the impact of higher pulp and energy costs, and considering the continued rise in pulp prices in year-to-date 2014, we will need to consider additional programs to offset the negative impact. In the current fiscal year, in addition to the TAD Project ramp-up, we will also turn our attention to other high return CAPEX projects.

"We are pleased to report that the TAD Project contributed positive EBITDA of $4.1 million in the fourth quarter. We continue to expect to achieve our TAD EBITDA target of $60 million by 2017, and in 2014 we anticipate TAD EBITDA in the $20 to $25 million range.

"We estimate that Q1 2014 EBITDA will be similar to slightly above Q1 2013 due to current market conditions, including higher input costs. Similar to 2013, we expect a sequential improvement in Q2 2014 results reflecting higher promotional activities during the second quarter," concluded Mr. Gosselin.

KPLP Q4 2013 Financial Results
Revenue in Q4 2013 was $242.9 million, the same as in Q4 2012, including the impact of 6 fewer days of sales in Q4 2013 compared to Q4 2012. An increase in Consumer segment revenue resulting from new business related to the TAD Project and the favourable impact of foreign exchange on U.S. based sales was offset by a decrease in AFH segment revenue.

Cost of sales in Q4 2013 were $173.1 million, compared to $172.4 million in Q4 2012. The impact of increases in commodity prices, particularly pulp fibre and natural gas, and the unfavourable impact of foreign exchange was partially offset by the impact of 6 fewer days of sales in Q4 2013 compared to Q4 2012. As a percentage of revenue, cost of sales increased to 71.2 percent in Q4 2013 from 71.0 percent in Q4 2012.

Operating expenses in Q4 2013 were $52.2 million, compared to $59.7 million in Q4 2012. Operating expenses decreased due to: the impact of 6 fewer days in Q4 2013 compared to Q4 2012; lower freight and selling expenses as a result of changes in sales mix; lower advertising and promotion expenses; a lower management fee in Q4 2013; and direct and incremental costs related to the TAD Project and reorganization expenses incurred in Q4 2012.

EBITDA in Q4 2013 was $28.3 million, compared to $23.0 million in Q4 2012 primarily due to the decrease in operating expenses. TAD Project EBITDA was $4.1 million in Q4 2013. EBITDA in Q4 2012 included $1.8 million of direct and incremental expenses without any corresponding revenue for the TAD Project.

Net income in Q4 2013 was $7.6 million, compared to $5.4 million in Q4 2012. Net income increased primarily due to higher EBITDA, partially offset by higher interest expense and a lower income tax credit in Q4 2013.

The cash balance as of December 31, 2013 was $87.7 million, compared to $87.8 million as of September 29, 2013. Cash from operating activities improved while additional cash was used in investing and financing activities.

KPLP Full Year Financial Results
Revenue was $955.3 million in fiscal 2013 compared to $922.9 million in fiscal 2012. The increase in revenue was primarily due to higher sales volumes in Canada and new business related to the TAD Project.

EBITDA was $116.2 million in fiscal 2013 compared to $110.9 million in fiscal 2012. The increase in EBITDA was primarily driven by the increase in revenue, offset somewhat by lower operating margins due to higher commodity costs and operating expenses.

Net income was $48.9 million in fiscal 2013 compared to $41.4 million in fiscal 2012. The increase in net income was primarily due to higher EBITDA, the income tax recovery and a net recovery related to restructuring activities, partially offset by increased interest and depreciation expenses.

KPT Highlights

Q4 2013 Highlights

• Net loss of $0.8 million in Q4 2013
• Loss per share of $0.08 in Q4 2013
• Declared quarterly dividend of $0.18 per share, payable April 15, 2014

Full Year Highlights

• Net loss of $0.3 million in Fiscal 2013
• Loss per share of $0.03 in Fiscal 2013

KPT Q4 2013 Financial Results
Included in the net loss of $0.8 million in Q4 2013 was $1.3 million representing KPT's share of KPLP's profit. The profit was offset by depreciation expense of $1.7 million related to adjustments to carrying amounts on acquisition, and income tax expense of $0.4 million.

KPT Full Year Financial Results
Included in the net loss of $0.3 million in Fiscal 2013 was $8.2 million representing KPT's share of KPLP's profit. The profit was offset primarily by depreciation expense of $7.1 million related to adjustments to carrying amounts on acquisition, and income tax expense of $2.0 million.

KPLP Distribution
KPLP will pay a distribution of $0.18 per KPLP unit to its partners on or prior to April 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 April 15, 2014 to shareholders of record at the close of business on March 31, 2014.

Conference Call Information
KPT will hold its fourth quarter conference call on Wednesday, March 19, 2014 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, April 16, 2014 by dialing 1-855-859-2056 or 416-849-0833 and entering passcode 47011329.

The replay of the webcast will remain available on the web site until midnight, April 16, 2014.

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 fourth quarter and fiscal year ended December 31, 2013 available on SEDAR at www.sedar.com.

Forward-Looking Statements
Certain statements in this press release about KPT's and KPLP's current and future plans, expectations and intentions, results, levels of activity, performance, goals or achievements or any other future events or developments constitute forward-looking statements. The words "may", "will", "would", "should", "could", "expects", "plans", "intends", "trends", "indications", "anticipates", "believes", "estimates", "predicts", "likely" or "potential" or the negative or other variations of these words or other comparable words or phrases, are intended to identify forward-looking statements. The forward-looking information is based on certain key expectations and assumptions made by KPT, including expectations and assumptions concerning the impact of the TAD Project on EBITDA. 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 19, 2014 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.
Consolidated Statements of Financial Position
(thousands of Canadian dollars)
		December 31, 2013		December 31, 2012
		$		$
Assets
Current assets
	Cash and cash equivalents	87,674		121,489
	Trade and other receivables	94,789		94,308
	Receivables from related parties	1,429		668
	Inventories	151,505		116,873
	Current portion of income tax recoverable	630		-
	Prepaid expenses	4,777		4,413
		340,804		337,751
Non-current assets
	Property, plant & equipment	616,687		580,814
	Other long-term assets	10,268		6,236
	Income tax recoverable	14,132		3,443
	Goodwill	152,021		152,021
	Intangible assets	13,483		13,828
	Deferred income taxes	14,141		1,178
Total assets		1,161,536		1,095,271
Liabilities
Current liabilities
	Trade and other payables	188,470		186,309
	Payables to related parties	5,134		9,057
	Distributions payable	9,455		-
	Current portion of income tax payable	-		571
	Current portion of provisions	999		3,719
	Current portion of long-term debt	8,276		3,802
		212,334		203,458
Non-current liabilities
	Long-term debt	342,013		323,885
	Other long-term liabilities	323		544
	Provisions	6,615		5,506
	Pensions	80,380		148,989
	Post-retirement benefits	48,746		48,302
	Liabilities to non-unitholders	690,411		730,684
	Current portion of Partnership units liability	3,475		-
	Long-term portion of Partnership units liability	114,364		118,562
	Total Partnership units liability	117,839		118,562
Total liabilities		808,250		849,246
Equity
	Partnership units	282,672		257,516
	Retained earnings (deficit)	50,945		(14,736)
	Accumulated other comprehensive income	19,669		3,245
Total equity		353,286		246,025
Total equity and liabilities		1,161,536		1,095,271

Kruger Products L.P.
Consolidated Statements of Comprehensive Income (Loss)
(thousands of Canadian dollars)
			Quarter ended				Year ended
			December 31, 2013		December 31, 2012		December 31, 2013		December 31, 2012
			$		$		$		$
Revenue			242,944		242,903		955,346		922,874
Expenses
	Cost of sales		173,077		172,400		675,730		646,089
	Operating expenses		52,159		59,710		199,794		194,987
	Impairment (recovery) of non-financial assets		-		(1,292)		(1,789)		4,608
	Restructuring costs		1,372		791		1,372		9,391
Operating income			16,336		11,294		80,239		67,799
Interest expense			9,951		8,273		42,251		27,829
Income before income taxes			6,385		3,021		37,988		39,970
Income taxes			(1,287)		(2,380)		(10,940)		(1,428)
Net income for the year			7,672		5,401		48,928		41,398
Other comprehensive income (loss)
	Items that will not be reclassified to net income:
	Remeasurement of pensions		13,341		13,170		55,619		(39,342)
	Remeasurement of post-retirement benefits		(910)		4,693		599		(102)
	Items that may be subsequently reclassified to net income:		-		-
	Available-for-sale investment		(9)		-		69		-
	Cumulative translation adjustment		8,487		3,245		16,355		(3,969)
Total other comprehensive income (loss) for the year			20,909		21,108		72,642		(43,413)
Comprehensive income (loss) for the year			28,581		26,509		121,570		(2,015)

Kruger Products L.P.
Consolidated Statements of Cash Flows
(thousands of Canadian dollars)
		Quarter ended				Year ended
		December 31, 2013		December 31, 2012		December 31, 2013		December 31, 2012
		$		$		$		$
Cash flows from operating activities
Net income for the year		7,672		5,401		48,928		41,398
Items not affecting cash
	Depreciation	9,697		10,755		33,561		28,331
	Amortization	166		146		581		530
	Loss (gain) on sale of fixed assets	(1)		622		(5)		1,060
	Change in amortized cost of Partnership units liability	(723)		-		(723)		-
	Unrealized foreign exchange (gain) loss	1,426		773		2,992		(777)
	Interest expense	9,951		8,273		42,251		27,829
	Pension and post retirement benefits	2,373		2,140		9,959		9,393
	Provisions	103		154		800		9,613
	Income taxes	(1,287)		(2,380)		(10,940)		(1,428)
	Impairment (recovery) of non-financial assets	-		(1,292)		(1,789)		4,608
	Total items not affecting cash	21,705		19,191		76,687		79,159
Net change in non-cash working capital		10,830		29,606		(34,271)		39,906
Contributions to pension and post-retirement benefit plans		(8,401)		(7,569)		(30,369)		(29,707)
Provisions paid		(832)		(2,336)		(2,841)		(7,245)
Income tax payments		(556)		367		(2,675)		(360)
Net cash from operating activities		30,418		44,660		55,459		123,151
Cash flows used in investing activities
Purchase of property, plant & equipment		(8,711)		(6,157)		(20,265)		(17,652)
Purchases of through-air-dried (TAD) expansion		(6,564)		(54,056)		(39,631)		(161,155)
Interest paid on credit facilities related to TAD		-		(4,320)		-		(6,125)
Available-for-sale investment		-		-		(836)		-
Government grants received		-		-		1,078		-
Purchases of software		(143)		(51)		(236)		(51)
Proceeds on sale of property, plant and equipment		1		16		5		199
Net cash used in investing activities		(15,417)		(64,568)		(59,885)		(184,784)
Cash flows from (used in) financing activities
Proceeds from credit facilities		-		51,830		10,813		145,957
Repayment of credit facilities		(3,903)		(27,096)		(7,999)		(65,000)
Payment of deferred financing fees		(29)		(26)		(641)		(26)
Transfer of assets to related parties		-		2,000		-		(209)
Interest paid on credit facilities		(6,495)		(3,290)		(27,676)		(17,720)
Settlement of interest rate swap		-		-		-		(413)
Distributions paid		(9,411)		(40,000)		(30,010)		(40,000)
Equity issuance costs		-		(11,110)		(1,206)		(11,110)
Proceeds from issuing partnership units		4,082		140,000		26,362		140,000
Net cash from (used in) financing activities		(15,756)		112,308		(30,357)		151,479
Effect of exchange rate changes on cash and cash equivalents held in foreign currency		615		342		968		(154)
Increase (decrease) in cash and cash equivalents during the year		(140)		92,742		(33,815)		89,692
Cash and cash equivalents - Beginning of year		87,814		28,747		121,489		31,797
Cash and cash equivalents - End of year		87,674		121,489		87,674		121,489

Kruger Products L.P.
Segment and Geographic Results
(thousands of Canadian dollars)
		Quarter ended				Year ended
		December 31, 2013		December 31, 2012		December 31, 2013		December 31, 2012
		$		$		$		$
Segment Information
Segment Revenue
	Consumer	202,107		199,099		792,670		745,548
	AFH	38,698		41,708		154,304		156,632
	Other	2,139		2,096		8,372		20,694
Total segment revenue		242,944		242,903		955,346		922,874
Segment EBITDA
	Consumer	27,226		24,664		110,342		113,716
	AFH	1,275		(1,757)		6,608		3,008
	Other	(228)		182		(722)		(5,782)
Total segment EBITDA		28,273		23,089		116,228		110,942
Reconciliation to Net Income:
Depreciation and amortization		9,863		10,901		34,142		28,861
Interest expense		9,951		8,273		42,251		27,829
Loss (gain) on sale of fixed assets		(1)		622		(5)		1,060
Change in amortized cost of Partnership units liability		(723)		-		(723)		-
Restructuring costs		1,372		791		1,372		9,391
Impairment (recovery) of non-financial assets		-		(1,292)		(1,789)		4,608
Unrealized foreign exchange loss (gain)		1,426		773		2,992		(777)
Income before income taxes		6,385		3,021		37,988		39,970
Income taxes		(1,287)		(2,380)		(10,940)		(1,428)
Net income for the period		7,672		5,401		48,928		41,398
Geographic Revenue
Canada		172,234		176,903		688,173		662,952
U.S.		63,590		58,135		239,225		231,532
Mexico		7,120		7,865		27,948		28,390
Total Revenue		242,944		242,903		955,346		922,874

KP Tissue Inc.
Statements of Financial Position
(thousands of Canadian dollars)
		December 31, 2013		December 31, 2012
		$		$
Assets
Current assets
	Distributions receivable	1,583		-
Non-current assets
	Deferred income taxes	-		105
	Investment in associate	161,584		139,499
Total Assets		163,167		139,604
Liabilities
Current liabilities
	Dividend payable	1,583		-
	Income taxes payable	580		-
		2,163		-
Non-current liabilities
	Deferred income taxes	3,033		-
Total liabilities		5,196		-
Equity
	Common shares	9,068		140,000
	Contributed surplus	144,819		-
	Retained earnings (deficit)	709		(583)
	Accumulated other comprehensive income	3,375		187
Total equity		157,971		139,604
Total liabilities and equity		163,167		139,604

KP Tissue Inc.
Statements of Comprenhensive Income (Loss)
(thousands of Canadian dollars, except share and per share amounts)
		Quarter ended				Year ended
		December 31, 2013		December 31, 2012		December 31, 2013		December 31, 2012
		$		$		$		$
Equity income		(384)		(989)		1,113		(989)
Gain on remeasurement of over allotment option		-		-		375		-
Dilution gain		59		-		240		-
Income (loss) before income taxes		(325)		(989)		1,728		(989)
Income taxes
	Current	(312)		-		580		-
	Deferred	696		(148)		1,433		(148)
		384		(148)		2,013		(148)
Net loss for the period		(709)		(841)		(285)		(841)
Other comprehensive income
	Items that will not be reclassified to net income:
	Remeasurements of pensions	1,944		258		8,130		258
	Remeasurements of post-retirement benefits	(133)		-		88		-
	Items that may be subsequently reclassified to net income:	-
	Available-for-sale investment	10		-		10		-
	Cumulative translation adjustment	2,028		187		3,178		187
Total other comprehensive income for the period		3,849		445		11,406		445
Comprehensive income (loss) for the period		3,140		(396)		11,121		(396)
Basic loss per share		(0.08)		(0.11)		(0.03)		(0.11)
Weighted average number of shares outstanding		8,791,225		8,000,001		8,752,830		8,000,001

KP Tissue Inc.
Statements of Cash Flows
(thousands of Canadian dollars)
		Quarter ended				Year ended
		December 31, 2013		December 31, 2012		December 31, 2013		December 31, 2012
		$		$		$		$
Cash flows from (used in) operating activities
Net loss for the period		(709)		(841)		(285)		(841)
Items not affecting cash
	Equity income	384		989		(1,113)		989
	Gain on remeasurement of over-allotment option	-		-		(375)		-
	Dilution gain	(59)		-		(240)		-
	Current income taxes	(312)		-		580		-
	Deferred income taxes	696		(148)		1,433		(148)
Net cash from (used in) operating activities		-		-		-		-
Cash flows used in investing activites
Investment in associate		(168)		(140,000)		(13,887)		(140,000)
Distribution received		1,581		-		5,058		-
Net cash used in investing activities		1,413		(140,000)		(8,829)		(140,000)
Cash flows from (used in) financing activities
Issuance of common shares		168		140,000		13,887		140,000
Dividend paid		(1,581)		-		(5,058)		-
Net cash from (used in) financing activities		(1,413)		140,000		8,829		140,000
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: Maison Brison - English

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]