KP Tissue Releases Second Quarter 2014 Financial Results

MISSISSAUGA, ON, Aug. 13, 2014 /CNW Telbec/ - KP Tissue Inc. ("KPT") (TSX: KPT) reports the Q2 2014 Financial and Operational Results of KPT and Kruger Products L.P. (KPLP):

• Revenue increased by 7.5% to $265.3 million in Q2 2014 compared to $246.8 million in Q2 2013
• EBITDA of $29.0 million in Q2 2014 compared to $31.7 million in Q2 2013
• TAD product sales continued to progress well, with EBITDA contribution of $7.8 million in Q2 2014
• Maintained number one overall consumer market share in Canada
• Acquired Metro Paper Canadian converting assets and North American customer base for cash consideration of $23.4 million
• Solid balance sheet with $40.5 million of cash at the end of the quarter

"TAD Product EBITDA of $7.8 million was an important contributor to second quarter EBITDA of $29.0 million. Our consumer and AFH businesses continued to face the challenge of high input costs and competitive environments during the quarter," said Mario Gosselin, CEO of KP Tissue and KPLP.

TAD product sales continued to ramp-up as planned and we expect fiscal 2014 TAD Product EBITDA to be in the previously provided range. Furthermore, we are now engaged in a study to evaluate capacity expansion and use of TAD technology.

"In the Canadian consumer market, our brands are maintaining their overall market share leadership. We are continuing our capital investment program as planned, to improve our profitability and reduce our manufacturing costs in Canada. We are currently realizing the benefits of two previously announced cost optimization projects and are planning to implement additional cost reduction initiatives in the back half of the year.

We expect EBITDA for the third quarter of 2014 to be higher than Q2 2014 and similar to or slightly higher than the third quarter of 2013. On a sequential basis, we anticipate an improvement in our Canadian consumer business reflecting normal seasonality," concluded Mr. Gosselin.

KP Tissue Inc.
KPT holds a 16.6% interest in KPLP. The highlights, discussion and analysis in this earnings release, unless identified specifically as representing the financial results of only KPT, relates entirely to the financial results of KPLP.

KPLP Q2 2014 Financial Results
Revenue in Q2 2014 was $265.3 million, compared to $246.8 in Q2 2013, an increase of $18.5 million. The increase was driven by improved Consumer segment revenue resulting from TAD product promotional activities in the U.S. and the favourable impact of foreign exchange on U.S. based sales. AFH segment revenue was positively impacted by the acquisition of Metro Paper on June 3^rd. Revenue in Canada decreased as a result of lower promotional activity compared to Q2 2013.

Cost of sales in Q2 2014 was $226.5 million, compared to $201.7 million in Q2 2013 due to the impact of increases in commodity prices, particularly pulp fibre and natural gas, the unfavourable impact of foreign exchange, and an increase in freight and warehousing expenses related primarily to higher sales volume. As a percentage of revenue, cost of sales increased to 85.3 percent in Q2 2014 from 81.7 percent in Q2 2013.

Selling, general and administrative expenses in Q2 2014 were $19.6 million, compared to $22.4 million in Q2 2013 due to decreases in departmental spending and advertising and promotion expenses.

EBITDA in Q2 2014 was $29.0 million compared to $31.7 million in Q2 2013 as EBITDA was impacted by lower margins due to higher cost of sales. TAD Product EBITDA was $7.8 million in Q2 2014 compared to an EBITDA loss of $1.9 million, including start-up costs, in Q2 2013.

Net income in Q2 2014 was $8.1 million, compared to $15.4 million in Q2 2013. The decrease was due to lower EBITDA of $2.7 million, a decrease in the deferred tax recovery of $3.2 million, and a change of $1.5 million in the amortized cost of the Partnership unit liability.

The cash balance as of June 29, 2014 was $40.5 million compared to $52.7 million as of March 30, 2014. Cash generated from operating activities and a reduction in working capital requirements, was partially offset by cash used to acquire Metro Paper ($23.4 million) and to pay distributions.

KPT Q2 2014 Financial Results

• Net loss of $0.3 million in Q2 2014
• Loss per share of $0.03 in Q2 2014

Included in the net loss of $0.3 million in Q2 2014 was $1.4 million representing KPT's share of KPLP's profit. The profit was offset by depreciation expense of $1.5 million related to adjustments to carrying amounts on acquisition, and income tax expense of $0.2 million.

KPLP Distribution
KPLP will pay a distribution of $0.18 per KPLP unit to its partners on or prior to October 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 October 15, 2014 to shareholders of record at the close of business on September 30, 2014.

Conference Call Information
KPT will hold its second quarter conference call on Wednesday, August 13, 2014 at 8:30 a.m. Eastern Time.

Details of conference call:
Via telephone:  1-888-231-8191 or 647-427-7450
Via the internet at: www.kptissueinc.com

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

Conference Call Rebroadcast
A rebroadcast of the conference call will be available until midnight, September 12, 2014 by dialing 1-855-859-2056 or 416-849-0833 and entering passcode 73141456.

The replay of the webcast will remain available on the web site until midnight, September 12, 2014.

About KP Tissue Inc. (KPT)
KPT was created to acquire, and its business is limited to holding, a limited partnership interest in KPLP. As of June 29, 2014, KPT held a 16.6% interest in KPLP, accounted for as an investment on the equity basis. On July 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 16.6% 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®, 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 2,500 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), (viii) one-time costs related to restructuring activities, and (ix) change in the amortized cost of the Partnership unit liability. 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 second quarter ended June 29, 2014 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.

SOURCE KP Tissue Inc.