The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Press release from PR Newswire

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

Tuesday, August 13, 2013

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

07:30 EDT Tuesday, August 13, 2013

MISSISSAUGA, ON, Aug. 13, 2013 /PRNewswire/ - 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 second quarter of 2013. KPLP is Canada's leading manufacturer of quality tissue products for household and commercial use.

KP Tissue Inc. and Kruger Products L.P. KPT was created to acquire, and its business is limited to holding, a limited partnership interest in KPLP. As of June 30, 2013, KPT held a 16.9% 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 second quarter of 2013. The following discussion and analysis, unless identified specifically as representing the financial results of only KPT, relates entirely to the financial results of KPLP. Accordingly, the results of KPLP apply to KPT only to the extent of its holding in KPLP.

On July 15, 2013, KPLP paid a distribution to its partners. Following the reinvestment by the partners of KPLP of a portion of such distribution pursuant to KPLP's distribution reinvestment plan, KPT held a 16.8% interest in KPLP.

KPLP Highlights

Q2 2013 Highlights

  • Revenue of $246.8 million in Q2 2013, compared to $231.3 million in Q2 2012, an increase of 6.7 percent year over year
  • EBITDA of $31.7 million in Q2 2013 (including $2.4 million of TAD Project start-up costs) compared to $29.3 million in Q2 2012 (including $0.9 million of TAD Project start-up costs), an increase of 8.1 percent year over year
  • Net income of $15.4 million in Q2 2013 compared to $15.6 million in Q2 2012, a decrease of $0.2 million year over year
  • Cash balance of $78.4 million as of June 30, 2013 compared to $92.4 million as of March 31, 2013

"Our results for the second quarter were very solid, and we are particularly pleased that our EBITDA reached $31.7 million. Moreover, as we expected, our Canadian branded businesses reported higher sales when compared to the first quarter of 2013 due to a shift in promotional activities. Our market share increased in all consumer product categories. The market's acceptance of our TAD products is as we have anticipated, and the start-up phase of our TAD facility is progressing as planned.  Margins have been somewhat impacted by rising commodity prices, fibre in particular, but these were not unforeseen," said Mario Gosselin, CEO and of KP Tissue and KPLP.

"Demand for our TAD products in the Private Label market in the U.S. is strong, and interest continues to build. From the TAD project, we continue to expect a modest positive contribution to EBITDA for the year as whole.

"Looking forward, we anticipate the higher commodity prices for pulp and energy to further impact our third quarter results and we are currently working on various initiatives to mitigate the effect," concluded Mr. Gosselin.

KPLP Q2 2013 Financial Results Revenue in Q2 2013 was $246.8 million, an increase of 6.7 percent compared to Q2 2012. Compared to Q2 2012, revenue was positively impacted by an increase in sales volume resulting primarily from additional promotional activities in Q2 2013 compared to Q2 2012 and new business related to the TAD Project. The increase in revenue compared to Q2 2012 was driven by an increase in Consumer segment revenue, partially offset by a slight decrease in AFH segment revenue and a decline in Other segment revenue as a result of the decision to cease production of parent rolls for sale at the New Westminster plant in 2012.

Cost of sales in Q2 2013 was $173.3 million, compared to $161.3 million in Q2 2012. As a percentage of revenue, cost of sales increased to 70.2 percent in Q2 2013 from 69.7 percent in Q2 2012 primarily due to increases in commodity prices, particularly pulp fibre.

Operating expenses in Q2 2013 were $52.4 million, compared to $47.5 million in Q2 2012. Compared to Q2 2012, operating expenses increased primarily due to higher sales, logistics and marketing related expenses, and public company costs paid on behalf of KPT.

EBITDA in Q2 2013 was $31.7 million, compared to $29.3 million in Q2 2012. EBITDA in Q2 2013 included $2.4 million of TAD Project start-up costs compared to $0.9 million in Q2 2012. Compared to Q2 2012, EBITDA increased primarily due to an increase in revenue, partially offset by higher cost of sales resulting primarily from increased fibre costs and higher operating expenses.

Net income in Q2 2013 was $15.4 million, compared to $15.6 million in Q2 2012. Compared to Q2 2012, net income decreased primarily due to increases in interest and depreciation expenses related to the TAD Project, almost offset by an increase in EBITDA and a deferred tax credit in Q2 2013 related to U.S. operations.

The cash balance as of June 30, 2013 was $78.4 million, down from $92.4 million as of March 31, 2013. The decrease in cash was primarily driven by capital expenditures of $9.1 million related to the TAD Project and an increase in working capital as inventories returned to more normalized levels and accounts payable decreased due to timing.

KPT Highlights

  • Net income of $0.6 million in Q2 2013
  • Earnings per share of $0.07 in Q2 2013
  • Declared quarterly dividend of $0.18 per share, payable October 15, 2013

KPT Q2 2013 Financial Results Included in the net income of $0.6 million in Q2 2013 was $2.6 million representing KPT's share of KPLP's profit. The profit was partially offset by depreciation of $1.3 million related to adjustments to carrying amounts on acquisition, and income tax expense of $0.7 million.

KPLP Distribution KPLP will pay a distribution of $0.18 per KPLP unit to its partners on or prior to October 15, 2013.

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, 2013 to shareholders of record at the close of business on September 30, 2013.

Conference Call Information KPT will hold its second quarter conference call on Tuesday, August 13, 2013 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 13, 2013 by dialing 1-855-859-2056 or 416-849-0833 and entering passcode 18506708.

The replay of the webcast will remain available on the web site until midnight, September 13, 2013.

About KP Tissue Inc. KPT was created to acquire, and its business is limited to holding, a limited partnership interest in KPLP. For more information visit www.kptissueinc.com.

About Kruger Products L.P. KPLP is Canada's leading manufacturer of quality tissue products for household, industrial and commercial use. KPLP serves the Canadian consumer market with such well-known brands as Cashmere®, Purex®, SpongeTowels®, Scotties®' and White Swan®. In the U.S., KPLP manufactures the White Cloud® brand, as well as many private label products. The Away-From-Home division manufactures and distributes high-quality, cost-effective product solutions to a wide range of commercial and public entities. KPLP has approximately 2,300 employees across North America and operates five FSC® CoC- certified mills (FSC® C104904), four of which are located in Canada and one in the US. For more information visit www.krugerproducts.ca.

Non-IFRS Measures This press release uses certain non-IFRS financial measures and ratios which KPLP believes provide useful information to both management of KPLP and the readers of the financial information in measuring the financial performance and financial condition of KPLP. These measures do not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similarly titled measures presented by other companies. An example of such measures is EBITDA. EBITDA is not a measurement of operating performance computed in accordance with IFRS and should not be considered as a substitute for operating income, net income or cash flows from operating activities computed in accordance with IFRS. "EBITDA" is calculated by KPLP as net income (loss) before (i) interest expense, (ii) income taxes, (iii) depreciation, (iv) amortization, (v) impairment of non-financial assets, (vi) loss (gain) on disposal of property, plant and equipment, (vii) unrealized foreign exchange loss (gain), and (viii) one-time costs related to restructuring activities. A reconciliation of EBITDA to the relevant reported results can be found in the Management's Discussion and Analysis ("MD&A") of KPT and KPLP for the 13-week and 26-week periods ended June 30, 2013 available on SEDAR at www.sedar.com.

Forward-Looking Statements Certain statements in this press release about KPT's and KPLP's current and future plans, expectations and intentions, results, levels of activity, performance, goals or achievements or any other future events or developments constitute forward-looking statements. The words "may", "will", "would", "should", "could", "expects", "plans", "intends", "trends", "indications", "anticipates", "believes", "estimates", "predicts", "likely" or "potential" or the negative or other variations of these words or other comparable words or phrases, are intended to identify forward-looking statements. The forward-looking information is based on certain key expectations and assumptions made by KPT, including expectations and assumptions concerning the impact of the start-up of the TAD Project on EBITDA, the benefits of the business rationalization program and the funding of remaining capital expenditures relating to the TAD Project. Although KPT believes that the expectations and assumptions on which such forward-looking information is based are reasonable, undue reliance should not be placed on the forward-looking information since no assurance can be given that such expectations and assumptions will prove to be correct.

Many factors could cause KPLP's actual results, level of activity, performance or achievements or future events or developments (which could in turn affect the economic benefits derived from the Corporation's economic interest in KPLP) to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, the following factors, which are discussed in greater detail in the "Risk Factors - Risks Related to KPLP's Business" section of the KPT Annual Information Form dated March 28, 2013 available on SEDAR at www.sedar.com: Kruger Inc.'s influence over KPLP; KPLP's reliance on Kruger Inc.; consequences of an event of insolvency relating to Kruger Inc.; risks associated with the TAD Project; operational risks; Gatineau Plant land lease; significant increases in prices; reduction in supply of fibre; increased pricing pressure and intense competition; KPLP's inability to innovate effectively; adverse economic conditions; dependence on key retail trade customers; damage to the reputation of KPLP or KPLP's brands; KPLP's sales being less than anticipated; KPLP's failure to implement its business and operating strategies; KPLP's obligation to make regular capital expenditures; KPLP's entering into unsuccessful acquisitions; KPLP's dependence on key personnel; KPLP's inability to retain its existing customers or obtain new customers; KPLP's loss of key suppliers; KPLP's failure to adequately protect its intellectual property rights; KPLP's reliance on third party intellectual property licenses; adverse litigation and other claims affecting KPLP; material expenditures due to comprehensive environmental regulation affecting KPLP's cash flow; KPLP's pension obligations are significant and can be materially higher than predicted if KPLP Management's underlying assumptions are incorrect; labour disputes adversely affecting KPLP's cost structure and KPLP's ability to run its plants; exchange rate and U.S. competitors; KPLP's inability to service all of its indebtedness; exposure to potential consumer product liability, restrictive covenants; interest rate and refinancing risk; information technology and innovation; insurance; and internal controls.

Readers should not place undue reliance on forward-looking statements made herein. The forward-looking information contained herein is expressly qualified in its entirety by this cautionary statement. The forward-looking information contained herein is made as of the date of press release and KPT undertakes no obligation to publicly update such forward-looking information to reflect new information, subsequent or otherwise, unless required by applicable securities laws.

Kruger Products L.P.
Unaudited Condensed Consolidated Statements of Financial Position
(thousands of Canadian dollars)
       
  June 30, 2013   December 31, 2012
  $   $
       
Assets      
       
Current assets      
  Cash and cash equivalents 78,364   121,489
  Trade and other receivables 94,584   94,308
  Receivables from related parties 1,910   668
  Inventories 138,400   116,873
  Income tax recoverable 932   2,872
  Prepaid expenses 8,468   4,413
  322,658   340,623
       
Non-current assets      
  Property, plant & equipment 604,329   580,814
  Other long-term assets 8,280   6,236
  Goodwill 152,021   152,021
  Intangible assets 13,643   13,828
  Income tax recoverable 11,575  
  Deferred income taxes 10,687   1,178
       
Total assets 1,123,193   1,094,700
       
Liabilities      
       
Current liabilities      
  Trade and other payables 166,596   186,309
  Payables to related parties 2,935   9,057
  Distribution payable 9,367   -
  Current portion of provisions 1,991   3,719
  Current portion of long-term debt 7,960   3,802
  188,849   202,887
       
Non-current liabilities      
  Long-term debt 333,484   323,885
  Other long-term liabilities 427   544
  Provisions 6,595   5,506
  Pensions 109,407   148,989
  Post-retirement benefits 47,391   48,302
Liabilities to non-unitholders 686,153   730,113
         
  Partnership units 118,562   118,562
       
Total Liabilities 804,715   848,675
       
       
Equity      
       
  Partnership units 274,899   257,516
  Retained earnings (deficit) 26,960   (14,736)
  Accumulated other comprehensive income 16,619   3,245
Total equity 318,478   246,025
       
Total equity and liabilities 1,123,193   1,094,700

 

Kruger Products L.P.
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)
(thousands of Canadian dollars)
               
  13-week   13-week   26-week   25-week
  period ended   period ended   period ended   period ended
  June 30, 2013   June 24, 2012   June 30, 2013   June 24, 2012
  $   $   $   $
               
Revenue 246,769   231,336   468,554   447,582
               
Expenses              
  Cost of sales 173,308   161,315   330,469   312,901
  Operating expenses 52,351   47,533   100,222   90,583
  Impairment (recovery) of non-financial assets (1,789)   -   (1,789)   5,900
  Restructuring costs -   (500)   -   8,600
               
Operating income 22,899   22,988   39,652   29,598
               
Interest expense 11,007   7,087   20,897   13,175
               
Income before income taxes 11,892   15,901   18,755   16,423
               
Income taxes (3,485)   269   (8,338)   432
               
Net income for the period 15,377   15,632   27,093   15,991
               
Other comprehensive income (loss)              
  Items that will not be reclassified to net income:              
  Remeasurements of pensions 21,203   (19,818)   33,698   (31,066)
  Remeasurements of post-retirement benefits 1,504   27   1,504   (1,610)
  Items that may be subsequently reclassified to net income:              
  Cumulative translation adjustment 8,835   4,154   13,374   1,373
               
Total other comprehensive income (loss) for the period 31,542   (15,637)   48,576   (31,303)
               
Comprehensive income (loss) for the period 46,919   (5)   75,669   (15,312)
               
               
               
Kruger Products L.P.
Unaudited Condensed Consolidated Statements of Cash Flows
(thousands of Canadian dollars)
               
  13-week   13-week   26-week   25-week
  period ended   period ended   period ended   period ended
  June 30, 2013   June 24, 2012   June 30, 2013   June 24, 2012
  $   $   $   $
               
Cash flows from (used in) operating activities              
Net income for the period 15,377   15,632   27,093   15,991
Items not affecting cash              
  Depreciation 8,856   5,633   16,189   11,623
  Amortization 144   159   276   309
  Loss (gain) on sale of fixed assets -   70   (4)   70
  Unrealized foreign exchange loss 1,638   1,026   2,493   461
  Interest expense 11,007   7,087   20,897   13,175
  Pension and post retirement benefits 2,456   2,593   5,164   4,876
  Provisions 223   (279)   485   9,148
  Income taxes (3,485)   269   (8,338)   432
  Impairment (recovery) of non-financial assets (1,789)   -   (1,789)   5,900
 
  Total items not affecting cash 19,050   16,558   35,373   45,994
Net change in non-cash working capital (9,774)   4,989   (44,216)   (5,939)
Contributions to pension and post-retirement benefit plans (7,389)   (8,035)   (14,717)   (16,318)
Provisions paid (312)   (1,623)   (1,802)   (1,623)
Income tax payments (743)   (569)   (1,737)   (578)
               
Net cash from (used in) operating activities 16,209   26,952   (6)   37,527
               
Cash flows used in investing activities              
Purchase of property, plant & equipment (4,573)   (6,345)   (7,590)   (10,934)
Purchases of through-air-dried (TAD) expansion (9,112)   (41,548)   (28,773)   (70,397)
Purchases of software (87)   -   (90)   -
Proceeds on sale of property, plant and equipment -   -   4   -
               
Net cash used in investing activities (13,772)   (47,893)   (36,449)   (81,331)
               
Cash flows from financing activities              
Proceeds from credit facilities -   28,090   4,571   65,643
Repayment of credit facilities (3,654)   (22,863)   (3,730)   (27,863)
Payment of deferred financing fees (453)   2   (453)   -
Transfer of assets to related parties -   (45)   -   (706)
Interest paid on credit facilities (6,755)   (1,856)   (13,971)   (9,435)
Distribution paid (11,232)   -   (11,232)   -
Proceeds from issuing partnership units, net 5,093   -   17,383   -
               
Net cash from financing activities (17,001)   3,328   (7,432)   27,639
               
Effect of exchange rate changes on cash and cash              
equivalents held in foreign currency 507   250   762   82
               
Decrease in cash and cash equivalents during the period (14,057)   (17,363)   (43,125)   (16,083)
               
Cash and cash equivalents - Beginning of period 92,421   33,077   121,489   31,797
               
Cash and cash equivalents - End of period 78,364   15,714   78,364   15,714
               
               
               
Kruger Products L.P.
Segment and Geographic Results
(thousands of Canadian dollars)
               
  13-week   13-week   26-week   25-week
  period ended   period ended   period ended   period ended
  June 30, 2013   June 24, 2012   June 30, 2013   June 24, 2012
  $   $   $   $
               
Segment Information              
               
Segment Revenue              
  Consumer 205,358   182,832   389,761   359,207
  AFH 40,004   41,132   75,285   74,479
  Other 1,407   7,372   3,508   13,896
               
Total segment revenue 246,769   231,336   468,554   447,582
               
Segment EBITDA              
  Consumer 29,104   29,968   53,027   58,025
  AFH 2,677   3,167   4,140   5,079
  Other (33)   (3,759)   (350)   (6,543)
               
Total segment EBITDA 31,748   29,376   56,817   56,561
               
Reconciliation to Net Income:              
               
Depreciation and amortization 9,000   5,792   16,465   11,932
Interest expense 11,007   7,087   20,897   13,175
Loss (gain) on sale of fixed assets -   70   (4)   70
Restructuring costs -   (500)   -   8,600
Impairment (recovery) of non-financial assets (1,789)   -   (1,789)   5,900
Unrealized foreign exchange loss 1,638   1,026   2,493   461
               
Income before income taxes 11,892   15,901   18,755   16,423
               
Income taxes (3,485)   269   (8,338)   432
               
Net income for the period 15,377   15,632   27,093   15,991
               
               
Geographic Revenue              
               
Canada 183,087   165,454   340,649   320,368
U.S. 56,331   58,715   113,465   113,210
Mexico 7,351   7,167   14,440   14,004
               
Total Revenue 246,769   231,336   468,554   447,582

 

KP Tissue Inc.
Unaudited Condensed Statement of Financial Position
(thousands of Canadian dollars)
       
  June 30, 2013   December 31, 2012
  $   $
Assets      
       
Current assets      
  Distribution receivable 1,579   -
       
Non-current assets      
  Deferred income taxes -   123
  Investment in associate 158,596   139,364
       
Total Assets 160,175   139,487
       
Liabilities      
       
Current liabilities      
  Dividend payable 1,579   -
  Income taxes payable 599   -
       
  2,178   -
       
Non-current liabilities      
  Deferred income taxes 1,400   -
       
Total liabilities 3,578   -
       
Equity      
       
  Common shares 8,750   140,000
  Contributed surplus 144,819   -
  Retained earnings (deficit) 1,001   (583)
  Accumulated other comprehensive income 2,027   70
       
Total equity 156,597   139,487
       
Total liabilities and equity 160,175   139,487
       
       
       
KP Tissue Inc.
Unaudited Condensed Statement of Comprehensive Income
(thousands of Canadian dollars, except share and per share amounts)
       
  13-week   26-week
  period ended   period ended
  June 30, 2013   June 30, 2013
  $   $
       
Equity income 1,228   481
       
Gain on remeasurement of over allotment option -   375
Dilution gain 112   112
       
Earnings before income taxes 1,340   968
       
Income taxes      
  Current 386   599
  Deferred 354   460
       
  740   1,059
       
Net income (loss) for the period 600   (91)
       
Other comprehensive income      
  Items that will not be reclassified to net income:      
  Remeasurements of pensions (net of tax of $465 and $737) 3,109   4,932
  Remeasurements of post-retirement benefits (net of tax of nil and $33) 220   220
  Items that may be subsequently reclassified to net income:      
  Cumulative translation adjustment (net of tax of $194 and $293) 1,295   1,957
       
Total other comprehensive income for the period 4,624   7,109
       
Comprehensive income for the period 5,224   7,018
       
Basic earnings (loss) per share 0.07   (0.01)
       
Weighted average number of shares outstanding 8,770,427   8,718,721
       
       
       
KP Tissue Inc.
Unaudited Condensed Statement of Cash Flows
(thousands of Canadian dollars)
       
  13-week   26-week
  period ended   period ended
  June 30, 2013   June 30, 2013
  $   $
Cash flows from (used in) operating activities      
Net income (loss) for the period 600   (91)
Items not affecting cash      
  Equity income (1,228)   (481)
  Gain on remeasurement of over-allotment option -   (375)
  Dilution gain (112)   (112)
  Current income taxes 386   599
  Deferred income taxes 354   460
       
Net cash from (used in) operating activities -   -
       
Cash flows from (used in) investing activites      
Investment in associate (444)   (13,569)
Distribution received 1,898   1,898
       
Net cash from (used in) investing activities 1,454   (11,671)
       
Cash flows from (used in) financing activities      
Issuance of common shares 444   13,569
Dividend paid (1,898)   (1,898)
       
Net cash from (used in) financing activities (1,454)   11,671
       
Increase (decrease) in cash and cash equivalents during the period -   -
       
Cash and cash equivalents - Beginning of period -   -
       
Cash and cash equivalents - End of period -   -

 

 

 

 

 

SOURCE KP Tissue Inc.

For further information: <p> </p> <p> Wendy Kelley<br/> General Counsel and Corporate Secretary<br/> KP Tissue Inc.<br/> Tel.: 905.812.6936<br/> <a href="mailto:wendy.kelley@krugerproducts.ca">wendy.kelley@krugerproducts.ca</a> </p> <p> <b>INVESTORS: </b><br/> Mike Baldesarra<br/> Director of Investor Relations<br/> KP Tissue Inc.<br/> Tel.: 905.812.6962<br/> <a href="mailto:IR@KPTissueinc.com">IR@KPTissueinc.com</a> </p>

Products
  • Globe Unlimited

    Digital all access pass across devices. subscribe

  • The Globe and Mail Newspaper

    Newspaper delivered to your doorstep. subscribe

  • Globe2Go

    The digital replica of our newspaper. subscribe

  • Globe eBooks

    A collection of articles by the Globe. subscribe

See all Globe Products

Advertise with us

GlobeLink.ca

Your number one partner for reaching Canada's Influential Achievers. learn more

The Globe at your Workplace
Our Company
Customer Service
Advertising Privacy
Globe Recognition
Mobile Apps
NEWS APP
INVESTING APP
Other Sections