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

MISSISSAUGA, ON, May 14, 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 first 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 March 31, 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 first 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 April 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 16.9% interest in KPLP.

KPLP Highlights

Q1 2013 Highlights

• Revenue of $221.8 million in Q1 2013, compared to $216.2 million in Q1 2012, an increase of 2.6 percent year over year
• EBITDA of $25.1 million in Q1 2013 (including $1.8 million of TAD Project start-up costs) compared to $27.2 million in Q1 2012 (including $0.8 million of TAD Project start-up costs), a decrease of 7.8 percent year over year
• Net income of $11.7 million in Q1 2013 compared to $0.4 million in Q1 2012, an increase of $11.3 million year over year
• Cash balance of $92.4 million as of March 31, 2013 compared to $121.5 million as of December 31, 2012

"The first quarter of 2013 was highlighted by the completion of the construction phase of our TAD Project, and we began our first customer deliveries. We are carrying out our strategy to gradually ramp up TAD product sales in 2013, which should generate a modest positive contribution to EBITDA for the year as a whole, " said Mario Gosselin, CEO of KP Tissue and KPLP.

"Revenue for the first quarter 2013 was $221.8 million, up 2.6% over 2012. We benefited from additional days of sales in the quarter and solid growth in the U.S. business. This was partially offset by our decision last year to cease production of parent rolls for sale. While our private label revenue was strong, sales in our Canadian branded business were somewhat soft in Q1 primarily due to the timing of our promotional activities. We expect revenue to improve in Q2 over Q1.

"First quarter EBITDA of $25.1 million decreased compared to the same period in 2012, but increased compared to the EBITDA we achieved in the fourth quarter of 2012. Q1 EBITDA benefited year-over-year from the business rationalization program we implemented last year along with reduced management fees. These gains were impacted by start-up costs for the TAD Project and higher fibre and energy costs. In addition, our Away-From-Home Segment EBITDA returned to a more normalized level in the first quarter.

"We look ahead to the rest of 2013 with confidence in our business model considering the positioning of our brands and the strong initial reaction of customers to our TAD products in the premium private label market," Mr. Gosselin concluded.

KPLP Q1 2013 Financial Results
Revenue in Q1 2013 was $221.8 million, an increase of 2.6 percent compared to Q1 2012. Compared to Q1 2012, revenue was positively impacted by volume and mix increases primarily related to an additional 5 days of sales in Q1 2013 compared to Q1 2012. The increases in revenue compared to Q1 2012 were driven by increases in Consumer and AFH segment revenues, partially offset by declines in Other segment revenue primarily as a result of the decision to cease production of parent rolls for sale at the New Westminster plant in Q1 2012.

Cost of sales in Q1 2013 was $157.2 million, compared to $151.6 million in Q1 2012. As a percentage of revenue, cost of sales increased to 70.9 percent in Q1 2013 from 70.1 percent in Q1 2012 primarily due to increases in commodity prices, particularly pulp fibre.

Operating expenses in Q1 2013 were $47.9 million, compared to $43.0 million in Q1 2012. Compared to Q1 2012, operating expenses increased primarily due to higher sales, logistics and marketing related expenses, public company costs paid on behalf of KPT and the unfavourable impact of foreign exchange.

EBITDA in Q1 2013 was $25.1 million, compared to $27.2 million in Q1 2012. EBITDA in Q1 2013 included $1.8 million of TAD Project start-up costs compared to $0.8 million in Q1 2012. Compared to Q1 2012, EBITDA decreased primarily due to increased fibre costs and operating expenses, partially offset by higher sales volumes.

Net income in Q1 2013 was $11.7 million, compared to $0.4 million in Q1 2012. Compared to Q1 2012, net income increased primarily due to a deferred tax credit related to the U.S. operations in Q1 2013, partially offset by an increase in interest expense related to the TAD Project and lower EBITDA.

The cash balance as of March 31, 2013 was $92.4 million, down from $121.5 million as of December 31, 2012. The decrease in cash was primarily driven by cash used in operations related to a higher inventory balance at the end of Q1 2013 required to meet expected Q2 2013 demand and a decline in accounts payable due to timing. The cash balance was also impacted by capital expenditures of $22.7 million, of which $19.7 million related to the TAD Project and $3.0 million related to existing sites. This compared to capital expenditures in Q1 2012 of $33.4 million, of which $28.8 million related to the TAD Project and $4.6 million related to existing sites. The decreases in the cash balance were partially offset by proceeds of $12.3 million from the issuance of partnership units related to the partial exercise of the overallotment option in Q1 2013.

KPT Highlights

• Net loss of $0.7 million in Q1 2013
• Loss per share of $0.08 in Q1 2013
• Declared quarterly dividend of $0.18 per share, payable July 15, 2013

KPT Q1 2013 Financial Results

Included in the net loss of $0.7 million in Q1 2013 was $2.0 million representing KPT's share of KPLP's profit. The profit was more than offset by depreciation of $2.7 million related to adjustments to carrying amounts on acquisition, and income tax expense of $0.3 million.

KPLP Distribution
KPLP will pay a distribution of $0.18 per KPLP unit to its partners on or prior to July 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 July 15, 2013 to shareholders of record at the close of business on June 28, 2013.

Conference Call Information
KPT will hold its conference call on Tuesday, May 14, 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, June 14, 2013 by dialing 1-855-859-2056 or 416-849-0833 and entering passcode 36940226.

The replay of the webcast will remain available on the web site until midnight, June 14, 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 period ended March 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 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.

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KP Tissue Inc.
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SOURCE KP Tissue Inc.