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

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.

SOURCE KP Tissue Inc.