KP Tissue Releases First Quarter 2019 Financial Results Toronto Stock Exchange:KPT

(MENAFN- GlobeNewsWire - Nasdaq) itemprop="articleBody">MISSISSAUGA, Ontario, May 10, 2019 (GLOBE NEWSWIRE) -- KP Tissue Inc. (KPT) (TSX: KPT) reports the Q1 2019 financial and operational results of KPT and Kruger Products L.P. (KPLP). Kruger Products is Canada's leading manufacturer of quality tissue products for the Consumer market (Cashmere, Purex, SpongeTowels, Scotties, and White Swan) and the Away-From-Home market, and continues to grow in the U.S. Consumer tissue business with the White Cloud® brand and premium private label products. KPT currently holds a 15.5% interest in KPLP.

KPLP Q1 2019 Business and Financial Highlights

Revenue increased by 8.4% to $351.0 million in Q1 2019 compared to Q1 2018

Adjusted EBITDA was $23.6 million in Q1 2019 compared to $30.7 million in Q1 2018

Pulp costs remained high in the quarter

TAD Sherbrooke Project progressing on time and on budget

Declared a quarterly dividend of $0.18 per share to be paid on July 15, 2019

'In the first quarter we posted solid revenue growth driven by both higher volume and the benefit from price increases. Given higher year-over-year input costs, we are very pleased by the performance of our consumer segment supported by the strength of our brand recognition and position. However, the Away-from-Home segment recorded disappointing results as it was negatively impacted by input costs, capacity-driven cost challenges and a competitive market, indicated Dino Bianco, CEO.

'In recent weeks, we started the site excavation for the TAD Sherbrooke Project. At this time, we have also purchased or contracted for most of the assets required for the project. In fact, this year we expect to invest between $250 and $275 million of the total project cost of $575 million.

'Looking forward, we have prioritized some operational excellence initiatives across the business, which we anticipate benefiting from in the second half of the year. We continue to invest in our business to build long-term value,' concluded Mr. Bianco.

Outlook
KPLP will benefit from the Consumer Canada price increase implemented in Q4 2018, along with the Consumer US and Away-From-Home price increases announced in 2019. These price increases combined with cost reduction initiatives are expected to largely offset the continued high input costs and unfavourable impacts of foreign exchange fluctuations. For Q2 2019, Adjusted EBITDA is forecast to show sequential improvement compared to Q1 2019 while being lower than Q2 2018.

KPLP Q1 2019 Financial Results
Revenue was $351.0 million in Q1 2019 compared to $323.7 million in Q1 2018, an increase of $27.3 million or 8.4%. The increase in revenue was primarily due to the favourable impact of increased sales volume, the Consumer Canada price increase implemented in Q4 2018 and the benefit of foreign exchange fluctuations on U.S. sales.

Cost of sales was $320.1 million in Q1 2019 compared to $286.0 million in Q1 2018, an increase of $34.1 million or 11.9%. Manufacturing costs increased primarily due to increased sales volume, significantly higher pulp costs, the unfavourable impact of foreign exchange fluctuations on USD denominated costs and the cost of outsourced manufacturing. Freight costs were essentially flat in Q1 2019 compared to Q1 2018 and warehousing costs increased. As a percentage of revenue, cost of sales were 91.2% in Q1 2019 compared to 88.4% in Q1 2018.

Selling, general and administrative (SG & A) expenses were $22.1 million in Q1 2019 compared to $22.5 million in Q1 2018, a decrease of $0.4 million or 2.0%. The decrease was primarily due to lower advertising and promotion expenses. As a percentage of revenue, SG & A expenses were 6.3% in Q1 2019 compared to 6.9% in Q1 2018.

Adjusted EBITDA was $23.6 million in Q1 2019 compared to $30.7 million in Q1 2018, a decrease of $7.1 million. The decrease was primarily due to significantly higher costs for pulp and unfavourable net foreign exchange, which were partially offset primarily by higher sales volume and pricing.

Net loss was $3.2 million in Q1 2019 compared to net income of $1.6 million in Q1 2018, a decrease of $4.8 million. The decrease was primarily due to lower Adjusted EBITDA of $7.1 million as discussed above and a lower income tax recovery in Q1 2019 compared to Q1 2018 of $0.9 million, partially offset by a positive change in amortized cost of Partnership units liability of $1.2 million, a decrease in interest expense of $1.4 million and lower depreciation expense of $0.6 million.

Total liquidity, representing cash and cash equivalents and availability under the credit line within covenant limitations, was $167.5 million as of March 31, 2019, compared to $178.7 million as of December 31, 2018. The March 31, 2019 balance includes $119.5 million of cash and cash equivalents held by KPSI and committed to the TAD Sherbrooke Project.

KPT Q1 2019 Financial Results
KPT had a net loss of $2.0 million in Q1 2019. Included in the net loss was $0.5 million representing KPT's share of KPLP's loss, depreciation expense of $1.4 million related to adjustments to carrying amounts on acquisition and an income tax expense of $0.1 million.

Dividends on Common Shares
The Board of Directors of KPT declared a quarterly dividend of $0.18 per share to be paid on July 15, 2019 to shareholders of record at the close of business on June 28, 2019.

Additional Information
For additional information please refer to Management's Discussion and Analysis (MD & A) of KPT and KPLP for the first quarter ended March 31, 2019 available on SEDAR at www.sedar.com or our website at www.kptissueinc.com .

First Quarter Results Conference Call Information
KPT will hold its first quarter conference call on Friday, May 10, 2019 at 8:30 a.m. Eastern Time.

Via telephone: 1-877-223-4471 or 647-788-4922

Via the internet at: www.kptissueinc.com

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

A rebroadcast of the conference call will be available until midnight, May 17, 2019 by dialing 1-800-585-8367 or 416-621-4642 and entering passcode 1389777.

The replay of the webcast will remain available on the website until midnight, May 17, 2019.

About KP Tissue Inc. (KPT)
KPT was created to acquire, and its business is limited to holding, a limited partnership interest in KPLP, which is accounted for as an investment on the equity basis. KPT currently holds a 15.5% 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 and operates eight FSC® COC-certified (FSC® C-104904) production facilities in North America. For more information visit www.krugerproducts.ca .

Non-IFRS Measures
This press release uses certain non-IFRS financial measures which KPLP believes provide useful information to 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 a measure is Adjusted EBITDA. Beginning with Q4 2015 in accordance with Canadian Securities Administrators Staff Notice 52-306 (Revised), we have referenced Adjusted EBITDA as a non-IFRS financial measure. This term replaces the previously referenced non-IFRS financial measure EBITDA. Adjusted 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. 'Adjusted EBITDA' is calculated by KPLP as net income (loss) before (i) interest expense, (ii) income taxes, (iii) depreciation, (iv) amortization, (v) impairment (gain on sale) of non-financial assets, (vi) loss (gain) on disposal of property, plant and equipment, (vii) foreign exchange loss (gain), (viii) costs related to restructuring activities, (ix) changes in amortized cost of Partnership units liability, (x) change in fair value of derivatives, and (xi) one-time consulting costs related to operational transformation initiatives. A reconciliation of Adjusted EBITDA to the relevant reported results can be found in the MD & A of KPT and KPLP for the first quarter ended March 31, 2019 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. Forward-looking statements in this press release include, but are not limited to, statements regarding the projected capacity of the TAD Sherbrooke Project, the anticipated benefits of the TAD Sherbrooke Project and the expected dates for commencement of construction and production of the TAD Sherbrooke Project. 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 statements are based on certain key expectations and assumptions made by KPT or KPLP. Although KPT and KPLP believe 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 statements since no assurance can be given that such expectations and assumptions will prove to be correct.

The outlook provided in respect of Adjusted EBITDA for Q2 2019 is forward-looking information and is subject to the risk and uncertainties referred to below. The purpose of the outlook is to provide the reader with an indication of management's expectations, at the date of this press release, regarding KPLP's future financial performance. Readers are cautioned that this information may not be appropriate for other purposes.

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 KPT'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 8, 2019 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 Sherbrooke Project; operational risks; Gatineau Plant land lease; significant increases in input costs; 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; covenant compliance; interest rate and refinancing risk; and risks relating to information technology; cyber-security; insurance; internal controls; and trade.

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.

INFORMATION:

Francois Paroyan
General Counsel and Corporate Secretary
KP Tissue Inc.
Tel.: 905.812.6936

INVESTORS:

Mike Baldesarra
Director of Investor Relations
KP Tissue Inc.
Tel.: 905.812.6962

Kruger Products L.P. Unaudited Condensed Consolidated Statement of Financial Position (thousands of Canadian dollars) Restated Restated March 31, 2019 December 31, 2018 January 1, 2018 $ $ $ Assets Current assets Cash and cash equivalents 142,143 169,884 8,837 Trade and other receivables 136,879 127,633 113,194 Receivables from related parties 177 172 85 Current portion of advances to partners 268 - 1,928 Inventories 206,631 202,916 192,394 Income tax recoverable - 362 522 Prepaid expenses 11,024 4,065 5,509 497,122 505,032 322,469 Non-current assets Advances to partners - 1,704 4,489 Property, plant and equipment 782,842 786,022 761,610 Right-of-use assets 91,322 94,247 99,174 Other long-term assets 6,359 10 6,331 Goodwill 160,939 160,939 160,939 Intangible assets 15,780 14,924 15,327 Deferred income taxes 33,835 33,440 26,092 Total assets 1,588,199 1,596,318 1,396,431 Liabilities Current liabilities Bank indebtedness 7,138 - 9,051 Trade and other payables 208,788 238,856 190,698 Payables to related parties 6,787 5,620 2,596 Income tax payable 608 80 498 Distributions payable 10,880 10,723 10,382 Current portion of provisions 238 292 333 Current portion of long-term debt 13,755 13,939 190,947 Current portion of lease liabilities 15,974 16,178 15,169 264,168 285,688 419,674 Non-current liabilities Long-term debt 590,811 563,955 225,368 Lease liabilities 96,232 98,952 104,888 Provisions 5,620 5,398 5,973 Pensions 103,376 104,939 119,558 Post-retirement benefits 56,378 54,051 60,457 Liabilities to non-unitholders 1,116,585 1,112,983 935,918 Current portion of Partnership units liability 6,187 - 1,928 Long-term portion of Partnership units liability 111,884 116,524 158,381 Total Partnership units liability 118,071 116,524 160,309 Total liabilities 1,234,656 1,229,507 1,096,227 Equity Partnership units 384,204 376,274 356,240 Deficit (117,310 ) (102,502 ) (123,123 ) Accumulated other comprehensive income 86,649 93,039 67,087 Total equity 353,543 366,811 300,204 Total equity and liabilities 1,588,199 1,596,318 1,396,431

Kruger Products L.P.
Unaudited Condensed Consolidated Statement of Comprehensive Income (Loss)
(thousands of Canadian dollars)
Restated 3-month
period ended
March 31, 2019 3-month
period ended
April 1, 2018 $ $ Revenue 350,977 323,735 Expenses Cost of sales 320,108 286,052 Selling, general and administrative expenses 22,056 22,934 Gain on sale of non-financial assets - (215 ) Restructuring costs, net 65 - Operating income 8,748 14,964 Interest expense 11,297 12,649 Other expense 849 1,788 Income (loss) before income taxes (3,398 ) 527 Income taxes (186 ) (1,050 ) Net income (loss) for the period (3,212 ) 1,577 Other comprehensive income (loss) Items that will not be reclassified to net income (loss): Remeasurements of pensions 2,027 16,806 Remeasurements of post-retirement benefits (2,130 ) 638 Items that may be subsequently reclassified to net income (loss): Cumulative translation adjustment (6,390 ) 8,844 Total other comprehensive income (loss) for the period (6,493 ) 26,288 Comprehensive income (loss) for the period (9,705 ) 27,865

Kruger Products L.P. Unaudited Condensed Consolidated Statement of Cash Flows (thousands of Canadian dollars) Restated 3-month
period ended
March 31, 2019 3-month
period ended
April 1, 2018 $ $ Cash flows from (used in) operating activities Net income (loss) for the period (3,212 ) 1,577 Items not affecting cash Depreciation 14,380 15,198 Amortization 362 295 Loss (gain) on sale of property, plant and equipment (5 ) 434 Change in amortized cost of Partnership units liability 1,547 2,678 Foreign exchange gain (698 ) (241 ) Change in fair value of derivatives - (649 ) Interest expense 11,297 12,649 Pension and post-retirement benefits 2,445 3,344 Provisions 170 48 Income taxes (186 ) (1,050 ) Gain on sale of non-financial assets - (215 ) Total items not affecting cash 29,312 32,491 Net change in non-cash working capital (52,625 ) (36,621 ) Contributions to pension and post-retirement benefit plans (3,112 ) (3,987 ) Provisions paid (65 ) (41 ) Income tax payments (259 ) (352 ) Net cash used in operating activities (29,961 ) (6,933 ) Cash flows from (used in) investing activities Purchases of property, plant and equipment (5,521 ) (15,718 ) Purchases of property, plant and equipment related to the TAD2 project (11,116 ) - Interest paid on credit facilities related to the TAD2 project (684 ) - Purchases of software (1,218 ) - Proceeds on sale of property, plant and equipment 5 331 Net cash used in investing activities (18,534 ) (15,387 ) Cash flows from (used in) financing activities Proceeds from long-term debt 24,777 38,050 Repayment of long-term debt (1,254 ) (285 ) Payment of deferred financing fees (286 ) (232 ) Payment of lease liabilities (4,225 ) (3,719 ) Interest paid on long-term debt (2,588 ) (3,240 ) Distributions and advances paid, net (1,970 ) (7,025 ) Net cash from financing activities 14,454 23,549 Effect of exchange rate changes on cash and cash equivalents held in foreign currency (838 ) 322 Increase (decrease) in cash and cash equivalents during the period (34,879 ) 1,551 Cash and cash equivalents - Beginning of period 169,884 (214 ) Cash and cash equivalents - End of period 135,005 1,337

Kruger Products L.P.
Segment and Geographic Results
(thousands of Canadian dollars)
Restated 3-month
period ended
March 31, 2019 3-month
period ended
April 1, 2018 $ $ Segment Information Segment Revenue Consumer 296,184 270,210 AFH 54,793 53,525 Total segment revenue 350,977 323,735 Segment Adjusted EBITDA Consumer 30,092 31,067 AFH (6,584 ) 250 Other 42 (641 ) Total segment Adjusted EBITDA 23,550 30,676 Reconciliation to Net Income (Loss): Depreciation and amortization 14,742 15,493 Interest expense 11,297 12,649 Change in amortized cost of Partnership units liability 1,547 2,678 Change in fair value of derivatives - (649 ) (Gain) loss on sale of property, plant and equipment (5 ) 434 Gain on sale of non-financial assets - (215 ) Restructuring costs, net 65 - Foreign exchange gain (698 ) (241 ) Income (loss) before income taxes (3,398 ) 527 Income taxes (186 ) (1,050 ) Net income (loss) (3,212 ) 1,577 Geographic Revenue Canada 197,417 188,653 U.S. 127,512 115,552 Mexico 26,048 19,530 Total revenue 350,977 323,735

KP Tissue Inc. Unaudited Condensed Statement of Financial Position (thousands of Canadian dollars) Restated Restated March 31, 2019 December 31, 2018 January 1, 2018 $ $ $ Assets Current assets Distributions receivable 1,705 1,694 1,658 Receivable from Partnership 313 269 - Income tax recoverable 230 230 826 2,248 2,193 2,484 Non-current assets Investment in associate 95,122 99,421 94,952 Total Assets 97,370 101,614 97,436 Liabilities Current liabilities Dividend payable 1,705 1,694 1,658 Payable to Partnership - - 52 Current portion of advances from Partnership 269 - 309 1,974 1,694 2,019 Non-current liabilities Advances from Partnership - 269 731 Deferred income taxes 3,509 3,634 515 Total liabilities 5,483 5,597 3,265 Equity Common shares 17,683 17,090 15,014 Contributed surplus 144,819 144,819 144,819 Deficit (85,892 ) (82,269 ) (77,706 ) Accumulated other comprehensive income 15,277 16,377 12,044 Total equity 91,887 96,017 94,171 Total liabilities and equity 97,370 101,614 97,436

KP Tissue Inc.
Unaudited Condensed Statement of Comprehensive Income (Loss)
(thousands of Canadian dollars, except share and per share amounts)
3-month
period ended
March 31, 2019 3-month
period ended
April 1, 2018 $ $ Equity loss (1,949 ) (1,202 ) Dilution gain 89 43 Loss before income taxes (1,860 ) (1,159 ) Income taxes 92 (321 ) Net loss for the period (1,952 ) (838 ) Other comprehensive income (loss) net of tax expense (recovery) Items that will not be reclassified to net loss: Remeasurements of pensions 277 2,332 Remeasurements of post-retirement benefits (196 ) 89 Items that may be subsequently reclassified to net loss: Cumulative translation adjustment (1,100 ) 1,472 Total other comprehensive income (loss) for the period (1,019 ) 3,893 Comprehensive income (loss) for the period (2,971 ) 3,055 Basic loss per share (0.21 ) (0.09 ) Weighted average number of shares outstanding 9,464,356 9,245,170

KP Tissue Inc. Unaudited Condensed Statement of Cash Flows (thousands of Canadian dollars)
3-month
period ended
March 31, 2019 3-month
period ended
April 1, 2018 $ $ Cash flows from (used in) operating activities Net loss for the periods (1,952 ) (838 ) Items not affecting cash Equity loss 1,949 1,202 Dilution gain (89 ) (43 ) Income taxes 92 (321 ) Total items not affecting cash 1,952 838 Tax payments - (244 ) Advances received - 244 Net cash from (used in) operating activities - - Cash flows from investing activites Partnership unit distributions received 1,148 1,144 Net cash from investing activities 1,148 1,144 Cash flows used in financing activities Dividends paid (1,148 ) (1,144 ) Net cash used in financing activities (1,148 ) (1,144 ) Increase (decrease) in cash and cash equivalents during the period - - Cash and cash equivalents - Beginning of period - - Cash and cash equivalents - End of period - -

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