KP Tissue Releases First Quarter 2016 Financial Results
Continued Revenue and Market Share Growth
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E-mailMISSISSAUGA, ONTARIO -- (Marketwired) -- 05/05/16 -- KP Tissue Inc. (KPT) (TSX: KPT) reports the Q1 2016 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 16.2% interest in KPLP.
KPLP Q1 2016 Business and Financial Highlights
-- Revenue increased by 5.4% to $279.7 million in Q1 2016 compared to Q1
2015
-- Adjusted EBITDA was $28.1 million in Q1 2016 compared to $31.1 million
in Q1 2015
-- Continued negative impact of foreign exchange estimated at approximately
$2 million on Adjusted EBITDA over the previous year
-- Market share leader in Canada with overall Q1 growth
-- Declared a quarterly dividend of $0.18 per share to be paid on July 15,
2016
"Despite revenue growth supported by the Consumer segment, the weak Canadian dollar continued to have a measurable impact on our Adjusted EBITDA for the seasonally lower first quarter," said Mario Gosselin, CEO of KPT and KPLP.
"TAD Product Adjusted EBITDA for the quarter increased to $10.5 million from $9.7 million last year. We continue to expect progress over the next few quarters allowing us to achieve our $60 million TAD Product Adjusted EBITDA goal for Fiscal 2017.
"Starting last year, we expanded our CAPEX program to dedicate more funds to high-return projects. In 2016, CAPEX is expected to reach $65 to $85 million. The benefits of these projects on manufacturing cost reductions and capacity improvements will begin in Fiscal 2017. In the first quarter, two new modern converting lines began production in our Away-From-Home (AFH) business and we incurred higher operating costs due to the start-up and the continued implementation of our AFH growth plan.
"As indicated before, to offset part of the rise of raw material costs, price increases to our Canadian retailers will take effect in the second quarter and will have a full impact in the third quarter. We expect second quarter 2016 Adjusted EBITDA to be slightly higher than the same quarter last year, mainly driven by higher promotional activity in our U.S. market. However, we will continue to be impacted by the unfavourable exchange rate," concluded Mr. Gosselin.
KPLP Q1 2016 Financial Results
Revenue in Q1 2016 was $279.7 million, compared to $265.4 million in Q1 2015, an increase of $14.3 million or 5.4%. The increase in revenue was primarily due to the favourable impact of foreign exchange on U.S. dollar sales.
Cost of sales in Q1 2016 increased to $240.6 million compared to $222.5 million in Q1 2015 primarily due to the negative impact of foreign exchange fluctuations and increased warehousing costs due to higher inventory levels, somewhat offset by a decline in USD pulp and natural gas prices. As a percentage of revenue, cost of sales were 86.0% in Q1 2016 compared to 83.9% in Q1 2015.
Selling, general and administrative (SG&A) expenses in Q1 2016 were $21.7 million, compared to $21.6 million in Q1 2015. The increase was primarily due to slightly higher advertising & promotion expenses and the unfavourable impact of foreign exchange, partially offset by cost reduction initiatives. As a percentage of revenue, SG&A expenses decreased to 7.8% in Q1 2016 from 8.1% in Q1 2015.
Adjusted EBITDA in Q1 2016 was $28.1 million compared to $31.1 million in Q1 2015 as the net unfavourable impact of foreign exchange of approximately $2.0 million and higher warehousing costs were the primary drivers of the decrease in Adjusted EBITDA, as all other factors combined were relatively neutral. TAD Product Adjusted EBITDA was $10.5 million in Q1 2016 compared to $9.7 million in Q1 2015.
Net income in Q1 2016 was $6.4 million compared to $4.7 million in Q1 2015 primarily due to an increase in unrealized foreign exchange (gain) loss of $5.0 million and no restructuring costs compared to $1.1 million in Q1 2015, partially offset by lower Adjusted EBITDA of $3.0 million and higher interest and depreciation expense of $0.8 million and $0.5 million, respectively, and an increase in the tax expense of $0.3 million.
Total liquidity, representing cash and cash equivalents and availability under the credit line within covenant limitations, was $58.5 milion as of March 27, 2016 compared to $36.4 million as of December 31, 2015.
KPT Q1 2016 Financial Results
KPT incurred a net loss of $1.5 million in Q1 2016. Included in the net loss was $1.0 million representing KPT's share of KPLP's income. The income was reduced by depreciation expense of $1.4 million related to adjustments to carrying amounts on acquisition and income tax expense of $0.9 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, 2016 to shareholders of record at the close of business on June 30, 2016.
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 27, 2016 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 Thursday, May 5, 2016 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, June 6, 2016 by dialing 800-585-8367 or 416-621-4642 and entering passcode 86330180.
The replay of the webcast will remain available on the website until midnight, June 6, 2016.
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 16.2% 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 U.S. 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. Examples of such measures are Adjusted EBITDA and TAD Product Adjusted EBITDA. Beginning with Q4 2015 in accordance with Canadian Securities Administrators Staff Notice 52-306 (Revised), we reference Adjusted EBITDA and TAD Product Adjusted EBITDA as non-IFRS financial measures. These terms replace the previously referenced non-IFRS financial measures EBITDA and TAD Product EBITDA. Our definition of Adjusted EBITDA and TAD Product Adjusted EBITDA are unchanged from our former definition of EBITDA and TAD Product EBITDA respectively. Accordingly, this change in terminology has no impact on our reported financial results for prior periods. Adjusted EBITDA and TAD Product Adjusted EBITDA are not measurements 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 (recovery) of non-financial assets, (vi) loss (gain) on disposal of property, plant and equipment, (vii) unrealized foreign exchange loss (gain), (viii) costs related to restructuring activities, (ix) changes in the amortized cost of the Partnership units liability, and (x) one-time costs due to pension revaluations related to past service. 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 27, 2016 available on SEDAR at www.sedar.com. "TAD Product Adjusted EBITDA" represents the portion of KTG Adjusted EBITDA generated by the sale of TAD products.
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 Adjusted EBITDA, the expectation of continued growth in sales of TAD products in the U.S., and stable interest rates. 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.
The outlook provided in respect of Adjusted EBITDA for Q2 2016 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 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 10, 2016 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 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, 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 Statement of Financial Position
(thousands of Canadian dollars)
March 27, December 31,
2016 2015
$ $
----------------------------------
Assets
Current assets
Cash and cash equivalents 3,980 25,455
Trade and other receivables 122,527 108,720
Receivables from related parties 284 185
Current portion of advances to partners 1,234 2,630
Inventories 184,224 184,985
Income tax recoverable 629 772
Prepaid expenses 12,221 8,429
----------------------------------
325,099 331,176
Non-current assets
Advances to partners 4,234 4,234
Property, plant & equipment 725,596 737,708
Other long-term assets 6,809 8,107
Goodwill 160,939 160,939
Intangible assets 15,638 15,853
Deferred income taxes 38,858 39,411
----------------------------------
Total assets 1,277,173 1,297,428
----------------------------------
----------------------------------
Liabilities
Current liabilities
Trade and other payables 185,892 180,329
Payables to related parties 9,430 3,775
Distributions payable 9,951 9,871
Current portion of provisions 2,561 3,096
Current portion of long-term debt 9,619 10,183
----------------------------------
217,453 207,254
Non-current liabilities
Long-term debt 411,844 425,859
Other long-term liabilities 30 48
Provisions 6,428 6,180
Pensions 101,829 87,164
Post-retirement benefits 57,332 57,346
----------------------------------
Liabilities to non-unitholders 794,916 783,851
Current portion of Partnership units
liability 2,630 2,630
Long-term portion of Partnership units
liability 121,148 122,546
----------------------------------
Total Partnership units liability 123,778 125,176
----------------------------------
Total liabilities 918,694 909,027
----------------------------------
Equity
Partnership units 322,424 318,012
Deficit (49,479) (29,416)
Accumulated other comprehensive income 85,534 99,805
----------------------------------
Total equity 358,479 388,401
----------------------------------
Total equity and liabilities 1,277,173 1,297,428
----------------------------------
----------------------------------
Kruger Products L.P.
Unaudited Condensed Consolidated Statement of Comprehensive Income (Loss)
(thousands of Canadian dollars)
13-week 13-week
period ended period ended
March 27, 2016 March 29, 2015
$ $
------------------------------------
Revenue 279,690 265,376
Expenses
Cost of sales 240,647 222,540
Selling, general and administrative
expenses 21,652 21,619
Restructuring costs - 1,054
------------------------------------
Operating income 17,391 20,163
Interest expense 11,214 10,342
Other (income) expense (829) 4,782
------------------------------------
Income before income taxes 7,006 5,039
Income taxes 616 329
------------------------------------
Net income for the period 6,390 4,710
------------------------------------
Other comprehensive income (loss)
Items that will not be reclassified to
net income:
Remeasurements of pensions (16,769) (17,406)
Remeasurements of post-retirement
benefits 121 (3,652)
Items that may be subsequently reclassified to net
income:
Available-for-sale investment (290) (251)
Cumulative translation adjustment (13,981) 23,877
------------------------------------
Total other comprehensive income (loss)
for the period (30,919) 2,568
------------------------------------
Comprehensive income (loss) for the
period (24,529) 7,278
------------------------------------
------------------------------------
Kruger Products L.P.
Unaudited Condensed Consolidated Statement of Cash Flows
(thousands of Canadian dollars)
13-week 13-week
period ended period ended
March 27, 2016 March 29, 2015
$ $
----------------------------------
Cash flows from (used in) operating
activities
Net income for the period 6,390 4,710
Items not affecting cash
Depreciation 10,087 9,744
Amortization 284 163
Loss on sale of fixed assets 1 165
Change in amortized cost of Partnership
units liability 1,234 1,312
Gain on sale of investment (324) -
Unrealized foreign exchange (gain) loss (1,739) 3,298
Interest expense 11,214 10,342
Pension and post-retirement benefits 2,659 2,680
Provisions 141 1,333
Income taxes 616 329
----------------------------------
Total items not affecting cash 24,173 29,366
Net change in non-cash working capital (16,639) (23,409)
Contributions to pension and post-
retirement benefit plans (5,843) (3,634)
Provisions paid (476) (265)
Income tax payments (865) (555)
----------------------------------
Net cash from operating activities 6,740 6,213
----------------------------------
Cash flows from (used in) investing
activities
Purchases of property, plant & equipment (16,189) (9,462)
Proceeds on sale of investment 1,439 -
Government assistance received 1,209 -
Purchases of software (69) (165)
Proceeds on sale of property, plant and
equipment - 186
----------------------------------
Net cash used in investing activities (13,610) (9,441)
----------------------------------
Cash flows from (used in) financing
activities
Proceeds from long-term debt 791 -
Repayment of long-term debt (7,204) (204)
Payment of deferred financing fees (330) -
Interest paid on long-term debt (1,019) (7,215)
Distributions and advances paid (6,547) (10,411)
Proceeds from issuing Partnership units - 195
----------------------------------
Net cash used in financing activities (14,309) (17,635)
----------------------------------
Effect of exchange rate changes on cash
and cash equivalents held in foreign
currency (296) 1,032
----------------------------------
Decrease in cash and cash equivalents
during the period (21,475) (19,831)
Cash and cash equivalents - Beginning of
period 25,455 51,788
----------------------------------
Cash and cash equivalents - End of period 3,980 31,957
----------------------------------
----------------------------------
Kruger Products L.P.
Segment and Geographic Results
(thousands of Canadian dollars)
13-week 13-week
period ended period ended
March 27, 2016 March 29, 2015
$ $
----------------------------------
Segment Information
Segment Revenue
Consumer 228,151 210,150
AFH 49,051 48,559
Other 2,488 6,667
----------------------------------
Total segment revenue 279,690 265,376
----------------------------------
----------------------------------
Segment Adjusted EBITDA
Consumer 28,003 30,297
AFH (166) 968
Other 250 (148)
----------------------------------
Total segment Adjusted EBITDA 28,087 31,117
Reconciliation to Net Income:
Depreciation and amortization 10,371 9,907
Interest expense 11,214 10,342
Change in amortized cost of Partnership
units liability 1,234 1,312
Loss on sale of fixed assets 1 165
Restructuring costs - 1,054
Unrealized foreign exchange (gain) loss (1,739) 3,298
----------------------------------
Income before income taxes 7,006 5,039
Income taxes 616 329
----------------------------------
Net income 6,390 4,710
----------------------------------
----------------------------------
Geographic Revenue
Canada 165,885 163,393
U.S. 101,673 93,378
Mexico 12,132 8,605
----------------------------------
Total revenue 279,690 265,376
----------------------------------
----------------------------------
KP Tissue Inc.
Unaudited Condensed Statement of Financial Position
(thousands of Canadian dollars)
March 27, December 31,
2016 2015
$ $
----------------------------------
Assets
Current assets
Distributions receivable 1,620 1,613
Income tax recoverable 983 828
----------------------------------
2,603 2,441
Non-current assets
Investment in associate 118,799 126,643
----------------------------------
Total Assets 121,402 129,084
----------------------------------
----------------------------------
Liabilities
Current liabilities
Dividend payable 1,620 1,613
Payable to Partnership 108 108
Current portion of advances from
Partnership 205 432
----------------------------------
1,933 2,153
Non-current liabilities
Advances from Partnership 709 709
Deferred income taxes 1,154 1,007
----------------------------------
Total liabilities 3,796 3,869
----------------------------------
Equity
Common shares 11,992 11,577
Contributed surplus 144,819 144,819
Deficit (54,743) (49,291)
Accumulated other comprehensive income 15,538 18,110
----------------------------------
Total equity 117,606 125,215
----------------------------------
Total liabilities and equity 121,402 129,084
----------------------------------
----------------------------------
KP Tissue Inc.
Unaudited Condensed Statement of Comprehensive Loss
(thousands of Canadian dollars, except share and per share amounts)
13-week 13-week
period ended period ended
March 27, 2016 March 29, 2015
$ $
----------------------------------
Equity loss (378) (658)
Dilution gain (loss) (171) 85
----------------------------------
Loss before income taxes (549) (573)
Income taxes 929 64
----------------------------------
Net loss for the period (1,478) (637)
----------------------------------
Other comprehensive income (loss)
net of tax expense (recovery)
Items that will not be reclassified to
net loss:
Remeasurements of pensions (2,380) (2,495)
Remeasurements of post-retirement
benefits 12 (367)
Items that may be subsequently
reclassified to net loss:
Available-for-sale investment (41) (36)
Cumulative translation adjustment (2,531) 3,411
----------------------------------
Total other comprehensive income (loss)
for the period (4,940) 513
----------------------------------
Comprehensive loss for the period (6,418) (124)
----------------------------------
----------------------------------
Basic loss per share (0.16) (0.07)
----------------------------------
----------------------------------
Weighted average number of shares
outstanding 8,993,554 8,871,820
----------------------------------
----------------------------------
KP Tissue Inc.
Unaudited Condensed Statement of Cash Flows
(thousands of Canadian dollars)
13-week 13-week
period ended period ended
March 27, 2016 March 29, 2015
$ $
----------------------------------
Cash flows from (used in) operating
activities
Net loss for the period (1,478) (637)
Items not affecting cash
Equity loss 378 658
Dilution (gain) loss 171 (85)
Income taxes 929 64
----------------------------------
Total items not affecting cash 1,478 637
Tax payments (205) (790)
Tax Distribution received - 571
Advances received 205 219
----------------------------------
Net cash from (used in) operating
activities - -
----------------------------------
Cash flows from (used in) investing
activites
Investment in associate - (195)
Partnership unit distributions received 1,613 1,595
----------------------------------
Net cash from investing activities 1,613 1,400
----------------------------------
Cash flows from (used in) financing
activities
Issuance of common shares - 195
Dividends paid (1,613) (1,595)
----------------------------------
Net cash used in financing activities (1,613) (1,400)
----------------------------------
Increase (decrease) in cash and cash
equivalents during the period - -
Cash and cash equivalents - Beginning of
period - -
----------------------------------
Cash and cash equivalents - End of period - -
----------------------------------
----------------------------------
Contacts: INFORMATION: Francois Paroyan General Counsel and Corporate Secretary KP Tissue Inc. 905.812.6936 [email protected] INVESTORS: Mike Baldesarra Director of Investor Relations KP Tissue Inc. 905.812.6962 [email protected]
Source: KP Tissue Inc.
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