Kruger Products is Canada's leading manufacturer of quality tissue products for the Consumer market (Cashmere(R), Purex(R), SpongeTowels(R), Scotties(R), and White Swan(R)) and the Away-From-Home market, and continues to grow in the U.S. Consumer tissue business with the White Cloud(R) brand and premium private label products. KPT currently holds a 16.3% interest in KPLP.
KPLP Q4 2015 Business and Financial Highlights
Revenue increased by 7.9% to $300.6 million in Q4 2015 compared to Q4 2014
Adjusted EBITDA was $30.3 million in Q4 2015, consistent with Q4 2014 despite significant cost pressures
TAD Product Q4 2015 Adjusted EBITDA increased by $4.1 million year-over-year to $13.2 million
#1 market share leader in Canada with Q4 growth
Declared a quarterly dividend of $0.18 per share to be paid on April 15, 2016
KPLP Full Year 2015 Business and Financial Highlights
Revenue increased by 8.9% to $1,138.9 million in 2015 compared to $1,046.2 million in 2014
Adjusted EBITDA of $126.4 million in 2015, up from $121.6 million in 2014
TAD Product 2015 Adjusted EBITDA increased by $18.4 million year-over-year to $45.3 million
Redeemed $175 million of senior notes by increasing existing credit facility to $300 million, resulting in interest expense savings of approximately $8 million annually at expected interest rates
"In Fiscal 2015, the solid performance of our U.S. Business combined with cost reduction initiatives, was masked by the significant negative impact of the lower Canadian dollar. This is reflected in higher commodity prices which impacted our Canadian business results," said Mario Gosselin, CEO of KP Tissue and Kruger Products L.P."
"We are pleased with the progress of our TAD Products for their third full year of commercialization considering Adjusted EBITDA of $45 million. We remain confident that North American industry demand will absorb incremental capacity in upcoming years and provide us with solid growth opportunities in the private label market.
"The Away-from-Home segment reported a solid Adjusted EBITDA improvement over the prior year reflecting improved volume in the base business combined with cost reduction initiatives and also benefits from the Metro Paper acquisition.
"From a market share perspective in the Canadian Consumer segment, we maintained our momentum and continued to be the clear overall industry leader. Despite efforts to mitigate higher input costs, the pressure exercised by the weak Canadian dollar on commodity prices has had a significant and increasing negative impact on our Adjusted EBITDA over the past several quarters. In the context of a competitive and price sensitive environment, we recently announced a price increase effective at the end of April 2016 to our Canadian retailers to partially offset the rise of raw material prices.
"We expect first quarter Adjusted EBITDA for Fiscal 2016 to be below the same quarter last year, reflecting the ongoing impact of the weak Canadian dollar. In 2016, we plan to significantly invest in our operations to improve manufacturing costs with CAPEX in the range of $65-$70 million. Despite some important headwinds, we have an action plan in place to improve manufacturing costs and support growth opportunities," concluded Mr. Gosselin.
KPLP Q4 2015 Financial Results
Revenue in Q4 2015 was $300.6 million, compared to $278.6 million in Q4 2014, an increase of $22.0 million or 7.9%. The increase in revenue was primarily due to additional sales volume in the U.S consumer business from our TAD products and organic growth in the Away-From-Home (AFH) business. In addition, U.S. sales were favourably impacted by foreign exchange.
Cost of sales in Q4 2015 increased to $259.8 million compared to $234.0 million in Q4 2014 primarily due to the negative impact of foreign exchange, slightly offset by a decline in USD pulp and natural gas prices. Freight and warehousing costs increased due to higher sales volumes and inventory levels. Cost reduction initiatives partially offset the above increases in cost of sales. As a percentage of revenue, cost of sales were 86.4% in Q4 2015 compared to 84.0% in Q4 2014.
Selling, general and administrative (SG&A) expenses in Q4 2015 were $23.5 million, compared to $24.5 million in Q4 2014 primarily due to lower advertising & promotion and selling expenses and the benefit of cost reduction initiatives, partially offset by higher selling expenses resulting from increased sales volume and the unfavourable impact of foreign exchange. As a percentage of revenue, SG&A expenses were 7.8% in Q4 2015 compared to 8.8% in Q4 2014.
Adjusted EBITDA in Q4 2015 was $30.3 million compared to $30.4 million in Q4 2014 as the net unfavourable impact of foreign exchange and higher warehousing costs were almost offset by the positive impact of higher sales volumes and lower SG&A. TAD Product EBITDA increased to $13.2 million in Q4 2015 from $9.1 million in Q4 2014 due to increased sales volume, favourable foreign exchange and the continued ramp-up in manufacturing efficiencies.
Net income in Q4 2015 was a loss of $0.5 million, compared to income of $0.1 million in Q4 2014. The decrease was primarily due to a change in the tax expense of $5.9 million resulting from a $5.5 million reversal of previously recognized deferred tax assets in our U.S. subsidiary, higher depreciation expense of $2.0 million and restructuring costs of $0.9 million, partially offset by the change in the amortized costs of the Partnership unit liability of $8.9 million.
The cash balance as of December 31, 2015 was $25.5 million compared to $38.5 million as of September 27, 2015. Cash generated from operating activities resulting from Adjusted EBITDA in Q4 2015 was more than offset by higher working capital, pension funding, capital spending and interest payments in the quarter.
KPLP 2015 Financial Results
Revenue was $1,138.9 million in Fiscal 2015 compared to $1,046.2 million in Fiscal 2014, an increase of 8.9% or $92.7 million. The increase in revenue was primarily due to additional sales volume across all regions and in both the Consumer and AFH segments, including a significant increase in AFH segment revenue resulting from the acquisition of Metro Paper. In the Consumer and AFH U.S. businesses, sales were favourably impacted by foreign exchange on U.S. dollar sales.
Adjusted EBITDA was $126.4 million in Fiscal 2015 compared to $121.6 million in Fiscal 2014. Higher sales volumes in both the Consumer and AFH segments, lower costs (in U.S. dollars) for pulp and natural gas and cost reduction initiatives were partially offset by higher SG&A from increased sales and the net negative impact of foreign exchange. TAD Product Adjusted EBITDA was $45.3 million in Fiscal 2015 compared to $26.9 million in Fiscal 2014.
Net income was $1.5 million in Fiscal 2015 compared to $21.1 million in Fiscal 2014. The decrease in net income was primarily due to increases in interest and tax expense of $13.5 million and $9.2 million, respectively, the Q2 pension revaluation related to past service costs of $3.4 million, an increase in the unrealized foreign exchange loss of $3.4 million, and higher depreciation expense of $4.9 million. These increases were partially offset by higher Adjusted EBITDA of $4.8 million.
KPT Q4 2015 Financial Results
KPT incurred a net loss of $27.8 million in Q4 2015. Included in the net loss was $0.1 million representing KPT's share of KPLP's loss. The loss was increased by the net of depreciation expense of $1.4 million related to adjustments to carrying amounts on acquisition, partially offset by an income tax recovery of $1.8 million.
Also included in the loss was an impairment of KPT's investment in KPLP of $28.0 million. KPT performed an impairment test at December 31, 2015 as a result of the market value decline in KPT's publicly traded common shares during Fiscal 2015.
KPT 2015 Financial Results
KPT incurred a net loss of $31.3 million in 2015. Included in the net loss was $0.2 million representing KPT's share of KPLP's income. The income was reduced by the net of depreciation expense of $5.7 million related to adjustments to carrying amounts on acquisition, partially offset by an income tax recovery of $2.1 million.
Amendment to Senior Credit Facility
Subsequent to the year-end, an amendment was obtained under the Senior Credit Facility to increase the Ratio of Funded Debt to EBITDA covenant for the entire 2016 fiscal year, which is expected to allow for the impact of foreign exchange fluctuations and the implementation of a significantly expanded 2016 capital spending program.
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 April 15, 2016 to shareholders of record at the close of business on March 31, 2016.
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 16.3% interest in KPLP. For more information visit www.kptissueinc.com.