March 9, 2017

KP Tissue Releases Fourth Quarter and Full Year 2016 Financial Results

Record Results for 2016

MISSISSAUGA, ONTARIO--(Marketwired - March 9, 2017) - KP Tissue Inc. (KPT) (TSX:KPT) reports the Q4 and full year 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(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 16.1% interest in KPLP.

KPLP Q4 2016 Business and Financial Highlights




--  Revenue increased by 13.0% to $339.6 million in Q4 2016 compared to Q4

    2015

--  Adjusted EBITDA was $42.9 million in Q4 2016 compared to $30.3 million

    in Q4 2015, up 41.6%

--  Kruger Products continues to be the market share leader in Canada

--  Declared a quarterly dividend of $0.18 per share to be paid on April 17,

    2017



KPLP Full Year 2016 Business and Financial Highlights




--  Revenue increased by 7.8% to $1,227.9 million in 2016 compared to

    $1,138.9 million in 2015

--  Adjusted EBITDA was $152.5 million in 2016, up from $126.4 million in

    2015, a 20.6% increase



"We are extremely pleased with our results for Fiscal 2016. The record Revenue and Adjusted EBITDA performance was primarily due to higher sales volume, improved pricing and strong contribution from TAD products" said Mario Gosselin, CEO of KP Tissue and KPLP.

"We continue to be #1 in overall tissue market share in Canada, with share gains in our market leading position in the bathroom tissue category, while remaining the uncontested market leader in the facial tissue category and holding a strong #2 position in the paper towels category. In the U.S., we continue to leverage our TAD product manufacturing capacity to take advantage of growth opportunities in the U.S. premium private label market.

"In the past two years, our capital program has increased significantly, focused on projects related to capacity growth and cost reduction with quick paybacks, highlighted by our $55 million paper machine investment in Crabtree to reduce our overall paper costs. We are starting to see the benefits of these investments in our results, and expect a positive impact from capital projects on our costs going forward," concluded Mr. Gosselin.

Q1 2017 Outlook

For the first quarter of 2017, Adjusted EBITDA is expected to increase over Q1 2016, while being seasonally lower than the fourth quarter of 2016 due primarily to twelve fewer sales days and higher advertising expenses.

KPLP Q4 2016 Financial Results

Revenue in Q4 2016 was $339.6 million, compared to $300.6 million in Q4 2015, an increase of $39.0 million or 13.0%. The increase in revenue was primarily due to higher sales volumes and a selling price increase in Canada.

Cost of sales in Q4 2016 increased to $284.2 million, compared to $259.9 million in Q4 2015, primarily due to higher sales volumes, somewhat offset by cost reduction initiatives and the impact of capital projects. As a percentage of revenue, cost of sales were 83.7% in Q4 2016 compared to 86.5% in Q4 2015.

Selling, general and administrative (SG&A) expenses in Q4 2016 were $26.4 million, compared to $23.5 million in Q4 2015. The increase was primarily due to higher selling expenses related to higher sales volumes and higher advertising expenses. As a percentage of revenue, SG&A expenses were 7.8% in Q4 2016, consistent with Q4 2015.

Adjusted EBITDA in Q4 2016 was $42.9 million, compared to $30.3 million in Q4 2015, primarily due to higher sales volume, improved pricing and mix of products sold, and the impact of cost reduction initiatives and capital projects, partially offset by higher SG&A costs. Adjusted EBITDA attributable to the sale of TAD products was $13.8 million in Q4 2016 compared to $13.2 million in Q4 2015.

Net loss in Q4 2016 was $4.5 million, compared to $0.5 million in Q4 2015, primarily due to a change in the amortized cost of the Partnership units liability of $23.2 million, and higher depreciation and interest expense of $1.2 million and $0.7 million, respectively. These increases were partially offset by higher Adjusted EBITDA of $12.6 million, a decrease in tax expense of $4.2 million, and a gain on sale of non-financial assets of $2.5 million.

Total liquidity, representing cash and cash equivalents and availability under the credit line within covenant limitations, was $103.5 million as of December 31, 2016, compared to $90.6 million as of September 25, 2016.

KPLP 2016 Financial Results

Revenue was $1,227.9 million in Fiscal 2016, compared to $1,138.9 million in Fiscal 2015, an increase of $89.0 million or 7.8%. The increase in revenue was primarily due to additional sales volume across all regions as well as a selling price increase in Canada, and the favourable impact of foreign exchange on U.S. dollar sales.

Adjusted EBITDA was $152.5 million in Fiscal 2016, compared to $126.4 million in Fiscal 2015. The increase was primarily due to higher sales volume, improved pricing and mix of products sold, and the impact of cost reduction initiatives and capital projects. These were partially offset by higher SG&A costs and the net negative impact of foreign exchange. Adjusted EBITDA attributable to the sale of TAD products was $49.0 million in Fiscal 2016 compared to $45.3 million in Fiscal 2015.

Net income was $35.5 million in Fiscal 2016, compared to $1.5 million in Fiscal 2015. The increase in net income was primarily due to higher Adjusted EBITDA of $26.1 million, a decrease in interest expense of $14.2 million, a change in the foreign exchange gain/loss of $7.2 million, a decrease in tax expense of $3.8 million, and no pension revaluation related to past service costs compared to $3.4 million in Fiscal 2015. These decreases were partially offset by a change in the amortized cost of the Partnership units liability of $19.4 million, and higher depreciation expense of $5.9 million.

KPT Q4 2016 Financial Results

KPT incurred a net loss of $0.4 million in Q4 2016. Included in the net loss was $0.7 million representing KPT's share of KPLP's loss. The loss was increased by the net of depreciation expense of $1.5 million related to adjustments to carrying amounts on acquisition, partially offset by an income tax recovery of $1.8 million.

KPT 2016 Financial Results

KPT incurred a net loss of $1.7 million in 2016. Included in the net loss was $5.8 million representing KPT's share of KPLP's income. The income was reduced by depreciation expense of $5.9 million related to adjustments to carrying amounts on acquisition and income tax expense of $1.8 million

Dividends on Common Shares

The Board of Directors of KPT declared a quarterly dividend of $0.18 per share to be paid on April 17, 2017 to shareholders of record at the close of business on March 31, 2017.

Additional Information

For additional information please refer to Management's Discussion and Analysis (MD&A) of KPT and KPLP for the fourth quarter and year ended December 31, 2016 available on SEDAR at www.sedar.com or our website at www.kptissueinc.com.

Fourth Quarter Results Conference Call Information

KPT will hold its fourth quarter conference call on Thursday, March 9, 2017 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, April 8, 2017 by dialing 800-585-8367 or 416-621-4642 and entering passcode 59685751.

The replay of the webcast will remain available on the website until midnight, April 8, 2017.

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 16.1% 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(R), Purex(R), SpongeTowels(R), Scotties(R) and White Swan(R). In the U.S., KPLP manufactures the White Cloud(R) 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 production facilities in North America, including five FSC(R) CoC-certified plants (FSC(R) 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 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 reference Adjusted EBITDA as a non-IFRS financial measure. This term replaces the previously referenced non-IFRS financial measure EBITDA. Our definition of Adjusted EBITDA is unchanged from our former definition of EBITDA. Accordingly, this change in terminology has no impact on our reported financial results for prior periods. 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 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 fourth quarter ended December 31, 2016 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 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 Q1 2017 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 9, 2017 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; cyber-security; insurance; internal controls and trade related risk.

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.

               Consolidated Statement of Financial Position

                      (thousands of Canadian dollars)



                                      December 31, 2016  December 31, 2015

                                                      $                  $

                                     --------------------------------------

Assets

Current assets

  Cash and cash equivalents                      36,511             25,455

  Trade and other receivables                   123,095            108,720

  Receivables from related parties                  185                185

  Current portion of advances to

   partners                                       5,465              2,630

  Inventories                                   179,543            184,985

  Income tax recoverable                            423                772

  Prepaid expenses                                7,286              8,429

                                     --------------------------------------

                                                352,508            331,176

Non-current assets

  Advances to partners                                -              4,234

  Property, plant & equipment                   762,270            737,708

  Other long-term assets                          6,075              8,107

  Goodwill                                      160,939            160,939

  Intangible assets                              15,270             15,853

  Deferred income taxes                          39,913             39,411

                                     --------------------------------------

Total assets                                  1,336,975          1,297,428

                                     --------------------------------------

                                     --------------------------------------



Liabilities

Current liabilities

  Bank indebtedness                               9,007                  -

  Trade and other payables                      201,477            180,329

  Payables to related parties                     3,606              3,775

  Income tax payable                              1,779                  -

  Distributions payable                          10,148              9,871

  Current portion of provisions                   1,885              3,096

  Current portion of long-term debt               8,859             10,183

                                     --------------------------------------

                                                236,761            207,254

Non-current liabilities

  Long-term debt                                415,379            425,859

  Other long-term liabilities                         -                 48

  Provisions                                      6,487              6,180

  Pensions                                       92,646             87,164

  Post-retirement benefits                       57,162             57,346

                                     --------------------------------------

  Liabilities to non-unitholders                808,435            783,851

  Current portion of Partnership

   units liability                                8,611              2,630

  Long-term portion of Partnership

   units liability                              137,296            122,546

                                     --------------------------------------

  Total Partnership units liability             145,907            125,176

                                     --------------------------------------

Total liabilities                               954,342            909,027

                                     --------------------------------------



Equity

  Partnership units                             336,576            318,012

  Deficit                                       (42,792)           (29,416)

  Accumulated other comprehensive

   income                                        88,849             99,805

                                     --------------------------------------

Total equity                                    382,633            388,401

                                     --------------------------------------

Total equity and liabilities                  1,336,975          1,297,428

                                     --------------------------------------

                                     --------------------------------------










                            Kruger Products L.P.

               Consolidated Statement of Comprehensive Income

                      (thousands of Canadian dollars)



                             13-week      13-week

                        period ended period ended   Year ended   Year ended

                        December 31, December 31, December 31, December 31,

                                2016         2015         2016         2015

                                   $            $            $            $

                        ----------------------------------------------------



Revenue                      339,626      300,583    1,227,896    1,138,870



Expenses

  Cost of sales              284,299      259,842    1,031,647      970,759

  Selling, general and

   administrative

   expenses                   26,480       23,452       92,763       87,978

  Gain on sale of non-

   financial assets           (2,544)          12       (2,939)      (1,119)

  Restructuring costs,

   net                           134          989          552        2,824

                        ----------------------------------------------------



Operating income              31,257       16,288      105,873       78,428



  Interest expense            10,673       10,095       44,000       58,164

  Other expense               23,061          561       22,754       11,331

                        ----------------------------------------------------



Income (loss) before

 income taxes                 (2,477)       5,632       39,119        8,933



Income taxes                   2,017        6,157        3,629        7,439

                        ----------------------------------------------------



Net income (loss) for

 the period                   (4,494)        (525)      35,490        1,494

                        ----------------------------------------------------



Other comprehensive

 income (loss)

  Items that will not be

   reclassified to net

   income (loss):

  Remeasurements of

   pensions                   55,495       11,217       (8,491)       7,094

  Remeasurements of

   post-retirement

   benefits                    4,613       (1,965)          94       (2,667)

  Items that may be

   subsequently

   reclassified to net

   income (loss):

  Available-for-sale

   investment                      -          513         (290)         207

  Cumulative translation

   adjustment                  6,192       13,242      (10,666)      56,135

                        ----------------------------------------------------



Total other

 comprehensive income

 (loss) for the period        66,300       23,007      (19,353)      60,769

                        ----------------------------------------------------



Comprehensive income for

 the period                   61,806       22,482       16,137       62,263

                        ----------------------------------------------------

                        ----------------------------------------------------







                            Kruger Products L.P.

                    Consolidated Statement of Cash Flows

                      (thousands of Canadian dollars)



                             13-week      13-week

                        period ended period ended   Year ended   Year ended

                        December 31, December 31, December 31, December 31,

                                2016         2015         2016         2015

                                   $            $            $            $

                        ----------------------------------------------------

Cash flows from (used

 in) operating

 activities

Net income (loss) for

 the period                   (4,494)        (525)      35,490        1,494

Items not affecting cash

  Depreciation                13,661       12,189       47,436       41,643

  Amortization                   270          318        1,146          881

  Loss on sale of fixed

   assets                        142          450          139          734

  Change in amortized

   cost of Partnership

   units liability            22,129       (1,010)      23,363        4,003

  Gain on sale of

   investment                      -            -         (324)           -

  Foreign exchange

   (gain) loss                   932        1,578         (285)       6,906

  Interest expense            10,673       10,095       44,000       58,164

  Pension and post

   retirement benefits         2,597        2,685       10,402       14,146

  Provisions                     147          229        1,338        3,034

  Income taxes                 2,017        6,157        3,629        7,439

  Gain on sale of non-

   financial assets           (2,544)          12       (2,939)      (1,119)

                        ----------------------------------------------------

  Total items not

   affecting cash             50,024       32,703      127,905      135,831



Net change in non-cash

 working capital              11,857       (4,382)       1,386      (24,540)

Contributions to pension

 and post-retirement

 benefit plans                (4,417)     (11,553)     (18,335)     (23,084)

Provisions paid                 (815)      (2,580)      (2,267)      (3,558)

Income tax payments              (83)        (557)      (1,970)      (2,107)

                        ----------------------------------------------------



Net cash from operating

 activities                   52,072       13,106      142,209       84,036

                        ----------------------------------------------------



Cash flows from (used

 in) investing

 activities

Purchases of property,

 plant & equipment           (22,794)     (21,552)     (81,460)     (54,701)

Capitalized interest

 paid                           (222)           -         (222)           -

Proceeds on sale of

 investment                        -            -        1,439            -

Government assistance

 received                      1,191            -        2,400            -

Purchases of software           (492)        (722)        (563)      (2,682)

Proceeds on sale of

 property, plant and

 equipment                     4,860            -        5,399          736

                        ----------------------------------------------------



Net cash used in

 investing activities        (17,457)     (22,274)     (73,007)     (56,647)

                        ----------------------------------------------------



Cash flows from (used

 in) financing

 activities

Proceeds from long-term

 debt                          4,614      206,000        9,609      206,000

Repayment of long-term

 debt                         (9,776)    (179,976)     (17,882)    (184,856)

Payment of deferred

 financing fees                  (34)      (1,248)        (745)      (1,388)

Interest paid on long-

 term debt                   (15,868)     (22,603)     (34,162)     (44,978)

Distributions and

 advances paid, net           (5,979)      (7,156)     (22,862)     (31,811)

Proceeds from issuing

 Partnership units                 -            -            -          195

                        ----------------------------------------------------



Net cash used in

 financing activities        (27,043)      (4,983)     (66,042)     (56,838)

                        ----------------------------------------------------



Effect of exchange rate

 changes on cash and

 cash equivalents held

 in foreign currency             408        1,059       (1,111)       3,116

                        ----------------------------------------------------



Increase (decrease) in

 cash and cash

 equivalents during the

 period                        7,980      (13,092)       2,049      (26,333)



Cash and cash

 equivalents - Beginning

 of period                    19,524       38,547       25,455       51,788

                        ----------------------------------------------------



Cash and cash

 equivalents - End of

 period                       27,504       25,455       27,504       25,455

                        ----------------------------------------------------

                        ----------------------------------------------------







                            Kruger Products L.P.

                       Segment and Geographic Results

                      (thousands of Canadian dollars)



                             13-week      13-week

                        period ended period ended   Year ended   Year ended

                        December 31, December 31, December 31, December 31,

                                2016         2015         2016         2015

                                   $            $            $            $

                        ----------------------------------------------------



Segment Information



Segment Revenue

  Consumer                   277,543      240,583      986,881      897,959

  AFH                         59,549       54,799      227,062      220,320

  Other                        2,534        5,201       13,953       20,591

                        ----------------------------------------------------



Total segment revenue        339,626      300,583    1,227,896    1,138,870

                        ----------------------------------------------------

                        ----------------------------------------------------



Segment Adjusted EBITDA

  Consumer                    40,469       30,726      146,367      122,483

  AFH                          2,452          621        5,217        5,407

  Other                           (1)      (1,094)         947       (1,505)

                        ----------------------------------------------------



Total segment Adjusted

 EBITDA                       42,920       30,253      152,531      126,385



Reconciliation to Net

 Income (Loss):



Depreciation and

 amortization                 13,931       12,507       48,582       42,524

Interest expense              10,673       10,095       44,000       58,164

Change in amortized cost

 of Partnership units

 liability                    22,129       (1,010)      23,363        4,003

Loss on sale of fixed

 assets                          142          450          139          734

Pension revaluation -

 past service cost                 -            -            -        3,416

Gain on sale of non-

 financial assets             (2,544)          12       (2,939)      (1,119)

Restructuring costs              134          989          552        2,824

Foreign exchange (gain)

 loss                            932        1,578         (285)       6,906

                        ----------------------------------------------------



Income (loss) before

 income taxes                 (2,477)       5,632       39,119        8,933



Income taxes                   2,017        6,157        3,629        7,439

                        ----------------------------------------------------



Net income (loss)             (4,494)        (525)      35,490        1,494

                        ----------------------------------------------------

                        ----------------------------------------------------



Geographic Revenue



Canada                       209,605      184,512      746,483      711,881

U.S.                         115,767      103,384      429,627      389,154

Mexico                        14,254       12,687       51,786       37,835

                        ----------------------------------------------------



Total revenue                339,626      300,583    1,227,896    1,138,870

                        ----------------------------------------------------

                        ----------------------------------------------------







                               KP Tissue Inc.

                      Statement of Financial Position

                      (thousands of Canadian dollars)



                                       December 31, 2016  December 31, 2015

                                                       $                  $

                                      --------------------------------------

Assets



Current assets

  Distributions receivable                         1,636              1,613

  Receivable from Partnership                        426                  -

  Income tax recoverable                               -                828

                                      --------------------------------------

                                                   2,062              2,441



Non-current assets

  Investment in associate                        117,349            126,643

                                      --------------------------------------



Total Assets                                     119,411            129,084

                                      --------------------------------------

                                      --------------------------------------



Liabilities



Current liabilities

  Dividend payable                                 1,636              1,613

  Payable to Partnership                               -                108

  Current portion of advances from

   Partnership                                       914                432

  Income tax payable                                 884                  -

                                      --------------------------------------

                                                   3,434              2,153

Non-current liabilities

  Advances from Partnership                            -                709

  Deferred income taxes                              893              1,007

                                      --------------------------------------



Total liabilities                                  4,327              3,869

                                      --------------------------------------



Equity



  Common shares                                   13,176             11,577

  Contributed surplus                            144,819            144,819

  Deficit                                        (58,729)           (49,291)

  Accumulated other comprehensive

   income                                         15,818             18,110

                                      --------------------------------------



Total equity                                     115,084            125,215

                                      --------------------------------------



Total liabilities and equity                     119,411            129,084

                                      --------------------------------------

                                      --------------------------------------







                               KP Tissue Inc.

                  Statement of Comprehensive Income (Loss)

    (thousands of Canadian dollars, except share and per share amounts)



                             13-week      13-week

                        period ended period ended   Year ended   Year ended

                        December 31, December 31, December 31, December 31,

                                2016         2015         2016         2015

                                   $            $            $            $

                        ----------------------------------------------------



Equity loss                   (2,225)      (1,516)        (124)      (5,480)



Dilution gain (loss)              49          (59)         191           70



Impairment in investment

 in associate                      -      (28,000)           -      (28,000)

                        ----------------------------------------------------



Income (loss) before

 income taxes                 (2,176)     (29,575)          67      (33,410)



Income taxes                  (1,768)      (1,796)       1,789       (2,066)

                        ----------------------------------------------------



Net loss for the period         (408)     (27,779)      (1,722)     (31,344)

                        ----------------------------------------------------



Other comprehensive

 income (loss) net of

 tax expense (recovery)

  Items that will not be

   reclassified to net

   loss:

  Remeasurements of

   pensions                    7,839        1,603       (1,195)       1,013

  Remeasurements of

   post-retirement

   benefits                      456         (196)           9         (267)

  Items that may be

   subsequently

   reclassified to net

   loss:

  Available-for-sale

   investment                      -           72          (41)          29

  Cumulative translation

   adjustment                  1,244        2,376       (2,251)      10,223

                        ----------------------------------------------------



Total other

 comprehensive income

 (loss) for the period         9,539        3,855       (3,478)      10,998

                        ----------------------------------------------------



Comprehensive income

 (loss) for the period         9,131      (23,924)      (5,200)     (20,346)

                        ----------------------------------------------------

                        ----------------------------------------------------



Basic loss per share           (0.04)       (3.12)       (0.19)       (3.52)

                        ----------------------------------------------------

                        ----------------------------------------------------



Weighted average number

 of shares outstanding     9,084,494    8,952,820    9,037,833    8,910,948

                        ----------------------------------------------------

                        ----------------------------------------------------







                               KP Tissue Inc.

                          Statement of Cash Flows

                      (thousands of Canadian dollars)



                             13-week      13-week

                        period ended period ended   Year ended   Year ended

                        December 31, December 31, December 31, December 31,

                                2016         2015         2016         2015

                                   $            $            $            $

                        ----------------------------------------------------

Cash flows from (used

 in) operating

 activities

Net loss for the period         (408)     (27,779)      (1,722)     (31,344)

Items not affecting cash

  Equity loss                  2,225        1,516          124        5,480

  Dilution gain (loss)           (49)          59         (191)         (70)

  Impairment in

   investment in

   associate                       -       28,000            -       28,000

  Income taxes                (1,768)      (1,796)       1,789       (2,066)

                        ----------------------------------------------------

  Total items not

   affecting cash                408       27,779        1,722       31,344



Tax payments                       -         (307)        (205)      (1,712)

Tax Distribution

 received                          -            -            -          571

Advances received                  -          307          205        1,141

                        ----------------------------------------------------



Net cash from (used in)

 operating activities              -            -            -            -

                        ----------------------------------------------------



Cash flows from (used

 in) investing activites

Investment in associate            -            -            -         (195)

Partnership unit

 distributions received        1,180        1,205        4,908        5,217

                        ----------------------------------------------------



Net cash from investing

 activities                    1,180        1,205        4,908        5,022

                        ----------------------------------------------------



Cash flows from (used

 in) financing

 activities

Issuance of common

 shares                            -            -            -          195

Dividends paid                (1,180)      (1,205)      (4,908)      (5,217)

                        ----------------------------------------------------



Net cash used in

 financing activities         (1,180)      (1,205)      (4,908)      (5,022)

                        ----------------------------------------------------



Increase (decrease) in

 cash and cash

 equivalents during the

 period                            -            -            -            -



Cash and cash

 equivalents - Beginning

 of period                         -            -            -            -

                        ----------------------------------------------------



Cash and cash

 equivalents - End of

 period                            -            -            -            -

                        ----------------------------------------------------

                        ----------------------------------------------------









FOR FURTHER INFORMATION PLEASE CONTACT:

INFORMATION:

Francois Paroyan

General Counsel and Corporate Secretary

KP Tissue Inc.

905.812.6936

francois.paroyan@krugerproducts.ca





INVESTORS:


Mike Baldesarra

Director of Investor Relations

KP Tissue Inc.

905.812.6962

IR@KPTissueinc.com









Source: KP Tissue Inc.

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