KP TISSUE INC.
UNAUDITED CONDENSED FINANCIAL STATEMENTS
FOR THE 3-MONTH AND 9-MONTH PERIODS ENDED SEPTEMBER 30, 2024
AND SEPTEMBER 30, 2023
KP Tissue Inc.
2 Prologis Blvd., Suite 500, Mississauga, Ontario L5W 0G8 www.kptissueinc.com
KP Tissue Inc.
Unaudited Condensed Statements of Financial Position
(tabular amounts are in thousands of Canadian dollars)
September 30, 2024 | December 31, 2023 | |
$ | $ | |
Assets | ||
Current assets | ||
Dividends receivable | 1,796 | 1,793 |
Income taxes recoverable | 367 | 652 |
Receivable from Investee | 65 | - |
2,228 | 2,445 | |
Non-current assets | ||
Investment in associate (note 5) | 70,647 | 68,162 |
Total assets | 72,875 | 70,607 |
Liabilities | ||
Current liabilities | ||
Dividend payable (note 7) | 1,796 | 1,793 |
Payable to investee | - | 457 |
Income taxes payable | 376 | - |
Total liabilities | 2,172 | 2,250 |
Equity | ||
Common shares (note 7) | 22,702 | 22,560 |
Contributed surplus | 144,819 | 144,819 |
Deficit | (113,398) | (115,027) |
Accumulated other comprehensive income | 16,580 | 16,005 |
Total equity | 70,703 | 68,357 |
Total liabilities and equity | 72,875 | 70,607 |
Subsequent events (note 7) |
The accompanying notes are an integral part of these unaudited condensed financial statements.
1
KP Tissue Inc.
Unaudited Condensed Statements of Income (Loss) and Comprehensive Income (Loss)
For the 3-month and 9-month periods ended September 30, 2024 and September 30, 2023
(tabular amounts are in thousands of Canadian dollars, except share and per share amounts)
3-month period | 3-month period | 9-month period | 9-month period | ||||
ended September | ended September | ended September | ended September | ||||
30, 2024 | 30, 2023 | 30, 2024 | 30, 2023 | ||||
$ | $ | $ | $ | ||||
Share of income (loss) | 2,259 | 1,789 | 4,758 | (2,909) | |||
Depreciation of fair value increments | (278) | (286) | (847) | (886) | |||
Equity income (loss) | 1,981 | 1,503 | 3,911 | (3,795) | |||
Dilution gain | 107 | 262 | 500 | 787 | |||
Income (loss) before income taxes | 2,088 | 1,765 | 4,411 | (3,008) | |||
Deferred tax expense | - | - | - | 3,892 | |||
Net income (loss) | 2,088 | 1,765 | 4,411 | (6,900) | |||
Other comprehensive income (loss) | |||||||
net of income tax expense (recovery) (note 6) | |||||||
Items that will not be | |||||||
reclassified to net income (loss): | |||||||
Remeasurements of pensions | (786) | 2,466 | 2,585 | 6,675 | |||
Remeasurements of post-retirement | |||||||
benefits | (215) | 370 | 17 | 2,229 | |||
Items that may be subsequently | |||||||
reclassified to net income (loss): | |||||||
Cumulative translation adjustment | (474) | 672 | 575 | 1,938 | |||
Other comprehensive income (loss) | (1,475) | 3,508 | 3,177 | 10,842 | |||
Total comprehensive income (loss) | 613 | 5,273 | 7,588 | 3,942 | |||
Basic earnings (loss) per share | 0.21 | 0.18 | 0.44 | (0.69) | |||
Weighted average number of shares | |||||||
outstanding | 9,979,383 | 9,957,841 | 9,973,463 | 9,953,646 | |||
The accompanying notes are an integral part of these unaudited condensed financial statements.
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KP Tissue Inc.
Unaudited Condensed Statements of Changes in Equity
For the 3-month and 9-month periods ended September 30, 2024 and September 30, 2023
(tabular amounts are in thousands of Canadian dollars, except share amounts)
Accumulated | ||||||
othe r | ||||||
Contribute d | compre he nsive | Total | ||||
Common shares | surplus | De ficit | income | equity | ||
# | $ | $ | $ | $ | $ | |
As of January 1, 2023 | 9,945,976 | 22,379 | 144,819 | (108,008) | 14,840 | 74,030 |
Issuance of common shares (note 7) | 12,746 | 131 | - | - | - | 131 |
Dividends payable (note 7) | - | - | - | (1,793) | - | (1,793) |
Dividends paid | - | - | - | (3,582) | - | (3,582) |
Fair value adjustment | - | (1) | - | 1 | - | - |
Remeasurements of pensions | - | - | - | 6,675 | - | 6,675 |
Remeasurements of | - | - | - | 2,229 | - | |
post-retirement benefits | 2,229 | |||||
Cumulative translation adjustment | - | - | - | - | 1,938 | 1,938 |
Net loss | - | - | - | (6,900) | - | (6,900) |
As of September 30, 2023 | 9,958,722 | 22,509 | 144,819 | (111,378) | 16,778 | 72,728 |
Accumulated | ||||||
other | ||||||
Contributed | comprehensive | Total | ||||
Common shares | surplus | Deficit | income | equity | ||
# | $ | $ | $ | $ | $ | |
As of January 1, 2024 | 9,963,722 | 22,560 | 144,819 | (115,027) | 16,005 | 68,357 |
Issuance of common shares (note 7) | 16,588 | 143 | - | - | - | 143 |
Dividends payable (note 7) | - | - | - | (1,796) | - | (1,796) |
Dividends paid | - | - | - | (3,589) | - | (3,589) |
Fair value adjustment | - | (1) | - | 1 | - | - |
Remeasurements of pensions | - | - | - | 2,585 | - | 2,585 |
Remeasurements of | ||||||
post-retirement benefits | - | - | - | 17 | - | 17 |
Cumulative translation adjustment | - | - | - | - | 575 | 575 |
Net income | - | - | - | 4,411 | 4,411 | |
As of September 30, 2024 | 9,980,310 | 22,702 | 144,819 | (113,398) | 16,580 | 70,703 |
The accompanying notes are an integral part of these unaudited condensed financial statements.
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KP Tissue Inc.
Unaudited Condensed Statements of Cash Flows
For the 9-month periods ended September 30, 2024 and September 30, 2023
(tabular amounts are in thousands of Canadian dollars)
9-month period | 9-month period | |
ended September | ended September | |
30, 2024 | 30, 2023 | |
$ | $ | |
Cash flows from (used in) operating activities | ||
Net income (loss) | 4,411 | (6,900) |
Items not affecting cash | ||
Equity loss (income) | (3,911) | 3,795 |
Dilution gain | (500) | (787) |
Deferred tax expense | - | 3,892 |
Total items not affecting cash | (4,411) | 6,900 |
Decrease in payable to investee | (660) | (137) |
Tax refunds, net | 660 | 137 |
Net cash from (used in) operating activities | - | - |
Cash flows from investing activites | ||
Dividends received, net | 5,239 | 5,242 |
Net cash from investing activities | 5,239 | 5,242 |
Cash flows used in financing activities | ||
Dividends paid, net | (5,239) | (5,242) |
Net cash used in financing activities | (5,239) | (5,242) |
Increase (decrease) in cash and cash equivalents during the period | - | - |
Cash and cash equivalents - Beginning of period | - | - |
Cash and cash equivalents - End of period | - | - |
The accompanying notes are an integral part of these unaudited condensed financial statements.
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KP Tissue Inc.
Notes to Unaudited Condensed Financial Statements
For the 9-month periods ended September 30, 2024 and September 30, 2023
(tabular amounts are in thousands of Canadian dollars, except share amounts)
-
General information
KP Tissue Inc. (KPT or the Corporation) was incorporated by articles of incorporation under the Canadian Business Corporations Act on October 1, 2012. As of September 30, 2024, the Corporation held a 12.7% interest in Kruger Products Inc. (Kruger Products). As of December 31, 2023, the Corporation held a 13.1% interest in Kruger Products.
On January 1, 2023, KPLP undertook a corporate reorganization (the Kruger Products Reorganization) pursuant to which KPLP sold and assigned to its wholly-owned subsidiary, Kruger Products, and Kruger Products purchased and assumed from KPLP, in exchange for common shares, all of the properties, operations, assets and liabilities of KPLP, and KPLP was subsequently dissolved and wound-up into its partners. As a result of the Kruger Products Reorganization, Kruger Products, as the successor corporate entity to KPLP, now operates the business previously operated by KPLP.
Kruger Products' principal business is to produce, distribute, market and sell a wide range of disposable tissue products, including bathroom tissue, facial tissue, paper towels and napkins for both the consumer and away-from-home markets in North America. The Corporation's headquarters are located in Mississauga, Ontario, Canada. - Basis of presentation
These unaudited condensed financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS Accounting Standards) applicable to the preparation of interim financial statements, including International Accounting Standards (IAS) 34 - Interim Financial Reporting as issued by the International Accounting Standards Board (IASB), and with interpretations of the International Financial Reporting Committee which the Canadian Accounting Standards Board has approved for incorporation into Part 1 of the CPA Canada Handbook - Accounting. These unaudited condensed financial statements should be read in conjunction with the annual audited financial statements of the Corporation for the year ended December 31, 2023.
These unaudited condensed financial statements were approved by the board of directors on November 12, 2024. -
Summary of significant accounting policies
The significant accounting policies used in the preparation of these unaudited condensed financial statements were disclosed in the annual audited financial statements of the Corporation for the year ended December 31, 2023 and have been applied to all periods presented.
Accounting standard issued but not yet implemented:
- IFRS 18, Presentation and Disclosure in Financial Statements. In April 2024, the IASB issued IFRS 18 to achieve comparability of the financial performance of similar entities. The standard, which replaces IAS 1, impacts the presentation of primary financial statements and notes, mainly the income statement where companies will be required to present separate categories of income and expense for operating, investing, and financing activities with prescribed subtotals for each new category. IFRS 18 will require management-defined performance measures to be explained and included in a separate note within the consolidated financial statements. The mandatory effective date would be for annual reporting periods beginning on or after January 1, 2027, including interim financial statements, and requires retrospective application. The Company is currently assessing the impact of the new standard.
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KP Tissue Inc.
Notes to Unaudited Condensed Financial Statements
For the 9-month periods ended September 30, 2024 and September 30, 2023
(tabular amounts are in thousands of Canadian dollars, except share amounts)
- Amendments to IFRS 9 and IFRS 7 - Amendments to the Classification and Measurement of Financial Instruments. On May 30, 2024, the IASB issued amendments to IFRS Accounting Standards 9 and IFRS Accounting Standards 7 aimed at improving the classification and measurement of financial instruments. The recent amendments simplify financial reporting by allowing earlier recognition of liabilities settled via electronic payments, clarifying the assessment of cash flows for basic lending arrangements, and refining definitions for non-recourse features and linked instruments. The amendments also introduce more detailed disclosure requirements for fair value changes in equity instruments and mandate reporting of terms that could affect cash flow timings or amounts. The amendment will be effective from January 1, 2026 and entities must apply these amendments retrospectively, with earlier adoption permitted. The Company is currently assessing the impact of the amendments.
- Critical accounting estimates and judgments
The preparation of these unaudited condensed financial statements in conformity with IFRS Accounting Standards requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities in the unaudited condensed financial statements and the disclosure of contingencies at the dates of the unaudited condensed statement of financial position, and the reported amounts of revenues and expenses during the reporting period. On a regular basis and with the information available, management reviews its estimates and judgements, including those related to fair value and the basis of accounting. Actual results could differ from those estimates. When adjustments become necessary, they are reported in earnings in the period in which they occur.
The estimates and judgement applied by management that most significantly affect the unaudited condensed financial statements are the same as the ones that applied to the annual audited financial statements for the year ended December 31, 2023. - Investment in associate
Changes in the carrying amount of the investment were as follows:
9-month period | 9-month period | ||
ended September | ended September | ||
30, 2024 | 30, 2023 | ||
$ | $ | ||
Opening balance | 68,162 | 79,338 | |
Increase in investment | 143 | 131 | |
Share of income (loss) | 4,758 | (2,909) | |
Depreciation of fair value increments | (847) | (886) | |
Share of other comprehensive income (loss) | 3,177 | 1,232 | |
Dilution gain | 500 | 787 | |
Dividends | (5,385) | (5,375) | |
Partnership unit refunds | 139 | - | |
Closing balance | 70,647 | 72,318 | |
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KP Tissue Inc.
Notes to Unaudited Condensed Financial Statements
For the 9-month periods ended September 30, 2024 and September 30, 2023
(tabular amounts are in thousands of Canadian dollars, except share amounts)
The following summarizes financial information about the assets, liabilities, revenue and net income (loss) of Kruger Products, in which the Corporation holds a 12.7% interest as of September 30, 2024. The financial information was derived from the unaudited condensed consolidated financial statements of Kruger Products for the 9-month period ended September 30, 2024. The assets and liabilities disclosed include the fair value adjustments made to the carrying amount of the assets and liabilities of the associate on its acquisition.
September 30, 2024 | |||||
Kruger Products | KPT basis of | ||||
basis of accounting | Fair value increment | accounting | |||
$ | $ | $ | |||
Current assets | 584,320 | - | 584,320 | ||
Non-current assets | 1,910,917 | 301,936 | 2,212,853 | ||
Liabilities | 1,828,241 | - | 1,828,241 | ||
Net assets | 666,996 |
3-month period ended September 30, 2024
$
9-month period ended September 30, 2024
$
Revenue | 521,085 | 1,510,317 | |||
Net income attributable to Kruger Products | 17,993 | 37,541 | |||
Other comprehensive income (loss) | (10,736) | 25,154 | |||
Total comprehensive income | |||||
attributable to Kruger Products | 7,257 | 62,695 | |||
December 31, 2023 | |||||
Kruger Products | KPT basis of | ||||
basis of accounting | Fair value increment | accounting | |||
$ | $ | $ | |||
Current assets | 542,854 | - | 542,854 | ||
Non-current assets | 1,782,776 | 307,973 | 2,090,749 | ||
Liabilities | 1,712,003 | - | 1,712,003 | ||
Net assets | 613,627 |
3-month period ended September 30, 2023
$
9-month period ended September 30, 2023
$
Revenue | 473,399 | 1,390,693 |
Net income (loss) attributable to Kruger Products | 12,928 | (21,849) |
Other comprehensive income | 25,770 | 10,827 |
Total comprehensive income (loss) | ||
attributable to Kruger Products | 38,698 | (11,022) |
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KP Tissue Inc.
Notes to Unaudited Condensed Financial Statements
For the 9-month periods ended September 30, 2024 and September 30, 2023
(tabular amounts are in thousands of Canadian dollars, except share amounts)
The following shows the reconciliation of KPT's portion of Kruger Products equity to the investment recorded in KPT:
September 30, 2024 | December 31, 2023 | ||
$ | $ | ||
Kruger Products consolidated equity | 666,996 | 613,627 | |
Add back: Inception value of Partnership units liability | (a) | 118,562 | 118,562 |
Less: Equity pertaining to Kruger Inc. and KPGP | (635,784) | (585,120) | |
Equity pertaining to KPT | 149,774 | 147,069 | |
Investment in associate recorded in KPT | 70,647 | 68,162 | |
Reconciling difference | 79,127 | 78,907 | |
Reconciling items since inception: | |||
Equity issuance costs | (11,110) | (11,110) | |
Depreciation of fair value increments | 61,183 | 60,336 | |
Currency translation adjustment in fair value increments | (2,950) | (2,962) | |
Tax Distribution | 9,181 | 9,320 | |
Gain on exercise of overallotment option | (375) | (375) | |
Dilution gain | (4,802) | (4,302) | |
Impairment in investment in associate | 28,000 | 28,000 | |
- | - |
- As a result of the Kruger Products Reorganization, KPLP's Partnership unit liability was extinguished as KPLP's Partnership Agreement was terminated in accordance with its terms and KPLP's corresponding requirement to make the Tax Distribution was eliminated.
With respect to KPT's investment in Kruger Products, the liability of KPT for the debts, liabilities and other obligations of Kruger Products is limited to KPT's capital contribution to Kruger Products.
6 Income taxes
As a result of the Kruger Products Reorganization (note 1), KPLP's tax status changed from a limited partnership to a corporation. Kruger Products is, therefore, a tax paying entity and will recognize income tax provisions directly. KPT no longer incurs taxable income and therefore the Deferred tax liability of $5.7 million recorded in KPT's audited statement of financial position as of December 31, 2022 was derecognized through the unaudited condensed statement of comprehensive income (loss) for the 9-month period ended September 30, 2023, as Deferred tax expense of $3.9 million and through Other comprehensive income (OCI) remeasurement of pension of $6.9 million Deferred tax recovery, OCI remeasurement of post retirement benefits of $0.5 million Deferred tax recovery and OCI cumulative translation adjustment of $2.2 million Deferred tax recovery.
8
KP Tissue Inc.
Notes to Unaudited Condensed Financial Statements
For the 9-month periods ended September 30, 2024 and September 30, 2023
(tabular amounts are in thousands of Canadian dollars, except share amounts)
7 Dividends
During the 9-month periods ended September 30, 2024 and September 30, 2023, the Corporation paid a quarterly dividend of $0.18 per share to shareholders. Pursuant to the Corporation Dividend Reinvestment Plan (DRIP), a portion of the dividend was reinvested by the shareholders, resulting in the Corporation issuing common shares. The proceeds were used to acquire additional shares of Kruger Products. The dividends paid, the additional common shares issued at the share price, and the gross proceeds were as follows:
9-month period ended September 30, 2024 | ||||
Issuance of | ||||
Dividends paid | Share price | Common shares | Gross proceeds | |
Dividend Payment Date | $ | $ | # | $ |
January 15, 2024 | 1,793 | 8.99 | 4,615 | 41 |
April 15, 2024 | 1,794 | 8.52 | 5,880 | 50 |
July 15, 2024 | 1,795 | 8.52 | 6,093 | 52 |
5,382 | 16,588 | 143 | ||
9-month period ended September 30, 2023 | ||||
Issuance of | ||||
Dividends paid | Share price | Common shares | Gross proceeds | |
Dividend Payment Date | $ | $ | # | $ |
January 16, 2023 | 1,790 | 10.18 | 4,682 | 48 |
April 17, 2023 | 1,791 | 10.25 | 3,000 | 30 |
July 17, 2023 | 1,791 | 10.30 | 5,064 | 53 |
5,372 | 12,746 | 131 |
Subsequent to September 30, 2024, on October 15, 2024, the Corporation paid a dividend of $1.8 million to shareholders at $0.18 per common share. Pursuant to the Corporation DRIP, a portion of the dividend was reinvested by the shareholders, resulting in the Corporation issuing 7,237 common shares at a price of $8.34.
Subsequent to September 30, 2024, the Corporation declared a dividend of $0.18 per common share to shareholders, payable on January 15, 2025.
As a result of the DRIP and Kruger Inc.'s reinvestment of its dividends from Kruger Products in common shares of Kruger Products, a dilution gain of $0.5 million was recorded during the 9-month period ended September 30, 2024 (9- month period ended September 30, 2023 - $0.8 million).
8 Economic dependence
The Corporation was created to acquire, and its business is limited to holding, a limited equity interest in Kruger Products, which is accounted for as an investment in an associate using the equity method of accounting. As such, the Corporation is economically dependent on Kruger Products and exposed to all the risks associated with the business of Kruger Products, including, but not limited to, liquidity risk.
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Disclaimer
KP Tissue Inc. published this content on November 13, 2024, and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on November 13, 2024 at 21:45:44.127.