K-Bro Reports Best Quarterly Financial Results in History

(TSX: KBL)

Q3, 2011 Financial Results

  • Revenue for the three months ended September 30, 2011 was $31.1 million, an increase of 13.3% over Q3, 2010.
  • EBITDA for the third quarter increased by $1.1 million or by 26.3% to $6.0 million compared to $4.9 million in Q3, 2010.
  • EBITDA margin increased in Q3, 2011 to 19.4% from 17.9% in Q3, 2010 due to efficiencies realized on additional volume and synergies achieved in recent plant acquisitions.
  • K-Bro declared eligible dividends of $0.09167 per common share per month in the quarter totaling $0.275 per share or $1.10 on an annualized basis.
  • Net earnings after taxes increased to $2.7 million from $2.3 million as a result of the flow through of revenue and EBITDA from reduced corporate costs.

EDMONTON, Nov. 9, 2011 /CNW/ - K-Bro Linen Inc ("K-Bro" or the "Corporation") today announced revenue of $31.1 million and EBITDA of $6.0 million for the three-months ended September 30, 2011.  Net earnings after tax of $2.7 million, diluted earnings per common share of $0.39, cash flow from operations of $8.2 million and distributable cash flow of $5.3 million were realized in the quarter.

     
(thousands, except per share amounts For the three months ended September 30,  
and percentages) 2011 2010 $ Change % Change  
                   
Revenue  $ 31,144   $ 27,498    3,646  13.3%  
Operating expenses   25,098     22,570    2,528  11.2%  
EBITDA(1)   6,046     4,928    1,118  22.7%  
EBITDA(1) as a % of revenue   19.4%     17.9%   1.5%  
Earnings before income taxes   3,679     2,396    1,283  53.6%  
Income tax expense   953     138    815  590.6%  
Net earnings   2,726     2,258    468  20.7%  
Basic earnings per Share  $ 0.39    $ 0.33    0.06  18.2%  
Diluted earnings per Share  $ 0.39   $ 0.32    0.07  21.9%  
                   
Total assets   90,350     91,713    (1,363) -1.5%  
Long-term debt, end of period   7,224     11,097    (3,873) -34.9%  
                   
Cash provided by operating activities   8,217     5,200    3,017  58.0%  
Net change in non-cash working capital items   2,928     452    2,476  547.8%  
Maintenance capital expenditures   9     173    (164) -94.8%  
Distributable cash flow(1)   5,280     4,575    705  15.4%  
Dividends declared   1,927     1,927    0.0%  
Payout ratio(1)   36.4%     41.9%   -5.6%  
(1) Refer to the Terminology section for further details                  

 

     
(thousands, except per share amounts For the nine months ended September 30,  
and percentages) 2011 2010 $ Change % Change  
                   
Revenue  $ 87,701    $ 77,331    10,370  13.4%  
Operating expenses   72,310     64,465    7,845  12.2%  
EBITDA(1)   15,391      12,866    2,525  19.6%  
EBITDA(1) as a % of revenue   17.5%     16.6%   0.9%  
Earnings before income taxes   8,557     5,546    3,011  54.3%  
Income tax expense   2,272     151    2,121  1408.6%  
Net earnings   6,285     5,395    890  16.5%  
Basic earnings per Share  $ 0.91    $ 0.78    0.13  16.7%  
Diluted earnings per Share  $ 0.90    $ 0.77    0.13  16.9%  
                   
Total assets   90,350     91,713    (1,363)  -1.5%  
Long-term debt, end of period   7,224     11,097    (3,873)  -34.9%  
                   
Cash provided by operating activities   14,931      13,004    1,927  14.8%  
Net change in non-cash working capital items   1,322     660    662  100.3%  
Maintenance capital expenditures   656     1,158    (502)  -43.4%  
Distributable cash flow(1)   12,953     11,186    1,767  15.8%  
Dividends declared   5,780      5,780    0.0%  
Payout ratio(1)   44.4%     51.6%   -7.2%
(1) Refer to the Terminology section for further details    

For the nine months ended September 30, 2011, revenue was $87.7 million, compared to $77.3 million for the comparative period in 2010. EBITDA was $15.4 million compared to $12.9 million for the same period last year. Net earnings for the nine months ended September 30, 2011 were $6.3 million, or $0.90 per share (diluted), compared to $5.4 million, or $0.77 per share, for the same period in 2010.  Distributable cash flow for the nine months ended September 30, 2011 was $13.0 million compared to $11.2 million for the comparable period, or an increase of 15.8% on a year-over-year basis.

K-Bro management will host a conference call to discuss the Corporation's third quarter results at 9:00am Eastern Standard Time on November 10, 2011. To register and listen to the conference call please visit www.newswire.ca.

OUTLOOK

"Third quarter results showed strong improvements in operational and financial performance compared to 2010.  Revenue and EBITDA increased by 13.1% and 22.7% as a result of both organic and acquisition growth.  Q3, 2011 is K-Bro's best quarterly results in our history, which demonstrates the strength and durability of our business model and strategy" said Linda McCurdy, President & CEO.  "We have transitioned new customers and volumes in key markets and integrated new facilities, including our recent acquisition of Dextraze in Montreal.  During the quarter we also commenced a strategic capital investment plan in several plants in order to further improve our service and increase our capacity."

CORPORATE PROFILE

K-Bro is the largest owner and operator of laundry and linen processing facilities in Canada. K-Bro provides a comprehensive range of general linen and operating room linen processing, management and distribution services to healthcare institutions, hotels and other commercial accounts.  K-Bro currently operates eight processing facilities under three distinctive brands, including K-Bro Linen Systems Inc., Buanderie HMR and Les Buanderies Dextraze, in seven Canadian cities: Québec City, Montréal, Toronto, Edmonton, Calgary, Vancouver and Victoria.

Additional information regarding the Corporation including required securities filings are available on our website at www.k-brolinen.com and on the Canadian Securities Administrators' website at www.sedar.com; the System for Electronic Document Analysis and Retrieval ("SEDAR").


K-Bro est le plus important propriétaire et exploitant de buanderies au Canada. K-Bro fournit une gamme étendue de services de buanderie aux établissements de soins de santé, hôtels et autres clients commerciaux. K-Bro exploite actuellement huit usines sous trois marques distinctives, incluant K-Bro Linen Systems Inc., Buanderie HMR et Les Buanderies Dextraze, dans sept villes canadiennes: Québec, Montréal, Toronto, Edmonton, Calgary, Vancouver et Victoria.

Vous pouvez obtenir des renseignements supplémentaires sur la Société, y compris les documents déposés auprès des autorités de réglementation, sur notre site Web, au www.k-brolinen.com et sur le site Web des autorités canadiennes en valeurs mobilières au www.sedar.com, le site Web du Système électronique de données, d'analyse et de recherche (« SEDAR »).

TERMINOLOGY

Results for the three and nine months ended September 30, 2011 are presented in conformity with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board and prior year results have been restated accordingly. Periods prior to January 1, 2010 will not be presented under IFRS.  Throughout this News Release, and other documents referred to, and in order to provide a better understanding of the financial results, K-Bro management uses the terms "EBITDA", "distributable cash flow" and "payout ratio". These terms do not have any standardized meaning under IFRS. Therefore, EBITDA, distributable cash flow and payout ratio may not be comparable to similar measures presented by other issuers.  Specifically, the terms "EBITDA", "distributable cash flow" and "payout ratio" have been defined as:

EBITDA is defined by management as revenue less operating expenses which represents income from operations before amortization.

       
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
(thousands)  2011 2010   2011 2010
                           
Net earnings  $ 2,726   $ 2,258      $ 6,285    $ 5,395  
Add:                          
Income tax expense      953     138       2,272     151  
Interest expense and financial charges, net      131     173       319     489  
Depreciation of property, plant and equipment      1,559     1,613       4,530     4,771  
Amortization of intangible assets      673     641       1,955     1,899  
Loss on disposal of property, plant and equipment      4     105       30     161  
EBITDA  $ 6,046    $ 4,928      $ 15,391    $ 12,866  

 

Distributable cash flow is defined by management as cash provided by operating activities, plus or minus the net change in non-cash working capital items, less maintenance capital expenditures. Management believes this measure reflects the cash generated from the ongoing operations of the business. Distributable cash flow is a non-IFRS measure and it should not be seen as a measurement of liquidity or a substitute for comparable metrics prepared in accordance with IFRS.

Payout ratio is defined by management as the actual cash dividends declared divided by distributable cash flow. The payout ratio depends on the distributable cash flow and the Corporation's dividend policy.


       
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
(thousands)   2011 2010   2011 2010
                            
 Cash provided by operating activities  $ 8,217    $ 5,200       $ 14,931    $  13,004   
Deduct (add):                          
Net changes in non-cash working capital items     2,928     452        1,322     660   
Maintenance capital expenditures     9     173        656     1,158   
 Distributable cash flow  $ 5,280    $ 4,575       $  12,953   11,186   
Dividends declared     1,927     1,927        5,780     5,780   
 Payout ratio   36.4%     41.9%       44.4%     51.6%  

 

Figures expressed in percentages are calculated from amounts rounded in thousands of dollars.

FORWARD LOOKING STATEMENTS

This News Release contains forward-looking information that represents internal expectations, estimates or beliefs concerning, among other things, future activities or future operating results and various components thereof. The use of any of the words "anticipate", "continue", "expect", "may", "will", "project", "should", "believe", and similar expressions suggesting future outcomes or events are intended to identify forward-looking information.  Statements regarding such forward-looking information reflect management's current beliefs and are based on information currently available to management.

These statements are not guarantees of future performance and are based on management's estimates and assumptions that are subject to risks and uncertainties, which could cause K-Bro's actual performance and financial results in future periods to differ materially from the forward-looking information contained in this News Release.  These risks and uncertainties include, among other things, (i) risks associated with acquisitions, including the possibility of undisclosed material liabilities; (ii) K-Bro's competitive environment; (iii) utility and labour costs; (iv) K-Bro's dependence on long-term contracts with the associated renewal risk;, (v) increased capital expenditure requirements; (vi) reliance on key personnel; (vii) changing trends in government outsourcing; and (viii) the availability of future financing. Material factors or assumptions that were applied in drawing a conclusion or making an estimate set out in the forward-looking information include: (i) volumes and pricing assumptions; (ii) utility costs; (iii) expected impact of labour cost initiatives; and (iv) the level of capital expenditures. Although the forward-looking information contained in this News Release is based upon what management believes are reasonable assumptions, there can be no assurance that actual results will be consistent with these forward-looking statements.  Certain statements regarding forward-looking information included in this News Release may be considered "financial outlook" for purposes of applicable securities laws, and such financial outlook may not be appropriate for purposes other than this News Release.

All forward-looking information in this News Release is qualified by these cautionary statements.  Forward-looking information in this News Release is presented only as of the date made. Except as required by law, K-Bro does not undertake any obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances.

SOURCE K-Bro Linen Inc.

For further information:

Linda McCurdy 
President & Chief Executive Officer   
Christopher Burrows
Vice-President & Chief Financial Officer
 
K-Bro Linen Inc.  (TSX: KBL)
Phone: 780.453.5218 
Email: inquiries@k-brolinen.com
Web: www.k-brolinen.com

 


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