K-Bro Announces 2015 Annual Results and Declares March Dividend

(TSX: KBL)

2015 Annual Financial Results

  • Revenue for the three and twelve months ended December 31, 2015 was $37.7 million and $144.5 million, respectively, increases of 11.5% and 5.9% over the comparable 2014 periods.

  • EBITDA for the fourth quarter decreased by $0.1 million to $6.2 million for Q4, 2015 compared to $6.3 million for Q4, 2014. On an annual basis, 2015 EBITDA increased by $0.9 million to $27.1 million compared to the 2014 fiscal year.

  • EBITDA margin decreased in the fourth quarter to 16.4% from 18.7% in the comparative period of 2014. For the year, the EBITDA margin decreased from 19.2% in 2014 to 18.8% in 2015.

  • K-Bro declared dividends of $1.20 per common share and distributable cash was $2.69 per common share on a fully diluted basis.

  • Net earnings after taxes decreased by $0.1 million to $12.1 million from fiscal 2014.

Highlights and Significant Items for Fiscal 2015

During Q4, K-Bro completed construction of the new Regina facility. Management estimates that the total costs to commission the new facility are $35.6 million for new laundry equipment, land and building. Transition into and start-up of the new facility continued in Q4, with the initial processing and delivery of the 3sHealth volume. As anticipated, transition and start-up costs associated with the new facility were incurred during Q3 and Q4, which negatively impacted the EBITDA margin. 



(thousands, except per share amounts

For the three months ended December 31,

and percentages)

2015

2014

$ Change

% Change

Revenue

$

37,680

$

33,793

3,887

11.5%

Operating expenses

31,507

27,460

4,047

14.7%

EBITDA(1)

6,173

6,333

(160)

-2.5%

EBITDA(1)as a % of revenue

16.4%

18.7%

-

-2.3%

Earnings before income taxes

2,986

4,005

(1,019)

-25.4%

Income tax expense

828

922

(94)

-10.2%

Net earnings

2,158

3,083

(925)

-30.0%

Basic earnings per Share

$

0.27

$

0.43

(0.16)

-37.2%

Diluted earnings per Share

$

0.27

$

0.43

(0.16)

-37.2%

Dividends declared per diluted share

$

0.30

$

0.30

-

0.0%






Total assets

143,023

132,638

10,385

7.8%






Cash provided by operating activities

3,897

9,401

(5,504)

-58.5%

Net change in non-cash working capital items

(1,387)

3,878

(5,265)

-135.8%

Share-based compensation expense(1)

262

306

(44)

-14.4%

Maintenance capital expenditures

420

309

111

35.9%

Distributable cash flow(1)

4,602

4,908

(306)

-6.2%

Dividends declared

2,396

2,220

176

7.9%

Payout ratio(1)

52.1%

45.2%

-

6.9%

(1) Refer to the Terminology section for further details






(thousands, except per share amounts

For the year ended December 31,

and percentages)

2015

2014

$ Change

% Change






Revenue

$

144,537

$

136,440

8,097

5.9%

Operating expenses

117,397

110,199

7,198

6.5%

EBITDA(1)

27,140

26,241

899

3.4%

EBITDA(1)as a % of revenue

18.8%

19.2%

-

-0.4%

Earnings before income taxes

17,261

16,663

598

3.6%

Income tax expense

5,193

4,465

728

16.3%

Net earnings

12,068

12,198

(130)

-1.1%

Basic earnings per Share

$

1.52

$

1.72

(0.20)

-11.6%

Diluted earnings per Share

$

1.52

$

1.72

(0.20)

-11.6%

Dividends declared per diluted share

$

1.21

$

1.20

0.01

0.8%











Total assets

143,023

132,638

10,385

7.8%

Long-term debt, end of period

2,349

-

2,349

100.0%






Cash provided by operating activities

17,617

23,909

(6,292)

-26.3%

Net change in non-cash working capital items

(6,321)

1,340

(7,661)

-571.7%

Share-based compensation expense(1)

1,304

1,099

205

18.7%

Maintenance capital expenditures

1,279

1,242

37

3.0%

Distributable cash flow(1)

21,355

20,228

1,127

5.6%

Dividends declared

9,570

8,498

1,072

12.6%

Payout ratio(1)

44.8%

42.0%

-

2.8%

(1) Refer to the Terminology section for further details.

EDMONTON, March 10, 2016 /CNW/ - K-Bro Linen Inc. ("K-Bro" or the "Corporation") today announced revenue of $144.5 million and EBITDA of $27.1 million for the year ended December 31, 2015. Net earnings after tax were $12.1 million, diluted earnings per common share were $1.52, and distributable cash was $2.69 per diluted common share for the year.

DIVIDEND

K-Bro also announces a dividend of $0.10 per common share of the Corporation payable on April 15, 2016 to Shareholders of record on March 31, 2016. The Corporation's policy is for shareholders of record on the last business day of a calendar month to receive dividends during the fifteen days following the end of such month. K-Bro designates this dividend as an eligible dividend pursuant to subsection 89(14) of the Income Tax Act (Canada) and similar provincial and territorial legislation.

OUTLOOK

"During 2015 we enjoyed considerable successes – we once again achieved new records in revenue and completed the construction of our new facility in Regina." said Linda McCurdy, President & Chief Executive Officer. "Looking forward, fiscal 2016 will bring additional changes and growth to K-Bro, as we continue to further grow the business in the Saskatchewan market, relocate into a new state-of-the-art facility in Toronto and further expand our relationship with various Health Authorities in Vancouver. This year marked the tenth consecutive year of stable growth and reliable dividends to our shareholders."

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 nine processing facilities and two distribution centres under three distinctive brands, including K-Bro Linen Systems Inc., Buanderie HMR and Les Buanderies Dextraze, in ten Canadian cities: Québec City, Montréal, Toronto, Regina, Saskatoon, Prince Albert, 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 neuf usines et deux centres de distribution sous trois entités distinctes, incluant K-Bro Linen Systems Inc., Buanderie HMR et Les Buanderies Dextraze, dans dix villes canadiennes: Québec, Montréal, Toronto, Regina, Saskatoon, Prince Albert, 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, via le Système électronique de données, d'analyse et de recherche (« SEDAR »).

TERMINOLOGY

Throughout this news release, and other documents referred to, and in order to provide a better understanding of the financial results, K-Bro uses the terms "EBITDA", "Adjusted EBITDA", "Adjusted net earnings", "Adjusted net earnings per share", "distributable cash" and "payout ratio". These terms do not have any standardized meaning under International Financial Reporting Standards ("IFRS") as set out in the CPA Handbook. Therefore, EBITDA, Adjusted EBITDA, Adjusted net earnings, Adjusted net earnings per share, distributable cash and payout ratio may not be comparable to similar measures presented by other issuers. Specifically, the terms "EBITDA", "Adjusted EBITDA", "Adjusted net earnings", "Adjusted net earnings per share", "distributable cash", and "payout ratio" have been defined as:

EBITDA is defined as earnings before interest, income taxes, depreciation, and amortization. EBITDA is not a recognized measure for financial statement presentation under IFRS. EBITDA is not intended to represent cash flow from operations, as defined by IFRS, and it should not be considered as an alternative to net earnings, cash flow from operations, or any other measure of performance prescribed by IFRS. The Corporation's EBITDA may also not be comparable to EBITDA used by other corporations, which may be calculated differently. The Corporation considers EBITDA to be a meaningful measure to assess its operating performance in addition to standardized IFRS measures. It is included because the Corporation believes it can be useful in measuring its ability to service debt, fund capital expenditures, and expand its business.










Three Months Ended
December 31,


Year Ended
December 31,

(thousands)


2015

2014


2015

2014

Net earnings


2,158

3,083


$

12,068

$

12,198

Add:








Income tax expense


828

922


5,193

4,465


Depreciation of property, plant and equipment


2,353

1,725


7,573

6,817


Amortization of intangible assets


506

530


2,009

2,121


Finance expense


156

103


107

593


Loss (gain) on disposal of property, plant and equipment


172

(30)


190

47

EBITDA


$

6,173

$

6,333


$

27,140

$

26,241

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 and less cash taxes. Management believes this measure reflects the cash generated from the ongoing operation of the business. Distributable cash is an additional GAAP measure generally used by dividend paying corporations as an indicator of financial performance and it should not be seen as a measurement of liquidity or a substitute for comparable metrics prepared in accordance with IFRS.










Three Months Ended
December 31,


Year Ended
December 31,

(thousands)


2015

2014


2015

2014

Cash provided by operating activities


$

3,897

$

9,401


$

17,617

$

23,909

Deduct (add):



-



-


Net changes in non-cash working capital items


(1,387)

3,878


(6,321)

1,340


Share-based compensation expense


262

306


1,304

1,099


Maintenance capital expenditures


420

309


1,279

1,242

Distributable cash flow


$

4,602

$

4,908


$

21,355

$

20,228

Payout ratio is defined by management as the actual cash divided by distributable cash. This is a key measure used by investors to value K-Bro, assess its performance and provide an indication of the sustainability of dividends. The payout ratio depends on the distributable cash and the Corporation's dividend policy.












Three Months Ended
December 31,


Year Ended
December 31,

(thousands)


2015

2014


2015

2014


Cash dividends


2,396

2,220


9,570

8,498


Distributable cash


4,602

4,908


21,355

20,228

Payout ratio


52.1%

45.2%


44.8%

42.0%

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 inherent 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; and (vii) 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; (iv) foreign exchange rates; and (v) 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, the Corporation disclaims any intention or obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances.

SOURCE K-Bro Linen Inc.

For further information: Linda McCurdy, President & Chief Executive Officer or Kristie Plaquin, 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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http://www.k-brolinen.com

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