K-BRO ANNOUNCES FIRST QUARTER RESULTS AND DECLARES MAY DIVIDEND

(TSX: KBL)

Q1, 2011 Financial Results

  • Revenue for the three months ended March 31, 2011 was $27.7 million, an increase of 15.7% over the comparable 2010 period.
  • EBITDA for the first quarter increased by $0.8 million or by 21.8% to $4.5 million compared to $3.7 million in Q1, 2010.
  • EBITDA margin increased in the first quarter to 16.2% from 15.4% in the comparative period of 2010 due to costs associated with the acquisition of the second Vancouver plant incurred in Q1, 2010.
  • K-Bro declared eligible dividends of $0.09167 per common share per month in the quarter which equates to $1.10 on an annualized basis.
  • Net earnings after taxes increased to $1.6 million from $1.4 million as a result of the increased volume and earnings which were offset by income taxes as a result of the transition to a Corporation from a Fund.

EDMONTON, May 16 /CNW/ - K-Bro Linen Inc ("K-Bro" or the "Corporation") today announced revenue of $27.7 million and EBITDA of $4.5 million for the three-months ended March 31, 2011.  Net earnings after tax were $1.6 million, diluted earnings per common share of $0.22 and cash flow from operations of $4.14 million were realized in the quarter.

               
(thousands, except per share amounts and   For the three months ended March 31
percentages)   2011   2010   $ Change   % Change
Revenue   $ 27,686   $ 23,932   3,754   15.7%
Operating expenses   23,207   20,256   2,951   14.6%
EBITDA(1)   4,479   3,676   803   21.8%
EBITDA(1) as a % of revenue   16.2%   15.4%     - 0.8%
Earnings before income taxes   2,153   1,385   768   55.5%
Income tax expense (recovery)   597   (42)   639   -1521.4%
Net earnings   1,556   1,427   129   9.0%
Basic earnings per Share   $ 0.23   $ 0.21   0.02   9.5%
Diluted earnings per Share   $ 0.22   $ 0.20   0.02   10.0%
                 
Total assets   90,473   94,323   (3,850)   -4.1%
Long-term debt, end of period   8,838   15,912   (7,074)   -44.5%
                 
Cash provided by operating activities   4,137   3,330   807   24.2%
Net change in non-cash working capital items   130   (205)   335   -163.4%
Maintenance capital expenditures   224   534   (310)   -58.1%
Distributable cash flow(1)   3,783   3,001   782   26.1%
Dividends declared   1,927   1,927   -   0.0%
Payout ratio(1)   50.8%   64.1%   -   -13.3%
(1)Refer to the Terminology section for further details

In the first quarter of 2011, revenue was $27.7 million which is 15.7% higher than the $23.9 million generated in the comparable period in 2010. This year-over-year increase was due to a combination of the acquisition of the second plant in Vancouver and the additional volume from the acquisition of the healthcare contracts in Vancouver which commenced processing in late Q4, 2010.  EBITDA increased from $3.7 million in Q1, 2010 to $4.5 million in Q1, 2011, from contributions from our second plant in Vancouver, the additional healthcare volume in Vancouver and reduced corporate costs.

DIVIDEND

K-Bro also announces a dividend of $0.09167CAD per common share of the Corporation for the period from May 1 to 31, 2011, to be paid on June 15, 2011 to holders of record of common shares on May 31, 2011.

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

"K-Bro continued to generate solid cash flow and strong operating performance in the first quarter of 2011.  Both revenues and overall volumes are up in the quarter which has offset increasing pressure on labour costs," said Linda McCurdy, President & Chief Executive Officer. "Our focus remains firmly on executing our strategies and developing shareholder value.  K-Bro's financial position is healthy; our balance sheet remains robust and we plan to continue evaluating opportunities for growth."

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 has seven processing plants in six Canadian cities: Québec City, Toronto, Edmonton, Calgary, Vancouver and Victoria.

K-Bro Linen Inc. carries on the business previously conducted by K-Bro Linen Income Fund (the "Fund").  Additional information regarding the Corporation and the predecessor Fund 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").

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", "distributable cash flow" and "payout ratio". These terms do not have any standardized meaning under International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board. 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
March 31,
(thousands)     2011     2010
Net earnings     $ 1,556     $ 1,427
Add:            
Income tax expense (recovery)     597     (42)
Interest expense and financial charges, net     104     127
Depreciation of property, plant and equipment     1,575     1,546
Amortization of intangible assets     641     618
Loss on disposal of property, plant and equipment     6     -
EBITDA     $ 4,479     $ 3,676

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
March 31
(thousands)     2011   2010
Cash provided by operating activities     $ 4,137   $ 3,330
Deduct (add):          
Net changes in non-cash working capital items     130   (205)
Maintenance capital expenditures     224   534
Distributable cash flow     $ 3,783   $ 3,001
Dividends declared     1,927   1,927
Payout ratio     50.8%   64.1%

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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