K-Bro Linen Income Fund Announces 2006 Year End Results



    EDMONTON, March 7 /CNW/ - K-Bro Linen Income Fund ("K-Bro") (TSX -
KBL.UN) today announced its financial results for the year ended December 31,
2006.

    
    Highlights

    -   2006 revenue was $17.7 million for the fourth quarter and
        $65.1 million for the year, increases of 30.9% over the fourth
        quarter of 2005 and 24.7% over the comparable twelve months of 2005.
    -   EBITDA for the fourth quarter increased over 2005 by 16.6% to
        $2.3 million and for the twelve month period ended December 31
        increased by 9.2% to $8.3 million compared to the same 2005
        period.
    -   EBITDA margin improved to 13.0% in the fourth quarter of 2006 from
        12.2% in the third quarter primarily due to some stabilization of
        labor costs. However, the impact of labor costs saw the EBITDA margin
        decline from 14.6% in the fourth quarter of 2005 and for the twelve
        month periods, it declined from 14.8% in 2005 to 12.8% in 2006.
    -   For the year, K-Bro made distributions of $1.10 per unit and
        distributable cash was $1.39 per unit. This amounted to annual
        distributions of $5.7 million compared to distributable cash of
        $7.2 million for a payout ratio of 79.3%.
    -   Earnings before income taxes declined in 2006 as a result of the
        decreased EBITDA margin and increased amortization charges; however,
        as a result of a reduction in future income tax rates, net earnings
        after taxes increased in 2006 to $3.9 million from $3.5 million in
        fiscal 2005.

    Financial Highlights (in 000's except per unit amounts)

    The following table provides certain selected consolidated financial and
operating data prepared by K-Bro management for the periods indicated:

                                            For the               For the
                                            fiscal              three-month
                                         periods ended         periods ended
                                          December 31           December 31
                                        2006(1)   2005(2)     2006      2005
    -------------------------------------------------------------------------
    Revenue                            $65,108   $48,102   $17,712   $13,531
    -------------------------------------------------------------------------
    Operating expenses                  56,773    40,988    15,413    11,560
    -------------------------------------------------------------------------
    EBITDA(3)                           $8,335    $7,114    $2,299    $1,971
    -------------------------------------------------------------------------
    EBITDA(3) as a % of revenue          12.8%     14.8%     13.0%     14.6%
    -------------------------------------------------------------------------
    Earnings before income taxes        $2,667    $3,159      $696      $885
    -------------------------------------------------------------------------
    Income tax recovery                  1,211       293       269        93
    -------------------------------------------------------------------------
    Net earnings                        $3,878    $3,452      $964      $978
    -------------------------------------------------------------------------
    Basic & diluted earnings
     per Unit                            $0.74     $0.78     $0.17     $0.22
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Total assets                       $75,074   $58,458   $75,074   $58,458
    -------------------------------------------------------------------------
    Long-term debt, end of period       $9,278    $5,401    $9,278    $5,401
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Cash provided by operating
     activities                         $4,558    $7,117    $2,926    $3,011
    -------------------------------------------------------------------------
    Net change in non-cash working
     capital items                       3,223      (363)     (820)   (1,126)
    -------------------------------------------------------------------------
    Maintenance capital expenditures      (539)     (589)      (75)     (372)
    -------------------------------------------------------------------------
    Cash taxes                               -         -         -         6
    -------------------------------------------------------------------------
    Distributable cash(3)               $7,242    $6,165    $2,031    $1,518
    -------------------------------------------------------------------------
    Distributions declared              $5,749    $4,223    $1,511    $1,158
    -------------------------------------------------------------------------
    Payout ratio(3)                      79.3%     68.6%     74.3%     79.4%
    -------------------------------------------------------------------------
    Notes: (1)   For the period January 1 to December 31.
           (2)   For the period February 3 to December 31.
           (3)   Non-GAAP Measures:
                 In order to provide a better understanding of its results,
                 K-Bro uses the terms EBITDA, Distributable cash and Payout
                 ratio. These are not earnings or cashflow measures
                 recognized by Canadian generally accepted accounting
                 principles ("GAAP") and have no standardized meaning
                 prescribed by GAAP. Therefore, EBITDA, Distributable cash
                 and Payout ratio may not be comparable to similar measures
                 presented by other issuers. EBITDA is defined by management
                 as revenue less operating expenses which represents income
                 from operations before amortization. Distributable cash 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 a non-GAAP measure generally
                 used by Canadian income trusts 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 GAAP. This measure is commonly used by
                 management, and management believes by investors and other
                 stakeholders, to evaluate the ongoing performance of K-Bro.
                 K-Bro reports on its payout ratio (calculated as actual cash
                 distributions divided by distributable cash) because
                 management believes that this is a key measure used by
                 investors to value K-Bro, assess its performance and provide
                 an indication of the sustainability of its distributions.
                 The payout ratio depends on the distributable cash and the
                 Fund's distribution policy.
    

    The revenue increase in the fourth quarter of 2006 was the result of the
acquisition of Premier Linen Supply and new customers added during the year,
as well as increases in price and volume from existing customers. In 2006,
K-Bro commenced processing for new customers with annualized revenues of
approximately $5,100. These included the previously announced new customers in
Toronto (St. Michael's Hospital, Mount Sinai Hospital and Westin Harbour
Castle hotel) and in Calgary (Fairmont Palliser hotel, Delta Calgary Airport
hotel and the Delta Lodge at Kananaskis).
    EBITDA increased by $328 (16.6%) for the quarter compared to 2005 as a
result of this additional volume; however, as a percentage of revenue, EBITDA
declined in the fourth quarter to 13.0% vs. 14.6% for the 2005 quarter. The
main cause of this reduction continues to be higher labor costs in a tight
Alberta market.
    K-Bro generated cash from operating activities of $2,926 for the 2006
fourth quarter, a decrease of $84 compared to the fourth quarter of 2005. This
decrease is attributable to an increased working capital requirement
associated with higher accounts receivable as a result of higher revenues and
increased purchases of linen for new healthcare customers.

    Outlook

    "We have seen some stabilization of costs in the Alberta labor market but
it remains a major focus. We continue to achieve revenue and EBITDA growth
that is very satisfying but our margins remain under pressure from these labor
costs" said Linda McCurdy, President and Chief Executive Officer. "Our
short-term focus remains on our cost profile; however, we continue to pursue
potential growth opportunities and we are in the process of finalizing
negotiations on a further ten year contract with the Calgary Health Region,
all of which bode well for the future."
    Further information can be found in the disclosure documents filed by
K-Bro Linen Income Fund with the securities regulatory authorities, available
at www.sedar.com.

    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
owns and operates processing plants from leased facilities in five Canadian
cities: Toronto, Edmonton, Calgary, Vancouver and Victoria.

    Financial Results

    K-Bro completed its initial public offering and acquired K-Bro Holdco
Inc. on February 3, 2005. Figures expressed in percentages are calculated from
actual unrounded amounts.

    Notice to Readers
    This news release contains forward-looking information that represents
internal expectations, estimates or beliefs. Certain statements contained
within this news release constitute forward-looking statements. The use of any
of the words "anticipate", "continue", "expect", "may", "will", "project",
"should", "believe", and similar expressions are intended to identify forward
looking statements. The expectations, estimates and beliefs contained in such
forward-looking statements necessarily involve known and unknown risks and
uncertainties which may cause the Fund's actual performance and financial
results in future periods to differ materially from any expectations,
estimates and beliefs of future performance or results expressed or implied by
such forward-looking statements. These risks and uncertainties include, among
other things, K-Bro's competitive environment, utility costs, integration of
acquisitions, K-Bro's dependence on long-term contracts, the availability of
future financing, the impact of the federal government's proposed "Tax
Fairness" plan and such other risks and uncertainties as described in the
Fund's periodic reports filed with Canadian securities regulatory authorities.
Accordingly, unitholders and potential investors are cautioned that events or
circumstances could cause actual results to differ materially from those
discussed. The Fund does not undertake any obligation to publicly revise these
forward-looking statements to reflect subsequent events or circumstances,
except as required by applicable law.

    %SEDAR: 00021539E




For further information:

For further information: Linda McCurdy, President & CEO, K-Bro Linen
Income Fund, Phone: (780) 453-5218; Doug Thomson, C.A., Vice-President & CFO,
K-Bro Linen Income Fund, Phone: (780) 453-5218


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