K-Bro Linen Income Fund Announces 2007 Year End Results



    EDMONTON, March 10 /CNW/ - K-Bro Linen Income Fund ("K-Bro") (TSX -
KBL.UN) today announced its financial results for the year ended December 31,
2007.

    Highlights

    
    -   Revenue for the three and twelve months ended December 31, 2007 was
        $18.7 million and $74.1 million respectively, increases of 5.7% and
        13.8% over the comparable 2006 periods.
    -   EBITDA for the fourth quarter decreased by $0.4 million to
        $1.9  million from 2006 but for the 2007 year, EBITDA increased by
        $0.9 million to $9.2 million compared to the 2006 fiscal year. The
        EBITDA margin declined in the fourth quarter to 10.1% from 13.0% in
        the fourth quarter of 2006 due to the escalation in the cost of
        Alberta labour as well as higher equipment repair and linen costs.
        For the year, the EBITDA margin declined from 12.8% in 2006 to 12.4%
        in 2007 primarily as a result of the Alberta labour costs.
    -   For the year, K-Bro made distributions of $1.10 per unit and
        distributable cash was $1.40 per unit. This amounted to annual
        distributions of $6.0 million compared to distributable cash of
        $7.7 million for a payout ratio of 78.5%.
    -   Earnings before income taxes declined in 2007 as a result of the
        decreased EBITDA margin and increased amortization charges; however,
        as a result of a one time pick-up resulting from a reduction in
        future income tax rates, net earnings after taxes increased in 2007
        to $4.1 million from $3.9 million in 2006.

    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:

    -------------------------------------------------------------------------
    Fiscal year                                    2007
    -------------------------------------------------------------------------
                               Total      Q4        Q3        Q2        Q1
    -------------------------------------------------------------------------
    Revenue                   74,101    18,725    19,059    18,560    17,757
    -------------------------------------------------------------------------
    Operating expenses        64,913    16,842    16,630    16,050    15,391
    -------------------------------------------------------------------------
    EBITDA(1)                  9,188     1,883     2,429     2,510     2,366
    -------------------------------------------------------------------------
    EBITDA as a % of revenue   12.4%     10.1%     12.7%     13.5%     13.3%
    -------------------------------------------------------------------------
    Earnings before income
     taxes                     2,556       185       756       881       734
    -------------------------------------------------------------------------
    Income tax recovery        1,558       859       262       220       217
    -------------------------------------------------------------------------
    Net earnings               4,114     1,044     1,018     1,101       951
    -------------------------------------------------------------------------
    Basic & diluted earnings
     per Unit                   0.75      0.19      0.19      0.20      0.17
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Total assets              83,342    83,342    76,384    74,119    74,030
    -------------------------------------------------------------------------
    Long-term debt, end of
     period                   16,627    16,627    12,734     9,510     7,478
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Cash provided (used) by
     operating activities      6,942     2,966       207       124     3,645
    -------------------------------------------------------------------------
    Net change in non-cash
     working capital items     1,366    (1,398)    1,991     2,231    (1,458)
    -------------------------------------------------------------------------
    Maintenance capital
     expenditures               (604)      (58)     (150)     (170)     (226)
    -------------------------------------------------------------------------
    Distributable cash(1)      7,704     1,510     2,048     2,185     1,961
    -------------------------------------------------------------------------
    Distributions declared     6,046     1,511     1,512     1,511     1,512
    -------------------------------------------------------------------------
    Payout ratio(1)            78.5%    100.0%     73.8%     69.2%     77.1%
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    Fiscal year                                    2006
    -------------------------------------------------------------------------
                               Total      Q4        Q3        Q2        Q1
    -------------------------------------------------------------------------
    Revenue                   65,108    17,712    17,024    16,362    14,010
    -------------------------------------------------------------------------
    Operating expenses        56,773    15,413    14,940    14,228    12,192
    -------------------------------------------------------------------------
    EBITDA(1)                  8,335     2,299     2,084     2,134     1,818
    -------------------------------------------------------------------------
    EBITDA as a % of revenue   12.8%     13.0%     12.2%     13.0%     13.0%
    -------------------------------------------------------------------------
    Earnings before income
     taxes                     2,667       696       562       780       629
    -------------------------------------------------------------------------
    Income tax recovery        1,211       269       727        90       125
    -------------------------------------------------------------------------
    Net earnings               3,878       964     1,289       870       755
    -------------------------------------------------------------------------
    Basic & diluted earnings
     per Unit                   0.74      0.17      0.24      0.16      0.17
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Total assets              75,074    75,074    75,024    72,260    72,408
    -------------------------------------------------------------------------
    Long-term debt, end of
     period                    9,278     9,278     9,861     6,303     4,000
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Cash provided (used) by
     operating activities      4,558     2,926       860      (432)    1,204
    -------------------------------------------------------------------------
    Net change in non-cash
     working capital items     3,223      (820)    1,074     2,497       472
    -------------------------------------------------------------------------
    Maintenance capital
     expenditures               (539)      (75)     (205)     (110)     (149)
    -------------------------------------------------------------------------
    Distributable cash(1)      7,242     2,031     1,729     1,955     1,527
    -------------------------------------------------------------------------
    Distributions declared     5,749     1,511     1,512     1,512     1,214
    -------------------------------------------------------------------------
    Payout ratio(1)            79.3%     74.3%     87.4%     77.8%     79.5%
    -------------------------------------------------------------------------

    (1) Non-GAAP Measures:
        In order to provide a better understanding of the results, K-Bro uses
        the terms EBITDA, distributable cash and payout ratio. These are not
        earnings or cashflow measures recognized by 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 investors, management and other stakeholders to
        evaluate the ongoing performance of K-Bro. K-Bro reports on its
        payout ratio (actual cash distribution divided by distributable cash)
        because this is a key measure used by investors to value K-Bro,
        assess its performance and provide an indication of the
        sustainability of distributions. The payout ratio depends on the
        distributable cash and the Fund's distribution policy.
    

    The 2007 fourth quarter revenue increase was primarily the result of
increases in price and volume from existing customers.
    EBITDA decreased by $416 for the quarter compared to 2006 as a result of
higher labour, linen and repair costs with the result that EBITDA as a
percentage of revenue declined in the fourth quarter to 10.1% vs. 13.0% for
the 2006 fourth quarter. For the year overall, EBITDA increased by $853 in
2007 from 2006.
    K-Bro generated cash from operating activities of $2,966 for the 2007
fourth quarter, virtually unchanged from the fourth quarter of 2006.

    Outlook

    "We're satisfied with the 2007 year as a whole although disappointed by
the Q4 EBITDA margin. We continue to achieve annual revenue and EBITDA growth
that is meaningful and are optimistic about our 2008 prospects" said Linda
McCurdy, President and Chief Executive Officer. "Although we expect 2008 to
start slowly from an EBITDA perspective with an anticipated payout ratio in
the first quarter that is significantly higher that past performance, it is
anticipated that 2008 as a whole will show a meaningful increase in revenue
and EBITDA compared to 2007 with an overall payout ratio that falls within
acceptable levels. This is based on the new Calgary plant and contract coming
on stream in the latter part of Q1 2008, anticipated positive results from our
labour cost initiatives and expected organic growth and market share
increases. The acquisition of the HMR laundry in Quebec City in January and
our successful bought deal equity financing in February will assist with this
growth in 2008 and beyond."
    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
has processing plants in six Canadian cities: Toronto, Edmonton, Calgary,
Vancouver, Victoria and Quebec City.

    Financial Results

    Figures expressed in percentages are calculated from actual unrounded
amounts.

    Notice to Readers

    This news release contains forward-looking information within the meaning
of applicable securities laws. 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 press release. These risks and uncertainties
include, among other things, (i) interruptions or delays in relocating K-Bro's
Calgary plant, and any consequential interruption in customer service; (ii)
risks associated with the acquisition of HMR, including additional expense
associated with completing an acquisition and amortizing any acquired
intangible assets; the difficulty of assimilating the operations and personnel
of the acquired business; the possibility of undisclosed material liabilities;
and the potential disruption of K-Bro's ongoing business and the distraction
of management from its day-to-day operations; (iii) K-Bro's competitive
environment; (iv) utility costs; (v) K-Bro's dependence on long-term
contracts, (vi) increased capital expenditure requirements; (vii) reliance on
key personnel; 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 contribution from new
Calgary plant once it comes on-line in the latter part of Q1, 2008; (iv)
expected impact of labour cost initiatives; (v) anticipated contribution from
the HMR acquisition; and, (vi) 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.

    %SEDAR: 00021539E




For further information:

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


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890