K-Bro Linen Income Fund Announces Second Quarter Results



    
    Strong EBITDA Growth Achieved

    /NOT FOR DISTRIBUTION IN THE UNITED STATES OR OVER UNITED STATES WIRE
    SERVICES/
    

    EDMONTON, Aug. 6 /CNW/ - K-Bro Linen Income Fund ("K-Bro") (TSX - KBL.UN)
today announced its financial results for the quarter ended June 30, 2009.

    
    Highlights

    -   EBITDA for the second quarter of 2009 increased by $0.8 million to
        $4.1 million, an increase of 24.5% compared to the second quarter of
        2008. The EBITDA margin increased significantly in the second quarter
        to 18.9% from 15.1% in the second quarter of 2008 due primarily to
        the improvements in labour and utility costs assisted by the new
        Calgary plant which fully came on stream in Q2, 2008
    -   Revenue for the three months ended June 30, 2009 was $21.7 million
        compared to $21.8 million in the comparable 2008 period. For the year
        to date, revenue has increased by 4.2% to $43.2 million from $41.5
        million in the first six months of 2008.
    -   For the period, K-Bro made distributions of $0.275 per unit and
        distributable cash was $0.49 per unit. This amounted to distributions
        of $1.9 million for the period compared to distributable cash of $3.4
        million for a payout ratio of 56.2%.
    -   Net earnings after taxes increased in the second quarter of 2009 to
        $2.2 million from $1.0 million in the second quarter of 2008. This is
        the result of the higher 2009 EBITDA and no loss on disposal of
        equipment as was incurred in 2008.

    Financial Highlights (in $000's except percentages and 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
                                    three months ended      six months ended
                                          June 30               June 30
    -------------------------------------------------------------------------
                                       2009     2008(2)      2009     2008(2)
    -------------------------------------------------------------------------
    Revenue                         $21,746    $21,840    $43,239    $41,503
    -------------------------------------------------------------------------
    Operating expenses               17,635     18,539     35,636     36,030
    -------------------------------------------------------------------------
    EBITDA(1)                         4,111      3,301      7,603      5,473
    -------------------------------------------------------------------------
    EBITDA as a % of revenue           18.9%      15.1%      17.6%      13.2%
    -------------------------------------------------------------------------
    Earnings before income taxes      2,176        780      3,683      1,137
    -------------------------------------------------------------------------
    Income tax (expense) recovery        (8)       231         77        590
    -------------------------------------------------------------------------
    Net earnings                     $2,168     $1,011     $3,760     $1,727
    -------------------------------------------------------------------------
    Basic earnings per Unit           $0.31      $0.15      $0.54      $0.26
    -------------------------------------------------------------------------
    Diluted earnings per Unit         $0.31      $0.14      $0.54      $0.26
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Total assets                    $84,639    $89,398    $84,639    $89,398
    -------------------------------------------------------------------------
    Long-term debt, end of period    $6,735     $9,010     $6,735     $9,010
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Cash provided by operating
     activities                       3,539        470      2,743      4,158
    -------------------------------------------------------------------------
    Net change in non-cash working
     capital items                      494      2,649      4,677        771
    -------------------------------------------------------------------------
    Maintenance capital expenditures   (608)      (172)      (741)      (242)
    -------------------------------------------------------------------------
    Distributable cash(1)            $3,425     $2,947     $6,679     $4,687
    -------------------------------------------------------------------------
    Distributions declared           $1,926     $1,926     $3,852     $3,701
    -------------------------------------------------------------------------
    Payout ratio(1)                    56.2%      65.4%      57.7%      79.0%
    -------------------------------------------------------------------------

    (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.

    (2) Adoption of new accounting policy:
           Restated for the adoption of CICA accounting standard 3064, which
           requires the expensing of certain expenditures related to a pre-
           operating period of a facility rather than recording them as
           assets.
    

    The small net revenue decrease in the second quarter of 2009 was
primarily the result of the softening of hospitality revenues offset by net
increases in price and volume from existing and new customers.
    EBITDA increased by $0.8 million for the quarter compared to 2008 as a
result of lower labour and utility costs with the result that EBITDA as a
percentage of revenue increased in the second quarter of 2009 to 18.9% from
15.1% in the second quarter of 2008.
    K-Bro generated $3.5 million of cash from operating activities in the
second quarter of 2009 compared to cash generated from operating activities of
$0.5 million in the second quarter of 2008. This is as a result of the $0.8
million of increased EBITDA augmented by a total of $2.2 million from
decreased accounts receivable and prepaid expenses due to the timing of
various receipts and disbursements.

    Outlook

    "Despite the softening of our hospitality revenues in Q2, we're pleased
with our overall results and our margin improvement as a result of our large
investment in a new Calgary plant in 2008 and our ongoing labor efficiency
improvements," said Linda McCurdy, President and Chief Executive Officer.
"Although the economy remains weak, our outlook for 2009 remains positive. The
majority of our business is based on long-term healthcare contracts, we
maintain a strong balance sheet with low debt levels and we have effective
control over our costs which we believe will allow us to show meaningful
growth once again."
    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) K-Bro's competitive environment; (ii) utility
costs; (iii) K-Bro's dependence on long-term contracts, (iv) increased capital
expenditure requirements; (v) reliance on key personnel; and (vi) 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; (iv)
expected impact of labour cost initiatives; 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, 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


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