K-Bro Reports Q2, 2015 Results and Declares August Dividend

(TSX: KBL)

Q2, 2015 Financial Highlights

  • Revenue for the three months ended June 30, 2015 was $35.3 million, an increase of 2.9% over the comparable 2014 period.
  • EBITDA for the second quarter increased by $0.1 million or by 1.2% to $7.1 million compared to $7.0 million in Q2, 2014.
  • EBITDA margin decreased on a quarter over quarter basis to 20.1% in Q2, 2015 compared to 20.4% in Q2, 2014.
  • Net earnings after taxes for the second quarter decreased by $0.3 million to $3.0 million compared to $3.3 million in Q2, 2014.

 








(thousands, except per share amounts

For the three months ended June 30

and percentages)

2015

2014

$ Change

% Change








Revenue

$

35,337

$

34,348

989

2.9%

Operating expenses


28,251


27,344

907

3.3%

EBITDA(1)


7,086


7,004

82

1.2%

EBITDA(1) as a % of revenue


20.1%


20.4%

-

-0.3%

Earnings before income taxes


4,676


4,580

96

2.1%

Income tax expense


1,637


1,247

390

31.3%

Net earnings


3,039


3,333

(294)

-8.8%

Basic earnings per Share

$

0.38

$

0.47

(0.09)

-19.1%

Diluted earnings per Share

$

0.38

$

0.47

(0.09)

-19.1%








Total assets


135,516


117,984

17,532

14.9%








Cash provided by operating activities


3,773


2,705

1,068

39.5%

Net change in non-cash working capital items


(2,302)


(2,995)

693

-23.1%

Share-based compensation expense(1)


334


102

232

227.5%

Maintenance capital expenditures


268


491

(223)

-45.4%

Distributable cash flow(1)


5,473


5,107

366

7.2%

Dividends declared


2,391


2,102

289

13.7%

Payout ratio(1)


43.7%


41.0%

-

2.7%

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



















(thousands, except per share amounts

For the six months ended June 30

and percentages)

2015

2014

$ Change

% Change








Revenue

$

69,157

$

66,619

2,538

3.8%

Operating expenses


55,767


54,328

1,439

2.6%

EBITDA(1)


13,390


12,291

1,099

8.9%

EBITDA(1) as a % of revenue


19.4%


18.5%

-

0.9%

Earnings before income taxes


8,900


7,476

1,424

19.0%

Income tax expense


2,842


2,112

730

34.6%

Net earnings


6,058


5,364

694

12.9%

Basic earnings per Share

$

0.77

$

0.76

0.01

1.3%

Diluted earnings per Share

$

0.76

$

0.76

-

0.0%








Total assets


135,516


117,984

17,532

14.9%








Cash provided by operating activities


7,987


6,721

1,266

18.8%

Net change in non-cash working capital items


(3,741)


(4,082)

341

-8.4%

Share-based compensation expense(1)


713


474

239

50.4%

Maintenance capital expenditures


633


806

(173)

-21.5%

Distributable cash flow(1)


10,382


9,523

859

9.0%

Dividends declared


4,779


4,141

638

15.4%

Payout ratio(1)


46.0%


43.4%

-

2.6%

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






 

EDMONTON, Aug. 12, 2015 /CNW/ - K-Bro Linen Inc. ("K-Bro" or the "Corporation") today announced revenue of $35.3 million and EBITDA of $7.1 million for the three-months ended June 30, 2015.  Net earnings after tax were $3.0 million, earnings of $0.38 per share, and distributable cash of $0.687 per diluted share for the quarter.

In the second quarter of 2015, revenue was $35.3 million which was 2.9% higher than the $34.3 million generated in the comparable period in 2014. This period-over-period increase was mainly due to organic growth at existing customers across the plants in addition to new customers secured in existing markets. EBITDA increased from $7.0 million in Q2, 2014 to $7.1 million in Q2, 2015, predominantly as a result of lower utilities and organic growth from existing customers across the plants.

DIVIDEND

The Board of Directors has declared a monthly dividend of $0.10 per common share for the period from August 1 to 31, 2015, to be paid on September 15, 2015 to shareholders of record on August 31, 2015.  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

"We are pleased with the excellent results for the quarter which are being driven by strong revenues from new and existing customers." said Linda McCurdy, President & Chief Executive Officer.  "We are delivering excellent service and we have a portfolio of processing facilities ready to serve increasing numbers of national clients. Looking ahead, we are focused on completing our new Regina facility and growing the business in a new province. We remain excited about our future and confident in our ability to continue to provide value to our customers and 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 eight processing facilities and one distribution centre under three distinctive brands, including K-Bro Linen Systems Inc., Buanderie HMR and Les Buanderies Dextraze, in eight Canadian cities: Québec City, Montréal, Toronto, Saskatoon, 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 huit usines sous trois marques distinctives, incluant K-Bro Linen Systems Inc., Buanderie HMR et Les Buanderies Dextraze, dans sept villes canadiennes: Québec, Montréal, Toronto, Saskatoon, 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, le site Web du 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
June 30,

Six Months Ended
June 30,

(thousands)

2015

2014

2015

2014

Net earnings

$

3,039

$

3,333

$

6,058

$

5,364

Add:










Income tax expense


1,637


1,247


2,842


2,112


Depreciation of property, plant and equipment


1,713


1,686


3,401


3,350


Amortization of intangible assets


506


530


996


1,060


Finance expenses (income)


177


196


79


365


Loss on disposal of property, plant and equipment


14


12


14


40

EBITDA

$

7,086

$

7,004

$

13,390

$

12,291

 

Adjusted EBITDA is a measure which has been reported in order to assist in the comparison of historical EBITDA to current results.  The calculation of Adjusted EBITDA normalizes the impact of non-recurring infrequent and/or unusual transactions which did not occur during the preceding two years and are not expected to recur within the next two years, and the related impact on EBITDA (as defined above).

Adjusted net earnings and adjusted net earnings per share are measures which have been reported in order to assist in the comparison of historical net earnings to current results.  The calculation of Adjusted net earnings normalizes the impact of non-recurring infrequent and/or unusual transactions net of corporate income taxes which did not occur during the preceding two years and are not expected to recur within the next two years, and the related impact on net earnings and net earnings per share.  The normalization of these net expenses in the calculation of adjusted net earnings and adjusted net earnings per share is considered by management to be a more accurate representation of the net earnings from continuing operations.

For the quarter ended June 30, 2015, each of the non-GAAP adjusted measures noted above (adjusted EBITDA, adjusted net earnings and adjusted net earnings per share) are equivalent to their unadjusted measures.  Accordingly, no calculations have been presented for these three measures.

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
June 30,

Six Months Ended
June 30,

(thousands)

2015

2014

2015

2014

Cash provided by operating activities

$

3,773

$

2,705

$

7,987

$

6,721

Deduct:










Net changes in non-cash working capital items


(2,302)


(2,995)


(3,741)


(4,082)


Share-based compensation expense


334


102


713


474


Maintenance capital expenditures


268


491


633


806

Distributable cash flow

$

5,473

$

5,107

$

10,382

$

9,523

 

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
June 30,


Six Months Ended
June 30,

(thousands)


2015

2014


2015

2014


Cash dividends


2,391

2,102


4,779

4,141


Distributable cash


5,473

5,107


10,382

9,523

Payout ratio


43.7%

41.0%


46.0%

43.4%

 

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; 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, 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; 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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