K-Bro Announces 2013 Annual Results and Declares March Dividend
(TSX: KBL)
2013 Annual Financial Results
- Revenue for the three and twelve months ended December 31, 2013 was $32.3 million and $131.2 million, respectively, increases of 2.2% and 3.9% over the comparable 2012 periods.
- EBITDA for the fourth quarter decreased by $0.4 million to $5.4 million from 2012; for the 2013 year, EBITDA decreased by $1.2 million to $23.3 million compared to the 2012 fiscal year. The decline in EBITDA is consistent with the Corporation's expectation and was anticipated primarily as the result of our transition to our new Edmonton processing facility.
- Adjusted EBITDA for 2013 decreased by $0.5 million to $24.0 million compared to the 2012 fiscal year.
- EBITDA margin decreased in the fourth quarter to 16.8% from 18.3% in the comparative period of 2012 due primarily as a result of the negative impact on efficiency and productivity as a result of the transfer of operations in Edmonton and partially offset by a settlement pertaining to disputed development costs. For the year, the EBITDA margin decreased to 17.8% in 2013 from 19.4% in 2012, again primarily as a result of the transition costs and reduced productivity during the transition period to transfer of operations in Edmonton.
- K-Bro declared dividends of $1.15 per common share and distributable cash was $2.61 per common basic on a fully diluted basis. This amounted to annual dividends of $8.14 million compared to distributable cash of $18.4 million for an overall payout ratio of 44.2%.
- Net earnings after taxes decreased by $0.8 million to $10.3 million from fiscal 2012. The decrease is the direct result of transition related costs incurred during the year.
Highlights and Significant Items for Fiscal 2013
- Awarded a ten-year contract with 3sHealth for laundry and linen services for the province of Saskatchewan. The contract encompasses a comprehensive linen supply and service program covering general, operating room and specialty linens as well as on-site services at certain facilities. Services under the terms and conditions of this contract will commence in 2015. The agreement is renewable for two additional three year periods at 3sHealth's option. Planning and design activities have commenced for the construction of a new processing facility in Regina, Saskatchewan. Expected costs of construction and commissioning of the facility are estimated to be $22 million for a leased facility.
- Completed construction of the new leased Edmonton facility. The total costs to commission the new facility were approximately $27.8 million for new efficiency enhancing equipment, leaseholds and conversion costs, with returns anticipated from reduced labour, lower energy consumption and other work-flow improvements. Transition into and start-up of the new facility commenced in Q3 and was completed in Q4. As anticipated, transition costs associated with moving into the new facility were incurred during the quarter and negatively impacted the EBITDA margin.
EDMONTON, March 12, 2014 /CNW/ - K-Bro Linen Inc. ("K-Bro" or the "Corporation") today announced revenue of $131.2 million and EBITDA of $23.3 million for the year ended December 31, 2013. Net earnings after tax were $10.3 million, diluted earnings per common share were $1.47, and distributable cash was $2.61 per diluted common share for the year.
| (thousands, except per share amounts | For the three months ended December 31 | |||||
| and percentages) | 2013 | 2012 | $ Change | % Change | ||
| Revenue | $ | 32,344 | $ | 31,586 | 758 | 2.4% |
| Operating expenses | 26,923 | 25,809 | 1,114 | 4.3% | ||
| EBITDA(1) | 5,421 | 5,777 | (356) | -6.2% | ||
| EBITDA(1) as a % of revenue | 16.8% | 18.3% | - | -1.5% | ||
| Adjusted EBITDA(1) | 5,421 | 5,777 | (356) | -6.2% | ||
| Adjusted EBITDA(1) as a % of revenue | 16.8% | 18.3% | - | -1.5% | ||
| Earnings before income taxes | 2,916 | 3,880 | (964) | -24.8% | ||
| Income tax expense | 799 | 1,122 | (323) | -28.8% | ||
| Net earnings | 2,117 | 2,758 | (641) | -23.2% | ||
| Basic earnings per Share | $ | 0.30 | $ | 0.39 | (0.09) | -23.1% |
| Diluted earnings per Share | $ | 0.30 | $ | 0.39 | (0.09) | -23.1% |
| Adjusted net earnings(1) | 2,117 | 2,758 | (641) | -23.2% | ||
| Basic adjusted net earnings per share(1) | $ | 0.30 | $ | 0.39 | (0.09) | -23.1% |
| Diluted adjusted net earnings per share(1) | $ | 0.30 | $ | 0.39 | (0.09) | -23.1% |
| Total assets | 112,330 | 94,800 | 17,530 | 18.5% | ||
| Long-term debt, end of year | 19,640 | 5,818 | 13,822 | 237.6% | ||
| Cash provided by operating activities | 6,399 | 7,928 | (1,529) | -19.3% | ||
| Net change in non-cash working capital items | 1,201 | 2,866 | (1,665) | -54.5% | ||
| Share-based compensation expense (1) | 261 | 176 | 85 | 51.9% | ||
| Maintenance capital expenditures | 180 | 486 | (306) | -63.0% | ||
| Distributable cash flow(1) | 4,757 | 4,400 | 357 | 8.1% | ||
| Dividends declared | 2,039 | 2,028 | 11 | 0.6% | ||
| Payout ratio(1) | 42.8% | 46.1% | - | -3.3% | ||
| (thousands, except per share amounts | For the year ended December 31 | |||||
| and percentages) | 2013 | 2012 | $ Change | % Change | ||
| Revenue | $ | 131,202 | $ | 126,290 | 4,912 | 3.9% |
| Operating expenses | 107,885 | 101,773 | 6,112 | 6.0% | ||
| EBITDA(1) | 23,317 | 24,517 | (1,200) | -4.9% | ||
| EBITDA(1) as a % of revenue | 17.8% | 19.4% | - | -1.6% | ||
| Adjusted EBITDA(1) | 24,030 | 24,517 | (487) | -2.0% | ||
| Adjusted EBITDA(1) as a % of revenue | 18.3% | 19.4% | - | -1.1% | ||
| Earnings before income taxes | 14,509 | 15,324 | (815) | -5.3% | ||
| Income tax expense | 4,173 | 4,175 | (2) | 0.0% | ||
| Net earnings | 10,336 | 11,149 | (813) | -7.3% | ||
| Basic earnings per Share | $ | 1.47 | $ | 1.60 | (0.13) | -8.1% |
| Diluted earnings per Share | $ | 1.47 | $ | 1.59 | (0.12) | -7.5% |
| Adjusted net earnings(1) | 10,835 | 11,149 | (313) | -2.8% | ||
| Basic adjusted net earnings per share(1) | $ | 1.54 | $ | 1.60 | (0.05) | -3.4% |
| Diluted adjusted net earnings per share(1) | $ | 1.54 | $ | 1.59 | (0.06) | -3.6% |
| Total assets | 112,330 | 94,800 | 17,530 | 18.5% | ||
| Long-term debt, end of year | 19,640 | 5,818 | 13,822 | 237.6% | ||
| Cash provided by operating activities | 19,186 | 20,809 | (1,623) | -7.8% | ||
| Net change in non-cash working capital items | (1,374) | (421) | (953) | 226.4% | ||
| Share-based compensation expense (1) | 1,237 | 1,105 | 132 | 11.9% | ||
| Maintenance capital expenditures | 886 | 1,020 | (134) | -13.1% | ||
| Distributable cash flow(1) | 18,437 | 19,105 | (668) | -3.5% | ||
| Dividends declared | 8,142 | 7,977 | 165 | 2.1% | ||
| Payout ratio(1) | 44.2% | 41.8% | - | 2.4% | ||
(1) Refer to the Terminology section for further details.
In the fourth quarter of 2013, revenue was $32.3 million, which was 2.2% higher than the $31.6 million generated in the comparable period in 2012. This year-over-year increase was due to organic growth from new volume and price increases at existing customers across the plants. EBITDA decreased from $5.8 million in Q4, 2012 to $5.4 million in Q4, 2013. This decrease was predominantly a result of the transition costs and reduced productivity during the transition period to transfer operations in Edmonton, partially offset by the organic growth and price increases, and a $0.6 million settlement pertaining to disputed development costs. In the fourth quarter ended December 31, 2013, a $0.3 million charge for estimated decommissioning costs of the former Edmonton facility was recorded to repairs and maintenance expense.
DIVIDEND
K-Bro also announces a dividend of $0.0958 per common share of the Corporation for the period from March 1 to 31, 2014, to be paid on April 15, 2014 to holders of record of common shares on March 31 2014. 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
"Fiscal 2013 was a successful year for K-Bro reaching a new record in revenue. Overall we are satisfied with our EBITDA, EBITDA margin and net earnings results, which were consistent with our expectations as previously forecast. Our transition and start-up of the new, modernized Edmonton facility is complete and we expect margins to gradually return to historic levels," said Linda McCurdy, President & Chief Executive Officer. "Looking forward, fiscal 2014 will bring additional changes and growth to K-Bro as we commence the planning and development of a state-of-the-art facility in Regina, Saskatchewan to serve the provincial linen processing requirements. This year marked the eighth consecutive year of stable growth and reliable dividends to 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 under three distinctive brands, including K-Bro Linen Systems Inc., Buanderie HMR and Les Buanderies Dextraze, in seven Canadian cities: Québec City, Montréal, Toronto, 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, 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", "debt to total capitalization", "distributable cash" and "payout ratio". These terms do not have any standardized meaning under International Financial Reporting Standards ("IFRS") as set out in the CICA 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 December 31, |
Year Ended December 31, |
|||||||||||
| (thousands) | 2013 | 2012 | 2013 | 2012 | ||||||||
| Net earnings | $ | 2,117 | $ | 2,758 | $ | 10,336 | $ | 11,149 | ||||
| Add: | ||||||||||||
| Income tax expense | 799 | 1,122 | 4,173 | 4,175 | ||||||||
| Interest expense and financial charges, net | 176 | (66) | 595 | 357 | ||||||||
| Depreciation of property, plant and equipment | 1,774 | 1,617 | 5,965 | 6,350 | ||||||||
| Amortization of intangible assets | 530 | 307 | 2,140 | 2,327 | ||||||||
| Loss on disposal of property, plant and equipment | 25 | 39 | 108 | 159 | ||||||||
| EBITDA | $ | 5,421 | $ | 5,777 | $ | 23,317 | $ | 24,517 | ||||
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). During the third quarter ended September 30, 2013, a charge equivalent to the remaining lease payments for decommissioned facilities was recognized as occupancy costs. The normalization of this expense from the calculation of EBITDA is considered by Management to be a more accurate representation of continuing operations.
| Three Months Ended December 31, |
Year Ended December 31, |
|||||||||||
| (thousands) | 2013 | 2012 | 2013 | 2012 | ||||||||
| EBITDA | $ | 5,421 | $ | 5,777 | $ | 23,317 | $ | 24,517 | ||||
| Add: | ||||||||||||
| Occupancy expense of decommissioned facilities | - | - | 713 | - | ||||||||
| Adjusted EBITDA | $ | 5,421 | $ | 5,777 | $ | 24,030 | $ | 24,517 | ||||
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 this net expense 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.
| Three Months Ended December 31, |
Year Ended December 31, |
||||||||||
| (thousands) | 2013 | 2012 | 2013 | 2012 | |||||||
| Net earnings | $ | 2,117 | $ | 2,758 | $ | 10,336 | $ | 11,149 | |||
| Add/(deduct), net of corporate income taxes: | |||||||||||
| Occupancy expense of decommissioned facilities | - | - | 499 | - | |||||||
| Adjusted net earnings | $ | 2,117 | $ | 2,758 | $ | 10,835 | $ | 11,149 | |||
| Adjusted net earnings, per share: | |||||||||||
| Basic | $ | 0.30 | $ | 0.39 | $ | 1.54 | $ | 1.60 | |||
| Diluted | $ | 0.30 | $ | 0.39 | $ | 1.54 | $ | 1.59 | |||
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 non-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. Previously the share-based compensation was recorded as part of the net changes in non-cash working capital items; however the amount has been disclosed separately commencing in Q4, 2012. The comparative figures for the periods presented have been restated to reflect this revised presentation.
| Three Months Ended December 31, |
Year Ended December 31, |
|||||||||
| (thousands) | 2013 | 2012 | 2013 | 2012 | ||||||
| Cash provided by operating activities | $ | 6,399 | $ | 7,928 | $ | 19,186 | $ | 20,809 | ||
| Deduct: | ||||||||||
| Net changes in non-cash working capital items | 1,201 | 2,866 | (1,374) | (421) | ||||||
| Share-based compensation expense | 261 | 176 | 1,237 | 1,105 | ||||||
| Maintenance capital expenditures | 180 | 486 | 886 | 1,020 | ||||||
| Distributable cash flow | $ | 4,757 | $ | 4,400 | $ | 18,437 | $ | 19,105 | ||
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 December 31, |
Year Ended December 31, |
|||||
| (thousands) | 2013 | 2012 | 2013 | 2012 | ||
| Cash dividends | 2,039 | 2,028 | 8,142 | 7,977 | ||
| Distributable cash | 4,757 | 4,400 | 18,437 | 19,105 | ||
| Payout ratio | 42.8% | 46.1% | 44.2% | 41.8% | ||
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.
Linda McCurdy
President & Chief Executive Officer
Chris Burrows
Vice-President & Chief Financial Officer
K-Bro Linen Inc. (TSX: KBL)
Phone: 780.453.5218
Email: [email protected]
Web: www.k-brolinen.com
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