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K-Bro Linen Income Fund Announces Third Quarter Results


News provided by

K-Bro Linen Inc.

Nov 09, 2009, 07:00 ET

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

Strong EBITDA Growth Continuing

EDMONTON , Nov. 9 /CNW/ - K-Bro Linen Income Fund ("K-Bro") (TSX - KBL.UN) today announced its financial results for the third quarter ended September 30, 2009 .

    
    Highlights

    -   EBITDA for the third quarter of 2009 increased by $0.5 million to
        $4.1 million, an increase of 15.0% compared to the third quarter of
        2008. The EBITDA margin increased significantly in the third quarter
        to 18.3% from 16.3% in the third quarter of 2008 due primarily to the
        improvements in labour and natural gas costs assisted by the new
        Calgary plant which commenced operation in Q2, 2008.

    -   Revenue for the three months ended September 30, 2009 was
        $22.7 million compared to $22.1 million in the comparable 2008
        period, an increase of 2.7%. For the year to date, revenue has
        increased by 3.7% to $65.9 million from $63.6 million in the first
        nine months of 2008.

    -   For the quarter, K-Bro made distributions of $0.275 per unit and
        distributable cash was $0.54 per unit. This amounted to distributions
        of $1.9 million for the quarter compared to distributable cash of
        $3.8 million for a payout ratio of 50.6%.

    -   Net earnings after taxes increased by 30% in the third quarter of
        2009 to $2.1 million from $1.6 million in the third quarter of 2008.
        This is primarily the result of the higher 2009 EBITDA.


    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 three      For the nine
                                              months ended      months ended
                                              September 30      September 30
    -------------------------------------------------------------------------
                                             2009   2008(2)    2009   2008(2)
    -------------------------------------------------------------------------
    Revenue                               $22,659  $22,063  $65,898  $63,567
    -------------------------------------------------------------------------
    Operating expenses                     18,521   18,466   54,157   54,496
    -------------------------------------------------------------------------
    EBITDA(1)                               4,138    3,597   11,741    9,071
    -------------------------------------------------------------------------
    EBITDA as a % of revenue                18.3%    16.3%    17.8%    14.3%
    -------------------------------------------------------------------------
    Earnings before income taxes            2,192    1,546    5,875    2,683
    -------------------------------------------------------------------------
    Income tax (expense) recovery             (97)      64      (20)     654
    -------------------------------------------------------------------------
    Net earnings                           $2,095   $1,610   $5,855   $3,337
    -------------------------------------------------------------------------
    Basic earnings per Unit                 $0.30    $0.23    $0.84    $0.48
    -------------------------------------------------------------------------
    Diluted earnings per Unit               $0.30    $0.23    $0.83    $0.48
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Total assets                          $83,565  $88,241  $83,565  $88,241
    -------------------------------------------------------------------------
    Long-term debt, end of period          $5,107   $6,219   $5,107   $6,219
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Cash provided  by operating
     activities                            $5,568   $5,570   $8,311   $9,728
    -------------------------------------------------------------------------
    Net change in non-cash working
     capital items                         (1,505)  (2,135)   3,172   (1,364)
    -------------------------------------------------------------------------
    Maintenance capital expenditures         (256)     (68)    (997)    (310)
    -------------------------------------------------------------------------
    Distributable cash(1)                  $3,807   $3,367  $10,486   $8,054
    -------------------------------------------------------------------------
    Distributions declared                 $1,927   $1,926   $5,779   $5,628
    -------------------------------------------------------------------------
    Payout ratio(1)                         50.6%    57.2%    55.1%    69.9%
    -------------------------------------------------------------------------

    (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 revenue increase in the third quarter of 2009 was primarily the result of net increases in price and volume from existing and new customers offset by a general softening of hospitality revenues.

EBITDA increased by $0.5 million for the quarter compared to 2008 as a result of lower labour and energy costs with the result that EBITDA as a percentage of revenue increased in the third quarter of 2009 to 18.3% from 16.3% in the third quarter of 2008.

K-Bro generated $5.6 million of cash from operating activities in the third quarter of 2009, unchanged from the third quarter of 2008. This is as a result of the $0.5 million of increased EBITDA being offset by a net increase in working capital of $0.5 million due to the timing of various receipts and disbursements.

Outlook

"We're pleased with the continuation of our growth and margin improvement. We have benefited from our large investment in a new Calgary plant in 2008, our ongoing labor efficiency initiatives and lower energy costs in a tough economy," said Linda McCurdy, President and Chief Executive Officer. "We anticipate finishing 2009 with a strong balance sheet, low debt levels and a low payout ratio which will once again provide us with a solid foundation to meet the challenges of the next year."

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: 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

Modal title

Organization Profile

K-Bro Linen Inc.

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