K-Bro Announces Record Second Quarter Revenues and EBITDA
(TSX: KBL.UN)
Second Quarter 2010 & YTD Financial Results
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- Revenue for the three months ended June 30, 2010 was $25.9 million,
an increase of 19.1% over the comparable 2009 period. Revenue for
the six months ended June 30, 2010 was $49.8 million, an increase of
15.3% over the comparable 2009 period.
- EBITDA for the second quarter of 2010 increased by $0.2 million to
$4.32 million from the second quarter of 2009, an increase of 5.2%.
- Net earnings after taxes decreased in the second quarter of 2010 to
$1.97 million from $2.17 million in Q2, 2009, a decrease of 9.4%, due
to increases to amortization of tangible and intangible assets and
various financial charges.
- For the year-to-date, K-Bro made distributions of $0.550 per unit and
distributable cash was $1.01 per unit. Distributions of $3.85
million were paid for the six-month period compared to distributable
cash of $7.0 million for a payout ratio of 55.0%.
Highlights and Significant Items
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- In June, K-Bro signed ten year contracts with Vancouver Coastal
Health Authority, Fraser Health Authority, Provincial Health Services
Authority and Providence Health Care Society after being selected as
the successful proponent under a competitive RFP process. Certain
volumes have commenced processing in late June with the majority of
the new volume expected to commence in November, 2010.
- Integration of the second plant in Vancouver commenced and positively
contributed to EBITDA and revenue for the three and five months post-
acquisition.
EDMONTON, Aug. 12 /CNW/ - K-Bro Linen Income Fund ("K-Bro" or the "Fund") today announced EBITDA of $4.32 million for the quarter ended June 30, 2010. Net earnings after tax were $1.97 million and distributable cash was $0.53 per unit.
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For the three months ended June 30
($ 000's, except -----------------------------------------
per Unit amounts) 2010 2009 $ Change % Change
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Revenue $ 25,902 $ 21,746 4,156 19%
Operating expenses 21,578 17,635 3,943 22%
EBITDA(1) 4,324 4,111 213 5%
EBITDA(1) as a % of revenue 16.7% 18.9% -2% -12%
Earnings before income taxes 1,994 2,176 (182) - 8%
Income tax (expense) recovery (29) (8) (21) 263%
Net earnings 1,965 2,168 (203) -9%
Basic earnings per Unit $ 0.29 $ 0.31 (0.02) -6%
Diluted earnings per Unit $ 0.28 $ 0.31 (0.03) -10%
Total assets 93,279 84,639 8,640 10%
Long-term debt, end of period 13,836 6,735 7,101 105%
Cash provided by operating
activities 4,538 3,539 999 28%
Net change in non-cash
working capital items (417) 494 (911) -184%
Maintenance capital
expenditures (455) (608) 153 -25%
Distributable cash(1) 3,666 3,425 241 7%
Distributions declared 1,926 1,926 - 0%
Payout ratio(1) 52.6% 56.2% -4% -6%
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For the six months ended June 30
($ 000's, except -----------------------------------------
per Unit amounts) 2010 2009 $ Change % Change
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Revenue $ 49,834 $ 43,239 6,595 15%
Operating expenses 41,602 35,636 5,966 17%
EBITDA(1) 8,232 7,603 629 8%
EBITDA(1) as a % of revenue 16.5% 17.6% -1% -6%
Earnings before income taxes 3,742 3,682 60 2%
Income tax (expense) recovery (5) 77 (82) -106%
Net earnings 3,737 3,760 (23) -1%
Basic earnings per Unit $ 0.54 $ 0.54 - 0%
Diluted earnings per Unit $ 0.54 $ 0.54 - 0%
Total assets 93,279 84,639 8,640 10%
Long-term debt, end of period 13,836 6,735 7,101 105%
Cash provided by operating
activities 8,368 2,743 5,625 205%
Net change in non-cash
working capital items (480) 4,677 (5,157) -110%
Maintenance capital
expenditures (885) (741) (144) 19%
Distributable cash(1) 7,003 6,679 324 5%
Distributions declared 3,853 3,852 1 0%
Payout ratio(1) 55.0% 57.7% -3% -5%
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(1) Refer to the "Terminology" section for further details
The revenue increase in the quarter was primarily the result of the second processing plant in Vancouver which was completed on January 29, 2010. EBITDA increased by 5% to $4.32 million for the quarter and by 8% year-to-date to $8.23 million, compared to the respective 2009 periods. This increase is mainly as a result of the increased revenue in Vancouver and the continued corporate wide focus on operating cost reductions.
OUTLOOK
"The acquisition of our second Vancouver plant has lead to increased revenue and EBITDA in 2010. Further integration of the facility is presently underway that when completed will improve our operating margins" said Linda McCurdy, President and Chief Executive Officer. "With the signing of the long-term contracts in the Vancouver area, we have secured additional healthcare volume for the next decade and extended certain existing healthcare contracts to 2015. However, the continuing uncertainties in the financial markets and the slow recovery from the recent recession have negatively impacted consumer and business confidence and consequently the demand for accommodations which impacts our hospitality segment. We expect growth to be moderate over the remainder of the year."
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 seven processing plants in six Canadian cities: Quebec City, Toronto, Edmonton, Calgary, Vancouver and Victoria.
Additional information regarding K-Bro including the Fund's 2009 Annual Information Form and other 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").
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", "distributable cash" and "payout ratio". These terms do not have any standardized meaning under Canadian GAAP as set out in the CICA Handbook. Therefore, EBITDA, distributable cash and payout ratio may not be comparable to similar measures presented by other issuers. Specifically, the terms "EBITDA", "distributable cash", and "payout ratio" have been defined as:
EBITDA is defined by management as revenue less operating expenses which represents income from operations before amortization.
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Three months Six months
ended June 30 ended June 30
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($ 000's) 2010 2009 2010 2009
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Net earnings $1,965 $2,168 $3,737 $3,760
Add (deduct):
Income tax expense (recovery) 29 8 5 (77)
Financial charges 189 65 316 154
Amortization of property,
plant and equipment 1,444 1,331 2,859 2,684
Amortization of intangible assets 640 539 1,258 1,079
Loss on disposal of property,
plant and equipment 57 - 57 3
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EBITDA $4,324 $4,111 $8,232 $7,603
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Distributable cash is defined by management as cash provided by operating activities, plus or minus the net change in non-cash working capital items, less maintenance capital expenditures and less cash taxes. Management believes this measure reflects the cash generated from the ongoing operation of the business. Distributable cash is a non-GAAP measure generally used by Canadian income trusts as an indicator of financial performance and it should not be seen as a measurement of liquidity or a substitute for comparable metrics prepared in accordance with GAAP. This measure is commonly used by investors, management and other stakeholders to evaluate the ongoing performance of K-Bro.
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Three months Six months
ended June 30 ended June 30
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($ 000's) 2010 2009 2010 2009
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Cash provided by (used in)
operating activities $4,538 $3,539 $8,368 $2,743
Add (deduct):
Net changes in non-cash working
capital items (417) 494 (480) 4,677
Maintenance capital expenditures (455) (608) (885) (741)
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Distributable cash $3,666 $3,425 $7,003 $6,679
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Payout ratio is defined by management as the actual cash distribution divided by distributable cash. This is a key measure used by investors to value K-Bro, assess its performance and provide an indication of the sustainability of distributions. The payout ratio depends on the distributable cash and the Fund's distribution policy.
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Three months Six months
ended June 30 ended June 30
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($ 000's) 2010 2009 2010 2009
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Cash distributions 1,926 1,926 3,853 3,853
Distributable cash 3,666 3,425 7,003 6,679
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Payout ratio 52.6% 56.2% 55.0% 57.7%
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Figures expressed in percentages are calculated from actual unrounded amounts.
FORWARD LOOKING STATEMENTS
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 with the attendant renewal risk, (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 the newly acquired Vancouver 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.
For further information: Linda McCurdy, President & Chief Executive Officer, K-Bro Linen Income Fund, Phone: (780) 453-5218; Chris Burrows, Vice-President & Chief Financial Officer, K-Bro Linen Income Fund, Phone: (780) 453-5218, Email: [email protected], Web: www.k-brolinen.com
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