K-Bro Announces New Alberta Health Services Contract

(TSX: KBL)

EDMONTON, May 7, 2012 /CNW/ - K-Bro Linen Inc. (the "Corporation") announced today the award of a ten-year contract with Alberta Health Services ("AHS") for laundry and linen services for the Edmonton and surrounding areas.  This ten-year contract extends the existing relationship between the Corporation and AHS and is a result of a competitive request for proposal process that began in February 2011.

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 on April 1, 2013. The contract is renewable for an additional five years at AHS' option. The new ten-year contract also includes certain price concessions as compared to the existing services agreement which concludes in fiscal 2013.

Concurrently with the signing of a services agreement with AHS, the Corporation has entered into a long-term lease for the development of a new production plant in Edmonton.  Project management planning has commenced for the relocation of the Corporation's Edmonton operation to an upgraded, more efficient facility.  The expected costs of commissioning a new facility are expected to range from $20 to $25 million, including the addition of new efficiency enhancing equipment, with immediate returns from reduced labour, lower energy consumption and other work-flow improvements.

Management believes that efficiencies arising from this capital project will directly offset the price concessions made under the terms of the new AHS contract, as well as additional carrying costs of any associated debt.  The Corporation intends to finance the construction through its existing credit facilities.  It is anticipated that the new facility will be fully operational by Q3, 2013.

"It is rewarding to be chosen to provide a comprehensive linen service program to facilities under the auspices of Alberta Health Services", said Linda McCurdy, President & CEO.  "We are committed to providing AHS with a level of service, innovation and cost effectiveness that hopefully will see K-Bro servicing their needs for many more years.  Once again we wish to thank AHS for their confidence in K-Bro and we look forward to implementing our relocation plans that will allow us to grow with them into the future."

Alberta Health Services is one of the largest integrated health providers in Canada, providing complete health services to 3.7 million Alberta residents through 400 facilities throughout the province.

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 »).

---

NOTICE TO READER

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 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; (vii) changing trends in government outsourcing; and (viii) 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.

Linda McCurdy 
President & Chief Executive Officer

Chris Burrows
Vice-President & Chief Financial Officer

K-Bro Linen Inc.  (TSX: KBL)
Phone: [phone] 
Email: [email protected]
Web: www.k-brolinen.com