K-Bro Announces Record Third Quarter Revenues and EBITDA
(TSX: KBL.UN)
Third Quarter 2010 & YTD Financial Results
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- Revenue for the three months ended September 30, 2010 was
$27.5 million, an increase of 21.4% over the comparable 2009 period.
Revenue for the nine months ended September 30, 2010 was
$77.3 million, an increase of 17.4% over the comparable 2009 period.
- EBITDA for the third quarter of 2010 increased by $0.8 million to
$4.9 million from the third quarter of 2009, an increase of 19.1%.
- Net earnings after taxes increased in the third quarter of 2010 to
$2.36 million from $2.10 million in Q3, 2009, an increase of 12.6%.
- For the year-to-date, K-Bro made distributions of $0.825 per unit and
distributable cash was $1.68 per unit. Distributions of $5.78 million
were paid for the nine-month period compared to distributable cash of
$11.6 million for a payout ratio of 49.8%.
Highlights and Significant Items
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- K-Bro announced the proposed conversion of K-Bro from an income trust
to a corporation to take effect on January 1, 2011. Unitholders will
receive common shares of a newly-formed corporation (K-Bro Linen
Inc.) on a one-for-one basis. Upon completion of the conversion,
K-Bro Linen Inc. will indirectly own and operate the existing
business of K-Bro.
- K-Bro also intends that, following the conversion to a corporation,
K-Bro Linen Inc. will continue to pay dividends on a monthly basis
and anticipates that it will maintain the monthly dividend payment at
the same rate of CDN$0.09167 per common share per month. The actual
amount of future dividends may vary depending upon production
volumes, capital spending and costs and K-Bro cannot provide any
assurances with regard to future dividend payments.
- 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.
- K-Bro commenced the integration of the second plant in Vancouver
which positively contributed to EBITDA and revenue for the three and
eight months post-acquisition.
EDMONTON, Nov. 4 /CNW/ - K-Bro Linen Income Fund ("K-Bro" or the "Fund") today announced EBITDA of $4.9 million for the quarter ended September 30, 2010. Net earnings after tax were $2.36 million and distributable cash was $0.66 per unit.
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For the three months
ended September 30
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($ 000's, except per Unit amounts) 2010 2009 $ Change % Change
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Revenue $ 27,498 $ 22,659 4,839 21%
Operating expenses 22,571 18,521 4,050 22%
EBITDA(1) 4,927 4,138 790 19%
EBITDA(1) as a % of revenue 17.9% 18.3% 0% -2%
Earnings before income taxes 2,590 2,192 398 18%
Income tax (expense) recovery (229) (97) (133) 137%
Net earnings 2,361 2,095 265 13%
Basic earnings per Unit $ 0.34 $ 0.30 0.04 13%
Diluted earnings per Unit $ 0.34 $ 0.30 0.04 13%
Total assets 92,932 82,816 10,116 12%
Long-term debt, end of period 11,097 4,043 7,054 174%
Cash provided by operating
activities 5,180 5,568 (388) -7%
Net change in non-cash working
capital items (432) (1,505) 1,073 -71%
Maintenance capital expenditures (153) (256) 103 -40%
Distributable cash(1) 4,595 3,807 787 21%
Distributions declared 1,926 1,927 - 0%
Payout ratio(1) 41.9% 50.6% -9% -17%
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For the nine months
ended September 30
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($ 000's, except per Unit amounts) 2010 2009 $ Change % Change
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Revenue $ 77,331 $ 65,898 11,433 17%
Operating expenses 64,172 54,158 10,015 18%
EBITDA(1) 13,159 11,741 1,419 12%
EBITDA(1) as a % of revenue 17.0% 17.8% -1% -4%
Earnings before income taxes 6,332 5,875 457 8%
Income tax (expense) recovery (235) (20) (215) 1099%
Net earnings 6,097 5,855 242 4%
Basic earnings per Unit $ 0.88 $ 0.84 0.04 5%
Diluted earnings per Unit $ 0.87 $ 0.84 0.03 4%
Total assets 92,932 82,816 10,116 12%
Long-term debt, end of period 11,097 4,043 7,054 174%
Cash provided by operating
activities 13,548 8,311 5,237 63%
Net change in non-cash working
capital items (912) 3,172 (4,084) -129%
Maintenance capital expenditures (1,038) (997) (41) 4%
Distributable cash(1) 11,598 10,486 1,112 11%
Distributions declared 5,779 5,779 0 0%
Payout ratio(1) 49.8% 55.1% -5% -10%
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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 earlier in the year. EBITDA increased by 19.1% to $4.9 million for the quarter and by 12.1% year-to-date to $13.2 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
"We felt the effects of a modest recovery in the tourism industry in most of our geographic markets and look forward to finishing strong this year. Our low payout ratio and debt levels, combined with our solid results have led us to our recent announcement regarding our future dividend policy. We are extremely pleased with the addition of our second Vancouver facility and the strong contributions all of our plants have made over the period," said Linda McCurdy, President and Chief Executive Officer.
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 ended Nine months ended
September 30 September 30
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($ 000's) 2010 2009 2010 2009
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Net earnings $ 2,361 $ 2,095 $ 6,097 $ 5,855
Add:
Income tax expense 229 97 235 20
Financial charges 174 60 489 215
Amortization of property, plant
and equipment 1,418 1,346 4,277 4,029
Amortization of intangible assets 641 539 1,899 1,618
Loss on disposal of property,
plant and equipment 104 1 162 4
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EBITDA $ 4,927 $ 4,138 $ 13,159 $ 11,741
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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 ended Nine months ended
September 30 September 30
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($ 000's) 2010 2009 2010 2009
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Cash provided by (used in)
operating activities $ 5,180 $ 5,568 $ 13,548 $ 8,311
Add (deduct):
Net changes in non-cash working
capital items (432) (1,505) (912) 3,172
Maintenance capital expenditures (153) (256) (1,038) (997)
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Distributable cash $ 4,595 $ 3,807 $ 11,598 $ 10,486
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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 ended Nine months ended
September 30 September 30
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($ 000's) 2010 2009 2010 2009
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Cash distributions 1,926 1,927 5,779 5,779
Distributable cash 4,595 3,807 11,598 10,486
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Payout ratio 41.9% 50.6% 49.8% 55.1%
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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, Chris Burrows, President & Chief Executive Officer, 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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