K-Bro Linen Income Fund Announces A Successful Finish to the 2009 Year

EDMONTON, March 11 /CNW/ - K-Bro Linen Income Fund ("K-Bro") (TSX - KBL.UN) today announced its financial results for the year ended December 31, 2009.

    
    Highlights
    -   Revenue for the three and twelve months ended December 31, 2009 was
        $21.6 million and $87.5 million respectively, increases of 0.4% and
        2.8% over the comparable 2008 periods.
    -   EBITDA for the fourth quarter increased by $0.5 million to $3.8
        million from 2008 and for the 2009 year, EBITDA increased by $3.2
        million to $15.5 million compared to the 2008 fiscal year. The EBITDA
        margin increased in the fourth quarter to 17.6% from 15.4% in the
        fourth quarter of 2008 due primarily to the improvements in labour
        and energy costs. For the year, the EBITDA margin increased to 17.8%
        in 2009 from 14.6% in 2008, again primarily as a result of an
        improvement in labour and energy costs.
    -   For the year, K-Bro made distributions of $1.10 per unit and
        distributable cash was $1.99 per unit. This amounted to annual
        distributions of $7.7 million compared to distributable cash of $14.0
        million for a payout ratio of 55.1%.
    -   Net earnings after taxes increased in 2009 to $7.8 million from $4.7
        million in 2008 as a result of the increased EBITDA.

    Financial Highlights (in 000's except per unit amounts)

    The following table provides certain selected consolidated financial and
operating data prepared by K-Bro management for the periods indicated:

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    Fiscal year                                 2009               2008(2)
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                                         Total        Q4     Total        Q4
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    Revenue                             87,533    21,635    85,113    21,547
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    Operating expenses                  71,987    17,830    72,718    18,223
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    EBITDA(1)                           15,546     3,805    12,395     3,324
    -------------------------------------------------------------------------
    EBITDA as a % of revenue             17.8%     17.6%     14.6%     15.4%
    -------------------------------------------------------------------------
    Earnings before income taxes         7,677     1,803     3,866     1,183
    -------------------------------------------------------------------------
    Income tax recovery                    125       145       856       202
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    Net earnings                         7,802     1,948     4,722     1,385
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    Diluted earnings per Unit             1.11      0.27      0.70      0.21
    -------------------------------------------------------------------------

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    Total assets                        82,816    82,816    85,793    85,793
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    Long-term debt, end of period        4,043     4,043     4,061     4,061
    -------------------------------------------------------------------------

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    Cash provided by operating
     activities                         11,860     3,549    15,322     5,594
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    Net change in non-cash working
     capital items                       3,318       146    (3,788)   (2,424)
    -------------------------------------------------------------------------
    Maintenance capital expenditures    (1,184)     (187)     (490)     (180)
    -------------------------------------------------------------------------
    Distributable cash(1)               13,994     3,508    11,044     2,990
    -------------------------------------------------------------------------
    Distributions declared               7,706     1,927     7,554     1,927
    -------------------------------------------------------------------------
    Payout ratio(1)                      55.1%     54.9%     68.4%     64.4%
    -------------------------------------------------------------------------
    (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) Restatement of 2008 Results Resulting from Accounting Change:
        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 2009 fourth quarter revenue was flat compared to 2008 in both the healthcare and hospitality sectors. However, EBITDA increased by $0.5 million for the quarter compared to 2008 as a result of lower labour and energy costs. As a result, EBITDA increased in the fourth quarter to 17.6% of revenue from 15.4% for the 2008 fourth quarter. For the year overall, EBITDA increased by $3.2 million in 2009 from 2008.

K-Bro generated cash from operating activities of $3.5 million for the 2009 fourth quarter, a decrease of $2.0 million from the fourth quarter of 2008 as a result of working capital changes.

Outlook

"The results of our growth initiatives, the progress made on labour costs and the positive impact of a full year in our new Calgary plant are all reflected in our strong 2009 results" said Linda McCurdy, President and Chief Executive Officer. "We enter 2010 with the successful acquisition in January of a second plant in Vancouver, the anticipated continuance of a low payout ratio, a strong balance sheet, low debt levels and effective control over our costs. However, our view of organic growth is tempered by a low inflation rate negatively impacting price adjustments, provincial deficits potentially impacting hospital funding, changes in linen usage patterns as customers seek savings and an economy still in recovery mode. We are positioned to weather these storms and pursue growth opportunities as they arise but are cautiously optimistic about 2010."

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 seven 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 with the associated 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 impact of labour cost initiatives; (iv) anticipated contribution from the Vancouver plant acquisition; 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: [phone]; Doug Thomson, FCA, Vice-President & CFO, K-Bro Linen Income Fund, Phone: [phone]