K-Bro Reports Q3, 2013 Results and Declares November Dividend
(TSX: KBL)
Q3, 2013 Financial Highlights
- Revenue for the three and nine months ended September 30, 2013 was $34.6 million and $98.9 million, respectively, increases of 4.7% and 4.4% over the comparable periods.
- EBITDA for the quarter decreased by $1.0 million, or 14.9%, to $5.7 million compared to $6.7 million in Q3, 2012 and year-to-date EBITDA decreased by $0.8 million, or 4.5%, to $17.9 million from $18.7 million. EBITDA for the third quarter of 2013 included an expense accrual for the remaining lease payments on the former processing facility in Edmonton of $0.7 million.
- After adjusting for the lease accrual, adjusted EBITDA for the three and nine months ended September was $6.4 million and $18.6 million, respectively, compared to $6.7 million and $18.7 million.
- Adjusted EBITDA margin decreased on a quarter-over-quarter basis to 18.7% in Q3, 2013 compared to 20.4% in Q3, 2012. The margin decline was the result of the transition and transfer of operations to the new Edmonton facility.
- Net earnings after taxes for the third quarter decreased by $0.4 million to $2.6 million compared to $3.0 million in Q3, 2012. After adjusting for the lease accrual after tax, adjusted net earnings increased by 3.8%, or by $0.1 million, to $3.1 million compared to $3.0 million in Q3, 2012.
| (thousands, except per share amounts | For the three months ended September 30 | |||||
| and percentages) | 2013 | 2012 | $ Change | % Change | ||
| Revenue | $ | 34,551 | $ | 33,013 | 1,538 | 4.7% |
| Operating expenses | 28,816 | 26,274 | 2,542 | 9.7% | ||
| EBITDA(1) | 5,735 | 6,739 | (1,004) | -14.9% | ||
| EBITDA(1) as a % of revenue | 16.6% | 20.4% | - | -3.8% | ||
| Adjusted EBITDA(1) | 6,448 | 6,739 | (291) | -4.3% | ||
| Adjusted EBITDA as a % of revenue(1) | 18.7% | 20.4% | - | -1.7% | ||
| Earnings before income taxes | 3,674 | 4,183 | (509) | -12.2% | ||
| Income tax expense | 1,103 | 1,224 | (121) | -9.9% | ||
| Net earnings | 2,571 | 2,959 | (388) | -13.1% | ||
| Basic earnings per Share | $ | 0.37 | $ | 0.42 | (0.05) | -11.9% |
| Diluted earnings per Share | $ | 0.36 | $ | 0.42 | (0.06) | -14.3% |
| Adjusted net earnings(1) | 3,070 | 2,959 | 111 | 3.8% | ||
| Basic adjusted net earnings per share(1) | $ | 0.44 | $ | 0.42 | 0.02 | 4.8% |
| Diluted adjusted net earnings per share(1) | $ | 0.44 | $ | 0.42 | 0.02 | 4.8% |
| Total assets | 107,911 | 94,166 | 13,745 | 14.6% | ||
| Long-term debt, end of period | 17,028 | 7,787 | 9,241 | 118.7% | ||
| Cash provided by operating activities | 5,106 | 6,223 | (1,117) | -17.9% | ||
| Net change in non-cash working capital items | 332 | 598 | (266) | -44.5% | ||
| Share-based compensation expense (1) | 279 | 177 | 102 | 57.6% | ||
| Maintenance capital expenditures | 293 | 168 | 125 | 74.4% | ||
| Distributable cash flow(1) | 4,202 | 5,280 | (1,078) | -20.4% | ||
| Dividends declared | 2,039 | 2,028 | 11 | 0.5% | ||
| Payout ratio(1) | 48.4% | 38.3% | - | 10.1% | ||
| (1) Refer to the Terminology section for further details | ||||||
| (thousands, except per share amounts | For the nine months ended September 30 | |||||
| and percentages) | 2013 | 2012 | $ Change | % Change | ||
| Revenue | $ | 98,858 | $ | 94,704 | 4,154 | 4.4% |
| Operating expenses | 80,962 | 75,964 | 4,998 | 6.6% | ||
| EBITDA(1) | 17,896 | 18,740 | (844) | -4.5% | ||
| EBITDA(1) as a % of revenue | 18.1% | 19.8% | - | -1.7% | ||
| Adjusted EBITDA(1) | 18,609 | 18,740 | (131) | -0.7% | ||
| Adjusted EBITDA as a % of revenue(1) | 18.8% | 19.8% | - | -1.0% | ||
| Earnings before income taxes | 11,593 | 11,444 | 149 | 1.3% | ||
| Income tax expense | 3,374 | 3,053 | 321 | 10.5% | ||
| Net earnings | 8,219 | 8,391 | (172) | -2.0% | ||
| Basic earnings per Share | $ | 1.17 | $ | 1.20 | (0.03) | -2.5% |
| Diluted earnings per Share | $ | 1.17 | $ | 1.20 | (0.03) | -2.5% |
| Adjusted net earnings(1) | 8,725 | 8,391 | 334 | 4.0% | ||
| Basic adjusted net earnings per share(1) | $ | 1.24 | $ | 1.20 | 0.04 | 3.3% |
| Diluted adjusted net earnings per share(1) | $ | 1.24 | $ | 1.20 | 0.04 | 3.3% |
| Total assets | 107,911 | 94,166 | 13,745 | 14.6% | ||
| Long-term debt, end of period | 17,028 | 7,787 | 9,241 | 118.7% | ||
| Cash provided by operating activities | 12,787 | 12,881 | (94) | -0.7% | ||
| Net change in non-cash working capital items | (2,576) | (3,261) | 1,283 | -33.2% | ||
| Share-based compensation expense (1) | 977 | 929 | 48 | 5.2% | ||
| Maintenance capital expenditures | 705 | 534 | 339 | 92.6% | ||
| Distributable cash flow(1) | 13,680 | 14,679 | (999) | -6.8% | ||
| Dividends declared | 6,103 | 5,949 | 154 | 2.6% | ||
| Payout ratio(1) | 44.5% | 40.3% | - | 4.2% | ||
| (1) Refer to the Terminology section for further details | ||||||
EDMONTON, Nov. 13, 2013 /CNW/ - K-Bro Linen Inc. ("K-Bro" or the "Corporation") today announced revenue of $34.6 million, EBITDA of $5.7 million and Adjusted EBITDA of $6.4 million for the three-months ended September 30, 2013. Net earnings after tax were $2.6 million, earnings of $0.37 per basic share, and distributable cash of $0.596 per diluted share for the quarter.
In the third quarter of 2013, revenue was 4.7% higher than the comparable period in 2012. This year-over-year increase was primarily due to organic growth in volumes and revenues. EBITDA decreased from $6.7 million in Q3, 2012 to $5.7 million in Q3, 2013, while EBITDA margin declined from 20.4% to 16.6%, and net earnings declined from $3.0 to $2.6 million. The decreases in EBITDA and EBITDA margin is due to transition costs associated with the start-up and commissioning of the new Edmonton plant, including the recognition of the remaining lease liabilities as occupancy costs related to space leases on decommissioned sites and is consistent with the decline as previously forecast. Adjusted EBITDA, which normalizes the impact of the one-time recognition of lease costs, was $6.4 million for the quarter, compared to $6.7 million of Adjusted EBITDA in the comparative quarter. Adjusted net earnings increased to $3.1 million compared to $3.0 million in the comparative period.
DIVIDEND
K-Bro also announces a dividend of $0.0958CAD per common share of the Corporation for the period from November 1 to 30, 2013, to be paid on December 13, 2013 to holders of record of common shares on November 30, 2013. The Corporation's policy is for shareholders of record on the last business day of a calendar month to receive dividends during the fifteen days following the end of such month. K-Bro designates this dividend as an eligible dividend pursuant to subsection 89(14) of the Income Tax Act (Canada) and similar provincial and territorial legislation.
OUTLOOK
"During the quarter we were able to commence the transition from our former location into our new, modernized Edmonton facility. The transition will continue in the fourth quarter." said Linda McCurdy, President & Chief Executive Officer. "During the quarter each of our EBITDA, EBITDA margin and net earnings declined, which was consistent with our expectations as previously forecast. However, on an adjusted basis, our net earnings increased quarter-over-quarter and year-over-year. As we complete the transition, we continue to believe that our EBITDA margin will be impacted by up to 3% on a consolidated basis for the final quarter of 2013. Once the transition is complete, we expect margins to gradually return to historic levels."
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 »).
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", "Adjusted EBITDA", "Adjusted net earnings", "Adjusted net earnings per share", "distributable cash" and "payout ratio". These terms do not have any standardized meaning under International Financial Reporting Standards ("IFRS") as set out in the CICA Handbook. Therefore, EBITDA, Adjusted EBITDA, Adjusted net earnings, Adjusted net earnings per share, distributable cash and payout ratio may not be comparable to similar measures presented by other issuers. Specifically, the terms "EBITDA", "Adjusted EBITDA", "Adjusted net earnings", "Adjusted net earnings per share", "distributable cash", and "payout ratio" have been defined as:
EBITDA is defined as earnings before interest, income taxes, depreciation, and amortization. EBITDA is not a recognized measure for financial statement presentation under IFRS. EBITDA is not intended to represent cash flow from operations, as defined by IFRS, and it should not be considered as an alternative to net earnings, cash flow from operations, or any other measure of performance prescribed by IFRS. The Corporation's EBITDA may also not be comparable to EBITDA used by other corporations, which may be calculated differently. The Corporation considers EBITDA to be a meaningful measure to assess its operating performance in addition to standardized IFRS measures. It is included because the Corporation believes it can be useful in measuring its ability to service debt, fund capital expenditures, and expand its business.
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||
| (thousands) | 2013 | 2012 | 2013 | 2012 | ||||||||
| Net earnings | $ | 2,571 | $ | 2,959 | $ | 8,219 | $ | 8,391 | ||||
| Add: | ||||||||||||
| Income tax expense | 1,103 | 1,224 | 3,374 | 3,053 | ||||||||
| Interest expense and financial charges, net | 169 | 272 | 419 | 422 | ||||||||
| Depreciation of property, plant and equipment | 1,357 | 1,609 | 4,191 | 4,734 | ||||||||
| Amortization of intangible assets | 530 | 674 | 1,610 | 2,020 | ||||||||
| Loss on disposal of property, plant and equipment | 5 | 1 | 83 | 120 | ||||||||
| EBITDA | $ | 5,735 | $ | 6,739 | $ | 17,896 | $ | 18,740 | ||||
Adjusted EBITDA is a measure which has been reported in order to assist in the comparison of historical EBITDA to current results. The calculation of Adjusted EBITDA normalizes the impact of non-recurring infrequent and/or unusual transactions which did not occur during the preceding two years and are not expected to recur within the next two years, and the related impact on EBITDA (as defined above). During the quarter ended September 30, 2013, a charge equivalent to the remaining lease payments for decommissioned facilities has been recognized as occupancy costs. The normalization of this expense from the calculation of EBITDA is considered by Management to be a more accurate representation of continuing operations.
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||
| (thousands) | 2013 | 2012 | 2013 | 2012 | ||||||||
| EBITDA | $ | 5,735 | $ | 6,739 | $ | 17,896 | $ | 18,740 | ||||
| Add: | ||||||||||||
| Occupancy expense of decommissioned facilities | 713 | - | 713 | - | ||||||||
| Adjusted EBITDA | $ | 6,448 | $ | 6,739 | $ | 18,609 | $ | 18,740 | ||||
Adjusted net earnings and adjusted net earnings per share are measures which have been reported in order to assist in the comparison of historical net earnings to current results. The calculation of Adjusted net earnings normalizes the impact of non-recurring infrequent and/or unusual transactions net of corporate income taxes which did not occur during the preceding two years and are not expected to recur within the next two years, and the related impact on net earnings and net earnings per share. The normalization of these net expenses in the calculation of adjusted net earnings and adjusted net earnings per share is considered by management to be a more accurate representation of the net earnings from continuing operations.
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||
| (thousands) | 2013 | 2012 | 2013 | 2012 | ||||||||
| Net earnings | $ | 2,571 | $ | 2,959 | $ | 8,219 | $ | 8,391 | ||||
| Add: | ||||||||||||
| Occupancy expense of decommissioned facilities, net of corporate income taxes |
499 | - | 499 | - | ||||||||
| Adjusted net earnings | $ | 3,070 | $ | 2,959 | $ | 8,718 | $ | 8,391 | ||||
| Adjusted net earnings, per share: | ||||||||||||
| Basic | $ | 0.44 | $ | 0.42 | $ | 1.24 | $ | 1.20 | ||||
| Diluted | $ | 0.44 | $ | 0.42 | $ | 1.24 | $ | 1.20 | ||||
Distributable cash flow 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 an additional GAAP measure generally used by dividend paying corporations 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 IFRS. Previously the share-based compensation was recorded as part of the net changes in non-cash working capital items; however the amount has been disclosed separately commencing in Q4, 2012. The comparative figures for the periods presented have been restated to reflect this revised presentation.
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||
| (thousands) | 2013 | 2012 | 2013 | 2012 | ||||||
| Cash provided by operating activities | $ | 5,106 | $ | 6,223 | $ | 12,787 | $ | 12,881 | ||
| Deduct: | ||||||||||
| Net changes in non-cash working capital items | 332 | 598 | (2,575) | (3,261) | ||||||
| Share-based compensation expense | 279 | 177 | 977 | 929 | ||||||
| Maintenance capital expenditures | 293 | 168 | 705 | 534 | ||||||
| Distributable cash flow | $ | 4,202 | $ | 5,280 | $ | 13,680 | $ | 14,679 | ||
Payout ratio is defined by management as the actual cash 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 dividends. The payout ratio depends on the distributable cash and the Corporation's dividend policy.
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||
| (thousands) | 2013 | 2012 | 2013 | 2012 | ||
| Cash dividends | 2,039 | 2,028 | 6,103 | 5,949 | ||
| Distributable cash | 4,202 | 5,280 | 13,680 | 14,679 | ||
| Payout ratio | 48.4% | 38.3% | 44.5% | 40.3% | ||
Figures expressed in percentages are calculated from amounts rounded in thousands of dollars.
FORWARD LOOKING STATEMENTS
| 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 inherent 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; and (vii) 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. |
SOURCE: K-Bro Linen Inc.
Linda McCurdy
President & Chief Executive Officer
Chris Burrows
Vice-President & Chief Financial Officer
K-Bro Linen Inc. (TSX: KBL)
Phone: 780.453.5218
Email: [email protected]
Web: www.k-brolinen.com
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