K-BRO LINEN INC. (TSX: KBL)
2021 Financial and Operating Highlights
- Consolidated healthcare revenue for Q2 2021 increased by 21.7% compared to Q2 2020.
- Consolidated hospitality revenue for Q2 2021 increased by 312.2% compared to Q2 2020.
- EBITDA increased in the second quarter to
$12.2 million compared to$10.1 million over the comparable 2020 period. - EBITDA margin decreased to 23.2% in the current year from 26.8% over the comparable 2020 period.
- On a consolidated basis excluding IFRS 16 Leases ("IFRS 16") for the three months ended
June 30, 2021 the Corporation recorded adjusted EBITDA of$10.0 million and adjusted net earnings of$3.5 million in the second quarter of 2021. This is an increase over the comparable 2020 period where adjusted EBITDA was$7.6 million and adjusted net earnings was$1.3 million . - Net earnings in the second quarter of 2021 increased by
$1.8 million to$3.4 million compared to$1.6 million in the comparative period of 2020, and as a percentage of revenue increased by 2.2% to 6.5%. - Adjusted EBITDA margin decreased to 18.9% in the current year from 20.1% over the comparable 2020 period.
- During the second quarter, K-Bro declared dividends of
$0.300 per common share and distributable cash was$0.713 per common share on a fully diluted basis.
"In other developments, we are very pleased to have the opportunity to expand our long-term relationship with
Highlights and Significant Events for Fiscal 2021
Alberta Contract Award
On
In
On
On
The award renews all of K-Bro's existing volume in
British Columbia Contract Award
On
Revolving Credit Facility
On
During 2020, in consideration of the ongoing COVID-19 pandemic, management requested temporary changes to the terms and conditions of the credit facility, which were as follows:
- An increased Funded Debt to EBITDA covenant for the period of
September 30, 2020 toJune 30, 2021 which gradually allows for a maximum Funded Debt to EBITDA ratio of 4.5x for Q4 2020 and Q1 2021 including certain one-time add backs to EBITDA. - A reduction to the Fixed Charge Covenant for the period of
September 30, 2020 toJune 30, 2021 which reduces to a maximum of 1.1x. - A restriction on any further dividend increases during the covenant relief period of
July 1, 2020 toJune 30, 2021 .
These temporary covenant changes as well as the restriction on dividends expired on
Capital Investment Plan
For fiscal 2021, the Corporation's planned capital spending is expected to be approximately
COVID-19 Pandemic
The ongoing COVID-19 pandemic caused world governments to institute travel restrictions, impacting travel both in and out of
Since
In addition to this, in late Q1 2020 and into Q2 2020 we saw decreases in our healthcare business as a result of hospitals and health authorities taking measures to prepare for anticipated surges in COVID-19 related occupancy (i.e., cancellation of elective surgeries). As Q2 2020 progressed, we saw a return to more normal healthcare levels with subsequent quarters increasing above historical levels due to increased demand however we cannot predict with certainty how the progression of COVID-19 will impact overall volumes.
The following table depicts the impact of the COIVD-19 pandemic on the Corporation's revenue for 2020 and 2021.
Month | Healthcare | Hospitality | Consolidated | Month | Healthcare | Hospitality | Consolidated |
January | 3% | 7% | 5% | January | 25% | -80% | -14% |
February | 5% | 7% | 6% | February | 26% | -82% | -19% |
March | 0% | -27% | -12% | March | 27% | -80% | -20% |
Q1 2020 compared to Q1 2019 | 3% | -6% | -1% | Q1 2021 compared to Q1 2019 | 26% | -81% | -18% |
April | -8% | -94% | -45% | April | 24% | -81% | -22% |
May | 2% | -92% | -39% | May | 21% | -69% | -19% |
June | 9% | -90% | -40% | June | 22% | -49% | 0% |
Q2 2020 compared to Q2 2019 | 1% | -92% | -41% | Q2 2021 compared to Q2 2019 | 23% | -66% | -18% |
July | 13% | -76% | -29% | July | |||
August | 12% | -59% | -23% | August | |||
September | 12% | -53% | -20% | September | |||
Q3 2020 compared to Q3 2019 | 12% | -63% | -24% | Q3 2020 compared to Q3 2019 | |||
October | 12% | -61% | -20% | October | |||
November | 19% | -69% | -18% | November | |||
December | 24% | -78% | -22% | December | |||
Q4 2020 compared to Q4 | 18% | -69% | -20% | Q4 2020 compared to Q4 | |||
YTD | 9% | -60% | -22% | YTD | 25% | -73% | -18% |
Although the Corporation has developed and implemented measures to mitigate the effects of the COVID-19 pandemic which include, temporary restructuring through consolidating operations, reducing headcount, reducing certain capital expenditures and accessing available government assistance programs, earnings will continue to be particularly affected if we continue to experience reductions in travel and reduced hospitality and healthcare occupancy rates. The extent of such negative effects on our business and our financial and operational performance will depend on future developments, including the duration, spread and severity of outbreaks, the availability and effectiveness of the vaccine, the duration and geographic scope of related travel advisories and restrictions and the extent of the impact of the COVID-19 pandemic on overall demand for personal and business travel, all of which are highly uncertain and cannot be predicted with any degree of accuracy. As hotels are continuing to experience significantly reduced occupancy rates, our 2021 consolidated results of operations will continue to be significantly impacted. Additionally, our suppliers or other third parties we rely upon may experience delays or shortages, which could have an adverse effect on our business prospects and results of operations.
As an ongoing risk, the duration and full financial effect of the COVID-19 pandemic is unknown at this time, and continues to be offset through the Corporation's business continuity plan and other mitigating measures. Any estimate of the length and severity of these developments is therefore subject to significant uncertainty, and, accordingly, estimates of the extent to which the COVID-19 pandemic may materially and adversely affect the Corporation's operations, financial results and condition in future periods are also subject to significant uncertainty.
Therefore, uncertainty about judgments, estimates and assumptions made by management during the preparation of the Corporation's interim condensed consolidated financial statements related to potential impacts of the COVID-19 pandemic on revenue, expenses, assets, liabilities, and note disclosures could result in a material adjustment to the carrying value of the assets or liabilities affected.
Impairment of Assets
Impairment testing at
Management assessed that impairment indicators existed at
For the five CGUs who rely primarily on hospitality revenues an impairment test was completed using a probability-weighted discounted cash flow approach whereby the recoverable amount was based on the higher of an asset's fair value less costs to sell and value in use (being the present value of the expected future cash flows of the relevant asset or CGU).
The key assumptions in calculating the recoverable amount of the five CGU's were as follows:
2020 | ||||
Long-term growth rate % | 2.0% to 3.0% | |||
Pre-tax discount rate % | 10.5% to 12.5% |
For the
As a result of this testing at
CGU | Allocated to | Allocated to | Total | Recoverable | |||||
$ | 823 | $ | - | $ | 823 | $ | 2,485 | ||
654 | 2,339 | 2,993 | (1,917) | ||||||
1,700 | - | 1,700 | 5,433 | ||||||
$ | 3,177 | $ | 2,339 | $ | 5,516 | $ | 6,001 | ||
Based on management's review, there were no other CGUs as at
With the ongoing development of the COVID-19 pandemic, the length and severity of these developments is therefore subject to significant uncertainty, and accordingly may materially and adversely affect assumptions used in the consideration of the impairment of assets, impact whether a CGU has been impaired, and may change prior recorded impairment amounts.
Financial Results
For The Three Months Ended | |||||||||||||||
(thousands, except per share amounts | Canadian |
| 2021 | Canadian |
| 2020 | $ Change | % Change | |||||||
Revenue | $ | 44,156 | $ | 8,519 | $ | 52,675 | $ | 35,353 | $ | 2,167 | $ | 37,520 | 15,155 | 40.4% | |
Expenses included in EBITDA | 32,734 | 7,736 | 40,470 | 23,779 | 3,686 | 27,465 | 13,005 | 47.4% | |||||||
EBITDA | 11,422 | 783 | 12,205 | 11,574 | (1,519) | 10,055 | 2,150 | 21.4% | |||||||
EBITDA as a % of revenue | 25.9% | 9.2% | 23.2% | 32.7% | -70.1% | 26.8% | -3.6% | -13.4% | |||||||
Adjusted EBITDA without adoption of IFRS 16 | 9,945 | 9 | 9,954 | 10,140 | (2,582) | 7,558 | 2,396 | 31.7% | |||||||
Adjusted EBITDA without adoption of IFRS 16as a % of revenue | 22.5% | 0.1% | 18.9% | 28.7% | -119.2% | 20.1% | -1.2% | -6.0% | |||||||
Net earnings (loss) | 4,460 | (1,049) | 3,411 | 4,460 | (2,847) | 1,613 | 1,798 | 111.5% | |||||||
Basic earnings (loss) per share | $ | 0.421 | $ | (0.099) | $ | 0.322 | $ | 0.423 | $ | (0.270) | $ | 0.153 | $ | 0.169 | 110.5% |
Diluted earnings (loss) per share | $ | 0.418 | $ | (0.098) | $ | 0.320 | $ | 0.420 | $ | (0.268) | $ | 0.152 | $ | 0.168 | 110.5% |
Dividends declared per diluted share | $ | 0.30 | $ | 0.300 | $ | - | 0.0% | ||||||||
Adjusted net earnings (loss) without adoption of IFRS 16 | 4,490 | (1,012) | 3,478 | 4,482 | (3,190) | 1,292 | 2,186 | 169.2% | |||||||
Basic adjusted net earnings (loss) without adoption of IFRS 16 per share | $ | 0.423 | $ | (0.095) | $ | 0.328 | $ | 0.425 | $ | (0.302) | $ | 0.122 | $ | 0.206 | 168.9% |
Diluted adjusted net earnings (loss) without adoption of IFRS 16 per share | $ | 0.421 | $ | (0.095) | $ | 0.326 | $ | 0.422 | $ | (0.300) | $ | 0.122 | $ | 0.204 | 167.2% |
Total assets | 326,157 | 330,372 | (4,215) | -1.3% | |||||||||||
Long-term debt (excludes lease liabilities) | 40,696 | 56,416 | (15,720) | -27.9% | |||||||||||
Cash provided by operating activities | 3,047 | 6,289 | (3,242) | -51.6% | |||||||||||
Net change in non-cash working capital items | (7,022) | (2,926) | (4,096) | -140.0% | |||||||||||
Share-based compensation expense | 439 | 189 | 250 | 132.3% | |||||||||||
Maintenance capital expenditures | 275 | 280 | (5) | -1.8% | |||||||||||
Principal elements of lease payments | 1,742 | 1,487 | 255 | 17.1% | |||||||||||
Distributable cash flow | 7,613 | 7,259 | 354 | 4.9% | |||||||||||
Dividends declared | 3,211 | 3,196 | 15 | 0.5% | |||||||||||
Payout ratio | 42.2% | 44.0% | -1.8% | -4.1% | |||||||||||
For The Six Months Ended | |||||||||||||||
(thousands, except per share amounts | Canadian |
| 2021 | Canadian |
| 2020 | $ Change | % Change | |||||||
Revenue | $ | 88,858 | $ | 11,431 | $ | 100,289 | $ | 79,064 | $ | 15,731 | $ | 94,795 | 5,494 | 5.8% | |
Expenses included in EBITDA | 66,478 | 11,545 | 78,023 | 64,696 | 16,301 | 80,997 | (2,974) | -3.7% | |||||||
EBITDA | 22,380 | (114) | 22,266 | 14,368 | (570) | 13,798 | 8,468 | 61.4% | |||||||
EBITDA as a % of revenue | 25.2% | -1.0% | 22.2% | 18.2% | -3.6% | 14.6% | 7.6% | 52.1% | |||||||
Adjusted EBITDA without adoption of IFRS 16 | 19,453 | (1,680) | 17,773 | 16,988 | (2,321) | 14,667 | 3,106 | 21.2% | |||||||
Adjusted EBITDA without adoption of IFRS 16 as a % of revenue | 21.9% | -14.7% | 17.7% | 21.5% | -14.8% | 15.5% | 2.2% | 14.2% | |||||||
Net earnings (loss) | 8,617 | (3,572) | 5,045 | 1,988 | (3,783) | (1,795) | 6,840 | 381.1% | |||||||
Basic earnings (loss) per share | $ | 0.813 | $ | (0.337) | $ | 0.476 | $ | 0.189 | $ | (0.359) | $ | (0.170) | $ | 0.646 | 380.0% |
Diluted earnings (loss) per share | $ | 0.808 | $ | (0.335) | $ | 0.473 | $ | 0.187 | $ | (0.357) | $ | (0.169) | $ | 0.642 | 379.9% |
Dividends declared per diluted share | $ | 0.60 | $ | 0.600 | $ | - | 0.0% | ||||||||
Adjusted net earnings (loss) without adoption of IFRS 16 | 8,642 | (3,487) | 5,155 | 6,345 | (4,068) | 2,277 | 2,878 | 126.4% | |||||||
Basic adjusted net earnings (loss) without adoption of IFRS 16 per share | $ | 0.815 | $ | (0.329) | $ | 0.486 | $ | 0.602 | $ | (0.386) | $ | 0.216 | $ | 0.270 | 125.0% |
Diluted adjusted net earnings (loss) without adoption of IFRS 16 per share | $ | 0.811 | $ | (0.327) | $ | 0.484 | $ | 0.598 | $ | (0.383) | $ | 0.215 | $ | 0.269 | 125.1% |
Total assets | 326,157 | 330,372 | (4,215) | -1.3% | |||||||||||
Long-term debt (excludes lease liabilities) | 40,696 | 56,416 | (15,720) | -27.9% | |||||||||||
Cash provided by operating activities | 11,589 | 17,877 | (6,288) | -35.2% | |||||||||||
Net change in non-cash working capital items | (6,330) | 85 | (6,415) | -7547.1% | |||||||||||
Share-based compensation expense | 945 | 696 | 249 | 35.8% | |||||||||||
Maintenance capital expenditures | 387 | 608 | (221) | -36.3% | |||||||||||
Principal elements of lease payments | 3,594 | 3,153 | 441 | 14.0% | |||||||||||
Distributable cash flow | 12,993 | 13,335 | (342) | -2.6% | |||||||||||
Dividends declared | 6,415 | 6,377 | 38 | 0.6% | |||||||||||
Payout ratio | 49.4% | 47.8% | 1.6% | 3.3% | |||||||||||
(1) See "Terminology" for further details |
(2) Q1 2020 includes an adjustment of |
Dividends
The Board of Directors has declared a monthly dividend of
OUTLOOK
While the COVID-19 pandemic will have a continued significant negative impact on our hospitality revenue, management believes the prospects for the Corporation's healthcare business remains strong in the medium-to-long-term. By providing integral laundry and linen processing services to the hospitality and healthcare sectors, the Corporation has been designated an "essential" service in the jurisdictions in which it operates, which has allowed the Corporation's facilities to remain open and continue "normal" operations. This has mitigated some of the more dramatic financial and operational impacts experienced by many other businesses in other industries. In addition, management believes that the financial flexibility provided by our strong balance sheet will enable us to operate without disruption to our business model while maintaining our ability to service the healthcare and hospitality sectors in our Canadian and
CORPORATE PROFILE
K-Bro is the largest owner and operator of laundry and linen processing facilities in
The Corporation's operations in
The Corporation's operations in the
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").
TERMINOLOGY
Throughout this news release and other documents referred to herein, 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", "debt to total capital", "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 follows:
EBITDA
K–Bro reports EBITDA (Earnings before interest, taxes, depreciation and amortization) as a key measure used by management to evaluate performance. EBITDA is utilized to measure compliance with debt covenants and to make decisions related to dividends to Shareholders. We believe EBITDA assists investors to assess our performance on a consistent basis as it is an indication of our capacity to generate income from operations before taking into account management's financing decisions and costs of consuming tangible and intangible capital assets, which vary according to their vintage, technological currency and management's estimate of their useful life. Accordingly, EBITDA comprises revenues less operating costs before financing costs, capital asset and intangible asset amortization, and income taxes.
EBITDA is a sub–total presented within the statement of earnings in accordance with the amendments made to IAS 1 which became effective
Three Months Ended | Six Months Ended | |||||||||||
(thousands) | 2021 | 2020 | 2021 | 2020 | ||||||||
Net earnings (loss) | $ | 3,411 | $ | 1,613 | $ | 5,045 | $ | (1,795) | ||||
Add: | ||||||||||||
Income tax expense (recovery) | 1,183 | 798 | 2,005 | (325) | ||||||||
Finance expense | 901 | 791 | 1,766 | 1,984 | ||||||||
Depreciation of property, plant and equipment | 5,862 | 5,891 | 11,740 | 12,006 | ||||||||
Amortization of intangible assets | 848 | 962 | 1,710 | 1,928 | ||||||||
EBITDA | $ | 12,205 | $ | 10,055 | $ | 22,266 | $ | 13,798 | ||||
(1) Q1 2020 includes an adjustment of |
Non-GAAP Measures
Adjusted EBITDA without adoption of IFRS 16
Adjusted EBITDA without adoption of IFRS 16 is a measure which has been reported in order to assist in the comparison of historical EBITDA to current results. "Adjusted EBITDA" without adoption of IFRS 16 is defined as EBITDA (defined above) with the exclusion of IFRS 16, and certain material items that are unusual in nature, infrequently occurring or not considered part of our core operations.
Three Months Ended | |||||||||||||
Canadian |
| Canadian |
| ||||||||||
(thousands) | 2021 | 2021 | 2021 | 2020 | 2020 | 2020 | |||||||
EBITDA | $ | 11,422 | $ | 783 | $ | 12,205 | $ | 11,574 | $ | (1,519) | $ | 10,055 | |
Add back IFRS 16 Adjustments: | |||||||||||||
Delivery | (325) | (449) | (774) | (329) | (423) | (752) | |||||||
Occupancy costs | (1,152) | (325) | (1,477) | (1,105) | (640) | (1,745) | |||||||
- | - | - | |||||||||||
EBITDA without adoption of IFRS 16 | $ | 9,945 | $ | 9 | $ | 9,954 | $ | 10,140 | $ | (2,582) | $ | 7,558 | |
Add back non-reoccuring items: | |||||||||||||
Impairment of assets | - | - | - | - | - | - | |||||||
- | - | - | |||||||||||
Adjusted EBITDA without adoption of IFRS 16 | $ | 9,945 | $ | 9 | $ | 9,954 | $ | 10,140 | $ | (2,582) | $ | 7,558 | |
Six Months Ended | |||||||||||||
Canadian |
| Canadian |
| ||||||||||
(thousands) | 2021 | 2021 | 2021 | 2020 | 2020 | 2020 | |||||||
EBITDA | $ | 22,380 | $ | (114) | $ | 22,266 | $ | 14,368 | $ | (570) | $ | 13,798 | |
Add back IFRS 16 Adjustments: | |||||||||||||
Delivery | (668) | (923) | (1,591) | (687) | (820) | (1,507) | |||||||
Occupancy costs | (2,259) | (643) | (2,902) | (2,209) | (931) | (3,140) | |||||||
- | - | - | |||||||||||
EBITDA without adoption of IFRS 16 | $ | 19,453 | $ | (1,680) | $ | 17,773 | $ | 11,472 | $ | (2,321) | $ | 9,151 | |
Add back non-reoccuring items: | |||||||||||||
Impairment of assets | - | - | - | 5,516 | - | 5,516 | |||||||
- | - | - | |||||||||||
Adjusted EBITDA without adoption of IFRS 16 | $ | 19,453 | $ | (1,680) | $ | 17,773 | $ | 16,988 | $ | (2,321) | $ | 14,667 | |
Adjusted net earnings without adoption of IFRS 16 and adjusted net earnings without adoption of IFRS 16 per Share
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. "Adjusted net earnings" is defined as net earnings with the exclusion of IFRS 16, and certain material items that are unusual in nature, infrequently occurring or not considered part of our core operations.
Three Months Ended | |||||||||||||
Canadian |
| Canadian |
| ||||||||||
(thousands) | 2021 | 2021 | 2021 | 2020 | 2020 | 2020 | |||||||
Net earnings (loss) | $ | 4,460 | $ | (1,049) | $ | 3,411 | $ | 4,460 | $ | (2,847) | $ | 1,613 | |
Add back IFRS 16 Adjustments: | |||||||||||||
Delivery | (325) | (449) | (774) | (329) | (423) | (752) | |||||||
Occupancy costs | (1,152) | (325) | (1,477) | (1,105) | (640) | (1,745) | |||||||
Depreciation of property, plant and equipment | 1,147 | 674 | 1,821 | 1,091 | 544 | 1,635 | |||||||
Finance expense | 370 | 144 | 514 | 373 | 105 | 478 | |||||||
Income tax (recovery) expense | (10) | (7) | (17) | (8) | 71 | 63 | |||||||
Net earnings (loss) without adoption of IFRS 16 | $ | 4,490 | $ | (1,012) | $ | 3,478 | $ | 4,482 | $ | (3,190) | $ | 1,292 | |
Add back non-reoccuring items (net of income taxes): | |||||||||||||
Impairment of assets | - | - | - | - | - | - | |||||||
Adjusted net earnings (loss) without adoption of IFRS 16 | $ | 4,490 | $ | (1,012) | $ | 3,478 | $ | 4,482 | $ | (3,190) | $ | 1,292 | |
Weighted average number of shares outstanding: | |||||||||||||
Basic | 10,603,415 | 10,603,415 | 10,603,415 | 10,551,443 | 10,551,443 | 10,551,443 | |||||||
Diluted | 10,672,659 | 10,672,659 | 10,672,659 | 10,626,893 | 10,626,893 | 10,626,893 | |||||||
Adjusted net earnings (loss) without adoption of IFRS 16 per share: | |||||||||||||
Basic | ( | ( | |||||||||||
Diluted | ( | ( | |||||||||||
Six Months Ended | |||||||||||||
Canadian |
| Canadian |
| ||||||||||
(thousands) | 2021 | 2021 | 2021 | 2020 | 2020 | 2020 | |||||||
Net earnings (loss) | $ | 8,617 | $ | (3,572) | $ | 5,045 | $ | 1,988 | $ | (3,783) | (1,795) | ||
Add back IFRS 16 Adjustments: | |||||||||||||
Delivery | (668) | (923) | (1,591) | (687) | (820) | (1,507) | |||||||
Occupancy costs | $ | (2,259) | $ | (643) | (2,902) | (2,209) | (931) | (3,140) | |||||
Depreciation of property, plant and equipment | $ | 2,241 | $ | 1,374 | 3,615 | 2,204 | 1,201 | 3,405 | |||||
Finance expense | $ | 719 | $ | 294 | 1,013 | 757 | 206 | 963 | |||||
Income tax (recovery) expense | $ | (8) | $ | (17) | (25) | (17) | 59 | 42 | |||||
Net earnings (loss) without adoption of IFRS 16 | $ | 8,642 | $ | (3,487) | $ | 5,155 | $ | 2,036 | $ | (4,068) | $ | (2,032) | |
Add back non-reoccuring items (net of income taxes): | |||||||||||||
Impairment of assets | - | - | - | 4,309 | - | 4,309 | |||||||
Adjusted net earnings (loss) without adoption of IFRS 16 | $ | 8,642 | $ | (3,487) | $ | 5,155 | $ | 6,345 | $ | (4,068) | $ | 2,277 | |
Weighted average number of shares outstanding: | |||||||||||||
Basic | 10,600,457 | 10,600,457 | 10,600,457 | 10,545,450 | 10,545,450 | 10,545,450 | |||||||
Diluted | 10,661,731 | 10,661,731 | 10,661,731 | 10,609,815 | 10,609,815 | 10,609,815 | |||||||
Adjusted net earnings (loss) without adoption of IFRS 16 per share: | |||||||||||||
Basic | ( | ( | |||||||||||
Diluted | ( | ( | |||||||||||
Distributable Cash Flow
Distributable cash flow is a measure used by management to evaluate the Corporation's performance. While the closest IFRS measure is cash provided by operating activities, distributable cash flow is considered relevant because it provides an indication of how much cash generated by operations is available after capital expenditures. It should be noted that although we consider this measure to be distributable cash flow, financial and non–financial covenants in our credit facilities and dealer agreements may restrict cash from being available for dividends, re–investment in the Corporation, potential acquisitions, or other purposes. Investors should be cautioned that distributable cash flow may not actually be available for growth or distribution from the Corporation. Management refers to "Distributable cash flow" as to cash provided by (used in) operating activities with the addition of net changes in non–cash working capital items, less share–based compensation, maintenance capital expenditures and principal elements of lease payments.
Three Months Ended | Six Months Ended | ||||||||||
(thousands) | 2021 | 2020 | 2021 | 2020 | |||||||
Cash provided by operating activities | $ | 3,047 | $ | 6,289 | $ | 11,589 | $ | 17,877 | |||
Deduct (add): | |||||||||||
Net changes in non-cash working capital items | (7,022) | (2,926) | (6,330) | 85 | |||||||
Share-based compensation expense | 439 | 189 | 945 | 696 | |||||||
Maintenance capital expenditures | 275 | 280 | 387 | 608 | |||||||
Principal elements of lease payments | 1,742 | 1,487 | 3,594 | 3,153 | |||||||
Distributable cash flow | $ | 7,613 | $ | 7,259 | $ | 12,993 | $ | 13,335 | |||
Payout Ratio
"Payout ratio" is defined by management as the actual cash dividend 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 | Six Months Ended | ||||||
(thousands) | 2021 | 2020 | 2021 | 2020 | |||
Cash dividends | 3,211 | 3,196 | 6,415 | 6,377 | |||
Distributable cash flow | 7,613 | 7,259 | 12,993 | 13,335 | |||
Payout ratio | 42.2% | 44.0% | 49.4% | 47.8% | |||
Debt to Total Capital
"Debt to total capital" is defined by management as the total long–term debt (excludes lease liabilities) divided by the Corporation's total capital. This is a measure used by investors to assess the Corporation's financial structure.
Distributable cash flow, payout ratio, debt to total capital adjusted EBITDA, adjusted net earnings, and adjusted net earnings per share are not calculations based on IFRS and are not considered an alternative to IFRS measures in measuring K–Bro's performance. Distributable cash Flow, payout ratio, adjusted EBITDA, adjusted net earnings, and adjusted net earnings per share do not have standardized meanings in IFRS and are therefore not likely to be comparable with similar measures used by other issuers.
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 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 costs, minimum wage legislation and labour costs; (iv) K-Bro's dependence on long-term contracts with the associated renewal risk including, without limitation, in connection with the settlement of definitive documentation in respect there of; (v) increased capital expenditure requirements; (vi) reliance on key personnel; (vii) changing trends in government outsourcing; (viii) changes or proposed changes to minimum wage laws in
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.
This news release also makes reference to certain measures in this document that do not have any standardized meaning as prescribed by IFRS and, therefore, are considered non–GAAP measures. These measures may not be comparable to similar measures presented by other issuers. Please see "Terminology" for further discussion.
SOURCE
© Canada Newswire, source
