(TSX:KBL) EDMONTON, AB, May 6, 2024 /CNW/ - K-Bro Linen Inc. ("K-Bro" or the "Corporation") today announces its Q1 2024 financial and operating results. Q1 2024 Financial and Operating Highlights Consolidated revenue increased 13.3% compared to Q1 2023, with healthcare revenue having increased by 8.4% and hospitality revenue by 21.4%. EBITDA increased in the first quarter of 2024 by $1.3 million to $11.6 million compared to $10.3 million over the comparable 2023 period, an 12.3% increase. One-time transaction costs of $1.5 million associated with the syndicated credit facility and the acquisition of Shortridge had negative impact on margin of 1.8%. EBITDA margin decreased to 14.5% from 14.6% in the comparable period. Net earnings in the first quarter of 2024 decreased by $0.2 million to $1.8 million compared to $2.0 million in the comparative period of 2023, and as a percentage of revenue decreased by 0.5% to 2.3% For the first quarter of 2024, K-Bro declared dividends of $0.300 per common share. Long-term debt at the end of Q1 2024 was $65.7 million compared to $70.2 million at the end of fiscal 2023. K-Bro entered into a three-year, $175 million committed, syndicated revolving credit facility on March 26, 2024. K-Bro repurchased and cancelled 64,554 shares in Q1 2024 under the normal course issuer bid. To date, a total of 263,616 shares have been repurchased and cancelled. Subsequent to the quarter, on April 30, 2024, K-Bro acquired Shortridge Ltd. a high-quality hospitality laundry provider based in the North West of England. Linda McCurdy, President & CEO of K-Bro, commented that "I'm pleased with our strong first quarter results and our momentum to start the year.  Both of K-Bro's healthcare and hospitality segments continue to experience steady growth trends and we remain focused on delivering industry-leading service to our existing and new customers.  We see a positive outlook for K-Bro and are excited about our organic growth prospects and potential future M&A. Strategic acquisitions of complementary high-quality operators continue to be an important contributor to K-Bro's overall growth profile.  Our new upsized $175 million syndicated credit facility, with a further $75 million accordion, provides further financial flexibility to pursue growth opportunities.  On April 30, 2024, we announced the acquisition of Shortridge and I'm excited by the potential this acquisition presents in the UK.  Shortridge further diversifies our customer base in the UK and helps position our combined UK business for more growth as we look to extend K-Bro's footprint further south into the remainder of the UK.  We have an active M&A pipeline and remain well positioned from a balance sheet and liquidity perspective and will continue to be disciplined as we evaluate acquisitions. On May 15, 2023, we announced a normal course issuer bid and have repurchased 263,616 shares to date. As we emerge from a challenging number of years, we are excited about our outlook." Highlights and Significant Events for Q1 2024 Acquisition of Shortridge On April 30, 2024 the Corporation announced the acquisition of Shortridge Ltd. ("Shortridge Acquisition"), a private hospitality laundry provider based in the North West of England, expanding K-Bro's geographic footprint in the UK. The Shortridge Acquisition was completed through a share purchase agreement consisting of existing working capital, fixed assets, contracts and an employee base. Shortridge is being acquired for consideration of $41.2 million (£24.1 million), on a cash-free, debt free basis (subject to customary conditions, including certain escrows of $7.7 million (£4.5 million)) and with a further potential earn-out of $3.4 million (£2.0 million) for achieving certain targets for the 12 months through September 2024. Shortridge's last twelve months' revenue for the period ended March 31, 2024 was approximately $21.4 million (£12.5 million). The transaction includes the freehold and leasehold real estate for Shortridge's laundry processing facilities. The acquisition is being funded entirely from K-Bro's recently increased syndicated debt facility and is expected to be accretive to the Corporation. The contracts acquired are in the England hospitality sector, which complements the existing business of the Corporation. Based on the Corporation's evaluation of the Shortridge Acquisition and the criteria in the identification of a business combination established in IFRS 3, the Shortridge Acquisition will be accounted for using the acquisition method, whereby the purchase consideration will be allocated to the fair values of the net assets acquired however given the proximity of the transaction to March 31, 2024 the Corporation has not yet finished its accounting of the Shortridge Acquisition. Acquisition of Buanderie Paranet On March 1, 2023 the Corporation completed the acquisition of 100% of the share capital of Buanderie Para-Net ("Paranet") operating as Paranet (the "Paranet Acquisition"), a private laundry and linen services company operating in Québec City, Quebec. The Paranet Acquisition was completed through a share purchase agreement consisting of existing working capital, fixed assets, contracts and an employee base. The contracts acquired are in the Quebec healthcare and hospitality sector, which complements the existing business of the Corporation. Based on the Corporation's evaluation of the Paranet Acquisition and the criteria in the identification of a business combination established in IFRS 3, the Paranet Acquisition has been accounted for using the acquisition method, whereby the purchase consideration is allocated to the fair values of the net assets acquired. The Corporation financed the Paranet Acquisition and transaction costs from existing loan facilities. The purchase price allocated to the net assets acquired, based on their estimated fair values, is as follows: Cash  consideration $           11,074 Contingent consideration $                945 Total purchase price $           12,019 The assets and liabilities recognized as a result of the Paranet Acquisition are as follows: Net Assets Acquired: Accounts receivable 1,317 Prepaid expenses and deposits 137 Linen in service 970 Accounts payable and accrued liabilities (2) (1,552) Lease liabilities (1,176) Deferred income taxes (1,474) Property, plant and equipment(1,2) 6,142 Intangible assets 2,450 Net identifiable assets acquired 6,814 Goodwill 5,205 Net assets acquired $           12,019 1) Includes ROUA from the Canadian Division of $1,176 comprised of buildings of $964 and vehicles of $212 2) Includes provision of $219 for asset retirement obligation The intangible assets acquired are made up of $2,450 for the customer contracts along with related relationships and customer lists. The goodwill is attributable to the workforce, and the efficiencies and synergies created between the existing business of the Corporation and the acquired business. Goodwill will not be deductible for tax purposes. As at March 31, 2024, the purchase price allocation is no longer provisional and has been finalized for Paranet. Contingent consideration In the event that a certain EBITDA target was achieved by Paranet for the twelve month period ended August 31, 2023, additional undiscounted consideration of up to $1,890 would have been payable in cash during the fourth quarter of 2023. While performance was in-line with expectations, the target was not achieved; therefore, no payment was made. During the first three quarters of 2023, the estimated fair value of the possible payment was classified as contingent consideration. The fair value of the contingent consideration was estimated by considering the probability-adjusted future expected cash flows in regards to Paranet achieving the target that would result in consideration being paid. The impact of discounting these future cash flows was not considered because the impact would be nominal. Given that the EBITDA target was not achieved for the twelve month period ended August 31, 2023, the contingent consideration amount of $945 has been derecognized and a gain on settlement of contingent consideration has been recorded in Consolidated Statement of Earnings and Comprehensive Income for the twelve months ended December 31, 2023. Acquisition of Villeray On November 1, 2023, the Corporation completed the acquisition of 100% of the share capital of Buanderie Villeray and its affiliate Buanderie La Relance (the "Villeray Acquisition"), a private laundry and linen services company incorporated in Canada and operating in Montréal, Quebec. The Villeray Acquisition was completed through a share purchase agreement consisting of existing working capital, fixed assets, customer relationships and an employee base. Villeray operates in the hospitality and healthcare sector, which complements the existing business of the Corporation. As part of the transaction, the Corporation closed its Granby facility and consolidated existing volumes into Villeray. Based on the Corporation's evaluation of the Villeray Acquisition and the criteria in the identification of a business combination established in IFRS 3, the Villeray Acquisition has been accounted for using the acquisition method, whereby the purchase consideration is allocated to the fair values of the net assets acquired. The Corporation financed the Villeray Acquisition and transaction costs from existing loan facilities. The purchase price allocated to the net assets acquired, based on their estimated fair values, is as follows: Cash  consideration $           11,204 Contingent consideration $                500 Total purchase price $           11,704 The assets and liabilities recognized as a result of the Villeray Acquisition are as follows: Net Assets Acquired: Accounts receivable 907 Prepaid expenses and deposits 187 Income tax receivable 69 Accounts payable and accrued liabilities (2) (807) Lease liabilities (2,706) Deferred income taxes (1,416) Property, plant and equipment(1,2) 7,161 Intangible assets 2,530 Net identifiable assets acquired 5,925 Goodwill 5,779 Net assets acquired $           11,704 1) Includes ROUA from the Canadian Division of $2,706 related to buildings 2) Includes provision of $97 for asset retirement obligation The provisional intangible assets acquired are made up of $2,530 related to customer relationships. The goodwill is attributable to the workforce, and the efficiencies and synergies created between the existing business of the Corporation and the acquired business. Goodwill will not be deductible for tax purposes. Contingent consideration The estimated fair value of payment has been classified as contingent consideration by exercising significant judgment as to whether it should be classified as such, or as renumeration to the former owner, who will be employed subsequent to the close of the transaction. The Corporation has determined by considering all relevant factors included in the agreements as it pertains to employment terms, valuation of the business, and other relevant terms that the additional consideration is most appropriately reflected as contingent consideration. In the event that a certain EBITDA target is achieved by Villeray for the twelve month period ended October 31, 2024, additional undiscounted consideration ranging from $500 to $1,000 will be payable in cash during the first quarter of 2025. The potential undiscounted amount payable within the agreement will only be paid should the EBITDA target be achieved. Should the EBITDA target not be achieved, no payment will be made. The fair value of the contingent consideration of $500 was estimated by considering ...