CALGARY, ALBERTA--(Marketwired - Nov. 14, 2013) -
NOT FOR DISTRIBUTION IN THE UNITED STATES. FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF UNITED STATES SECURITIES LAW.
Alaris Royalty Corp. ("Alaris" or the "Corporation") (TSX:AD) today announced its results for the three and nine months ended September 30, 2013.
The Corporation continued to apply its five investment strategy pillars of Low Volatility, Visibility, Diversification, Liquidity and Growth during another strong quarter. The results of the quarter are summarized in three key performance metrics compared to the prior year period on a per share basis (the Corporation used Normalized EBITDA rather than EBITDA to back out the impact of a significant gain realized in the second quarter on the reduction of its financial interest in LifeMark Health Limited Partnership ("LifeMark")):
|Three months ending Sept 30||Nine months ending Sept 30|
|2013||2012||% Change||2013||2012||% Change|
|Revenue per share1||$||0.51||$||0.39||+32.3||%||$||1.41||$||1.12||+25.3||%|
|Normalized EBITDA per share1||$||0.42||$||0.31||+35.5||%||$||1.16||$||0.88||+31.9||%|
|Dividends per share1||$||0.36||$||0.30||+20.0||%||$||1.00||$||0.88||+14.3||%|
1Using the weighted average shares outstanding for the period.
Alaris experienced significant increases in revenue, Normalized EBITDA and dividends on a per share basis in the quarter, a direct result of the continued execution of our business plan to find well run, successful new private company partners ("Private Company Partners") with a long track record of sustainable cash flow.
For the three months ended September 30, 2013, the Corporation's revenue from its Private Company Partners increased 66% to $14.46 million compared to $8.68 million in the prior year period. The increase was due to the addition of five new Private Company Partners in the past 13 months: Labstat International Limited Partnership ("Labstat") in June 2012, Agility Health, LLC ("Agility") in December 2012, SHS Services Management Limited Partnership ("SHS") in March 2013, SCR Mining and Tunneling, LP ("SCR") in May 2013; and Sequel Youth Family Services, LLC ("Sequel") in July 2013. The Corporation also completed additional contributions into KMH Limited Partnership ("KMH") and Killick Aerospace Limited Partnership ("Killick") in the second half of 2012. Each of these transactions added new revenues in the current period compared to the prior year. Expenses were as expected in the quarter while legal and accounting expenses were higher in the prior year period due to a transaction the Corporation chose not to close due to issues raised in the due diligence process.
At each quarter end, the Corporation reviews the fair value of the preferred units in each of the Private Company Partners. At September 30, 2013, there were four partners where the fair value was changed although the net impact to the Corporation's financial statements was nil. Two partners saw the fair value increase (LMS and Killick) based on strong financial performance and positive resets to the annual distributions. Two partners saw the fair value decrease: SHS based on a previously disclosed five month voluntary reduction to the annual distribution; and Labstat based on the anticipated restructuring of the 2014 distributions. "We continue to be impressed with the Labstat management team as they have worked hard to find, and have secured new business to replace projects they were expecting from the implementation of the new American tobacco testing regulations. The core business remains strong and we expect Labstat to be a successful long-term partner for Alaris," said Darren Driscoll, CFO, Alaris Royalty Corp. More information is provided in the Private Company Partner Update portion of the Corporation's MD&A.
|Three months ending||Nine months ending|
|Reconciliation of Earnings to EBITDA (thousands)||Sept 30, 2013||Sept 30, 2012||Sept 30, 2013||Sept 30, 2012|
|Adjustments to Earnings:|
|Deferred income tax expense||3,043||1,912||9,219||4,117|
|Gain on reduction of LifeMark interest||-||-||(13,052||)||-|
For the three and nine months ended September 30, 2013, the Corporation recorded earnings of $8.4 million and $32.7 million, EBITDA of $11.8 million and $43.2 million and Normalized EBITDA of $11.7 million and $30.2 million compared to earnings of $4.9 million and $13.1 million and EBITDA and Normalized EBITDA of $6.9 million and $18.0 million in the prior year periods. The 70% increase in Normalized EBITDA in the quarter and 67% increase in the nine month period was due to the new revenue streams noted above as they were added with minimal additional costs. The more significant increases in earnings and EBITDA in the nine month period include a $13.05 million gain on the partial redemption of the preferred units in LifeMark. LifeMark redeemed $30 million of the $65.5 million preferred units held by Alaris in the second quarter.
"We began the second quarter by adding our largest partner in Sequel, followed by a successful bought deal financing to allow us to repay all of our outstanding debt. We ended the quarter with a follow on contribution to one of our current Partners and laid the foundation for our 13th partner that was added in early November," said Darren Driscoll, CFO, Alaris Royalty Corp.
Alaris' agreements with its Private Company Partners provide for estimated revenues to Alaris of approximately $51.4 million for 2013. Revenues from our Private Company Partners for the three months ended December 31, 2013 are expected to be $14.9 million. As a result of a successful equity offering in the third quarter, the Corporation had all of its $50 million credit facility for use in future transactions until drawing $36 million subsequent to quarter end leaving $14 million undrawn. General and administrative expenses are currently estimated to be $5.0 million for 2013, inclusive of all public company costs. Cash requirements after earnings are expected to remain at minimal levels.
The Consolidated Statement of Financial Position, Statement of Comprehensive Income, and Statement of Cash Flows are attached to this news release. Alaris' financial statements and MD&A are available on SEDAR at www.sedar.com and on our website at www.alarisroyalty.com, where you will also find an updated corporate presentation.
About the Corporation:
Alaris provides alternative financing to the Private Company Partners in exchange for distributions with the principal objective of generating stable and predictable cash flows for dividend payments to its shareholders. Distributions from the Private Company Partners are structured as a percentage of a "top line" financial performance measure such as gross margin and same-store sales and rank in priority to the owners' common equity position.
The terms EBITDA and Normalized EBITDA are financial measures used in this news release that are not standard measures under International Financial Reporting Standards ("IFRS"). The Corporation's method of calculating EBITDA and Normalized EBITDA may differ from the methods used by other issuers. Therefore, the Corporation's EBITDA and Normalized EBITDA may not be comparable to similar measures presented by other issuers.
EBITDA refers to net earnings (loss) determined in accordance with IFRS, before depreciation and amortization, interest expense and income tax expense. EBITDA is used by management and many investors to determine the ability of an issuer to generate cash from operations. Management believes EBITDA is a useful supplemental measure from which to determine the Corporation's ability to generate cash available for debt service, working capital, capital expenditures, income taxes and dividends.
Normalized EBITDA refers to EBITDA excluding items that are non-recurring in nature including the gain on sale of interests in the Private Company Partners.
The term EBITDA should only be used in conjunction with the Corporation's annual audited and quarterly reviewed financial statements, excerpts of which are available below, while complete versions are available on SEDAR at www.sedar.com. The Corporation has provided a reconciliation of net income to EBITDA and Normalized EBITDA in this news release.
This news release contains forward-looking statements as defined under applicable securities laws. Statements other than statements of historical fact contained in this news release are forward-looking statements, including, without limitation, management's expectations, intentions and beliefs concerning the growth, results of operations, performance of the Corporation and the Private Company Partners, the future financial position or results of the Corporation, business strategy, and plans and objectives of or involving the Corporation or the Private Company Partners. Many of these statements can be identified by looking for words such as "believe", "expects", "will", "intends", "projects", "anticipates", "estimates", "continues" or similar words or the negative thereof. In particular, this news release contains forward-looking statements regarding the anticipated revenues to be received by Alaris and its general and administrative expenses in 2013, the cash requirements of Alaris in 2013 and the anticipated restructuring of Labstat's 2014 distribution and Labstat's long-term performance outlook. To the extent any forward-looking statements herein constitute a financial outlook, they were approved by management as of the date hereof and have been included to provide an understanding with respect to Alaris' financial performance and are subject to the same risks and assumptions disclosed herein. There can be no assurance that the plans, intentions or expectations upon which these forward looking statements are based will occur.
By their nature, forward-looking statements require Alaris to make assumptions and are subject to inherent risks and uncertainties. Assumptions about the performance of the Canadian and U.S. economies in 2013 and how that will affect Alaris' business and that of its Private Company Partners are material factors considered by Alaris management when setting the outlook for Alaris. Key assumptions include, but are not limited to, assumptions that the Canadian and U.S. economies will grow moderately over the next 12 months, that interest rates will not rise in a material way over the next 12 to 24 months, that the Private Company Partners will continue to make distributions to Alaris as and when required, that the businesses of the Private Company Partners will continue to grow, what the Corporation expects to experience regarding resets to its annual royalties and distributions from its Private Company Partners in 2013, and that Alaris will have the ability to raise required equity and/or debt financing on acceptable terms. Management of Alaris has also assumed that capital markets will remain stable and that the Canadian dollar will remain in a range of approximately plus or minus 5% of par relative to the U.S. dollar. In determining expectations for economic growth, management of Alaris primarily considers historical economic data provided by the Canadian and U.S. governments and their agencies.
There can be no assurance that the assumptions, plans, intentions or expectations upon which these forward-looking statements are based will occur. Forward-looking statements are subject to risks, uncertainties and assumptions and should not be read as guarantees or assurances of future performance. The actual results of the Corporation and the Private Company Partners could materially differ from those anticipated in the forward-looking statements contained herein as a result of certain risk factors, including, but not limited to, the following: the dependence of Alaris on the Private Company Partners; reliance on key personnel; general economic conditions; failure to complete or realize the anticipated benefit of Alaris' financing arrangements with the Private Company Partners including without limitation any special circumstances or temporary relief measures; government regulations; a failure to obtain required regulatory approvals on a timely basis or at all; changes in legislation and regulations and the interpretations thereof; and risks relating to the Private Company Partners and their businesses, including, without limitation, a material change in the operations of a Private Company Partner or the industries they operate in and a change in the ability of the Private Company Partners to continue to pay Alaris' preferred distributions. Additional risks that may cause actual results to vary from those indicated are discussed under the heading "Risk Factors" in the Corporation's Annual Information Form for the year ended December 31, 2012, which is filed under the Corporation's profile at www.sedar.com. Accordingly, readers are cautioned not to place undue reliance on any forward-looking information contained in this news release. Statements containing forward-looking information reflect management's current beliefs and assumptions based on information in its possession on the date of this news release. Although management believes that the expectations represented in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct.
|Alaris Royalty Corp.|
|Condensed consolidated statement of financial position (unaudited)|
|September 30||December 31|
|Cash and cash equivalents||$||5,679,027||$||3,638,255|
|Trade and other receivables||1,535,625||917,642|
|Promissory note receivable||11,500,000||2,500,000|
|Promissory note receivable||5,885,000||1,250,000|
|Preferred LP Units||394,328,363||298,226,402|
|Investment tax credit receivable||10,922,393||10,922,393|
|Deferred income taxes||4,817,915||8,673,125|
|Accounts payable and accrued liabilities||$||754,677||$||1,805,561|
|Income taxes payable||536,457||40,585|
|Loans and borrowings||-||50,000,000|
|Fair value reserve||(9,083,951||)||2,336,689|
|Total Liabilities and Equity||$||441,344,727||$||332,940,710|
|Alaris Royalty Corp.|
|Condensed consolidated statement of comprehensive income (unaudited)|
|Three months ended Sept 30||Nine months ended Sept 30|
|Royalties and distributions||$||14,464,752||$||8,676,756||$||36,570,619||$||22,945,958|
|Interest and other||297,665||115,528||762,885||122,888|
|Gain on reduction of partner interests||-||-||13,052,160||-|
|Gain/(loss) on foreign exchange contracts||466,353||-||(22,649||)||-|
|Salaries and benefits||263,034||73,248||2,329,222||1,524,798|
|Corporate and office||282,003||254,772||1,068,945||768,566|
|Legal and accounting fees||252,842||519,446||829,726||1,048,445|
|Non-cash stock-based compensation||1,347,606||461,436||2,825,365||1,160,413|
|Depreciation and amortization||26,558||26,908||79,415||80,265|
|Earnings from operations||13,056,727||7,456,474||43,230,342||18,486,359|
|Unrealized foreign exchange (gain)/loss||1,329,300||600,533||78,090||567,161|
|Earnings before taxes||11,430,441||6,780,745||41,908,628||17,220,978|
|Current income tax expense||806,117||266,939||1,461,456||536,937|
|Deferred income tax expense||2,236,800||1,645,452||7,757,200||3,579,641|
|Other comprehensive income|
|Net change in fair value of Preferred LP Units||-||-||-||50,000|
|Tax impact of change in fair value||-||-||-||(6,250||)|
|Realized gain on reduction of partnership interest||-||-||(13,052,160||)||-|
|Tax impact of realized gain||-||-||1,631,520||-|
|Foreign currency translation differences||847,354||(356,295||)||19,527||(327,493||)|
|Other comprehensive income for the period, net of income tax||847,354||(356,295||)||(11,401,113||)||(283,743||)|
|Total comprehensive income for the period||$||9,234,878||$||4,512,059||$||21,288,859||$||12,820,657|
|Earnings per share|
|Basic earnings per share||$||0.30||$||0.22||$||1.26||$||0.64|
|Fully diluted earnings per share||$||0.29||$||0.21||$||1.22||$||0.63|
|Weighted average shares outstanding|
|Alaris Royalty Corp.|
|Condensed consolidated statement of cash flows (unaudited)|
|For the nine months ended September 30|
|Cash flows from operating activities|
|Earnings from the period||$||32,689,972||$||13,104,400|
|Deferred income tax expense||7,757,200||3,579,641|
|Depreciation and amortization||79,414||80,265|
|Unrealized foreign exchange loss/(gain)||78,090||567,161|
|(Gain)/Loss on foreign exchange contracts||22,649||(122,888||)|
|(Gain)/Loss on reduction of partner interests||(13,052,160||)||-|
|Non-cash stock based compensation||2,825,365||1,160,413|
|-trade and other receivables||(664,515||)||3,312,167|
|-trade and other payables||(555,012||)||(388,716||)|
|Cash generated from operating activities||30,486,935||22,001,148|
|Net cash from operating activities||$||29,243,311||$||21,302,928|
|Cash flows from investing activities|
|Acquisition of equipment||(5,232||)||(9,835||)|
|Acquisition/disposition of Preferred LP Units||(126,136,641||)||(44,015,150||)|
|Proceeds from reduction in Preferred LP Units||30,000,000||-|
|Net cash from/(used in) investing activities||$||(96,141,873||)||$||(44,024,984||)|
|Cash flows from financing activities|
|New share capital, net of share issue costs||155,954,527||46,282,160|
|Proceeds from exercise of options||2,147,226||-|
|Borrowing of senior debt||118,000,000||45,000,000|
|Repayment of senior debt||(168,000,000||)||(49,000,000||)|
|Promissory notes issued||(13,635,000||)||1,250,000|
|Payments in lieu of dividends on RSUs||(208,832||)||(178,953||)|
|Net cash used in financing activities||$||68,939,334||$||23,697,022|
|Net increase in cash and cash equivalents||2,040,772||9,74,965|
|Cash and cash equivalents, Beginning of period||3,638,255||3,888,465|
|Cash and cash equivalents, End of period||$||5,679,027||$||4,863,430|