CALGARY, ALBERTA--(Marketwired - Oct. 11, 2016) -
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) is pleased to announce a contribution of USD$18.0 million (approximately CAD$23.4 million) (the "Matisia Contribution") to Matisia LLC ("Matisia") in exchange for an annual distribution of USD$2.7 million (approximately CAD$3.5 million). The Matisia Contribution is comprised of both permanent preferred units (the "Permanent Units") and redeemable preferred units (the "Redeemable Units"). This is the first transaction for Alaris' Small Cap division, which is operated through its wholly-owned subsidiary Salaris Small Cap Royalty Corp. ("Salaris"). Alaris funded the Matisia Contribution with funds drawn on its credit facility (the "Facility").
New Partner - Matisia LLC
Alaris, through Salaris (and Salaris' US subsidiary), made the Matisia Contribution, which is comprised of USD$12.0 million (approximately CAD$15.6 million) of Permanent Units and USD$6.0 million (approximately CAD$7.8 million) of Redeemable Units. The Permanent Units entitle Alaris to an annual distribution of USD$1.8 million (approximately CAD$2.3 million) and the Redeemable Units entitle Alaris to an annual distribution of USD$0.9 million (approximately CAD$1.2 million) (collectively, the "Matisia Distribution"). The Redeemable Units are expected to be short-term and can be redeemed at any time at par by Matisia. The utilization of the combination of the Permanent Units and Redeemable Units was desirable for both Alaris and Matisia as no additional capital was needed from parties other than Alaris to complete the transaction. The Matisia Contribution is accretive to cash flow by adding approximately $0.05 per share ($0.03 per share on the Permanent Units) to Alaris' net cash from operations (after tax). The Matisia Distribution will be adjusted for the first time on January 1, 2018 based on the percentage change in gross revenues subject to a 5% collar.
Matisia is a Seattle, Washington based management consulting firm that provides companies with local, customized consulting solutions across six primary service lines: Business Intelligence, Business Transformation, Enterprise Resource Planning, Project and Product Management, Visual Communication and Organizational Change Management. Founded in 2006, Matisia has developed a passionate workplace culture with over 200 experienced consultants, providing services to a blend of blue-chip, Fortune 500 companies across a diverse set of industries. Matisia expects continued growth in the Seattle region, one of the fastest growing markets in the U.S., coupled with growth opportunities from its newly opened office in Minneapolis. Matisia has been recognized as one of the fastest-growing consulting firms in the U.S., as well as one of Washington's top workplaces.
"Matisia is poised to scale our Consultant-First brand into new markets, having proven our unique business model and culture in Seattle. The hands-off approach from the Salaris and Alaris team allows us to continue investing in our people and providing quality service to our clients long-term," said Darren Alger, President & CEO of Matisia.
"We are extremely pleased to have Matisia as the first partner in our Small Cap Division. Through Darren's leadership since joining Matisia in 2011, and his more than 20 years of experience in technology, management and business consulting, Matisia is positioned to continue its success while capitalizing on the robust consulting market," said Gregg Delcourt, President of Salaris. "Small cap deal flow continues to increase since the launch of Salaris last year, with near-term opportunities to deploy further capital in high quality companies," added Delcourt.
Based on Alaris' review of Matisia' unaudited internal pro forma results for the most recent trailing twelve month period in 2016, management of Alaris believes that Matisia would have an earnings coverage ratio above 2.0x, after giving effect to the Matisia Contribution, other changes to Matisia' capital structure and the Matisia Distribution payable to Alaris.
KPMG Corporate Finance, LLC acted as exclusive financial advisor to Matisia in connection with the transaction.
About the Corporation:
Alaris provides alternative financing to private company partners (the "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 Partners are adjusted each year based on the percentage change 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.
Salaris, a 100% owned subsidiary of Alaris, provides alternative financing to small cap private company partners (the "Small Cap Partners") employing the same non-control investment structure as Alaris. Salaris makes investments of up to $20 million in Small Cap Partners with EBITDA greater than $2 million located in Canada and the US.
Non IFRS Measures:
EBITDA refers to earnings determined in accordance with IFRS, before depreciation and amortization, net of gain or loss on disposal of capital assets, 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.
Contracted EBITDA refers to EBITDA for the previous twelve months excluding proceeds from any disposition of investments but including all projected contracted payments from new investments for the twelve-month period following the investment date.
Earnings Coverage Ratio refers to EBITDA of a Partner (as defined below) divided by such Partner's sum of debt servicing (interest and principal), unfunded maintenance capital expenditures and distributions to Alaris.
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 may be forward-looking statements under applicable securities legislation, including, without limitation, management's expectations, intentions and beliefs concerning: the return to Alaris on the Matisia Contribution, the Matisia earnings coverage ratio and the timeline for redemption of the Redeemable Units. 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. To the extent any forward-looking statements herein constitute a financial outlook, including, without limitation, estimates regarding the Matisia earnings coverage ratio and the increase in Alaris' net cash from operations per share, 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 over the next 24 months and how that will affect Alaris' business and that of its 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 Alaris will be able to resolve any issues that may arise with a Partner on terms materially in line with management's expectations, that Alaris will achieve the benefits of any concessions or relief measures provided to any Partners, that the Partners will continue to make distributions to Alaris as and when required, that the businesses of the Partners will continue to grow, what the Corporation expects to experience regarding resets to its annual royalties and distributions from its Partners upon the reset dates for each Partner, 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 10% relative to the U.S. dollar over the next six months. 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 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 Partners; reliance on key personnel; general economic conditions; failure to complete or realize the anticipated benefit of Alaris' financing arrangements with the Partners; a failure to obtain required regulatory approvals on a timely basis or at all; changes in legislation and regulations and the interpretations thereof; risks relating to the Partners and their businesses, including, without limitation, a material change in the operations of a Partner or the industries they operate in; inability to close additional Partner contributions in a timely fashion, or at all; a change in the ability of the Partners to continue to pay Alaris' preferred distributions; a change in the unaudited information provided to the Corporation; and a failure to realize the benefits of any concessions or relief measures provided by Alaris to any Partner or to successfully execute an exit strategy for a Partner where desired. Additional risks that may cause actual results to vary from those indicated are discussed under the heading "Risk Factors" and "Forward Looking Statements" in the Corporation's Management Discussion and Analysis for the year ended December 31, 2015, which is filed under the Corporation's profile at www.sedar.com and on its website at www.alarisroyalty.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.
Accordingly, readers are cautioned not to place undue reliance on any forward-looking information contained in this news release as a number of factors could cause actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed in the forward-looking statements. 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 assumptions reflected in the forward-looking statements contained herein are reasonable, there can be no assurance that such expectations will prove to be correct.
The forward-looking statements contained herein are expressly qualified in their entirety by this cautionary statement. The forward-looking statements included in this news release are made as of the date of this news release and Alaris does not undertake or assume any obligation to update or revise such statements to reflect new events or circumstances except as expressly required by applicable securities legislation.
Neither the TSX nor its Regulation Services Provider (as that term is defined in the policies of the TSX) accepts responsibility for the adequacy or accuracy of this release.
Vice President, Investments and Investor Relations