CALGARY, ALBERTA--(Marketwire - Oct. 11, 2011) - Alaris Royalty Corp. ("Alaris" or the "Company") (TSX:AD) is pleased to announce it has completed a $22,400,000 funding (the "Contribution") of KMH Cardiology Limited Partnership ("KMH" or the "Partnership") in support of its growth program. Under the terms of the funding (the "Transaction"), Alaris' distribution (the "Distribution") from KMH will increase by $3,319,000 on an annualized basis. The Distribution will increase Alaris' distributable cash per share ("DCPS") by approximately $0.15, a 15% increase.
This is the second capital contribution Alaris has made into the KMH Partnership since its origination in May 2010, bringing total capital contributions to the Partnership to $27,400,000 and cumulative annual distributions to approximately $4,192,000. Alaris will be funding the Contribution to the Partnership with $11,000,000 of cash on hand and by drawing $11,400,000 from its senior credit facility (the "Facility"). Alaris will begin to receive the Distribution from KMH on December 30, 2011.
"Having been partners with KMH for more than a year, we are very pleased to be contributing to the company's growth in acquiring two well-run and profitable facilities", said Steve King, President and CEO, Alaris Royalty Corp. "The acquisitions add considerably to KMH's free cash flow and also fortify the management team as it continues to expand its operations. For Alaris, this advances our business plan of placing capital with well-managed, profitable companies at accretive returns. The healthcare sector continues to perform very well despite the economy. Therefore, we are fortunate to be able to place the excess cash and available credit from the previously announced LifeMark transaction into KMH".
Uses of Capital
KMH is using the proceeds from the Contribution to acquire two (2) highly profitable medical imaging clinics in the United States, of which, one acquisition will be closing immediately while the other is expected to close by October 14th. The acquisitions are accretive to KMH and will result in KMH becoming a much larger and financially stronger Partner to Alaris. The acquisitions are expected to be seamless, with no interruptions to the operations of either clinic post-acquisition. This should result in KMH realizing cash flow from the new clinics immediately upon closing the transactions. KMH will have four (4) clinics in the United States and eight (8) clinics in Canada following these acquisitions.
"KMH is proud to partner with Alaris as we continue to expand globally and bring high quality healthcare services to new markets," says Neena Kanwar, President and CEO of KMH. "The addition of new facilities is a key component of KMH's long term plan, which is based on steady and strategic growth in the healthcare sector. Alaris has enabled us to secure and invest in the right opportunities at the right time so that KMH can continue its long-standing pattern of strong and stable returns for our investors."
Impact on Alaris
The Transaction increases Alaris' DCPS by $0.15 and reduces its payout ratio to approximately 86%. As a result of the Transaction, KMH will now account for approximately 18% of Alaris' total revenue, up from 4% prior to the Contribution, while Alaris' largest partner, LifeMark Health Limited Partnership, will now account for approximately 29% of the total revenue it receives from its 6 existing partnerships. Total revenue generated from the healthcare sector is now approximately 47% of Alaris' total revenue. Alaris has over $15,000,000 of undrawn capacity on its Facility to fund future transactions.
"Through the previously announced partnership with Killick Aerospace and this Transaction with KMH, Alaris has more than replaced the revenue received from LifeMark Health, prior to the previously announced June 2011 transaction", said Darren Driscoll, Chief Financial Officer, Alaris Royalty Corp. "Alaris now stands as a more diversified company with a stronger balance sheet and increased distributable cash per share because of the effective use of the LifeMark proceeds".
The Company invests in a diversified group of private businesses ("Private Company Partners") in exchange for royalties or distributions from the Private Company Partners, with the principal objective of generating stable and predictable cash flows for dividend payments to its shareholders. Royalties or distributions to Alaris from the Private Company Partners are structured as a percentage of a "top line" financial performance measure such as gross margin, same clinic sales, gross revenues and same-store sales and rank in priority to the owners' common equity position.
KMH provides access to rapidly-evolving medical technology, state-of-the-art diagnostic equipment and highly qualified specialists in Canada and the United States. According to KMH management, KMH has grown from a single facility in 1988 to become the largest provider of Nuclear Cardiology services in North America with 8 clinics in Ontario and 4 in the U.S.
KMH services include Nuclear Medicine, Cardiology and Magnetic Resonance Imaging (MRI) diagnostic services. Physician practice management solutions by KMH further enhance patient care by providing access to specialist consultations and treatment. According to KMH management, more than 85,000 patients visit KMH annually after being referred by physicians, insurance companies, employers and other third party service providers. KMH has successfully administered more than 600,000 cardiology, nuclear cardiology and nuclear medicine diagnostic tests and more than 40,000 magnetic resonance imaging scans. KMH consistently provides a high level of service which has created a strong rapport within the healthcare community. KMH is well recognized by more than 10,000 physicians and has established a preferred provider relationship within the insurance and health services industry.
The terms "distributable cash per share", "payout ratio", and "proforma distributable cash per share" (the "Non-IFRS Measures") are financial measures used in this news release that are not standard measures under International Financial Reporting Standards ("IFRS"). The Company's method of calculating the Non-IFRS Measures may differ from the methods used by other issuers. Therefore, the Company's Non-IFRS Measures may not be comparable to similar measures presented by other issuers.
Distributable cash per share means Alaris' net income prepared in accordance with IFRS excluding non-cash items that include stock-based compensation expense, future income taxes, and depreciation and amortization divided by the weighted average number of common shares issued and outstanding in the share capital of the Company over such period.
Payout ratio is calculated by dividing Alaris' annualized dividends per share by its proforma distributable cash per share.
Proforma distributable cash per share for the purposes of this document refers to the contractual distributable cash per share Alaris is expecting to receive from its partner's in the immediately preceding month from the closing of the Transaction, multiplied by 12.
This news release contains forward-looking statements. Statements other than statements of historical fact contained in this news release may be forward-looking statements, including, without limitation, management's expectations, intentions and beliefs concerning the transaction described herein including: the expected Distribution to the Company and the expected adjustments thereto; the expected timing of payment of the Distributions; the expected impact of the clinic acquisitions to KMH; the expected timing of the close of the second clinic to be acquired by KMH; the expectations for the seamless nature of the clinic acquisitions by KMH; and the expected effect on the Company's distributable cash per share. 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. There can be no assurance that the plans, intentions or expectations upon which these forward looking statements are based will occur.
Statements containing forward-looking information by their nature involve numerous assumptions and significant known and unknown facts and uncertainties of both a general and a specific nature. Key assumptions include, but are not limited to assumptions that: the Partnership will grow and may require capital from Alaris in the future; the Canadian and U.S. economies will not fall into deep recession in 2012; interest rates will not rise in a material nature over the next 12 months; and more private companies will require access to alternative sources of capital. In determining the Company's expectations for economic growth, management primarily considers historical economic data provided by the Canadian and U.S. governments and their agencies.
The forward-looking statements contained herein are subject to numerous known and unknown risks that may cause actual results to vary from those set forth in the forward-looking statements, including, but not limited to risks associated with: general economic conditions and changes in the financial markets; risks associated with KMH and its business; and a change in the ability of the KMH to continue to pay Alaris' preferred distributions. In addition, the information set forth under the heading "Risk Factors" in the Company's Annual Information Form dated March 25, 2011 (a complete copy of which can be found on SEDAR at www.sedar.com) identifies additional factors that could affect the operating results and performance of the Company and may cause the actual results of the Company to differ materially from those anticipated in forward-looking statements.
As forward-looking statements are subject to risks, uncertainties and assumptions and should not be read as guarantees or assurances of future performance. 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 expectations represented in such forward-looking statements 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.
Manager of Investor Relations & Business Analyst