CALGARY, ALBERTA--(Marketwire - Nov. 2, 2012) - Alaris Royalty Corp. ("Alaris" or the "Corporation") (TSX:AD) today announced its results for the three and nine months ended September 30, 2012.
For the three and nine months ended September 30, 2012, the Corporation's revenue from partner companies increased 79% and 46%, respectively, to $8.68 million and $22.95 million compared to the prior year periods. The increases were due to the addition of three new private company partners in the past 14 months: Killick Aerospace Limited Partnership ("Killick") in July 2011, Quetico, LLC ("Quetico") in December 2011, and Labstat International Limited Partnership ("Labstat") in June 2012. The Corporation also completed follow on contributions into KMH Limited Partnership ("KMH") in October 2011 and August 2012. Each of these transactions added new revenues in the first nine months of 2012 compared to the prior year.
For the three and nine months ended September 30, 2012, the Corporation recorded earnings of $4.87 million and $13.10 million, and Normalized EBITDA of $6.88 million and $18 million compared to earnings of $2.72 million and $28.34 million; and Normalized EBITDA of $3.84 million and $11.53 million in the prior year periods. Earnings were higher in 2011 as a result of the Corporation realizing significant gains in June 2011 on the reduction of its interest in LifeMark Health Limited Partnership ("LifeMark") and the sale of intangible assets. The 79% and 56% increases in Normalized EBITDA in the three and nine month current periods are due to the new revenue streams noted above as they were added with minimal additional costs. In the quarter, there were some one time deal costs incurred in the third quarter resulting from a transaction the Corporation decided not to proceed with that resulted in higher than expected legal and accounting expenses but remaining expenses were in line with expectations.
"Our third quarter was as expected with significant increases in both earnings and normalized EBITDA compared to the prior year periods as a result of the continued execution of our business plan to find well run, successful new Partners with a long track record of sustainable cash flow. Our balance sheet remains in great shape with only $2.5 million drawn on a $50 million credit facility as we continue to evaluate new opportunities in Canada and the United States" said Darren Driscoll, CFO, Alaris Royalty Corp.
|Reconciliation of Earnings to EBITDA (thousands)||3 months ending Sept 30, 2012||3 months ending Sept 30, 2011||9 months ending Sept 30, 2012||9 months ending Sept 30, 2011|
|Adjustments to Net Income:|
|Income tax expense||1,912||1,053||4,116||9,897|
|Gain on reduction of LifeMark interest||-||-||-||23,816|
|Gain on sale of intangible assets||-||-||-||3,892|
The Corporation's earnings per share include a number of non-cash items that makes it challenging for readers of the statements to calculate a Payout Ratio. Alaris management believes dividends paid, divided by cash flow from operating activities before changes in working capital is an effective measure of the Corporation's payout ratio. For the nine months ended September 30, 2012, the Payout Ratio is 93.2% compared to 98.3% in the same prior year period.
Alaris' agreements with its partner companies (its "Private Company Partners") provide for estimated revenues to Alaris of approximately $31.6 million for 2012. Revenues from our Private Company Partners for the three months ended December 31, 2012 are expected to be $8.6 million. The Corporation has $47.5 million remaining on its $50 million credit facility for use in future transactions. General and administrative expenses are currently estimated to be $4.0 million for 2012, 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. Alaris has also updated its corporate presentation which is available on the company website.
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, Normalized EBITDA and Payout Ratio 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, Normalized EBITDA and Payout Ratio may differ from the methods used by other issuers. Therefore, the Corporation's EBITDA, Normalized EBITDA and Payout Ratio 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, 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. The Corporation has provided a reconciliation of net income to EBITDA in this news release.
Normalized EBITDA refers to EBITDA excluding items that are non-recurring in nature, such as gains on the reduction of interests in Private Company Partners.
Payout Ratio refers to the portion of cash generated from operating activities that is paid out in dividends to shareholders.
The terms EBITDA and Normalized 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.
This news release contains forward-looking statements 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, 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 2012, and the cash requirements of Alaris in 2012.
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 2012 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 in 2012, that interest rates will remain low, 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, that the Corporation will experience positive resets to its annual royalties and distributions from its Private Company Partners in 2012, 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 continue to improve and that the Canadian dollar will strengthen modestly 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; government regulations; and risks relating to the Private Company Partners and their businesses. 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, 2011, 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 interim statement of financial position (unaudited)|
|September 30||December 31|
|Cash and cash equivalents||$||4,863,430||$||3,888,465|
|Trade and other receivables||258,622||3,443,679|
|Promissory note receivable||1,250,000||-|
|Preferred LP Units||250,574,564||207,408,290|
|Investment tax credit receivable||10,922,393||10,922,393|
|Deferred income taxes||11,072,185||13,967,984|
|Accounts payable and accrued liabilities||$||1,221,438||$||1,546,705|
|Income taxes payable||4,141||67,590|
|Loans and borrowings||625,000||-|
|Loans and borrowings||1,875,000||6,500,000|
|Fair value reserve||2,336,689||2,292,939|
|Total Liabilities and Equity||$||285,707,667||$||246,478,200|
|Alaris Royalty Corp.|
|Condensed consolidated interim statement of comprehensive income (unaudited)|
|Three months ended Sept 30||Nine months ended Sept 30|
|Royalties and distributions||$||8,676,756||$||4,842,028||$||22,945,958||$||15,712,932|
|Interest and other||115,528||24,847||122,888||38,624|
|Gain on reduction of partner interests||-||-||-||23,815,973|
|Gain on sale of intangible assets||-||-||-||3,891,560|
|Salaries and benefits||73,248||225,402||1,524,798||1,661,409|
|Corporate and office||254,772||124,180||768,566||592,331|
|Legal and accounting fees||519,446||120,658||1,048,445||377,676|
|Non-cash stock-based compensation||461,436||559,932||1,160,413||1,591,350|
|Depreciation and amortization||26,908||26,713||80,265||116,343|
|Earnings from operations||7,456,474||3,809,990||18,486,359||39,119,980|
|Unrealized foreign exchange loss||600,533||-||567,161||-|
|Earnings before taxes||6,780,745||3,774,616||17,220,978||38,241,213|
|Current income tax expense||266,939||-||536,937||-|
|Deferred income tax expense||1,645,452||1,053,375||3,579,641||9,897,408|
|Other comprehensive income|
|Net change in fair value of available-for-sale financial assets||-||-||50,000||2,280,975|
|Tax impact of change in fair value||-||-||(6,250||)||(285,122||)|
|Realized gain on reduction of partnership interest||-||-||-||(24,015,973||)|
|Tax impact of realized gain||-||-||-||3,001,997|
|Foreign currency translation differences||(356,295||)||-||(327,493||)||-|
|Other comprehensive income for the period, net of income tax||(356,295||)||-||(283,743||)||(19,018,123||)|
|Total comprehensive income for the period||$||4,512,059||$||2,721,241||$||12,820,657||$||9,325,682|
|Earnings per share|
|Basic earnings per share||$||0.22||$||0.16||$||0.64||$||1.68|
|Fully diluted earnings per share||$||0.21||$||0.16||$||0.63||$||1.62|
|Weighted average shares outstanding|
|Alaris Royalty Corp.|
|Condensed consolidated statement of cash flows (unaudited)|
|For the nine months ended September 30|
|Cash flows from operating activities|
|Earnings from the period||$||13,104,400||$||28,343,805|
|Deferred income tax expense||3,579,641||9,897,408|
|Depreciation and amortization||80,265||116,343|
|Unrealized foreign exchange loss||567,161||-|
|Gain on forward contracts||(122,888||)||-|
|Gain on intangible asset sale and reduction of partnership interest||-||(27,707,533||)|
|Non-cash stock based compensation||1,160,413||1,591,350|
|-trade and other receivables||3,312,167||111,083|
|-trade and other payables||(388,716||)||(254,257||)|
|Cash generated from operating activities||22,001,148||13,263,142|
|Net cash from operating activities||$||21,302,928||$||12,384,375|
|Cash flows from investing activities|
|Acquisition of equipment||(9,835||)||(7,232||)|
|Acquisition/disposition of Preferred LP Units||(44,015,150||)||(28,434,180||)|
|Proceeds from reduction in Preferred LP Units||-||65,000,000|
|Net cash from/(used in) investing activities||$||(44,024,985||)||$||36,558,588|
|Cash flows from financing activities|
|New share capital||49,042,500||-|
|Share issue costs||(2,760,340||)||-|
|Proceeds from exercise of warrants||-||3,808,500|
|Proceeds from exercise of options||607,500||9,087|
|Borrowing of senior debt||45,000,000||-|
|Repayment of senior debt||(49,000,000||)||(29,200,000||)|
|Promissory notes issued||1,250,000||-|
|Payments in lieu of dividends on RSUs||(178,953||)||(182,898||)|
|Net cash used in financing activities||$||23,697,022||$||(38,461,388||)|
|Net increase in cash and cash equivalents||974,965||10,481,575|
|Cash and cash equivalents, Beginning of period||3,888,465||1,816,868|
|Cash and cash equivalents, End of period||$||4,863,430||$||12,298,443|