CALGARY, ALBERTA--(Marketwired - Dec. 13, 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) was notified today that SHS Services Management LP ("SHS" or the "Partnership") has voluntarily filed an application for receivership due to operational and other challenges SHS has faced subsequent to becoming the licensed provider of home installed products and services under the Sears Home Services banner. Should Alaris not be able to realize on any of its financial interests in the Partnership moving forward, the financial impact to Alaris is estimated to be a decrease in net cash from operating activities, compared to the amount disclosed by Alaris in its press release dated November 8, 2013, of approximately 3% on an annualized basis or approximately $0.065 on a per share basis. This amount is not material to Alaris' cash flow and therefore today's announcement will not affect the Corporation's monthly dividend to shareholders. Based on these assumptions, on an annualized basis, Alaris estimates its net cash from operating activities to be $1.83 per share, which results in a payout ratio of approximately 78% based on an annualized dividend of $1.44 per share.
The parties involved have endeavored to make the business of SHS viable and will continue to work towards a solution. Alaris will also take all necessary action to enforce its rights under the agreements in place with the Partnership and affiliated parties and is hopeful the Corporation can realize a portion of its initial contribution. However, there are no assurances that Alaris will be able to collect any funds through the receivership process. As such, Alaris is not using any of the annual distributions from SHS in its financial forecasts from this point forward nor is it forecasting the collection of any of its original contribution as a source of future capital. Alaris, as a secured creditor of SHS in respect of the $2,000,000 loan provided to the Partnership in September 2013 expects to collect all of the $2,000,000 outstanding under such loan.
"We are very disappointed with the receivership of SHS and its performance as a licensee to Sears Canada Inc. The market dynamics as well as the transition of operations proved to be too difficult to overcome, with the problem being further magnified now that we've entered a seasonally slow time of year for the home services industry. Throughout this process, Alaris has analyzed its decision to invest in SHS. While the financial impact on Alaris is not material, we certainly do not take this situation lightly and have tightened our criteria for partnering with new private companies. We believe that the changes made internally as a result of this situation will make us a better company in the long run. The growth prospects for Alaris are still very positive in terms of contributing capital to new private company partners as well as for the positive operational performance of existing partners. We are looking forward to continued execution of our business plan as we head into 2014," said Steve King, President and CEO, Alaris Royalty Corp.
The Corporation provides alternative financing for 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 from the Private Company Partners are structured as a percentage of a "top line" financial performance measure such as net revenue, gross profit, and same location sales.
Non IFRS Measures
Payout Ratio: The term "payout ratio" is a financial measure used in this news release that is not a standard measure under International Financial Reporting Standards. The Corporation's method of calculating payout ratio may differ from the methods used by other issuers. Therefore, the Corporation's payout ratio may not be comparable to similar measures presented by other issuers. Payout ratio means Alaris' annualized dividend payable per share over the next twelve months divided by its expected net cash from operating activities over the next 12 months (after giving effect to the impact of SHS entering receivership). The payout ratio should only be used in conjunction with the Corporation's annual audited and quarterly reviewed financial statements, which are available on SEDAR at www.sedar.com.
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 results of the receivership by SHS, including whether Alaris will be able to realize any distributions on its original contribution to SHS or realize any return of capital contributed to SHS; Alaris' ability to realize on the $2,000,000 loan it provided to SHS; Alaris' remedies and actions in relation thereto; Alaris' growth prospects; operational performance of Alaris' other Private Company Partner's; Alaris' annualized dividend rate; and, the impact of the Partnership's receivership on net cash from operating activities, cash flow, payout ratio and Alaris' monthly dividend. 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, the estimated effect on net revenue, net cash from operating activities and estimated payout ratio, they were approved by management as of the date hereof and have been included to assist readers in understanding management's current expectations regarding 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.
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 Private Company Partners will continue to grow and may require additional capital from Alaris in the future; the Canadian and U.S. economies will grow moderately over the next 12 to 24 months; interest rates will not rise in a material nature over the next 12 to 24 months; more private companies will require access to alternative sources of capital; and the Corporation will obtain required regulatory approvals on a timely basis. In determining the Corporation'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 the Private Company Partners and their respective businesses; a change in the ability of the Private Company Partners to continue to pay Alaris' preferred distributions; a material change in the operations of a Private Company Partner or the industries in which they operate; failure to obtain required regulatory approvals on a timely basis or at all; changes in legislation and regulations and the interpretations thereof; SHS's business does not survive the receivership; a failure to recover any capital provided to SHS, outstanding distributions and future distributions; and an inability to realize on the $2,000,000 secured loan provided to SHS. In addition, the information set forth under the heading "Risk Factors" in the Corporation's Annual Information Form dated March 13, 2013 (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 Corporation and may cause the actual results of the Corporation 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 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