A Correction from Source is issued for the Alaris Royalty Corp. press release
disseminated on July 24, 2014 at 17:04 ET. The first table in the press release
providing the per share items was erroneously titled for the three and six
months ending June 30, 2013 and 2012 as has been corrected to the three and six
months ending June 30, 2014 and 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) is pleased to
announce its results for the three and six months ended June 30, 2014 as well as
pending additional contributions to SM Group International LP ("SMi") and Sequel
Youth Family Services, LLC ("Sequel") of $7.5 million and US$7.5 million
respectively (collectively the "Additional Partner Contributions").
The results of the quarter are summarized in four 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 non-cash foreign exchange
gains and losses and a gain on the reduction of the Corporation's financial
interest in LifeMark in 2013):
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Three months Six months
Per Share Items ending June 30 ending June 30
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2014 2013 % Change 2014 2013 % Change
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Revenue $0.55 $0.45 +22.2% $1.11 $0.90 +23.3%
Normalized EBITDA $0.41 $0.33 +24.2% $0.90 $0.70 +28.6%
Dividends $0.365 $0.325 +12.3% $0.725 $0.64 +13.3%
Net cash from operating
activities $0.45 $0.40 +12.5% $0.80 $0.74 +8.1%
Weighted average basic
shares outstanding
(000's) 28,902 24,963 28,808 25,209
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Alaris experienced significant increases in revenue, Normalized EBITDA, net cash
from operating activities and dividends on a per share basis in the quarter, a
direct result of the continued execution of our business plan to fund well run,
successful new private company partners ("Partners") with a long track record of
sustainable cash flow. For the three months ended June 30, 2014, the
Corporation's revenue from its Partners was as expected and increased 39.6% to
$16.24 million compared to $11.63 million in the prior year period. On a per
share basis, the increase was over 22%. The increase was due to the addition of
four new Partners in the past 13 months: SCR Mining and Tunneling, LP ("SCR") in
May 2013; Sequel in July 2013; SMi in November 2013; and Kimco Holdings, LLC
("Kimco") in June 2014. The Corporation also completed additional contributions
into Agility Health LLC ("Agility") and Killick Aerospace Limited Partnership
("Killick") in the fourth quarter of 2013. Each of these transactions added new
revenues in the current period compared to the prior year. Expenses were as
expected in the quarter with legal and accounting expenses higher compared to
the prior year period due to increased tax compliance matters.
At each quarter end, the Corporation reviews the fair value of the preferred
units in each of the Partners. At June 30, 2014, there were two changes to the
fair values of the Partners: an increase to LifeMark`s units of $1.42 million as
the repurchase right LifeMark has on the units increases by 4% in June of each
year; and a US$1.40 million reduction of the Quetico units due to a reduction in
growth expectations. More information is provided in the Private Company Partner
Update portion of the Corporation's MD&A.
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Reconciliation of Earnings to EBITDA Three months Six months
(thousands) ending June 30 ending June 30
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2014 2013 2014 2013
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Earnings $8,745 $17,597 $20,704 $24,342
Adjustments to Earnings:
Amortization 28 26 54 53
Finance costs 876 352 2,041 947
Income tax expense (645) 3,810 2,678 6,171
EBITDA $9,004 $21,785 $25,477 $31,513
Normalizing Adjustments
Unrealized foreign exchange
loss/(gain) 2,884 (458) 345 762
Gain on reduction of LifeMark
interest - (13,052) - (13,052)
Normalized EBITDA $11,888 $8,275 $25,822 $19,223
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For the three and six months ended June 30, 2014, the Corporation recorded
earnings of $8.75 million and $20.7 million, EBITDA of $9.0 million and $25.48
million and Normalized EBITDA of $11.89 million and $25.82 million compared to
earnings of $17.6 million and $24.34 million, EBITDA of $21.79 million and
$31.51 million and Normalized EBITDA of $8.28 million and $19.22 million in the
prior year periods. The decrease in earnings and EBITDA is due to the gain on
the reduction of the Corporation`s financial interest in LifeMark in 2013. The
significant increase in Normalized EBITDA in the quarter was due to the new
revenue streams noted above as they were added with minimal additional costs. On
a per share basis, the increase in Normalized EBITDA was 24.2%. The Corporation
has raised the dividend three times in the past twelve months resulting in
another double digit percentage increase in the dividends paid per share
compared to the prior year periods.
"We're pleased to be reporting another strong quarter with results in line with
our previously disclosed guidance. The quarter was highlighted by the addition
of another new Partner in June (Kimco) and a successful equity offering, which
brought our debt outstanding to nil at June 30, 2014. The accretive Kimco
transaction, along with accretive follow-on contributions to SMi and Sequel,
which we are scheduled to close shortly, are expected to continue to fuel our
growth on a gross and per share basis in the quarters to follow," said Darren
Driscoll, CFO, Alaris Royalty Corp.
Follow-on Contributions
The Corporation intends to make an additional contribution of $7.5 million to
SMi (the "Additional SMi Contribution") in exchange for additional preferred
units in SMi, which will entitle Alaris to receive additional annualized
distributions of $1.2 million, bringing total annualized distributions from SMi
to $6.0 million. The Additional SMi Contribution is expected to close on or
about July 25, 2014 and was in support of their growth initiatives. The
Corporation also expects to make an additional contribution of US$7.5 million,
on or before August 1, 2014, to Sequel (the "Additional Sequel Contribution") in
exchange for additional preferred units in Sequel, which will entitle Alaris to
receive an additional annualized distribution of US$1.1 million, bringing total
annualized distributions from Sequel to US$11 million. The Additional Sequel
Contribution was part of a package to allow Sequel to buyout a non-executive
owner of the business. The Additional Partner Contributions are subject to
customary approval and closing conditions.
The Additional Partner Contributions are expected to provide Alaris with
approximately $2.4 million of additional annualized revenue and approximately
$0.04 per share to Alaris' annualized net cash from operating activities. A
combination of cash on hand and the Corporation`s credit facility will be used
to fund the Additional Partner Contributions.
Outlook
Alaris' agreements with its Partners, after giving effect to the Additional
Partner Contributions, provide for estimated revenues to Alaris of approximately
$66 million for the fiscal year ended December 31, 2014 and approximately $17.3
million for the three months ended September 30, 2014. After the Additional
Partner Contributions, the Corporation will have approximately $72 million of
its $85 million credit facility available for use in future transactions.
General and administrative expenses are currently estimated to be $5.3 million
for 2014, inclusive of all public company costs. Cash requirements after
earnings are expected to remain at minimal levels. Shares outstanding as of the
date of this announcement are 31,996,221.
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.
Conference Call Details
The Corporation will be hosting a conference call at 9am MST (11am EST), Friday,
July 25, 2014 to discuss the financial results and outlook for the Corporation.
Participants can access the conference call by telephone by dialing toll free
1-866-852-2121 or 1-416-340-9531. Alternatively, to listen to this event online,
please enter http://www.gowebcasting.com/5614 in your web browser and follow the
prompts given. Please connect to the call or log into the webcast at least 10
minutes prior to the beginning of the event.
For those unable to participate in the conference call at the scheduled time, it
will be archived for replay until 11am EST August 1, 2014. You can access the
replay by dialing toll free 1-800-408-3053 or 1-905-694-9451 and entering the
passcode 2126351. The webcast will be archived for 90 days and is available for
replay by using the same link as above or by clicking on the link we'll have
stored under the "Investor Briefcase" on our website at www.alarisroyalty.com.
An updated corporate presentation will be posted to Alaris' website within the
next 24 hours at www.alarisroyalty.com.
About the Corporation:
Alaris provides alternative financing to 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 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.
Non-IFRS Measures
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. "Normalized EBITDA" is calculated by adjusting for non-recurring charges
and gains to EBITDA. Management deems non-recurring charges or gains to be
unusual and/or infrequent charges that the Corporation incurs or realizes
outside of its common day-to-day operations. For the three months ended June 30,
2014, the unrealized foreign exchange gains and losses and the 2013 gain on the
reduction of the Corporation`s interest in LifeMark are considered by management
to be non-recurring items. Adjusting for these non-recurring items allows
management to assess EBITDA from ongoing operations.
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.
Forward-Looking Statements
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
Partners, the future financial position or results of the Corporation, business
strategy, and plans and objectives of or involving the Corporation or the
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 2014 (in aggregate and quarterly), the cash requirements of Alaris
in 2014, Alaris` general and administrative costs for 2014, the balance
available on the Corporation's credit facility and the Additional Partner
Contributions (including the timing, the additional distribution payable to
Alaris and the impact on Alaris' net cash from operating activities). 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 2014 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 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 in
2014, 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 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; 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; risks
relating to the Partners and their businesses, including, without limitation, a
material change in the operations of a Private Company Partner or the industries
they operate in: a change in the ability of the Partners to continue to pay
Alaris' preferred distributions; and material adjustments to the unaudited
financial information provide to Alaris by the Partners. 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, 2013, 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)
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June 30 December 31
2014 2013
Assets
Cash and cash equivalents $11,650,301 $8,998,342
Prepayments and deposits 1,318,283 125,543
Trade and other receivables 2,632,453 955,831
Promissory notes receivable 7,550,000 8,500,000
--------------------------------
Current Assets 23,151,037 18,579,716
--------------------------------
Promissory notes receivable 6,915,000 6,915,000
Equipment 98,652 59,825
Intangible assets 6,433,796 6,479,265
Preferred LP and LLC Units 472,579,712 433,988,295
Investment tax credit receivable 10,922,393 10,922,393
Deferred income taxes 3,905,015 3,785,015
--------------------------------
Non-current assets 500,854,568 462,149,793
--------------------------------
Total Assets $524,005,605 $480,729,509
--------------------------------
Liabilities
Accounts payable and accrued liabilities $2,487,223 $1,361,588
Dividends payable 3,999,528 3,443,243
Income taxes payable 2,340,693 1,031,701
Foreign exchange contracts 317,896 633,801
--------------------------------
Current Liabilities 9,145,340 6,470,333
Loans and borrowings - 44,500,000
--------------------------------
Non-current liabilities - 44,500,000
--------------------------------
Total Liabilities $9,145,340 $50,970,333
--------------------------------
Equity
Share capital $497,297,701 $413,237,576
Equity reserve 7,520,693 5,688,079
Fair value reserve (4,829,091) (4,883,951)
Translation reserve 1,058,602 1,201,883
Retained Earnings 13,812,360 14,515,589
--------------------------------
Total Equity $514,860,265 $429,759,176
--------------------------------
--------------------------------
Total Liabilities and Equity $524,005,605 $480,729,509
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Alaris Royalty Corp.
Condensed consolidated statement of comprehensive income (unaudited)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three months ended June 30 Six months ended June 30
------------------------------------------------------------
2014 2013 2014 2013
----------------------------------------------------------------------------
Revenues and
other income
Royalties and
distributions $15,920,210 $ 11,363,576 $31,407,252 $ 22,142,406
Interest and
other 314,505 268,320 626,078 465,219
Gain on
reduction of
partner
interests - 13,052,160 - 13,052,160
Gain/(loss) on
foreign
exchange
contracts 675,535 (333,349) 315,906 (489,002)
------------------------------------------------------------
Total Revenue
and other
income 16,910,250 24,350,707 32,349,236 35,170,783
------------------------------------------------------------
Salaries and
benefits 2,353,965 1,775,414 2,691,243 2,066,187
Corporate and
office 429,606 403,769 923,079 789,017
Legal and
accounting fees 453,204 430,137 762,663 576,834
Non-cash stock-
based
compensation 1,110,080 748,061 1,833,142 1,477,760
Depreciation and
amortization 27,699 26,427 54,315 52,855
------------------------------------------------------------
Subtotal 4,374,554 3,383,808 6,264,442 4,962,653
------------------------------------------------------------
Earnings from
operations 12,535,696 20,966,899 26,084,794 30,208,130
Finance cost 876,075 351,577 2,041,212 946,638
Foreign exchange
(gain)/loss 3,559,064 (791,430) 661,442 (1,251,210)
------------------------------------------------------------
Earnings before
taxes 8,100,557 21,406,752 23,382,140 30,512,702
Current income
tax expense (123,912) 329,870 1,548,144 654,071
Deferred income
tax expense (520,700) 3,480,220 1,129,800 5,517,000
------------------------------------------------------------
Earnings $8,745,169 $ 17,596,662 $20,704,196 $ 24,341,631
------------------------------------------------------------
Other
comprehensive
income
Net change in
fair value of
Preferred LP
Units (73,940) - (73,940) -
Tax impact of
change in fair
value 128,800 - 128,800 -
Realized gain on
reduction of
partnership
interest (13,052,160) (13,052,160)
Tax impact of
realized gain 1,631,520 1,631,520
Foreign currency
translation
differences (1,959,871) 562,838 (143,281) 866,881
------------------------------------------------------------
Other
comprehensive
income for the
period, net of
income tax (1,905,011) (10,857,802) (88,421) (10,553,759)
------------------------------------------------------------
Total
comprehensive
income for the
period $6,840,158 $ 6,738,860 $20,615,775 $ 13,787,872
------------------------------------------------------------
Earnings per
share
Basic earnings
per share $0.30 $0.70 $0.72 $0.97
------------------------------------------------------------
Fully diluted
earnings per
share $0.30 $0.68 $0.70 $0.94
------------------------------------------------------------
Weighted average
shares
outstanding
Basic 28,902,064 24,963,420 28,808,539 25,209,090
------------------------------------------------------------
Fully Diluted 29,443,718 25,909,305 29,451,067 25,865,859
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Alaris Royalty Corp.
Condensed consolidated statement of cash flows (unaudited)
For the six months ended June 30
----------------------------------------------------------------------------
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2014 2013
Cash flows from operating activities
Earnings from the period $20,704,196 $24,341,631
Adjustments for:
Finance costs 2,041,212 946,638
Deferred income tax expense 1,129,800 5,517,000
Depreciation and amortization 54,315 52,855
Unrealized foreign exchange loss/(gain) 133,017 (1,251,210)
(Gain)/Loss on forward contracts (315,906) 489,002
(Gain)/Loss on reduction of partner
interests - (13,052,160)
Non-cash stock based compensation 1,833,142 1,477,760
--------------------------------
25,579,776 18,521,516
Change in:
-trade and other receivables (1,745,412) (283,349)
-prepayments (1,192,740) 61,613
-trade and other payables 2,434,627 1,354,597
--------------------------------
Cash generated from operating activities 25,076,251 19,654,377
Interest paid (2,041,212) (946,638)
--------------------------------
Net cash from operating activities $23,035,039 $18,707,739
--------------------------------
Cash flows from investing activities
Acquisition of equipment (47,674) -
Acquisition/disposition of Preferred LP
Units (38,872,862) (125,780,890)
Proceeds from reduction in Preferred LP
Units - 30,000,000
--------------------------------
Net cash used in investing activities $(38,920,536) $(95,780,890)
--------------------------------
Cash flows from financing activities
New share capital, net of share issue costs 82,933,144 55,821,490
Proceeds from exercise of options 5,453 2,332,603
Borrowing of senior debt 37,700,000 118,000,000
Repayment of senior debt (82,200,000) (72,000,000)
Promissory notes issued (50,000) (9,605,000)
Promissory notes repaid 1,000,000 -
Dividends paid (20,676,546) (15,538,172)
Payments in lieu of dividends on RSUs (174,595) (129,263)
--------------------------------
Net cash from financing activities $18,537,456 $78,881,658
--------------------------------
Net increase in cash and cash equivalents 2,651,959 1,808,507
Cash and cash equivalents, Beginning of
period 8,998,342 3,638,255
--------------------------------
Cash and cash equivalents, End of period $11,650,301 $5,446,762
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FOR FURTHER INFORMATION PLEASE CONTACT:
Alaris Royalty Corp.
Curtis Krawetz
Vice President, Investments and Investor Relations
403-221-7305
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