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. (TSX:AD) ("Alaris" or the "Corporation") today announced
its results for the three and six months ended June 30, 2013.
The Corporation continued to apply its five investment strategy pillars of Low
Volatility, Visibility, Diversification, Liquidity and Growth during another
strong quarter. The results of the quarter are summarized in three 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 impact of
a significant gain realized in the quarter on the reduction of interest in
LifeMark):
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Three Six
months ending months ending
June 30 June 30
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% %
2013 2012 Change 2013 2012 Change
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Revenue per share(1) $0.46 $0.37 +21.5% $0.88 $0.73 +20.2%
Normalized EBITDA per share(1) $0.35 $0.28 +25.8% $0.73 $0.57 +28.7%
Dividends per share(1) $0.325 $0.29 +12.1% $0.64 $0.575 +11.3%
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(1) Using the weighted average shares outstanding for the period.
Alaris experienced significant increases in revenue, Normalized EBITDA and
dividends on a per share basis in the quarter, a direct result of the continued
execution of our business plan to find well run, successful new private company
partners ("Private Company Partners") with a long track record of sustainable
cash flow.
For the three months ended June 30, 2013, the Corporation's revenue from its
Private Company Partners increased 55% to $11.36 million compared to $7.34
million in the prior year period. The increase was due to the addition of four
new Private Company Partners in the past 13 months: Labstat International
Limited Partnership ("Labstat") in June 2012, Agility Health, LLC ("Agility") in
December 2012, SHS Services Management Limited Partnership ("SHS") in March 2013
and SCR Mining and Tunneling, LP ("SCR") in May 2013. The Corporation also
completed follow on contributions into KMH Limited Partnership ("KMH") and
Killick Aerospace Limited Partnership ("Killick") in the second half of 2012.
Each of these transactions added new revenues in the current period compared to
the prior year. Legal and accounting expenses were approximately $100,000 higher
than the prior year period due to a transaction that did not move ahead as well
as additional fees from the Corporation's legal and tax advisors due to growth
in the business. Corporate and office expenses were approximately $185,000
higher than the prior year period due to increased administrative costs that
come from growth in the business including travel, TSX fees and Alaris' annual
conference for its Private Company Partners.
---------------------------------------------------------------------------
Three months ending Six months ending
Reconciliation of Earnings to June 30, June 30, June 30, June 30,
EBITDA (thousands) 2013 2012 2013 2012
---------------------------------------------------------------------------
Earnings $17,597 $4,160 $24,342 $8,135
Adjustments to Earnings:
Amortization 26 27 53 53
Interest expense 352 497 947 623
Deferred income tax expense 3,810 762 6,171 2,300
EBITDA $21,785 $5,446 $31,513 $11,111
Normalizing Adjustments
Gain on reduction of LifeMark
interest (13,052) - (13,052) -
Normalized EBITDA $8,733 5,446 $18,461 $11,111
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For the three and six months ended June 30, 2013, the Corporation recorded
earnings of $17.6 million and $24.3 million, EBITDA of $21.8 million and $31.5
million and Normalized EBITDA of $8.7 million and $18.5 million compared to
earnings of $4.2 million and $8.1 million and EBITDA and Normalized EBITDA of
$5.4 million and $11.1 million in the prior year periods. The 60% increase in
Normalized EBITDA in the quarter and 66% increase in the six month period was
due to the new revenue streams noted above as they were added with minimal
additional costs. The more significant increases in earnings and EBITDA in both
periods include a $13.05 million gain on the partial redemption of the preferred
units in LifeMark Health. LifeMark redeemed $30 million of the $65.5 million
preferred units in the current period.
"Our second quarter was another successful one with the addition of another
partner, a dividend increase and financial results again as we expected. We
began the next quarter with another dividend increase due to the addition of
another partner on the first day subsequent to June 30, 2013. With a successful
bought deal financing subsequent to the end of the quarter, we are debt free and
our balance sheet is poised for the next opportunity," said Darren Driscoll,
CFO, Alaris Royalty Corp.
Outlook
Alaris' agreements with its Private Company Partners provide for estimated
revenues to Alaris of approximately $51.7 million for 2013. Revenues from our
Private Company Partners for the three months ended September 30, 2013 are
expected to be $14.8 million. As a result of a successful equity offering
subsequent to June 30, 2013, the Corporation has all of its $50 million credit
facility for use in future transactions alongside approximately $4 million in
cash. General and administrative expenses are currently estimated to be $5.0
million for 2013, 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 Royalty Corp.
Condensed consolidated statement of financial position (unaudited)
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June 30 December 31
2013 2012
Assets
Cash and cash equivalents $5,446,762 $3,638,255
Prepayments 121,198 182,811
Trade and other receivables 3,151,262 3,417,642
--------------------------
Current Assets 8,719,222 7,238,708
--------------------------
Promissory note receivable 10,855,000 1,250,000
Equipment 52,494 59,881
Intangible assets 6,524,733 6,570,201
Preferred LP Units 326,760,712 298,226,402
Advance on acquisition of Preferred LP Units 69,425,400 -
Investment tax credit receivable 10,922,393 10,922,393
Deferred income taxes 5,521,114 8,673,125
--------------------------
Non-current assets 430,061,846 325,702,002
--------------------------
Total Assets $438,781,068 $332,940,710
--------------------------
Liabilities
Accounts payable and accrued liabilities $3,200,143 $1,805,561
Dividends payable 2,899,043 2,345,347
Income taxes payable 600 40,585
Loans and borrowings 54,333,333 -
--------------------------
Current Liabilities 60,433,119 4,191,493
Loans and borrowings 41,666,667 50,000,000
--------------------------
Non-current liabilities 41,666,667 50,000,000
--------------------------
Total Liabilities $102,099,786 $54,191,493
--------------------------
Equity
Share capital $311,416,908 $252,016,172
Equity reserve 3,895,070 2,930,483
Fair value reserve (9,083,951) 2,336,689
Translation reserve 601,661 (265,220)
Retained Earnings 29,851,594 21,731,093
--------------------------
Total Equity $336,681,282 $278,749,217
--------------------------
--------------------------
Total Liabilities and Equity $438,781,068 $332,940,710
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Alaris Royalty Corp.
Condensed consolidated statement of comprehensive income (unaudited)
---------------------------------------------------------------------------
Three months ended June 30 Six months ended June 30
------------------------------------------------------
2013 2012 2013 2012
---------------------------------------------------------------------------
Revenues
Royalties and
distributions $11,363,576 $7,337,772 $22,142,406 $14,268,991
Interest and other 268,320 (99,175) 465,219 7,360
Gain on reduction
of partner
interests 13,052,160 - 13,052,160 -
Gain/(loss) on
foreign exchange
contracts (333,349) - (489,002) -
------------------------------------------------------
Total Revenue 24,350,707 7,238,597 35,170,783 14,276,351
------------------------------------------------------
Salaries and
benefits 1,775,414 1,218,740 2,066,187 1,451,550
Corporate and
office 403,769 216,745 789,017 513,372
Legal and
accounting fees 430,137 343,672 576,834 528,998
Non-cash stock-
based compensation 748,061 349,488 1,477,760 698,977
Depreciation and
amortization 26,427 26,818 52,855 53,357
------------------------------------------------------
Subtotal 3,383,808 2,155,463 4,962,653 3,246,254
------------------------------------------------------
Earnings from
operations 20,966,899 5,083,134 30,208,130 11,030,097
Finance cost 351,577 496,846 946,638 623,025
Unrealized foreign
exchange
(gain)/loss (791,430) (335,812) (1,251,210) (27,525)
------------------------------------------------------
Earnings before
taxes 21,406,752 4,922,100 30,512,702 10,434,597
Current income tax
expense 329,870 228,890 654,071 365,563
Deferred income tax
expense 3,480,220 533,231 5,517,000 1,934,189
------------------------------------------------------
Earnings $17,596,662 $4,159,979 $24,341,631 $8,134,845
------------------------------------------------------
Other comprehensive
income
Net change in fair
value of Preferred
LP Units - 50,000 - 50,000
Tax impact of
change in fair
value - (12,500) - (12,500)
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 562,838 238,418 866,881 28,802
------------------------------------------------------
Other comprehensive
income for the
period, net of
income tax (10,857,802) 275,918 (10,553,759) 66,302
------------------------------------------------------
Total comprehensive
income for the
period $6,738,860 $4,435,897 $13,787,872 $8,201,147
------------------------------------------------------
Earnings per share
Basic earnings per
share $0.70 $0.21 $0.97 $0.42
------------------------------------------------------
Fully diluted
earnings per share $0.68 $0.20 $0.94 $0.40
------------------------------------------------------
Weighted average
shares outstanding
Basic 24,963,420 19,589,153 25,209,090 19,532,881
------------------------------------------------------
Fully Diluted 25,909,305 20,301,799 25,865,859 20,214,649
---------------------------------------------------------------------------
Alaris Royalty Corp.
Condensed consolidated statement of cash flows (unaudited)
For the six months ended June 30
---------------------------------------------------------------------------
2013 2012
Cash flows from operating activities
Earnings from the period $24,341,631 $8,134,845
Adjustments for:
Finance costs 946,638 623,025
Deferred income tax expense 5,517,000 1,934,189
Depreciation and amortization 52,855 53,357
Unrealized foreign exchange loss/(gain) (1,251,210) (27,525)
(Gain)/Loss on forward contracts 489,002 (7,360)
(Gain)/Loss on reduction of partner interests (13,052,160) -
Non-cash stock based compensation 1,477,760 698,977
--------------------------
18,521,516 11,409,508
Change in:
-trade and other receivables (283,349) 3,194,749
-prepayments 61,613 57,111
-trade and other payables 1,354,597 866,395
--------------------------
Cash generated from operating activities 19,654,377 15,527,763
Interest paid (946,638) (623,025)
--------------------------
Net cash from operating activities $18,707,739 $14,904,738
--------------------------
Cash flows from investing activities
Acquisition of equipment - (7,417)
Acquisition/disposition of Preferred LP Units (125,780,890) (41,775,150)
Proceeds from reduction in Preferred LP Units 30,000,000 -
--------------------------
Net cash from/(used in) investing activities $(95,780,890) $(41,782,567)
--------------------------
Cash flows from financing activities
New share capital, net of share issue costs 55,821,490 46,370,259
Proceeds from exercise of options 2,332,603 -
Borrowing of senior debt 118,000,000 43,000,000
Repayment of senior debt (72,000,000) (49,000,000)
Promissory notes issued (9,605,000) 1,250,000
Dividends paid (15,538,172) (11,101,954)
Payments in lieu of dividends on RSUs (129,263) (136,295)
--------------------------
Net cash used in financing activities $78,881,658 $27,882,010
--------------------------
Net increase in cash and cash equivalents 1,808,507 1,004,181
Cash and cash equivalents, Beginning of period 3,638,255 3,888,465
--------------------------
Cash and cash equivalents, End of period $5,446,762 $4,892,646
---------------------------------------------------------------------------
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.
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 including the gain on sale of Partner company interests.
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 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 2013, and the cash requirements of Alaris
in 2013.
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 2013 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 over the next 12 months, that interest rates
will not rise in a material way over the next 12 to 24 months, 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, what the Corporation expects to experience regarding resets to its annual
royalties and distributions from its Private Company Partners in 2013, 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 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, 2012, 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.
FOR FURTHER INFORMATION PLEASE CONTACT:
Alaris Royalty Corp.
Curtis Krawetz
Analyst, Manager of Investor Relations
403-221-7305
www.alarisroyalty.com
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