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) today announced
its results for the three and nine months ended September 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 second quarter on the reduction of its
financial interest in LifeMark Health Limited Partnership ("LifeMark")):
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Three months Nine months
ending Sept 30 ending Sept 30
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2013 2012 % Change 2013 2012 % Change
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Revenue per share1 $ 0.51 $ 0.39 +32.3% $ 1.41 $ 1.12 +25.3%
Normalized EBITDA
per share1 $ 0.42 $ 0.31 +35.5% $ 1.16 $ 0.88 +31.9%
Dividends per share1 $ 0.36 $ 0.30 +20.0% $ 1.00 $ 0.88 +14.3%
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1Using 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 September 30, 2013, the Corporation's revenue from
its Private Company Partners increased 66% to $14.46 million compared to $8.68
million in the prior year period. The increase was due to the addition of five
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, SCR Mining and Tunneling, LP ("SCR") in May 2013; and Sequel Youth Family
Services, LLC ("Sequel") in July 2013. The Corporation also completed additional
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. Expenses
were as expected in the quarter while legal and accounting expenses were higher
in the prior year period due to a transaction the Corporation chose not to close
due to issues raised in the due diligence process.
At each quarter end, the Corporation reviews the fair value of the preferred
units in each of the Private Company Partners. At September 30, 2013, there were
four partners where the fair value was changed although the net impact to the
Corporation's financial statements was nil. Two partners saw the fair value
increase (LMS and Killick) based on strong financial performance and positive
resets to the annual distributions. Two partners saw the fair value decrease:
SHS based on a previously disclosed five month voluntary reduction to the annual
distribution; and Labstat based on the anticipated restructuring of the 2014
distributions. "We continue to be impressed with the Labstat management team as
they have worked hard to find, and have secured new business to replace projects
they were expecting from the implementation of the new American tobacco testing
regulations. The core business remains strong and we expect Labstat to be a
successful long-term partner for Alaris," said Darren Driscoll, CFO, Alaris
Royalty Corp. More information is provided in the Private Company Partner Update
portion of the Corporation's MD&A.
----------------------------------------------------------------------------
Three months ending Nine months ending
Reconciliation of Earnings to Sept 30, Sept 30, Sept 30, Sept 30,
EBITDA (thousands) 2013 2012 2013 2012
----------------------------------------------------------------------------
Earnings $ 8,388 $ 4,868 $ 32,691 $ 13,104
Adjustments to Earnings:
Amortization 27 27 79 80
Interest expense 297 75 1,244 698
Deferred income tax expense 3,043 1,912 9,219 4,117
EBITDA $ 11,755 $ 6,882 $ 43,233 $ 17,999
Normalizing Adjustments
Gain on reduction of
LifeMark interest - - (13,052) -
Normalized EBITDA $ 11,755 $ 6,882 $ 30,181 $ 17,999
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For the three and nine months ended September 30, 2013, the Corporation recorded
earnings of $8.4 million and $32.7 million, EBITDA of $11.8 million and $43.2
million and Normalized EBITDA of $11.7 million and $30.2 million compared to
earnings of $4.9 million and $13.1 million and EBITDA and Normalized EBITDA of
$6.9 million and $18.0 million in the prior year periods. The 70% increase in
Normalized EBITDA in the quarter and 67% increase in the nine 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 the
nine month period include a $13.05 million gain on the partial redemption of the
preferred units in LifeMark. LifeMark redeemed $30 million of the $65.5 million
preferred units held by Alaris in the second quarter.
"We began the second quarter by adding our largest partner in Sequel, followed
by a successful bought deal financing to allow us to repay all of our
outstanding debt. We ended the quarter with a follow on contribution to one of
our current Partners and laid the foundation for our 13th partner that was added
in early November," said Darren Driscoll, CFO, Alaris Royalty Corp.
Outlook
Alaris' agreements with its Private Company Partners provide for estimated
revenues to Alaris of approximately $51.4 million for 2013. Revenues from our
Private Company Partners for the three months ended December 31, 2013 are
expected to be $14.9 million. As a result of a successful equity offering in the
third quarter, the Corporation had all of its $50 million credit facility for
use in future transactions until drawing $36 million subsequent to quarter end
leaving $14 million undrawn. 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, where you will also find an updated corporate
presentation.
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 interests in the Private Company Partners.
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
Private Company Partners, 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, the cash requirements of Alaris in
2013 and the anticipated restructuring of Labstat's 2014 distribution and
Labstat's long-term performance outlook. 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 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 including without limitation any special circumstances
or temporary relief measures; 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; and risks relating
to the Private Company Partners and their businesses, including, without
limitation, a material change in the operations of a Private Company Partner or
the industries they operate in and a change in the ability of the Private
Company Partners to continue to pay Alaris' preferred distributions. 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.
Alaris Royalty Corp.
Condensed consolidated statement of financial position (unaudited)
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----------------------------------------------------------------------------
September 30 December 31
2013 2012
Assets
Cash and cash equivalents $ 5,679,027 $ 3,638,255
Prepayments 120,503 182,811
Trade and other receivables 1,535,625 917,642
Promissory note receivable 11,500,000 2,500,000
-------------------------------
Current Assets 18,835,155 7,238,708
-------------------------------
Promissory note receivable 5,885,000 1,250,000
Equipment 53,902 59,881
Intangible assets 6,501,999 6,570,201
Preferred LP Units 394,328,363 298,226,402
Investment tax credit receivable 10,922,393 10,922,393
Deferred income taxes 4,817,915 8,673,125
-------------------------------
Non-current assets 422,509,572 325,702,002
-------------------------------
Total Assets $ 441,344,727 $ 332,940,710
-------------------------------
Liabilities
Accounts payable and accrued liabilities $ 754,677 $ 1,805,561
Dividends payable 3,443,243 2,345,347
Income taxes payable 536,457 40,585
-------------------------------
Current Liabilities 4,734,377 4,191,493
Loans and borrowings - 50,000,000
-------------------------------
Non-current liabilities - 50,000,000
-------------------------------
Total Liabilities $ 4,734,377 $ 54,191,493
-------------------------------
Equity
Share capital $ 413,439,317 $ 252,016,172
Equity reserve 4,704,926 2,930,483
Fair value reserve (9,083,951) 2,336,689
Translation reserve (245,693) (265,220)
Retained Earnings 27,795,751 21,731,093
-------------------------------
Total Equity $ 436,610,350 $ 278,749,217
-------------------------------
-------------------------------
Total Liabilities and Equity $ 441,344,727 $ 332,940,710
----------------------------------------------------------------------------
Alaris Royalty Corp.
Condensed consolidated statement of comprehensive income (unaudited)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three months ended Sept 30 Nine months ended Sept 30
-------------------------------------------------------
2013 2012 2013 2012
----------------------------------------------------------------------------
Revenues
Royalties and
distributions $ 14,464,752 $ 8,676,756 $ 36,570,619 $ 22,945,958
Interest and other 297,665 115,528 762,885 122,888
Gain on reduction of
partner interests - - 13,052,160 -
Gain/(loss) on
foreign exchange
contracts 466,353 - (22,649) -
-------------------------------------------------------
Total Revenue 15,228,770 8,792,284 50,363,015 23,068,846
-------------------------------------------------------
Salaries and benefits 263,034 73,248 2,329,222 1,524,798
Corporate and office 282,003 254,772 1,068,945 768,566
Legal and accounting
fees 252,842 519,446 829,726 1,048,445
Non-cash stock-based
compensation 1,347,606 461,436 2,825,365 1,160,413
Depreciation and
amortization 26,558 26,908 79,415 80,265
-------------------------------------------------------
Subtotal 2,172,043 1,335,810 7,132,673 4,582,487
-------------------------------------------------------
Earnings from
operations 13,056,727 7,456,474 43,230,342 18,486,359
Finance cost 296,986 75,196 1,243,624 698,220
Unrealized foreign
exchange (gain)/loss 1,329,300 600,533 78,090 567,161
-------------------------------------------------------
Earnings before taxes 11,430,441 6,780,745 41,908,628 17,220,978
Current income tax
expense 806,117 266,939 1,461,456 536,937
Deferred income tax
expense 2,236,800 1,645,452 7,757,200 3,579,641
-------------------------------------------------------
Earnings $ 8,387,524 $ 4,868,354 $ 32,689,972 $ 13,104,400
-------------------------------------------------------
Other comprehensive
income
Net change in fair
value of Preferred
LP Units - - - 50,000
Tax impact of change
in fair value - - - (6,250)
Realized gain on
reduction of
partnership interest - - (13,052,160) -
Tax impact of
realized gain - - 1,631,520 -
Foreign currency
translation
differences 847,354 (356,295) 19,527 (327,493)
-------------------------------------------------------
Other comprehensive
income for the
period, net of
income tax 847,354 (356,295) (11,401,113) (283,743)
-------------------------------------------------------
Total comprehensive
income for the
period $ 9,234,878 $ 4,512,059 $ 21,288,859 $ 12,820,657
-------------------------------------------------------
Earnings per share
Basic earnings per
share $ 0.30 $ 0.22 $ 1.26 $ 0.64
-------------------------------------------------------
Fully diluted
earnings per share $ 0.29 $ 0.21 $ 1.22 $ 0.63
-------------------------------------------------------
Weighted average
shares outstanding
Basic 28,106,555 22,306,832 26,022,045 20,464,201
-------------------------------------------------------
Fully Diluted 28,893,781 22,824,718 26,731,035 20,900,401
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Alaris Royalty Corp.
Condensed consolidated statement of cash flows (unaudited)
For the nine months ended September 30
----------------------------------------------------------------------------
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2013 2012
Cash flows from operating activities
Earnings from the period $ 32,689,972 $ 13,104,400
Adjustments for:
Finance costs 1,243,624 698,220
Deferred income tax expense 7,757,200 3,579,641
Depreciation and amortization 79,414 80,265
Unrealized foreign exchange loss/(gain) 78,090 567,161
(Gain)/Loss on foreign exchange contracts 22,649 (122,888)
(Gain)/Loss on reduction of partner interests (13,052,160) -
Non-cash stock based compensation 2,825,365 1,160,413
-------------------------------
31,644,154 19,067,212
Change in:
-trade and other receivables (664,515) 3,312,167
-prepayments 62,308 10,485
-trade and other payables (555,012) (388,716)
-------------------------------
Cash generated from operating activities 30,486,935 22,001,148
Interest paid (1,243,624) (698,220)
-------------------------------
Net cash from operating activities $ 29,243,311 $ 21,302,928
-------------------------------
Cash flows from investing activities
Acquisition of equipment (5,232) (9,835)
Acquisition/disposition of Preferred LP Units (126,136,641) (44,015,150)
Proceeds from reduction in Preferred LP Units 30,000,000 -
-------------------------------
Net cash from/(used in) investing activities $ (96,141,873) $ (44,024,984)
-------------------------------
Cash flows from financing activities
New share capital, net of share issue costs 155,954,527 46,282,160
Proceeds from exercise of options 2,147,226 -
Borrowing of senior debt 118,000,000 45,000,000
Repayment of senior debt (168,000,000) (49,000,000)
Promissory notes issued (13,635,000) 1,250,000
Dividends paid (25,318,587) (17,763,685)
Payments in lieu of dividends on RSUs (208,832) (178,953)
-------------------------------
Net cash used in financing activities $ 68,939,334 $ 23,697,022
-------------------------------
Net increase in cash and cash equivalents 2,040,772 9,74,965
Cash and cash equivalents, Beginning of
period 3,638,255 3,888,465
-------------------------------
Cash and cash equivalents, End of period $ 5,679,027 $ 4,863,430
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FOR FURTHER INFORMATION PLEASE CONTACT:
Alaris Royalty Corp.
Curtis Krawetz
Vice President, Investments and Investor Relations
403-221-7305
www.alarisroyalty.com
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