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 months ended March 31, 2014.
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):
----------------------------------------------------------------------------
Three months
ending March 31
----------------------------------------------------------------------------
2014 2013 % Change
----------------------------------------------------------------------------
Revenue per share $ 0.55 $ 0.44 +25.0%
Normalized EBITDA per share $ 0.49 $ 0.38 +28.9%
Net cash from operating activities per
share $ 0.45 $ 0.40 +12.5%
Dividends per share $ 0.36 $ 0.315 +14.3%
Weighted average basic shares outstanding
(000's) 28,713 24,715
----------------------------------------------------------------------------
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 find well run,
successful new private company partners ("Partners") with a long track record of
sustainable cash flow.
For the three months ended March 31, 2014, the Corporation's revenue from its
Private Company Partners was as expected and increased 44.1% to $15.80 million
compared to $10.96 million in the prior year period. On a per share basis, the
increase was 25.0%. The increase was due to the addition of three new Private
Company Partners in the past 12 months: SCR Mining and Tunneling, LP ("SCR") in
May 2013; Sequel Youth Family Services, LLC ("Sequel") in July 2013; and SM
Group International LP ("SMi") in November 2013. 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 were 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 Private Company Partners. At March 31, 2014, there were no
changes to the fair values of any of the Partners. More information is provided
in the Private Company Partner Update portion of the Corporation's MD&A.
----------------------------------------------------------------------------
Three months ending
March 31
Reconciliation of Earnings to EBITDA (000's) 2014 2013
----------------------------------------------------------------------------
Earnings $ 11,947 $ 6,689
Adjustments to Earnings:
Amortization 27 26
Finance costs 1,165 595
Income tax expense 3,333 2,398
EBITDA $ 16,472 $ 9,708
Normalizing Adjustments
Unrealized foreign exchange loss/(gain) (2,538) (304)
Normalized EBITDA $ 13,934 $ 9,404
----------------------------------------------------------------------------
For the three months ended March 31, 2014, the Corporation recorded earnings of
$11.95 million, EBITDA of $16.47 million and Normalized EBITDA of $13.93 million
compared to earnings of $6.69 million, EBITDA of $9.71 million and Normalized
EBITDA of $9.40 million in the prior year period. The 48% 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 28.9%. The Corporation has raised the dividend twice since
the end of the first quarter in the prior year resulting in a 14.3% increase in
the dividends paid per share compared to the prior year period.
"We're pleased to be reporting another quarter with results in line with the
outlook we provided when we announced our year end results. Despite the
challenges we experienced in late 2013, the strength of our model showed through
in this quarter again with significant growth on a per share basis in all of our
key financial performance metrics," said Darren Driscoll, CFO, Alaris Royalty
Corp.
Outlook
Alaris' agreements with its Private Company Partners provide for estimated
revenues to Alaris of approximately $63.2 million for 2014. Revenues from our
Private Company Partners for the three months ended June 30, 2014 are expected
to be approximately $15.5 million. Labstat has experienced a strong start in
2014. Based on unaudited financial statements prepared by management for the
three months ended March 31, 2014, revenue and EBITDA are both well ahead of the
prior year due to contracts Labstat procured in recent months commencing in
2014. Given these results are only for three months, the Corporation has not
accrued any amount in the first quarter for the amount of the cash sweep
expected in 2014. The Corporation has $24.5 million of its $75 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.
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
Alaris' management will host a conference call at 9am MST (11am EST) this
morning to discuss the financial results and outlook for the Corporation.
Participants can access the conference call by telephone by dialing toll free
1-800- 766-6630 or 1-416-340-8530. Alternatively, to listen to this event
online, please enter http://www.gowebcasting.com/5405 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 the end of day May 12, 2014. You can access the replay by
dialing toll free 1-800-408-3053 or 1-905-694-9451 and entering the passcode
2880691. 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.
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. Management deems non-recurring charges to be unusual and/or infrequent
charges that the Corporation incurs outside of its common day-to-day operations.
For the three months ended March 31, 2014, the unrealized foreign exchange gains
and losses gain are considered by management to be non-recurring charges. Adding
back these non-recurring charges 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
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 2014, and the cash requirements of Alaris
in 2014. 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 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 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 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 th e
Private Company 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; 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, 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)
----------------------------------------------------------------------------
March 31 December 31
2014 2013
Assets
Cash and cash equivalents $ 8,382,942 $ 8,998,342
Prepayments and deposits 1,318,283 125,543
Trade and other receivables 2,003,891 955,831
Promissory notes receivable 8,550,000 8,500,000
---------------------------------
Current Assets 20,255,116 18,579,716
---------------------------------
Promissory notes receivable 6,915,000 6,915,000
Equipment 58,337 59,825
Intangible assets 6,456,531 6,479,265
Preferred LP and LLC Units 445,013,091 433,988,295
Investment tax credit receivable 9,569,693 10,922,393
Deferred income taxes 3,487,215 3,785,015
---------------------------------
Non-current assets 471,499,867 462,149,793
---------------------------------
Total Assets $ 491,754,983 $ 480,729,509
---------------------------------
Liabilities
Accounts payable and accrued liabilities $ 456,263 $ 1,361,588
Dividends payable 3,446,661 3,443,243
Income taxes payable 2,532,657 1,031,701
Foreign exchange contracts 993,431 633,801
Loans and borrowings 4,208,333 -
---------------------------------
Current Liabilities 11,637,345 6,470,333
Loans and borrowings 46,291,667 44,500,000
---------------------------------
Non-current liabilities 46,291,667 44,500,000
---------------------------------
Total Liabilities $ 57,929,012 $ 50,970,333
---------------------------------
Equity
Share capital $ 413,243,029 $ 413,237,576
Equity reserve 6,411,141 5,688,079
Fair value reserve (4,883,951) (4,883,951)
Translation reserve 3,018,473 1,201,883
Retained Earnings 16,037,279 14,515,589
---------------------------------
Total Equity $ 433,825,971 $ 429,759,176
---------------------------------
Total Liabilities and Equity $ 491,754,983 $ 480,729,509
----------------------------------------------------------------------------
Alaris Royalty Corp.
Condensed consolidated statement of comprehensive income (unaudited)
For the three months ended March 31
----------------------------------------------------------------------------
---------------------------------
2014 2013
---------------------------------
Revenues
Royalties and distributions $ 15,488,567 $ 10,766,230
Interest 311,573 196,899
Loss on foreign exchange contracts (359,629) (155,653)
---------------------------------
Total Revenue 15,440,511 10,807,476
---------------------------------
Salaries and benefits 337,277 290,773
Corporate and office 497,104 384,217
Legal and accounting fees 309,474 153,575
Non-cash stock-based compensation 723,062 729,698
Depreciation and amortization 26,616 26,427
---------------------------------
Subtotal 1,893,533 1,584,690
---------------------------------
Earnings from operations 13,546,978 9,222,786
Finance costs 1,165,137 595,061
Unrealized foreign exchange gain (2,897,622) (459,780)
---------------------------------
Earnings before taxes 15,279,463 9,087,505
Deferred income tax expense 1,650,500 2,076,180
Current income tax expense 1,682,129 321,937
---------------------------------
Earnings $ 11,946,834 $ 6,689,388
---------------------------------
Other comprehensive income
Foreign currency translation differences 1,816,590 304,043
---------------------------------
Other comprehensive income for the period,
net of income tax 1,816,590 304,043
---------------------------------
Total comprehensive income for the period $ 13,763,424 $ 6,993,431
---------------------------------
Earnings per share
Basic earnings per share $ 0.42 $ 0.27
---------------------------------
Fully diluted earnings per share $ 0.41 $ 0.26
---------------------------------
Weighted average shares outstanding
Basic 28,713,974 24,715,021
---------------------------------
Fully Diluted 29,363,717 25,329,889
----------------------------------------------------------------------------
Alaris Royalty Corp.
Condensed consolidated statement of cash flows (unaudited)
For the three months ended March 31
----------------------------------------------------------------------------
2014 2013
Cash flows from operating activities
Earnings from the period $ 11,946,834 $ 6,689,388
Adjustments for:
Finance costs 1,165,137 595,061
Deferred income taxes 1,650,500 2,076,180
Depreciation and amortization 26,616 26,427
Unrealized foreign exchange (gain)/loss (2,897,622) (459,780)
(Gain)/Loss on foreign exchange contracts 359,629 155,653
Non-cash stock based compensation 723,062 729,698
---------------------------------
$ 12,974,156 $ 9,812,627
Change in:
-trade and other receivables $ (1,080,041) $ 451,168
-prepayments (1,192,740) 142,462
-trade and other payables 595,631 (967,539)
---------------------------------
Cash generated from operating activities 11,297,006 9,438,718
Finance costs (1,165,137) (595,061)
---------------------------------
Net cash from operating activities $ 10,131,869 $ 8,843,657
---------------------------------
Cash flows from investing activities
Acquisition of equipment $ (2,394) $ -
Acquisition of Preferred LP Units (6,278,572) (15,350,837)
---------------------------------
Net cash used in investing activities $ (6,280,966) $ (15,350,837)
---------------------------------
Cash flows from financing activities
Proceeds from debt 6,000,000 15,000,000
Repayment of debt - (51,000,000)
Promissory notes issued (50,000) (6,000,000)
New share capital, net of share issue costs - 56,208,127
Proceeds from exercise of options 5,453 2,332,604
Dividends paid (10,336,564) (7,597,310)
Payments in lieu of dividends on RSUs (85,192) (64,631)
---------------------------------
Net cash used in financing activities $ (4,466,303) $ 8,878,790
---------------------------------
Net increase in cash and cash equivalents $ (615,400) $ 2,371,610
Cash and cash equivalents, Beginning of
period 8,998,342 3,638,255
---------------------------------
Cash and cash equivalents, End of period $ 8,382,942 $ 6,009,865
----------------------------------------------------------------------------
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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