CALGARY, ALBERTA--(Marketwired - July 28, 2015) -
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, 2015.
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 2015 gain on the sale of Killick Aerospace Limited Partnership ("Killick")):
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Three months Six months
Per Share ending June 30 ending June 30
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% %
2015 2014 Change 2015 2014 Change
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Revenue $ 0.55 $ 0.55 - $ 1.14 $ 1.11 +2.7%
Normalized EBITDA $ 0.43 $ 0.41 +4.9% $ 0.93 $ 0.90 +3.3%
Dividends $ 0.38 $ 0.365 +4.1% $ 0.755 $ 0.725 +4.1%
Net cash from operating
activities $ 0.35 $ 0.45 -22.2% $ 0.71 $ 0.80 -11.3%
Weighted average basic
shares outstanding
(000's) 32,175 28,902 32,166 28,808
----------------------------------------------------------------------------Gross revenue from private company partners ("Partners") increased by 8.9% and 14.6% for the three and six months ending June 30, 2015, and on a per share basis revenue was flat for the 3 months ending June 30, 2015 and up 2.7% for the six months ending June 30, 2015 when compared to the prior year period. The growth levels are lower than previous periods due to no revenue being accrued for KMH Limited Partnership ("KMH") in the second quarter as well as the Killick redemption in early 2015. However, new accretive partnerships and organic growth in current partners contributed to increases in revenue, Normalized EBITDA and dividends paid on a per share basis.
Net cash from operating activities on a per share basis decreased by 22.2% and 11.3% in the three and six months ending June 30, 2015 due to a $6.8 million deposit paid to the CRA in period. Adding back the CRA deposit results in net cash from operating activities of $0.56 per share (a 24% increase for the three month period) and net cash from operating activities of $0.92 per share (a 15% increase for the six month period).
Subsequent to June 30, 2015, the Corporation completed a follow-on contribution to PF Growth Partners, LLC ("Planet Fitness") for $5.0 million in preferred units in order to support growth initiatives at Planet Fitness. The units have an annualized distribution of $0.7 million (14% return). Additionally, on July 16, 2015, the Corporation closed an equity offering that provided $109.7 million of net proceeds, almost all of which was applied against the senior credit facility resulting in senior debt of $35.2 million at July 28, 2015 compared to $144.2 million as at June 30, 2015.
3 months 6 months
ending June 30 ending June 30
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Reconciliation of Earnings to EBITDA
(thousands) 2015 2014 2015 2014
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Earnings $ 8,951 $ 8,745 $ 30,759 $ 20,704
Adjustments to Earnings:
Amortization 48 28 77 54
Finance costs 697 876 1,481 2,041
Income tax expense 2,980 (645) 7,977 2,678
EBITDA $ 12,676 $ 9,004 $ 40,294 $ 25,477
Normalizing Adjustments
Unrealized foreign exchange
loss/(gain) 1,165 2,884 (7,553) 345
Gain on disposition of Killick
units - - (2,792) -
Normalized EBITDA $ 13,841 $ 11,888 $ 29,949 $ 25,822
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----------------------------------------------------------------------------For the three and six months ended June 30, 2015, the Corporation recorded earnings of $8.95 million and $30.8 million, EBITDA of $12.7 million and $40.3 million and Normalized EBITDA of $13.8 million and $29.9 million compared to earnings of $8.75 million and $20.70 million, EBITDA of $9.0 million and $25.48 million and Normalized EBITDA of $11.9 million and $25.8 million in the prior year periods. The increase was due to the addition of four new Partners in the past 12 months: Kimco Holdings, LLC ("Kimco"), Planet Fitness, DNT Construction, LLC ("DNT") and Federal Resources Supply Company ("Federal Resources") and follow on investments into Solowave Design, LP ("Solowave"), Sequel Youth and Family Services, LLC ("Sequel") and SM Group International, LP ("SMi"). Each of these transactions added new revenues in the current period compared to the prior year. These new revenues were partially offset by two redemptions in the last twelve months: Quetico, LLC ("Quetico") in November 2014 and Killick in January 2015 as well as a decline in revenue from KMH as it undergoes a strategic process. Expenses were as expected in the quarter.
At each quarter end, the Corporation reviews the fair value of the preferred units in each of the Partners. At June 30, 2015, there were seven changes to the fair values of the Partners for a net increase in fair values of $2.2 million: an increase to Sequel's units of $4.71 million due to better than expected same program sales performance for Sequel's year ended June 30, 2015; an increase in the LifeMark Health Limited Partnership ("LifeMark") units of $1.48 million as the repurchase right LifeMark has on the units increases by 4% in June of each year; an increase in the Solowave units of $1.97 million due to better than expected performance; a reduction to the KMH units of $2 million due to a reduction in expectations from the strategic process that is underway; a reduction to the SCR Mining and Tunneling, LP ("SCR") units of $2.5 million, a reduction to the Agility Health, LLC ("Agility") units of $0.91 million and a reduction to the Kimco units of $0.57 million, each due to a reduction in growth expectations. More information related to the financial performance of the Partners is provided in the Private Company Partner Update portion of the Corporation's Management's discussion and analysis for the period (a copy of which is available under Alaris' profile at
www.sedar.com), which readers are encouraged to review.
"The second quarter was a significant one with two new partners in DNT ($87 million CAD) and Federal Resources ($58 million CAD), the ninth and tenth consecutive dividend increases and a successful equity offering that brought our debt outstanding down to $35.2 million as of July 28, 2015. The accretive transactions with new Partners, along with an accretive follow on contribution to Planet Fitness shortly after the quarter end, and net increases expected from our current Partner distribution resets 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.
Outlook
Alaris' agreements with its Partners provide for estimated revenues to Alaris of approximately $81.1 million for 2015 (no further distributions from KMH are included in this total). Revenues from our Partners for the three months ended September 30, 2015 are expected to be approximately $22.2 million (no further distributions from KMH are included in this total). After the successful equity offering closed on July 16, 2015, the Corporation has $35.2 million drawn on its $90.1 million credit facility (extended to $150.1 million until August 31, 2015). Annual general and administrative expenses are currently estimated at $7.0 million annually and include 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), Wednesday, July 29, 2015 to discuss the financial results and outlook for the Corporation. Participants can access the conference call by dialing toll free 1-866-223-7781 (or 1-416-340-2216). Alternatively, to listen to this event online, please enter
www.gowebcasting.com/6603 in to 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 5, 2015. You can access the replay by dialing toll free 1-800-408-3053 (or 1-905-694-9451) and entering the passcode 9949566. 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" section on our website 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, Normalized EBITDA and Per Share values 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, Normalized EBITDA and Per Share values may differ from the methods used by other issuers. Therefore, the Corporation's EBITDA, Normalized EBITDA and Per Share values 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 and six months ended June 30, 2015, the gain on the redemption of the Killick units and the unrealized foreign exchange gains and losses gain are considered by management to be non-recurring charges. Adjusting for these non-recurring items allows management to assess EBITDA from ongoing operations.
Per Share values, other than earnings per share, refer to the related financial statement caption as defined under IFRS or related term as defined herein, divided by the weighted average basic shares outstanding for the period.
The Non-IFRS measures should only be used in conjunction with the Corporation's annual audited 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 (annually and on a quarterly basis), its general and administrative expenses in 2015, and the cash requirements of Alaris in 2015. To the extent any forward-looking statements herein constitute a financial outlook, including, without limitation, estimates of revenues and expenses, 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 2015 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 (or that Alaris will recover all or a substantial portion of an investment upon a default), 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 2015, 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. 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; failure to achieve a positive resolution out of KMH's strategic review process, 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 and a change in the ability of the Partners to continue to pay Alaris' preferred distributions; and a material adjustment to any unaudited financial information that a Partner provided to Alaris. 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, 2014, 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
2015 2014
Assets
Cash and cash equivalents $20,537,538 $13,483,524
Prepayments and deposits 8,272,708 1,467,872
Trade and other receivables 6,039,699 5,551,730
Income tax receivable - 1,866,572
Promissory notes receivable 8,234,945 8,965,000
Investment tax credit receivable 5,743,189 -
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Current Assets 48,828,079 31,334,698
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Promissory notes receivable 3,500,000 3,500,000
Equipment 564,303 109,565
Intangible assets 6,342,860 6,388,328
Investments at Fair Value 647,114,611 527,641,735
Investment tax credit receivable 3,891,077 10,922,393
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Non-current assets 661,412,851 548,562,021
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Total Assets $710,240,930 $579,896,719
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Liabilities
Accounts payable and accrued liabilities $2,709,264 $1,453,661
Dividends payable 4,182,870 4,009,045
Income taxes payable 1,003,315 -
Loans and borrowings 69,200,000 -
Foreign exchange contracts 2,158,596 1,541,630
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Current Liabilities 79,254,045 7,004,336
Deferred income taxes 12,074,650 7,712,668
Loans and borrowings 75,000,000 35,500,000
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Non-current liabilities 87,074,650 43,212,668
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Total Liabilities $166,328,695 $50,217,004
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Equity
Share capital $500,185,139 $498,363,066
Equity reserve 10,702,551 8,858,711
Fair value reserve (3,951,731) (2,637,352)
Translation reserve 12,486,028 7,071,417
Retained Earnings 24,490,248 18,023,873
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Total Equity $543,912,235 $529,679,715
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Total Liabilities and Equity $710,240,930 $579,896,719
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Alaris Royalty Corp.
Condensed consolidated statement of comprehensive income (unaudited)
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Three months Six months
ended June 30 ended June 30
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2015 2014 2015 2014
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Revenues and
other income
Royalties and
distributions $17,446,917 $15,920,210 $36,227,126 $31,407,252
Interest and
other 239,990 314,505 476,596 626,078
Gain on
reduction of
partner
interests - - 2,792,457 -
Gain/(loss) on
foreign
exchange
contracts 47,375 675,535 (2,000,872) 315,906
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Total Revenue
and other
income 17,734,282 16,910,250 37,495,307 32,349,236
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Expenses
Salaries and
benefits 1,301,737 2,353,965 1,805,678 2,691,243
Corporate and
office 827,639 429,606 1,600,298 923,079
Legal and
accounting fees 591,690 453,204 894,473 762,663
Non-cash stock-
based
compensation 1,125,443 1,110,080 2,454,778 1,833,142
Depreciation and
amortization 47,531 27,699 76,823 54,315
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Subtotal 3,894,040 4,374,554 6,832,050 6,264,442
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Earnings from
operations 13,840,242 12,535,696 30,663,257 26,084,794
Finance cost 696,548 876,075 1,480,928 2,041,212
Unrealized
foreign
exchange
(gain)/loss 1,212,492 3,559,064 (9,553,823) 661,442
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Earnings before
taxes 11,931,202 8,100,557 38,736,152 23,382,140
Current income
tax expense 1,570,399 (123,912) 3,429,123 1,548,144
Deferred income
tax expense 1,409,527 (520,700) 4,547,831 1,129,800
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Earnings $8,951,276 $8,745,169 $30,759,198 $20,704,196
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Other
comprehensive
income
Net change in
fair value of
Preferred LP
Units 2,176,700 (73,940) 2,176,700 (73,940)
Tax impact of
change in fair
value (1,102,806) 128,800 (1,102,806) 128,800
Realized gain on
reduction of
partnership
interest
Tax impact of
realized gain
Foreign currency
translation
differences (990,910) (1,959,871) 5,414,611 (143,281)
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Other
comprehensive
income for the
period, net of
income tax 82,984 (1,905,011) 6,488,505 (88,421)
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Total
comprehensive
income for the
period $9,034,262 $6,840,158 $37,247,703 $20,615,775
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Earnings per
share
Basic earnings
per share $0.28 $0.30 $0.96 $0.72
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Fully diluted
earnings per
share $0.27 $0.30 $0.94 $0.70
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Weighted average
shares
outstanding
Basic 32,175,921 28,902,064 32,165,687 28,808,539
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Fully Diluted 32,718,883 29,443,718 32,848,703 29,451,067
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Alaris Royalty Corp.
Condensed consolidated statement of changes in equity (unaudited)
For the six months ended June 30, 2014
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Share Equity Fair Value Translation
Capital Reserve Reserve Reserve
Balance at January
1, 2014 $413,237,576 $5,688,079 $(4,883,951) $1,201,883
Total comprehensive
income for the
period
Earnings for the
period - - - -
Other comprehensive
income
Net change in fair
value of Preferred
units - - (73,940) -
Tax impact of change
in fair value - - 128,800 -
Foreign currency
translation
differences - - - (143,281)
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Total other
comprehensive
income - - 54,860 (143,281)
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Total comprehensive
income for the
period $- $- $54,860 (143,281)
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Transactions with
shareholders of the
Company, recognized
directly in equity
Contributions by and
distributions to
shareholders of the
Company
Non-cash stock based
compensation $- $1,833,142 $- $-
Dividends to
shareholders - - - -
Options exercised in
the period 5,981 (528) - -
Shares issued in the
period 87,417,135 - - -
Share issue costs,
net of tax (3,362,991) - - -
Payments in lieu of
dividends on RSUs - - - -
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Total transactions
with Shareholders
of the Company 84,060,125 1,832,614 - -
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Balance at June 30,
2014 $497,297,701 $7,520,693 $(4,829,091) $1,058,602
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Alaris Royalty Corp.
Condensed consolidated statement of changes in
equity (unaudited)
For the six months ended June 30, 2014
--------------------------------------------------
--------------------------------------------------
Retained Total
Earnings Equity
Balance at January
1, 2014 $14,515,589 $429,759,176
Total comprehensive
income for the
period
Earnings for the
period 20,704,196 20,704,196
Other comprehensive
income
Net change in fair
value of Preferred
units - (73,940)
Tax impact of change
in fair value - 128,800
Foreign currency
translation
differences - (143,281)
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Total other
comprehensive
income - (88,421)
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Total comprehensive
income for the
period $20,704,196 $20,615,775
------------------------------
Transactions with
shareholders of the
Company, recognized
directly in equity
Contributions by and
distributions to
shareholders of the
Company
Non-cash stock based
compensation $- $1,833,142
Dividends to
shareholders (21,232,830) (21,232,830)
Options exercised in
the period - 5,453
Shares issued in the
period - 87,417,135
Share issue costs,
net of tax - (3,362,991)
Payments in lieu of
dividends on RSUs (174,595) (174,595)
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Total transactions
with Shareholders
of the Company (21,407,425) 64,485,316
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Balance at June 30,
2014 $13,812,360 $514,860,267
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Alaris Royalty Corp.
Condensed consolidated statement of changes in equity (unaudited)
For the six months ended June 30, 2015
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Share Equity Fair Value Translation
Capital Reserve Reserve Reserve
Balance at January
1, 2015 $498,363,066 $8,858,711 $(2,637,352) $7,071,417
Total comprehensive
income for the
period
Earnings for the
period - - - -
Other comprehensive
income
Net change in fair
value of Preferred
units 2,176,700
Tax impact of change
in fair value (1,102,806)
Gain on partner
redemption - - (2,792,457) -
Tax impact on
realized gain - - 404,184 -
Foreign currency
translation
differences - - - 5,414,611
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Total other
comprehensive
income - - (1,314,379) 5,414,611
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Total comprehensive
income for the
period $- $- $(1,314,379) $5,414,611
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Transactions with
shareholders of the
Company, recognized
directly in equity
Contributions by and
distributions to
shareholders of the
Company
Non-cash stock based
compensation $- $2,460,878 $- $-
Dividends to
shareholders - - - -
Options exercised in
the period 1,466,073 (261,038) - -
Shares issued after
Director RSU
vesting 356,000 (356,000) - -
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Total transactions
with Shareholders
of the Company 1,822,073 1,843,840 - -
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Balance at June 30,
2015 $500,185,139 $10,702,551 $(3,951,731) $12,486,028
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Alaris Royalty Corp.
Condensed consolidated statement of changes in
equity (unaudited)
For the six months ended June 30, 2015
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Retained Total
Earnings Equity
Balance at January
1, 2015 $18,023,873 $529,679,715
Total comprehensive
income for the
period
Earnings for the
period 30,759,198 30,759,198
Other comprehensive
income
Net change in fair
value of Preferred
units 2,176,700
Tax impact of change
in fair value (1,102,806)
Gain on partner
redemption - (2,792,457)
Tax impact on
realized gain - 404,184
Foreign currency
translation
differences - 5,414,611
--------------------------------
Total other
comprehensive
income - 4,100,232
--------------------------------
Total comprehensive
income for the
period $30,759,198 $34,859,430
--------------------------------
Transactions with
shareholders of the
Company, recognized
directly in equity
Contributions by and
distributions to
shareholders of the
Company
Non-cash stock based
compensation $- $2,460,878
Dividends to
shareholders (24,292,823) (24,292,823)
Options exercised in
the period - 1,205,035
Shares issued after
Director RSU
vesting - -
--------------------------------
Total transactions
with Shareholders
of the Company (24,292,823) (20,626,910)
--------------------------------
Balance at June 30,
2015 $24,490,248 $543,912,235
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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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2015 2014
Cash flows from operating activities
Earnings from the period $30,759,198 $20,704,196
Adjustments for:
Finance costs 1,480,928 2,041,212
Deferred income tax expense 4,547,831 1,129,800
Depreciation and amortization 76,823 54,315
Unrealized foreign exchange loss/(gain) (9,553,823) 133,017
(Gain)/Loss on forward contracts 616,966 (315,906)
(Gain)/Loss on reduction of partner
interests (2,792,457) -
Non-cash stock based compensation 2,454,778 1,833,142
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27,590,244 25,579,776
Change in:
-trade and other receivables 1,378,603 (1,745,412)
-prepayments (6,804,836) (1,192,740)
-trade and other payables 2,258,918 2,434,627
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Cash generated from operating activities 24,422,929 25,076,251
Interest paid (1,480,928) (2,041,212)
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Net cash from operating activities $22,942,001 $23,035,039
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Cash flows from investing activities
Acquisition of equipment (486,092) (47,674)
Acquisition/disposition of Preferred LP
Units (146,918,721) (38,872,862)
Proceeds from reduction in Preferred LP
Units 44,300,000 -
----------------------------------
Net cash used in investing activities $(103,104,813) $(38,920,536)
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Cash flows from financing activities
New share capital, net of share issue
costs - 82,933,144
Proceeds from exercise of options 1,205,035 5,453
Borrowing of senior debt 149,200,000 37,700,000
Repayment of senior debt (40,500,000) (82,200,000)
Promissory notes issued (3,000,000) (50,000)
Promissory notes repaid 3,230,055 1,000,000
Dividends paid (24,118,995) (20,676,546)
Payments in lieu of dividends on RSUs - (174,595)
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Net cash from financing activities $86,016,095 $18,537,456
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Net increase in cash and cash equivalents 5,853,283 2,651,959
Impact of foreign exchange on cash
balances 1,200,731 -
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Cash and cash equivalents, Beginning of
period 13,483,524 8,998,342
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Cash and cash equivalents, End of period $20,537,538 $11,650,301
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