Alaris Equity Partners Income Trust (TSX-AD.UN) (together, as
applicable, with its subsidiaries, “
Alaris” or the
“
Trust”) is pleased to announce its results for
the three and nine months ended September 30, 2022. The results are
prepared in accordance with International Accounting Standard 34.
All amounts below are in Canadian dollars unless otherwise noted.
Highlights:
-
Revenue of $42.9 million in the third quarter of 2022 is consistent
with Q3 2021 and cash generated from operations, prior to changes
in working capital, of $44.0 million in Q3 2022 is an increase of
1.2% as compared to the same period in 2021. On a per unit basis,
revenue of $0.95 and cash from operations, prior to changes in
working capital, of $0.97 are both consistent with Q3 2021;
-
For the nine months ended September 30, 2022, total revenue was
$138.9 million and cash from operations, prior to changes in
working capital, was $123.7 million, representing increases of 26%
each, respectively, as compared to the same period in 2021. On a
per unit basis, revenue of $3.07 and cash from operations, prior to
changes in working capital, of $2.74 each increased 22% as compared
to the first nine months of 2021;
-
These increases year over year for the nine months ended September
30, 2022 primarily relate to the additional US$13.7 million
(CA$17.2 million) of Distributions received in April 2022 from
Kimco Holdings, LLC (“Kimco”) that were deferred
from prior years. The remaining $121.7 million of revenue earned in
the nine months ended September 30, 2022 represents a 10.6%
improvement from $110.0 million in the prior year comparable
period;
-
For the nine months ended September 30, 2022, the Trust has
generated basic earnings per unit of $2.13 and has paid out $0.99
of distributions per unit, resulting in $1.14 per unit of
additional book value, improving the book value per unit at quarter
end to $19.57;
-
Subsequent to September 30, 2022, Alaris contributed an initial
investment of US$24.0 million to Sagamore Plumbing and Heating, LLC
(“Sagamore”) inclusive of US$20.0 million of
preferred equity and a US$4.0 million minority common equity
investment. The contribution of preferred equity is in exchange for
preferred Distributions at an annualized pre-tax yield of 15%. See
below for further details on Sagamore’s business and Alaris’
initial contribution;
-
On October 1, 2022, Alaris’ investment in FNC Title Services
(“FNC”) was fully redeemed and resulted in total
gross proceeds on redemption of US$58.3 million, which included
US$5.2 million of additional Distributions owed up to the third
anniversary of Alaris initial investment. These Distributions will
be recognized as revenue in Q4 2022. The gross proceeds also
included a return of capital of US$40.0 million, a total combined
premium on the preferred and common equity investments of US$11.7
million and US$1.4 million placed into an escrow account for future
potential indemnification obligations. Upon receipt of the proceeds
in escrow Alaris’ total return will be 75% which represents an
unlevered IRR of approximately 42%; (8)
-
As a result of the FNC redemption, Alaris recorded an unrealized
gain of US$4.3 million during Q3 2022 to increase the fair value of
the investment to the redemption value. The total unrealized gain
of US$11.7 million will be reclassified from unrealized to realized
in Q4 2022;
-
Subsequent to September 30, 2022, Alaris received a common dividend
of US$5.9 million from Fleet Advantage, LLC
(“Fleet”), representing a significant portion of
the total initial invested capital from Q4 2021 of US$8.0 million.
During the three and nine months ended September 30, 2022 this
common dividend was recognized as a combination of a realized gain
of US$4.4 million and common dividend revenue of US$1.5
million;
-
Due to the impact that increases in market interest rates has had
on the valuation of common equity investments, there was a net
decrease to the fair value of unrealized investments recorded in
the three months ended September 30, 2022 of $7.1 million;
-
Based on the financial results of Alaris’ Partners so far in 2022,
Alaris currently expects an overall positive reset on Distributions
for 2023 of approximately 3.1% which would result in additional
revenue of $4.5 million or $0.10 per unit;
-
The weighted average combined Earnings Coverage Ratio (5) for
Alaris’ Partners remains greater than 1.75x with thirteen of
seventeen Partners greater than 1.5x; and
-
As a result of continued strong financial results in the nine
months ended September 30, 2022 along with having a Run Rate Payout
Ratio (4) below 70% and over $215 million of available capacity for
future investments, Alaris is pleased to announce an annualized
distribution increase of $0.04 per unit beginning with the Q4 2022
distribution payable to unitholders of record at December 30, 2022
and payable in January 2023. This represents an increase of 3.0%
and results in an annualized distribution of $1.36 per unit.
“Alaris’ third quarter results again exceeded
guidance as the additional common equity dividends from Fleet and
Amur along with a stronger US dollar helped in generating $43
million of revenue compared to guidance of $39 million. Our
portfolio continues to generate positive results even amidst the
strong headwinds from inflationary issues and higher interest
rates. With an average ECR across the portfolio still greater than
1.75x and another meaningful positive reset expected in 2023, the
diversification of our Partners across various recession resistant
industries continues to prove itself out,” said Steve King,
President and CEO.
“We are also very pleased to announce our third
consecutive year increasing our distribution. Today’s increase
reflects the continuing high performance of our portfolio, our
strong balance sheet and our growth prospects for the future. We
believe the current environment is very positive for Alaris given
that the costs of other alternative investment structures has gone
up considerably over the last year, making the Alaris offering even
more attractive to private companies looking for capital.
Maintaining our payout ratio between 65% to 75% was a key
consideration in our distribution strategy,” said King.
Per Unit Results |
Three months ended |
Nine months ended |
Period ending September 30 |
2022 |
2021 |
% Change |
|
2022 |
2021 |
% Change |
|
Revenue |
$ |
0.95 |
$ |
0.95 |
+0.0 |
% |
$ |
3.07 |
$ |
2.52 |
+21.8 |
% |
EBITDA (Note 1) |
$ |
0.88 |
$ |
1.28 |
-31.3 |
% |
$ |
3.01 |
$ |
3.09 |
-2.6 |
% |
Cash from operations, prior to changes in working capital |
$ |
0.97 |
$ |
0.97 |
+0.0 |
% |
$ |
2.74 |
$ |
2.25 |
+21.8 |
% |
Distributions declared |
$ |
0.33 |
$ |
0.33 |
+0.0 |
% |
$ |
0.99 |
$ |
0.95 |
+4.2 |
% |
Basic earnings |
$ |
0.67 |
$ |
1.03 |
-35.0 |
% |
$ |
2.13 |
$ |
2.25 |
-5.3 |
% |
Fully diluted earnings |
$ |
0.65 |
$ |
0.97 |
-33.0 |
% |
$ |
2.05 |
$ |
2.16 |
-5.1 |
% |
Weighted average basic units (000’s) |
|
45,281 |
|
45,032 |
|
|
45,238 |
|
43,615 |
|
|
|
|
|
|
|
|
For the three months ended September 2022,
revenue per unit remained consistent year over year as compared to
Q3 2021 as a result of multiple offsetting factors. In Q3 2022,
Fleet and Amur Financial Group Inc. (“Amur”)
declared common dividends that in total amounted to $3.1 million.
In Q3 2021, there were no comparable dividends as Amur did not
declare common dividends in the prior year quarter and the common
units in Fleet were not acquired until a follow-on investment in Q4
2021 and this is the first time they have distributed common
dividends since the transaction. In Q3 2022, Body Contour Centers,
LLC (“BCC”) distributions increased to $6.9
million (2021 – $2.8 million) or a 144.5% increase when compared to
Q3 2021, this increase is primarily due to a follow-on investment
that occurred in 2022. PF Growth Partners, LLC
(“PFGP”) Distributions increased to $3.9 million
or a 34.7% increase from $3.0 million in Q3 2021 which is due to a
positive reset on PFGP’s monthly Distributions plus partial
payments on deferred Distributions from prior years that were
deferred as a result of the impact of COVID-19. The above increases
in Q3 2022 are offset by Kimco and Federal Resources Supply Company
and its subsidiaries (“FED”) redemptions, from
each of which in Q3 2021 Alaris received Distributions of $5.8
million and $3.5 million respectively. The average exchange rate
during Q3 2022 was approximately 4% more favorable than in the
prior year, contributing to an improvement in US denominated
Distribution revenue.
For the nine months ended September 30, 2022,
revenue per unit increased by 21.8% compared to the first nine
months of 2021 primarily as a result of the $17.2 million (US$13.7
million) of Distributions from Kimco received as part of their
redemption that were deferred from prior years. After reducing the
total revenue earned in the first nine months of 2022 of $138.9
million by the $17.2 million, the remaining revenue of $121.7
million represents a 10.6% increase compared to $110.0 million in
the comparable period of 2021. The remaining increase in
Distribution revenue per unit relates to the common Distributions
described above, new investments in Brown and Settle Investments,
LLC (“Brown and Settle”), 3E, LLC
(“3E”) and Vehicle Leasing Holdings, LLC, dba
D&M Leasing (“D&M”) during Q1 and Q2 2021,
as well as follow-on investments to BCC, Heritage Restoration, LLC
(“Heritage”), Fleet and Accscient, LLC
(“Accscient”).
As the Trust’s cash from operations, prior to
changes in working capital, excludes primarily all non-cash items
in the Trust’s consolidated statement of comprehensive income, the
cash from operations, prior to changes in working capital, per unit
and the changes from period to period is an important tool to use
to summarize the ability for Alaris to generate cash. The cash from
operations, prior to change in working capital, per unit of $0.97
in Q3 2022 is consistent with the prior year. For the nine months
ended September 30, 2022, cash from operations, prior to change in
working capital, per unit increased by 21.8% primarily due to the
redemption of Kimco and the Distributions received that were
deferred from prior years.
The Actual Payout Ratio (2) for Alaris for the
nine months ended September 30, 2022 was 45%, an improvement from
52% in the comparable period of 2021, primarily as a result of the
improvements in revenue per unit noted above.
EBITDA per unit decreased by 31.3% in Q3 2022
and by 2.6% in the nine months ended September 30, 2022, each as
compared to the respective comparable periods in 2021, mainly as a
result of a reduction to the net realized and unrealized amounts in
each respective period as compared to the prior year. The net
realized and unrealized decrease in the fair value of investments
during Q3 2022 of $7.1 million and a net increase of $2.5 million
during the nine months ended September 30, 2022 are both reductions
as compared to in 2021, mainly due to the impact that higher market
interest rates has had on the valuation of common equity
investments.
Basic earnings per unit decreased by 35.0% in Q3
2022 and by 5.3% in the nine months ended September 30, 2022, each
as compared to the respective comparable periods in 2021, as a
result of the decreases in EBITDA per unit as discussed above.
Initial Investment in
Sagamore
On November 8, 2022, Alaris made an investment
in Sagamore Plumbing and Heating, LLC (“Sagamore”)
with an initial contribution of US$24.0 million (the
“Sagamore Investment”). The Sagamore Investment
consists of a US$20.0 million investment in preferred equity (the
“Sagamore Preferred Equity”) as well as an
investment of US$4.0 million in exchange for a minority ownership
of the common equity in Sagamore. The Sagamore Preferred Equity
entitles Alaris to an annualized Partner distribution of US$3.0
million (the “Sagamore Distribution”), an initial
pre-tax annualized yield of 15%. The Sagamore Distribution will be
adjusted annually based on the percentage change in gross revenue,
subject to a collar of +/- 6% and the first reset will occur on
January 1, 2024.
Based on Alaris’ review of Sagamore’s internal
financial results for the most recent trailing twelve-month period
in 2022 and giving effect to the Sagamore Investment and the
Sagamore Distribution payable to Alaris, Sagamore has no debt and
would have an earnings coverage ratio of between 1.5x and 2.0x.
Proceeds of the Sagamore Contribution were used for liquidity and
for growth in the business.
Founded in 1991 by Joseph Harold, Sagamore
offers a complete range of commercial plumbing, HVAC and facilities
maintenance services to clients across all industries, with
experienced teams and advanced capabilities to handle complex work
for applications in health care, biotech, pharmaceutical and
academic research. Sagamore operates in New England with a focus in
the greater Boston region.
“Sagamore’s highly professional management team
has built the Company around a philosophy that puts its employees
first, while delivering solid, sustainable free cash flow through
quality workmanship and customer satisfaction. We thoroughly enjoy
working with Joe Harold, Jim Abban and their leadership team, and
are excited to be partners in their continuation of the Sagamore
legacy,” said Gregg Delcourt, Chief Investment Officer, Alaris.
Outlook
The Trust deployed approximately $120.4 million
in the nine months ended September 30, 2022, consistent with
Alaris’ acquisition of investments in its condensed consolidated
interim statement of cash flows. The $42.9 million of total revenue
in Q3 2022 for Alaris was a result of this deployment and it
exceeded previous guidance of $39.3 million due to a combination of
$4.1 million of common dividends and a higher average US dollar. As
presented below, the outlook for the next twelve months includes
Run Rate Revenue (3) expected to be approximately $161.5 million;
however, it increases to be $168.6 million after including $7.1
million of make-whole Distributions in Q4 2022 from FNC as part of
their redemption. This includes current contracted amounts, an
additional US$2.4 million from PFGP related to deferred
Distributions during COVID-19 and an estimated $1.8 million of
common dividends. Alaris expects total revenue from its Partners in
Q4 2022 of approximately $47.0 million, inclusive of FNC’s
Distributions received on redemption of $7.1 million.
The Run Rate Cash Flow (6) table below outlines
the Trust’s expectation for revenue, general and administrative
expenses, interest expense, tax expense and distributions to
unitholders for the next twelve months. The Run Rate Cash Flow is a
Non-GAAP financial measure and outlines the net cash from operating
activities, net of distributions paid, that Alaris is expecting to
have after the next twelve months. This measure is comparable to
net cash from operating activities less distributions paid, as
outlined in Alaris’ condensed consolidated interim statements of
cash flows. The Trust’s method of calculating this Non-GAAP
financial measure may differ from the methods used by other
issuers. Therefore, it may not be comparable to similar measures
presented by other issuers.
Annual general and administrative expenses are
currently estimated at $17.0 million and include all public company
costs. The Trust’s Run Rate Payout Ratio (4) is expected to be
within a range of 65% and 70% when including Run Rate Revenue (3),
overhead expenses and its existing capital structure. The table
below sets out our estimated Run Rate Cash Flow alongside the
after-tax impact of positive net deployment, the impact of every 1%
increase in SOFR based on current outstanding USD debt and the
impact of every $0.01 change in the USD to CAD exchange rate.
Run Rate Cash Flow ($ thousands except per
unit) |
|
Amount ($) |
$ / Unit |
|
|
Revenue |
|
$ |
161,500 |
|
$ |
3.57 |
|
|
General
and administrative expenses |
|
(17,000 |
) |
|
(0.38 |
) |
|
Interest
and taxes |
|
|
(51,800 |
) |
|
(1.14 |
) |
|
Net cash from operating activities |
$ |
92,700 |
|
$ |
2.05 |
|
|
Distributions paid |
|
|
(61,600 |
) |
|
(1.36 |
) |
|
Run Rate Cash Flow |
|
$ |
31,100 |
|
$ |
0.69 |
|
|
Other considerations (after taxes and
interest): |
|
|
|
|
|
New
investments |
Every $50 million deployed @ 14% |
|
+3,000 |
|
|
+0.07 |
|
|
Interest
rates |
Every 1.0% increase in SOFR |
|
-1,200 |
|
|
-0.03 |
|
|
USD to CAD |
Every $0.01 change of USD to CAD |
|
+/- 900 |
|
|
+/- 0.02 |
|
|
|
|
|
|
|
|
|
|
|
The senior debt facility was drawn to $291.9
million at September 30, 2022 in the Trust’s statement of financial
position. The annual interest rate on that debt, inclusive of
standby charges on available capacity, was approximately 4.9% for
the nine months ended September 30, 2022. Subsequent to September
30, 2022, following a total repayment of US$66.0 million from the
FNC redemption and through cash flow, partially offset by a draw
for the investment in Sagamore, Alaris has the capacity to draw up
to an additional $219 million based on covenants and credit
terms.
The Condensed Consolidated Interim Statements of
Financial Position, Condensed Consolidated Interim Statements of
Comprehensive Income, and Condensed Consolidated Interim Statements
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.alarisequitypartners.com.
Earnings Release Date and Conference
Call Details
Alaris management will host a conference call at
9am MT (11am ET), Thursday, November 10, 2022 to discuss the
financial results and outlook for the Trust.
Participants must register for the call using
this link: Q3 2022 Conference Call. Pre-register to receive the
dial-in numbers and unique PIN to access the call seamlessly. It is
recommended that you join 10 minutes prior to the event start
(although you may register and dial in at any time during the
call). Participants can access the webcast here: Q3 Webcast. A
replay of the webcast will be available two hours after the call
and archived on the same web page for six months. Participants can
also find the link on our website, stored under the “Investors”
section – “Presentations and Events”, at
www.alarisequitypartners.com.
An updated corporate presentation will be posted
to the Trust’s website within 24 hours at
www.alarisequitypartners.com.
About the Trust:
Alaris, through its subsidiaries, provides
alternative financing to private companies
(“Partners”) in exchange for distributions,
dividends or interest (collectively,
“Distributions”) with the principal objective of
generating stable and predictable cash flows for distribution
payments to its unitholders. Distributions from the Partners are
adjusted annually based on the percentage change of a “top-line”
financial performance measure such as gross margin or same store
sales and rank in priority to the owner’s common equity
position.
Non-GAAP and Other Financial
MeasuresThe terms EBITDA, Actual Payout Ratio, Run Rate
Revenue, Run Rate Payout Ratio, Earnings Coverage Ratio, Run Rate
Cash Flow, IRR and Per Unit amounts (collectively, the
“Non-GAAP and Other Financial Measures”) are
financial measures used in this news release that are not standard
measures under International Financial Reporting Standards
(“IFRS”). The Trust’s method of calculating
EBITDA, Actual Payout Ratio, Run Rate Revenue, Run Rate Payout
Ratio, Earnings Coverage Ratio, Run Rate Cash Flow, IRR and Per
Unit amounts may differ from the methods used by other issuers.
Therefore, the Trust’s EBITDA, Actual Payout Ratio, Run Rate
Revenue, Run Rate Payout Ratio, Earnings Coverage Ratio, Run Rate
Cash Flow, IRR and Per Unit amounts may not be comparable to
similar measures presented by other issuers.
(1) “EBITDA” and
“EBITDA per unit” are Non-GAAP financial measures
and refer to earnings determined in accordance with IFRS, before
depreciation and amortization, interest expense (finance costs) and
income tax expense and the same amount divided by weighted average
basic units outstanding. EBITDA and EBITDA per unit are used by
management and many investors to determine the ability of an issuer
to generate cash from operations, aside from still including
fluctuations due to changes in exchange rates and changes in the
Trust’s investments at fair value. Management believes EBITDA and
EBITDA per unit are useful supplemental measures from which to
determine the Trust’s ability to generate cash available for
servicing its loans and borrowings, income taxes and distributions
to unitholders. Refer to the reconciliation of EBITDA and
calculation of EBITDA per unit in the table below.
|
Three months ended September
30 |
Nine months endedSeptember 30 |
$ thousands except per unit amounts |
2022 |
2021 |
% Change |
2022 |
2021 |
% Change |
Earnings |
$ |
30,141 |
$ |
46,178 |
-34.7 |
% |
$ |
96,172 |
$ |
98,142 |
-2.0 |
% |
Depreciation and amortization |
|
55 |
|
45 |
+22.2 |
% |
|
161 |
|
165 |
-2.4 |
% |
Finance costs |
|
7,081 |
|
6,858 |
+3.3 |
% |
|
20,642 |
|
18,265 |
+13.0 |
% |
Total income tax expense |
|
2,641 |
|
4,575 |
-42.3 |
% |
|
19,324 |
|
18,045 |
+7.1 |
% |
EBITDA |
$ |
39,918 |
$ |
57,656 |
-30.8 |
% |
$ |
136,299 |
$ |
134,617 |
+1.2 |
% |
Weighted average basic units (000's) |
|
45,281 |
|
45,032 |
|
|
45,238 |
|
43,615 |
|
EBITDA per unit |
$ |
0.88 |
$ |
1.28 |
-31.3 |
% |
$ |
3.01 |
$ |
3.09 |
-2.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) “Actual Payout Ratio” is a supplementary
financial measure and refers to Alaris’ total distributions paid
during the period (annually or quarterly) divided by the actual net
cash from operating activities Alaris generated for the period. It
represents the net cash from operating activities after
distributions paid to unitholders available for either repayments
of senior debt and/or to be used in investing activities.
(3) “Run Rate Revenue” is a
supplementary financial measure and refers to Alaris’ total revenue
expected to be generated over the next twelve months based on
contracted distributions from current Partners, excluding any
potential Partner redemptions, it also includes an estimate for
common dividends or distributions based on past practices, where
applicable. Run Rate Revenue is a useful metric as it provides an
expectation for the amount of revenue Alaris can expect to generate
in the next twelve months based on information known.
(4) “Run Rate Payout Ratio” is
a Non-GAAP financial ratio that refers to Alaris’ distributions per
unit expected to be paid over the next twelve months divided by the
net cash from operating activities per unit calculated in the Run
Rate Cash Flow table. Run Rate Payout Ratio is a useful metric for
Alaris to track and to outline as it provides a summary of the
percentage of the net cash from operating activities that can be
used to either repay senior debt during the next twelve months
and/or be used for additional investment purposes. Run Rate Payout
Ratio is comparable to Actual Payout Ratio as defined above.
(5) “Earnings Coverage Ratio
(“ECR”) is a
supplementary financial measure and refers to the EBITDA of a
Partner divided by such Partner’s sum of debt servicing (interest
and principal), unfunded capital expenditures and distributions to
Alaris. Management believes the earnings coverage ratio is a useful
metric in assessing our partners continued ability to make their
contracted distributions.
(6) “Run Rate Cash Flow” is a
Non-GAAP financial measure and outlines the net cash from operating
activities, net of distributions paid, that Alaris is expecting to
have after the next twelve months. This measure is comparable to
net cash from operating activities less distributions paid, as
outlined in Alaris’ consolidated statements of cash flows.
(7) “Per Unit” values, other
than earnings per unit, refer to the related financial statement
caption as defined under IFRS or related term as defined herein,
divided by the weighted average basic units outstanding for the
period.
(8) “IRR” is a supplementary
financial measure and refers to internal rate of return, which is a
metric used to determine the discount rate that derives a net
present value of cash flows to zero. Management uses IRR to analyze
partner returns. The Trust’s method of calculating this
supplementary financial measure may differ from the methods used by
other issuers. Therefore, it may not be comparable to similar
measures presented by other issuers.
The terms EBITDA, Actual Payout Ratio, Run Rate
Revenue, Run Rate Payout Ratio, Earnings Coverage Ratio, Run Rate
Cash Flow and Per Unit amounts should only be used in conjunction
with the Trust’s annual audited financial statements, complete
versions of which available on SEDAR at www.sedar.com.
Forward-Looking Statements
This news release contains forward-looking
information and forward-looking statements (collectively,
“forward-looking statements”) under applicable securities laws,
including any applicable “safe harbor” provisions. 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 Trust and the
Partners, the future financial position or results of the Trust,
business strategy and plans and objectives of or involving the
Trust 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 financial and operating performance of the Partners;
the Trust’s Run Rate Payout Ratio, Run Rate Cash Flow and Run Rate
Revenue; the impact of recent new investments and follow-on
investments; the Trust’s consolidated expenses; expectations
regarding receipt (and amount of) any common equity distributions
or dividends from Partners in which Alaris holds common equity,
including the impact on the Trust’s net cash from operating
activities, Run Rate Revenue, Run Rate Cash Flow and Run Rate
Payout Ratio; the use of proceeds from the senior credit facility;
the Trust’s ability to deploy capital and expectations regarding
the same; the yield on the Trust’s investments; the Trust’s return
on its investments; Q4 2022 revenue; revenue and Run Rate Cashflow
over the next 12 months; and the Trust’s expenses for the remainder
of 2022. To the extent any forward-looking statements herein
constitute a financial outlook or future oriented financial
information (collectively, “FOFI”), including
estimates regarding revenues, Distributions from Partners
(including expected resets, restarting full or partial
Distributions and common equity distributions), Run Rate Payout
Ratio, Run Rate Cash Flow, net cash from operating activities,
expenses and impact of capital deployment, 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 over the next 24 months and how that
will affect Alaris’ business and that of its Partners (including,
without limitation, any ongoing impact of COVID-19) 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 continue to
stabilize from the economic downturn created by COVID-19, the
Russia/Ukraine conflict and other global economic pressures over
the next twelve months; interest rates will not rise in a material
way from market expectations over the next 12 months; that those
Alaris Partners previously affected by COVID-19 will not see a
detrimental impact from COVID-19 over the next 12 months; that
those Partners detrimentally affected by COVID-19 will recover from
the pandemic’s impact and return to their pre-pandemic operating
environments; the businesses of the majority of our Partners will
continue to grow; more private companies will require access to
alternative sources of capital; the businesses of new Partners and
those of existing Partners will perform in line with Alaris’
expectations and diligence; 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 the Canadian and U.S.
dollar trading pair will remain in a range of approximately plus or
minus 15% of the current rate over the next 6 months. 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 as well as
prevailing economic conditions at the time of such
determinations.
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 Trust 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 ongoing impact of the COVID-19
pandemic and other global economic factors (including, without
limitation, the Russia/Ukraine conflict, inflationary measures and
global supply chain disruptions on the Trust and the Partners
(including how many Partners will experience a slowdown of their
business and the length of time of such slowdown), the dependence
of Alaris on the Partners; leverage and restrictive covenants under
credit facilities; reliance on key personnel; general economic
conditions, including any ongoing impact of COVID-19 on the
Canadian, U.S. and global economies; failure to complete or realize
the anticipated benefit of Alaris’ financing arrangements with the
Partners; 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 Partner or the industries they operate in;
inability to close additional Partner contributions or collect
proceeds from any redemptions in a timely fashion on anticipated
terms, or at all; a change in the ability of the Partners to
continue to pay Alaris at expected Distribution levels or restart
distributions (in full or in part); a failure to collect material
deferred Distributions; a change in the unaudited information
provided to the Trust; and a failure to realize the benefits of any
concessions or relief measures provided by Alaris to any Partner or
to successfully execute an exit strategy for a Partner where
desired. Additional risks that may cause actual results to vary
from those indicated are discussed under the heading “Risk Factors”
and “Forward Looking Statements” in Alaris’ Management Discussion
and Analysis and Annual Information Form for the year ended
December 31, 2021, which is filed under Alaris’ profile at
www.sedar.com and on its website at
www.alarisequitypartners.com.
Readers are cautioned that the assumptions used
in the preparation of forward-looking statements, including FOFI,
although considered reasonable at the time of preparation, based on
information in Alaris’ possession as of the date hereof, may prove
to be imprecise. In addition, there are a number of factors that
could cause Alaris’ actual results, performance or achievement to
differ materially from those expressed in, or implied by, forward
looking statements and FOFI, or if any of them do so occur, what
benefits the Trust will derive therefrom. As such, undue reliance
should not be placed on any forward-looking statements, including
FOFI.
The Trust has included the forward-looking
statements and FOFI in order to provide readers with a more
complete perspective on Alaris’ future operations and such
information may not be appropriate for other purposes. The
forward-looking statements, including FOFI, contained herein are
expressly qualified in their entirety by this cautionary statement.
Alaris disclaims any intention or obligation to update or revise
any forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by
law.
For more information please
contact:Investor RelationsAlaris Equity Partners
Income Trust403-260-1457ir@alarisequity.com
Alaris Equity Partners Income
TrustCondensed consolidated interim statements of
financial position
|
30-Sep |
31-Dec |
$ thousands |
2022 |
2021 |
Assets |
|
|
Cash and cash equivalents |
$ |
26,390 |
$ |
18,447 |
Derivative contracts |
|
- |
|
71 |
Accounts receivable and
prepayments |
|
10,485 |
|
3,181 |
Income taxes receivable |
|
25,807 |
|
28,991 |
Promissory notes and other
assets |
|
2,738 |
|
13,555 |
Current
Assets |
$ |
65,420 |
$ |
64,245 |
Promissory notes and other
assets |
|
- |
|
- |
Deposits and other assets |
|
32,748 |
|
24,979 |
Property and equipment |
|
530 |
|
658 |
Investments |
|
1,322,307 |
|
1,185,327 |
Non-current assets |
$ |
1,355,585 |
$ |
1,210,964 |
Total
Assets |
$ |
1,421,005 |
$ |
1,275,209 |
|
|
|
Liabilities |
|
|
Accounts payable and accrued
liabilities |
$ |
9,095 |
$ |
8,214 |
Distributions payable |
|
14,943 |
|
14,899 |
Derivative contracts |
|
1,915 |
|
- |
Office Lease |
|
388 |
|
500 |
Income tax payable |
|
251 |
|
740 |
Current
Liabilities |
$ |
26,592 |
$ |
24,353 |
Deferred income taxes |
|
60,269 |
|
43,903 |
Loans and borrowings |
|
291,889 |
|
326,569 |
Convertible debenture |
|
92,451 |
|
89,592 |
Senior unsecured
debenture |
|
62,494 |
|
- |
Other long-term
liabilities |
|
1,244 |
|
1,933 |
Non-current
liabilities |
$ |
508,347 |
$ |
461,997 |
Total
Liabilities |
$ |
534,939 |
$ |
486,350 |
|
|
|
Equity |
|
|
Unitholders' capital |
$ |
757,220 |
$ |
754,622 |
Translation reserve |
|
58,311 |
|
15,052 |
Retained earnings |
|
70,535 |
|
19,185 |
Total
Equity |
$ |
886,066 |
$ |
788,859 |
|
|
|
Total Liabilities and Equity |
$ |
1,421,005 |
$ |
1,275,209 |
|
|
|
Alaris Equity Partners Income TrustCondensed
consolidated interim statements of comprehensive income
|
Three months endedSeptember 30 |
|
Nine months endedSeptember 30 |
$ thousands except per unit amounts |
|
2022 |
|
|
2021 |
|
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
Revenues, including realized
foreign exchange gain |
$ |
42,870 |
|
$ |
42,878 |
|
|
$ |
138,931 |
|
$ |
110,045 |
|
Net realized gain / (loss)
from investments |
|
5,845 |
|
|
(10,259 |
) |
|
|
17,793 |
|
|
(10,259 |
) |
Net unrealized gain / (loss)
of investments at fair value |
|
(12,945 |
) |
|
26,122 |
|
|
|
(15,333 |
) |
|
47,880 |
|
Bad debt recovery |
|
- |
|
|
- |
|
|
|
- |
|
|
4,030 |
|
Total revenue and
other operating income |
$ |
35,770 |
|
$ |
58,741 |
|
|
$ |
141,391 |
|
$ |
151,696 |
|
|
|
|
|
|
|
General and
administrative |
|
5,432 |
|
|
3,920 |
|
|
|
15,092 |
|
|
8,235 |
|
Transaction diligence
costs |
|
1,495 |
|
|
109 |
|
|
|
3,348 |
|
|
2,845 |
|
Unit-based compensation |
|
204 |
|
|
1,371 |
|
|
|
2,004 |
|
|
3,977 |
|
Depreciation and
amortization |
|
55 |
|
|
45 |
|
|
|
161 |
|
|
165 |
|
Total operating
expenses |
|
7,186 |
|
|
5,445 |
|
|
|
20,605 |
|
|
15,222 |
|
Earnings from
operations |
$ |
28,584 |
|
$ |
53,296 |
|
|
$ |
120,786 |
|
$ |
136,474 |
|
Finance costs |
|
7,081 |
|
|
6,858 |
|
|
|
20,642 |
|
|
18,265 |
|
Unrealized loss on derivative
contracts |
|
2,711 |
|
|
1,338 |
|
|
|
1,984 |
|
|
1,614 |
|
Foreign exchange (gain) /
loss |
|
(13,990 |
) |
|
(5,653 |
) |
|
|
(17,336 |
) |
|
408 |
|
Earnings before
taxes |
$ |
32,782 |
|
$ |
50,753 |
|
|
$ |
115,496 |
|
$ |
116,187 |
|
Current income tax expense /
(recovery) |
|
(735 |
) |
|
(4,553 |
) |
|
|
6,786 |
|
|
3,593 |
|
Deferred income tax
expense |
|
3,376 |
|
|
9,128 |
|
|
|
12,538 |
|
|
14,452 |
|
Total income tax expense |
|
2,641 |
|
|
4,575 |
|
|
|
19,324 |
|
|
18,045 |
|
Earnings |
$ |
30,141 |
|
$ |
46,178 |
|
|
$ |
96,172 |
|
$ |
98,142 |
|
|
|
|
|
|
|
Other comprehensive
income |
|
|
|
|
|
Foreign currency translation
differences |
|
38,800 |
|
|
12,327 |
|
|
|
43,259 |
|
|
(541 |
) |
|
|
|
|
|
|
Total comprehensive income |
$ |
68,941 |
|
$ |
58,505 |
|
|
$ |
139,431 |
|
$ |
97,601 |
|
|
|
|
|
|
|
Earnings per
unit |
|
|
|
|
|
Basic |
$ |
0.67 |
|
$ |
1.03 |
|
|
$ |
2.13 |
|
$ |
2.25 |
|
Fully diluted |
$ |
0.65 |
|
$ |
0.97 |
|
|
$ |
2.05 |
|
$ |
2.16 |
|
Weighted average units
outstanding |
|
|
|
|
|
Basic |
|
45,281 |
|
|
45,032 |
|
|
|
45,238 |
|
|
43,615 |
|
Fully
Diluted |
|
49,760 |
|
|
49,530 |
|
|
|
49,717 |
|
|
48,113 |
|
|
|
|
|
|
|
Alaris Equity Partners Income TrustCondensed
consolidated interim statements of cash flows
|
Nine months ended September 30 |
$ thousands |
|
2022 |
|
|
2021 |
|
Cash flows from
operating activities |
|
|
Earnings for the period |
$ |
96,172 |
|
$ |
98,142 |
|
Adjustments for: |
|
|
Finance costs |
|
20,642 |
|
|
18,265 |
|
Deferred income tax expense |
|
12,538 |
|
|
14,452 |
|
Depreciation and amortization |
|
161 |
|
|
165 |
|
Bad debt recovery |
|
- |
|
|
(4,030 |
) |
Net realized (gain) / loss from investments |
|
(11,948 |
) |
|
10,259 |
|
Net unrealized (gain) / loss of investments at fair value |
|
15,333 |
|
|
(47,880 |
) |
Unrealized (gain) / loss on derivative contracts |
|
1,984 |
|
|
1,614 |
|
Unrealized foreign exchange (gain) / loss |
|
(16,493 |
) |
|
408 |
|
Transaction diligence costs |
|
3,348 |
|
|
2,845 |
|
Unit-based compensation |
|
2,004 |
|
|
3,977 |
|
Cash from operations, prior to
changes in working capital |
|
123,741 |
|
|
98,217 |
|
Changes in working
capital: |
|
|
Accounts receivable and prepayments |
|
(7,304 |
) |
|
(1,146 |
) |
Income tax receivable / payable |
|
6,524 |
|
|
(8,794 |
) |
Deposits and other assets |
|
(7,769 |
) |
|
- |
|
Accounts payable, accrued liabilities |
|
(524 |
) |
|
1,905 |
|
Cash generated from
operating activities |
|
114,668 |
|
|
90,182 |
|
Cash interest paid |
|
(15,704 |
) |
|
(13,585 |
) |
Net cash from
operating activities |
$ |
98,964 |
|
$ |
76,597 |
|
|
|
|
Cash flows from
investing activities |
|
|
Acquisition of
investments |
$ |
(120,387 |
) |
$ |
(264,900 |
) |
Transaction diligence
costs |
|
(3,348 |
) |
|
(2,845 |
) |
Proceeds from partner
redemptions |
|
58,275 |
|
|
14,913 |
|
Promissory notes and other
assets issued |
|
(2,738 |
) |
|
(5,818 |
) |
Promissory notes and other
assets repaid |
|
13,572 |
|
|
14,435 |
|
Net cash used in
investing activities |
$ |
(54,626 |
) |
$ |
(244,215 |
) |
|
|
|
Cash flows from
financing activities |
|
|
Repayment of loans and
borrowings |
$ |
(172,078 |
) |
$ |
(146,913 |
) |
Proceeds from loans and
borrowings |
|
121,901 |
|
|
269,585 |
|
Debt amendment and extension
fees |
|
(2,111 |
) |
|
(552 |
) |
Issuance of unitholders'
capital, net of unit issue costs |
|
- |
|
|
90,287 |
|
Proceeds from senior unsecured
debenture, net of fees |
|
62,192 |
|
|
- |
|
Distributions paid |
|
(44,778 |
) |
|
(39,966 |
) |
Office lease payments |
|
(112 |
) |
|
(121 |
) |
Net cash from / (used
in) financing activities |
$ |
(34,986 |
) |
$ |
172,320 |
|
|
|
|
Net increase in cash
and cash equivalents |
$ |
9,352 |
|
$ |
4,702 |
|
Impact of foreign exchange on
cash balances |
|
(1,409 |
) |
|
(1,836 |
) |
Cash and cash equivalents,
Beginning of period |
|
18,447 |
|
|
16,498 |
|
Cash and cash equivalents, End of period |
$ |
26,390 |
|
$ |
19,364 |
|
|
|
|
Cash taxes paid |
$ |
2,732 |
|
$ |
11,777 |
|
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