Diversified Royalty Corp. (TSX: DIV and DIV.DB) (the
“
Corporation” or “
DIV”) is
pleased to announce it has entered into an agreement with Nurse
Next Door Professional Homecare Services Inc. (“
Nurse Next
Door”) to add a fifth royalty stream to DIV's portfolio.
Highlights:
- Acquisition of Nurse Next Door trademarks and certain other
intellectual property rights for $52.0 million, excluding the Nurse
Next Door retained interest.
- Annual royalty from Nurse Next Door of $4.8 million,
representing ~13% of DIV’s pro-forma adjusted royalty revenue.
- Annual dividend on DIV’s common shares to be increased 3.4%
from 22.25 cents per share to 23 cents per share, subject to
closing of the Acquisition.
- New acquisition credit facility with $50 million of undrawn
capacity and a three-year term to fund future trademark and royalty
transactions.
Acquisition Overview
DIV and its wholly-owned subsidiary NND
Royalties Limited Partnership (“NND LP”) entered
into an acquisition agreement dated November 1, 2019 (the
“Acquisition Agreement”) with Nurse Next Door to
acquire the trademarks and certain other intellectual property
rights utilized by Nurse Next Door in its premium home care
business (the “NND Rights”) for a purchase price
(the “Purchase Price”) of $52.0 million (the
“Acquisition”), excluding a retained interest to
be provided to Nurse Next Door through the issuance of limited
partnership units of NND LP (the “Exchangeable
Units”). The cash Purchase Price of $52.0 million will be
funded with $44.75 million of DIV’s cash on hand and approximately
$7.25 million of senior debt to be provided by a Canadian chartered
bank under a new credit facility having a maximum borrowing
capacity of $14.5 million (the “NND Credit
Facility”).
Immediately following the closing of the
Acquisition, DIV will license the NND Rights back to Nurse Next
Door for 99 years, in exchange for an initial royalty payment of
$4.8 million per annum (the “Royalty” and together
with the Acquisition, the “Transaction”). The
Royalty will grow contractually at a rate of 2% per annum during
the term of the license. The pro forma trailing 12 month royalty
coverage is estimated to be greater than 145%.
The Acquisition will increase DIV’s tax pools by
$52 million. This depreciable tax basis adds to DIV’s already
existing depreciable tax basis of approximately $185 million and
can be depreciated over time to reduce DIV’s cash taxes.
Founded in 2001, Nurse Next Door operates 177
locations across Canada (65 locations), the United States (109
locations) and Australia (3 locations) generating annual system
sales of over $100 million. Nurse Next Door operates two Canadian
locations as corporate stores and the remaining 175 locations are
franchise operations. Future growth is currently expected to result
both from existing operating locations as well as opening
additional franchises. Nurse Next Door believes everyone should be
able to live at home, and provides compassionate service from
licensed non-medical caregivers as well as registered nurses to
achieve this objective. Nurse Next Door offers services ranging
from companionship, meal preparation and homemaking to home nursing
care, as well as around the clock care and end of life care. Nurse
Next Door’s customer satisfaction levels are reflected in its high
net promoter score of 65. Favourable North American demographics
are expected to drive the need for premium home care services going
forward.
Sean Morrison, President and Chief Executive
Officer of DIV, stated, “The Nurse Next Door transaction adds a
fifth royalty stream to DIV’s portfolio, representing approximately
13% of DIV’s pro-forma adjusted royalty revenue and is another step
in our strategy of purchasing royalties from a diverse group of
proven multi-location businesses and franchisors. Nurse Next Door
is one of the leading North American brands in the premium home
health care market, with an 18 year operating history, proven
franchisee economics, strong and growing cash flows, a centralized
technology-enabled services platform and call center, and an
experienced leadership team. DIV believes the Nurse Next Door
royalty is of superior quality given the competitive strength of
the underlying business, strong secular industry trends and
demographics, the high royalty coverage and the fixed 2% growth
rate.”
Mr. Morrison continued, “The Nurse Next Door
transaction is accretive, deploys the vast majority of DIV’s
remaining cash on hand and allows DIV to increase its annual
dividend to 23 cents per share while reducing the pro forma payout
ratio to just under 100%. This transaction, along with DIV’s recent
Mr. Mikes royalty acquisition, exemplify DIV’s business plan – to
acquire high quality trademarks and royalty streams on an accretive
basis, resulting in greater royalty portfolio diversification and
dividend increases.”
Ken Sim, Co-Founder of Nurse Next Door, stated,
“We are pleased to be able to have reached this agreement with DIV.
I remain as committed and invested in the long-term of Nurse Next
Door as ever. The proceeds of the royalty transaction will enable
Nurse Next Door to accomplish a number of strategic objectives,
including consolidating ownership within our existing shareholder
group, while retaining significant operational and financial
flexibility. We will continue to invest in our systems to
accelerate franchise partner growth and deliver our unique concept
of Happier Aging to more seniors around the world.”
Lawrence Haber, Chair of the Board of DIV,
stated, “The Nurse Next Door transaction is an excellent use of
DIV’s remaining cash on hand and is a testament to the patient and
disciplined manner in which DIV’s management team continues to
approach trademark and royalty acquisitions. Combined with Mr.
Lube, Air Miles, Sutton Group Realty and Mr. Mikes, Nurse Next Door
proves that DIV is able to execute on its strategy to acquire
trademarks and royalties from a diverse group of high quality
businesses and brands.”
Further Details of the Acquisition and
Royalty
The Acquisition will be completed by DIV through
its newly formed wholly owned subsidiary NND LP. The cash Purchase
Price of $52.0 million will be funded with $44.75 million of DIV’s
cash on hand and approximately $7.25 million from the NND Credit
Facility. In addition to the cash portion of the Purchase Price,
NND LP will issue the Exchangeable Units to Nurse Next Door as a
retained interest having an agreed value of $23.0 million. The
Exchangeable Units will be indirectly exchangeable for common
shares of DIV (or cash at DIV’s election) subject to certain
conditions being met.
Under the terms of the license and royalty
agreement that will be entered into upon closing of the Transaction
and which will govern the Royalty (the “Licence and Royalty
Agreement”), Nurse Next Door will pay NND LP a gross
royalty (the “Gross Royalty”) equal to the greater
of (i) 6% of the gross sales from Nurse Next Door’s franchises and
corporate stores in Canada and the United States, and (ii) the
Royalty of $4.8 million per year which increases at a fixed rate of
2% per annum. To the extent the Gross Royalty is greater than the
contractual Royalty, Nurse Next Door will be entitled to receive
the excess amount in the form of a cash distribution paid by NND LP
on the Exchangeable Units held by Nurse Next Door (the
“Nurse Next Door Distribution Entitlement”). So
long as certain royalty coverage tests are met, Nurse Next Door
will be able to sell additional annual royalties to DIV commencing
on February 1, 2021. In consideration for the incremental royalty,
Nurse Next Door will be entitled, subject to TSX approval, to
indirectly exchange certain of the Exchangeable Units for common
shares of DIV (or cash, at DIV’s election) based on a formula that
is accretive to DIV shareholders.
In addition to the Royalty payable to NND LP,
Nurse Next Door will pay DIV a management fee of approximately
$75,000 per year for strategic advice and other services. The
management fee will be increased at a rate of 2.0% per annum over
the term of the License and Royalty Agreement.
Under the terms of a governance agreement to be
entered into by DIV and certain of its affiliates and Nurse Next
Door and certain of its affiliates on closing (the
“Governance Agreement”), Nurse Next Door will have
the right at any time after the seventh anniversary of the closing
of the Transaction to buy back the NND Rights at a price determined
in accordance with a formula which has been structured with the
intention of ensuring a strong positive return to DIV upon any
exercise of such right.
The Transaction is expected to close in November
2019 and is subject to customary closing conditions.
The foregoing is a summary of certain key
commercial terms of the Acquisition Agreement, the Licence and
Royalty Agreement, the Governance Agreement and certain related
agreements to be entered into in connection therewith
(collectively, the “Transaction Agreements”).
These summaries do not purport to be complete and are subject to,
and qualified in their entirety by reference to, the full terms of
the Transaction Agreements, copies of which will be filed under
DIV’s profile on SEDAR and will be available at www.sedar.com in
due course.
NND Credit Facility
DIV, through its newly formed wholly-owned
subsidiary NND Holdings Limited Partnership (“Holdings
LP”) has entered into a term sheet with a Canadian
chartered bank for the NND Credit Facility, which provides for
borrowing capacity of up to $14.5 million, of which approximately
$7.25 million will be drawn at closing of the Transaction. The NND
Credit Facility is expected to have a term of 5 years, be
non-amortizing and have a floating interest rate equal to the
Bankers’ Acceptance Rate plus 1.90%. Holdings LP intends to enter
into an interest rate swap arrangement for the initial drawn
portion of the NND Credit Facility. The NND Credit Facility will be
secured against Holdings LP’s assets including by a pledge of
Holding LP’s interest in NND LP, and will have covenants customary
for this type of a credit facility. The NND Credit Facility will
also be guaranteed by NND LP and secured by NND LP’s interest in
the NND Rights and the Royalty. The NND Credit Facility will also
be secured by DIV on a limited recourse basis through the pledge by
DIV of its interest in Holdings LP. The NND Credit Facility remains
subject to the finalization of definitive legal documents and
customary closing conditions including the completion of the
Transaction.
Dividend Increase
Subject to the completion of the Acquisition,
DIV’s board of directors has approved an increase in DIV’s annual
dividend from 22.25 cents per share to 23 cents per share. The
dividend increase will take effect beginning in the month following
the completion of the Acquisition. DIV estimates its pro forma
payout ratio will be just under 100% following the dividend
increase.
Acquisition Facility
DIV has entered into a term sheet with a
Canadian chartered bank to provide a $50 million undrawn senior
secured credit facility to fund future trademark and royalty
acquisitions by DIV (“Acquisition Facility”). The
Acquisition Facility is expected to have a term of 3 years, and
each draw will be interest only for the first six months and then
amortize over 60 months. The Acquisition Facility will be subject
to a customary annual standby fee and draws under the Acquisition
Facility are expected to bear interest at market rates.
Mr. Morrison, President and Chief Executive
Officer of DIV, stated, “The Acquisition Facility and the ability
to increase the NND Credit Facility by approximately $7.25 million,
gives DIV approximately $57.25 million of capital available to fund
future royalty acquisitions. In addition, we expect that DIV will
be able to obtain additional term debt in connection with any
future royalty acquisition on a basis consistent with past
transactions, which will further expand DIV’s acquisition capacity.
The Acquisition Facility is a significant enhancement to DIV’s
capital structure as it provides the certainty of acquisition
financing to potential royalty partners without the cost associated
with carrying cash on DIV’s balance sheet. The Acquisition Facility
strengthens DIV’s competitive position as it continues to actively
pursue additional royalty transaction opportunities.”
The Acquisition Facility remains subject to the
finalization of definitive legal documents and customary closing
conditions.
Preliminary Third Quarter Results
Revenue and same-store-sales growth
(“SSSG”) for the three months and nine months
ended September 30, 2019 are consistent with the amounts reported
in DIV’s news release dated October 24, 2019. The following table
summarizes DIV’s preliminary third quarter results:
|
|
|
|
|
|
|
|
|
|
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Three months ended
September 30, |
Nine months ended
September 30, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
|
|
|
|
|
|
|
|
Revenue |
$ |
8,103 |
$ |
6,742 |
$ |
22,055 |
$ |
19,539 |
Distributable cash |
|
5,446 |
|
5,149 |
|
15,730 |
|
14,928 |
Dividends declared |
|
6,060 |
|
5,976 |
|
18,075 |
|
17,868 |
Payout Ratio |
|
111.1% |
|
116.0% |
|
114.9% |
|
119.7% |
|
|
|
|
|
|
|
|
|
Distributable cash per share |
|
0.0501 |
|
0.0479 |
|
0.1453 |
|
0.1394 |
Dividends declared per share |
|
0.0556 |
|
0.0556 |
|
0.1669 |
|
0.1669 |
|
|
|
|
|
|
|
|
|
Mr. Lube royalty income and management fees |
|
4,139 |
|
3,833 |
|
11,982 |
|
10,981 |
Sutton royalty income and management fees |
|
1,011 |
|
992 |
|
2,995 |
|
2,938 |
AIR MILES royalty income |
|
1,946 |
|
1,917 |
|
5,611 |
|
5,620 |
Mr. Mikes royalty income and management fees |
|
1,007 |
|
n / a |
|
1,467 |
|
n / a |
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|
|
|
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Revenue
Revenue increased by $1.4 million for the three
months ended September 30, 2019 (“Q3 2019”),
compared to the three months ended September 30, 2018 (“Q3
2018”). The increase in revenue was primarily driven by
the acquisition of the MRM Rights on May 20, 2019, the addition of
four locations to the Mr. Lube royalty pool on May 1, 2019,
positive SSSG at Mr. Lube and the annual contractual 2.0% increase
in the Sutton royalty rate, effective as of July 1st of each
year.
Revenue increased by $2.5 million for the nine
months ended September 30, 2019, compared to the nine months ended
September 30, 2018. The growth in revenues was due to the items
noted above, as well as the increase in the Mr. Lube royalty rate
and the net addition of one store to the Mr. Lube royalty pool on
May 1, 2018.
Distributable Cash
In Q3 2019, distributable cash increased by $0.3
million ($0.0022 per share) compared to Q3 2018. For the nine
months ended September 30, 2019, distributable cash increased by
$0.8 million ($0.0059 per share), compared to the nine months ended
September 30, 2018. The increase was primarily due to the growth in
revenues and was partially offset by higher interest expense and
current tax expense.
Dividends declared exceeded distributable cash
by $0.6 million for the three months and $2.3 million for the nine
months ended September 30, 2019. This resulted in a payout ratio of
111.1% for the three months and 114.9% for the nine months ended
September 30, 2019. The Corporation has a dividend reinvestment
plan that allows the dividends to be settled through a reinvestment
in the Corporation’s shares at the election of the shareholder. On
a cash basis, the payout ratio was 85.2% for the three months and
91.5% for the nine months ended September 30, 2019. As a result,
there was no cash shortfall in making dividend payments for the
three and nine months ended September 30, 2019.
The Q3 2019 and year-to-date financial
information contained in this news release is preliminary, is based
upon the estimates and assumptions of the respective management of
DIV, Mr. Lube, Sutton, and Mr. Mikes as applicable, has not yet
been approved by their respective Audit Committees or Boards of
Directors, and has not been subject to a review by their respective
auditors. The final Q3 2019 financial results could differ
materially from the above preliminary financial information.
President and CEO to Receive Compensation in
Restricted Share Units in Lieu of Cash
The Corporation’s President and CEO has agreed
to receive 50% of his incentive amount in the form of restricted
share units (“RSUs”) instead of cash for a period
of 18 months, subject to the completion of the Acquisition. The
RSUs will be issued pursuant to DIV’s Amended and Restated Long
Term Incentive Plan at the five day weighted average trading price
of DIV’s common shares as at the end of each quarter. The agreement
by the President and CEO to receive his compensation in RSUs
demonstrates his commitment to DIV and further aligns his interests
with those of DIV’s shareholders.
Anita Anand Steps Down as Director to Serve in
Canadian Parliament
DIV also announces that Anita Anand has stepped
down from DIV’s board of directors effective today, following her
election as a Member of Parliament of Canada on October 21,
2019.
Lawrence Haber, Chair of the Board, said, “The
Corporation congratulates Ms. Anand on her election and thanks her
for her diligent service and considerable contributions as a
director and chair of the Board’s Governance, Nominating and
Compensation Committee throughout her tenure.”
Investor Conference Call
Management of DIV will host a live conference
call at 1:00 pm Pacific Time (4:00 pm Eastern Time) on Friday,
November 1, 2019. To participate by telephone across Canada, toll
free at 1 (877) 291-4570 (conference ID 3767928). The management
presentation for the conference call will be available on DIV’s
website www.diversifiedroyaltycorp.com prior to the call. An
archived telephone recording of the call will be available until
November 15, 2019 by calling 1 (800) 585-8367 or 1 (416) 621-4642
(conference ID 3767928).
About Diversified Royalty Corp.
DIV is a multi-royalty corporation, engaged in
the business of acquiring top-line royalties from well-managed
multi-location businesses and franchisors in North America. DIV’s
objective is to acquire predictable, growing royalty streams from a
diverse group of multi-location businesses and franchisors.
DIV currently owns the Sutton, Mr. Lube, AIR
MILES® and Mr. Mikes trademarks in Canada. Sutton is among the
leading residential real estate brokerage franchisor businesses in
Canada with over 200 offices across Canada. Mr. Lube is the leading
quick lube service business in Canada with 182 locations across
Canada and over $235 million of annual system sales. AIR MILES® is
Canada’s largest coalition loyalty program with over 200 leading
brand-name sponsors; approximately two-thirds of Canadian
households actively participate in the AIR MILES® Program. Mr.
Mikes operates 43 casual steakhouse restaurants primarily in
western Canadian communities with over $85 million of annual system
sales.
DIV expects to increase cash flow per share by
making accretive royalty purchases and through the growth of
purchased royalties. DIV expects to pay a predictable and stable
dividend to shareholders and increase the dividend as cash flow per
share increases allow.
Forward Looking Statements
Certain statements contained in this news
release may constitute “forward-looking information" or “financial
outlook” within the meaning of applicable securities laws that
involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements to
be materially different from any future results, performance or
achievements expressed or implied by such forward-looking
information or “financial outlook. The use of any of the words
“anticipate”, “continue”, “estimate”, “expect”, “intend”, “may”,
“will”, ”project”, “should”, “believe”, “confident”, “plan” and
“intends” and similar expressions are intended to identify
forward-looking statements, although not all forward-looking
statements contain these identifying words. Specifically,
forward-looking information or “financial outlook in this news
release includes, but are not limited to, statements made in
relation to: the completion of the Acquisition and the Transaction,
the terms thereof and the expected timing therefor of November
2019; certain of the expected terms of the Licence and Royalty
Agreement and the Governance Agreement (including the ability and
terms on which Nurse Next Door can buy back the NND Rights); the
details of the Royalty, the Gross Royalty and the Nurse Next Door
Distribution Entitlement; the possibility of future increases in
the Royalty payments made by Nurse Next Door to DIV and the
issuance of common shares by DIV in connection therewith, subject
to the approval of the TSX; statements related to the expected tax
implications of the Acquisition on DIV; the means by which DIV
intends to finance the Acquisition, including the expected terms of
the NND Credit Facility; the expectation that Holdings LP will
enter into an interest rate swap arrangement for the drawn portion
of the of the NND Credit Facility; DIV’s business plans and
strategies following the completion of the Transaction, including
continuing to execute on its business plan of acquiring high
quality trademarks and royalty streams on an accretive basis,
resulting in greater diversification and dividend increases; the
expectation that the Transaction will be accretive; Nurse Next
Door’s business plans and strategies following completion of the
Transaction, including consolidating ownership, and continuing to
invest in its systems to accelerate franchise partner growth and
deliver on its concept; the expectation that future growth at Nurse
Next Door will result both from existing operating locations as
well as opening additional franchises; the expectation that
favourable North American demographics are expected to drive the
need for premium home care services going forward; the expected
financial impact of the Transaction on DIV, including on its pro
forma payout ratio; the statement that DIV will increase its annual
dividend to $0.23 per share, subject to completion of the
Acquisition and the timing therefor; the expected terms of the
Acquisition Facility and the strategic impacts of the Acquisition
Facility and other available and potential debt capacity, including
strengthening DIV’s competitive position as it continues to
actively pursue additional royalty transaction opportunities; the
expected terms on which future term debt may be obtained; changes
to the manner in which DIV’s CEO and President’s incentive amount
will be paid during the 18 months following the completion of the
Acquisition; the preliminary nature of DIV’s and its royalty
partner’s results for Q3 2019 and the nine months ended September
30, 2019; DIV’s corporate objectives; and DIV’s expectation that it
will pay a predictable and stable dividend to shareholders and
increase the dividend as cash flow per share increases allow. These
statements involve known and unknown risks, uncertainties and other
factors that may cause actual results or events, performance, or
achievements of DIV to differ materially from those anticipated or
implied in such forward-looking statements. DIV believes that the
expectations reflected in these forward-looking statements are
reasonable but no assurance can be given that these expectations
will prove to be correct. In particular there can be no assurance
that: the Acquisition or the Transaction will close on the terms or
in accordance with the timing currently expected, or at all; DIV
will realize the expected benefits of the Transaction, or that it
will be accretive; there will be any future increases in the
Royalty payments made by Nurse Next Door to DIV; DIV or Holdings LP
will be able to obtain the NND Credit Facility on the terms
currently expected, or at all; DIV will be able to obtain the
Acquisition Facility on the terms currently expected, or at all or
that DIV will realize the strategic objectives of the Acquisition
Facility; the actual tax implications of the Acquisition on DIV
will be consistent with the expected tax implications; the
Transaction, if completed, will be successful; Nurse Next Door will
meet its business objectives, including its objectives with respect
to the future growth; Nurse Next Door will make the required
royalty payments required under the Licence and Royalty Agreement
and otherwise comply with its obligations under the Transaction
Agreements; Nurse Next Door will not be adversely affected by the
other risks facing its business; Nurse Next Door will not exercise
its right under the Governance Agreement to buy back the NND
Rights, or that any exercise by Nurse Next Door of its buy back
right will result in strong returns to DIV; or DIV will be able to
achieve any of its corporate objectives or make monthly dividend
payments to the holders of its common shares. Given these
uncertainties, readers are cautioned that forward-looking
information and financial outlook included in this news release are
not guarantees of future performance, and such forward-looking
information and financial outlook should not be unduly relied upon.
More information about the risks and uncertainties affecting DIV’s
business and the businesses of its royalty partners can be found in
the “Risk Factors” section of its Annual Information Form dated
March 11, 2019 and the “Risk Factors” section of its management’s
discussion and analysis for the three and six months ended June 30,
2019 that are available under DIV’s profile on SEDAR at
www.sedar.com.
In formulating the forward-looking statements
contained herein, management has assumed that, among other things,
all necessary consents and approvals for the Acquisition and the
Transaction will be obtained and the Transaction will be completed
in accordance with the timing currently expected and on the
currently contemplated terms, all conditions to the completion of
the NND Credit Facility and the Acquisition Facility will be
obtained and the NND Credit Facility and the Acquisition Facility
will be completed in accordance with the timing currently expected
and on the currently contemplated terms, Nurse Next Door will be
successful in meeting its stated corporate objectives, including
its growth targets, DIV will realize the expected benefits of the
Transaction and the Acquisition Facility, the Nurse Next Door
business will not suffer any material adverse effect, and the
business and economic conditions affecting DIV and Nurse Next Door
will continue substantially in the ordinary course, including
without limitation with respect to general industry conditions,
general levels of economic activity and regulations. These
assumptions, although considered reasonable by management at the
time of preparation, may prove to be incorrect.
To the extent any forward-looking information or
statements in this presentation constitute a “financial outlook”
within the meaning of applicable securities laws, such information
is being provided to assist investors in understanding the
potential financial impact of the Transaction, the NND Credit
Facility, the Acquisition Facility and the dividend increase on
DIV.
All of the forward-looking information and
financial outlook disclosed in this news release is qualified by
these cautionary statements and other cautionary statements or
factors contained herein, and there can be no assurance that the
actual results or developments contemplated thereby will be
realized or, even if substantially realized, that they will have
the expected consequences to, or effects on, DIV contemplated by
such forward-looking information and financial outlook contained
herein. The forward-looking information and financial outlook
included in this news release is made as of the date of this news
release and DIV assumes no obligation to publicly update or revise
such information to reflect new events or circumstances, except as
may be required by applicable law.
Non-IFRS Measures
This news release makes reference to certain
non-IFRS financial measures. These non-IFRS financial measures are
not recognized measures under IFRS, do not have a standardized
meaning prescribed by IFRS and are therefore unlikely to be
comparable to similar measures presented by other issuers, and
should not be construed as an alternative to other financial
measures determined in accordance with IFRS. Rather, these
financial measures are provided as additional information to
complement IFRS financial measures by providing further
understanding of DIV’s and Nurse Next Door’s financial performance
from management’s perspective and the expected financial impact of
the Transaction on DIV. Accordingly, non-IFRS financial measures
should never be considered in isolation nor as a substitute to
using net income as a measure of profitability or as an alternative
to the IFRS consolidated statements of income or other IFRS
financial measures. Management presents the non-IFRS measures,
“pro-forma payout ratio” (which is derived in part on the non-IFRS
measures distributable cash), “pro-forma adjusted royalty revenue”,
“pro-forma royalty coverage”, “SSSG”, “payout ratio” and
“distributable cash” in this news release.
Pro-forma payout ratio for DIV is calculated as
(i) DIV’s annualized current monthly dividend, adjusted to give
effect to the increase in the annual dividend expected to occur
following completion of the Transaction, divided by (ii) DIV’s
annualized Q3 2019 distributable cash, adjusted to give effect to:
the Transaction; the NND Credit Facility; the Acquisition Facility;
CEO incentive compensation that will cease in 10 months, 50% of the
CEO incentive compensation being settled in RSUs, incremental
salaries expense, non-recurring director fees, the reversal of
interest income earned on excess cash and taxes. Pro-forma payout
ratio is not a recognized measure under IFRS; however, management
of the Corporation believes that it provides supplemental
information regarding the extent to which the Corporation
distributes cash as dividends, when compared to its cash flow
capacity. Pro-forma payout ratio as used in this news release may
not be comparable to similar measures used by other issuers.
Pro-forma adjusted royalty revenue is calculated
as DIV’s annualized Q3 2019 revenues, adjusted to give effect to
the Transaction net of the Nurse Next Door Distribution
Entitlement. Pro-forma adjusted royalty revenue is not a recognized
measure under IFRS; however, management of the Corporation believes
it provides supplemental information regarding the extent to which
DIV shareholders have an interest in the consolidated revenues
earned by DIV. Pro-forma adjusted royalty revenue as used in this
news release may not be comparable to similar measures used by
other issuers.
Pro-forma royalty coverage is calculated as the
normalized 2019 EBITDA for Nurse Next Door divided by the sum of
the annualized royalty and management fee for the same period.
Normalized 2019 EBITDA for Nurse Next Door is calculated as net
income for that period before interest, taxes, depreciation,
amortization, compensation to shareholders, foreign exchange and
other non-cash gains, and adjusted for certain non-recurring
revenues and expenses.
For further details with respect to the
calculation of certain of these non-IFRS measures, see Appendix A
to the Corporation’s investor presentation titled “Diversified
Royalty Corp. – Nurse Next Door Trademark Acquisition and Royalty –
Investor Presentation” dated November 1, 2019, a copy of which is
available on the Corporation’s website at
www.diversifiedroyaltycorp.com and under the Corporation’s profile
on SEDAR at www.sedar.com. For further details with respect to how
DIV calculates SSSG, distributable cash and payout ratio, see
“Description of Non-IFRS and Additional IFRS Measures” in the DIV’s
management’s discussion and analysis for the three and six months
ended June 30, 2019, a copy of which is available on SEDAR at
www.sedar.com.
THE TORONTO STOCK EXCHANGE HAS NOT
REVIEWED AND DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR THE
ACCURACY OF THIS RELEASE.
Additional Information
Additional information relating to the
Corporation and other public filings, is available on SEDAR at
www.sedar.com.
Contact:Sean Morrison, President and Chief
Executive Officer Diversified Royalty Corp.(604) 235-3146
Greg Gutmanis, Chief Financial Officer and VP
AcquisitionsDiversified Royalty Corp.(604) 235-3146
Diversified Royalty (TSX:DIV.DB)
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From Jun 2024 to Jul 2024
Diversified Royalty (TSX:DIV.DB)
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From Jul 2023 to Jul 2024