NOT FOR DISTRIBUTION IN THE UNITED STATES.
FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF UNITED STATES SECURITIES LAW.
CALGARY, Alberta, Nov. 09, 2022 (GLOBE NEWSWIRE) -- 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 Measures
The 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 ended September 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 Relations
Alaris Equity Partners Income Trust
403-260-1457
ir@alarisequity.com
Alaris Equity Partners Income Trust
Condensed 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 Trust
Condensed consolidated interim statements of comprehensive income
| Three months ended September 30 | Nine months ended September 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 Trust
Condensed 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 | ||
