Alaris Royalty Corp. Contributes USD$22 Million to A New Partner
CALGARY, ALBERTA--(Marketwired - March 8, 2016) -
NOT FOR DISTRIBUTION IN THE UNITED STATES.
FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF UNITED STATES SECURITIES LAW.
Alaris Royalty Corp. ("Alaris" or the "Corporation") (TSX:AD) is pleased to announce a contribution of USD$22.0 million (approximately CAD$29.5 million) (the "Sandbox Contribution") to Sandbox Acquisitions, LLC and an affiliate (collectively "Sandbox") in exchange for an annual distribution of USD$3.3 million (approximately CAD$4.4 million) (the "Sandbox Distribution"). Alaris funded the Sandbox Contribution with funds drawn on its CAD$200.0 million credit facility (the "Facility") leaving approximately CAD$170.0 million available on the Facility (including the $50 million accordion feature) following the Sandbox Contribution.
New Partner - Sandbox
Alaris entered into subscription agreements with Sandbox, pursuant to which Alaris made the USD$22.0 million Sandbox Contribution in exchange for preferred units in Sandbox (the "Sandbox Units"), which will entitle Alaris to the USD$3.3 million Sandbox Distribution for the first full year following the transaction, which equates to a 15% yield. The Sandbox Distribution will be adjusted for the first time on January 1, 2017 based on the percentage change in gross revenue, subject to a 6% collar.
Sandbox offers a wide range of marketing and advertising services including strategic marketing and planning, creative development for all media and digital strategy solutions including CRM and data analytics for clients in a variety of industries within the US and Canada. Sandbox has decades of proven results and is owned and managed by highly experienced advertising professionals with global experience. Sandbox focuses on serving clients primarily in highly specialized industries such as life sciences, agriculture and financial services. The company plans to continue to acquire and combine regional marketing communication companies that would complement the entire organization through diversity of clients and industries, skill sets and expertise. Sandbox is headquartered in Chicago, IL with offices in Chicago, Kansas City, Indianapolis, Des Moines, Santa Monica, New York and Toronto.
"The addition of Sandbox is an important step in the diversification of our revenue. The specialized niche of business to business advertising agencies within Sandbox include customer relationships that have gone on for decades and Sandbox management have shown an outstanding ability to add strategic acquisitions that not only make economic sense but have also added to the service offerings of their agency. We look forward to a long and active partnership with Sandbox," said Steve King, President and CEO, Alaris.
"Partnering with Alaris will allow Sandbox to continue its growth through investment in our services, expansion into new markets and focusing on the right acquisitions. Our mission is to develop a singular, collaborative agency with a strong company culture to deliver superior advertising to our clients. Alaris has taken the time to learn about us and we are pleased to have embarked on this next leg of our agency's growth with them," said Mark Anthony, President, Sandbox.
Based on Alaris' review of Sandbox' unaudited internal proforma results for the most recent trailing twelve month period in 2015, management of Alaris believes that Sandbox would have an earnings coverage ratio in the range of approximately 1.5x to 2.0x, after giving effect to the Sandbox Contribution, other changes to Sandbox' capital structure and the Sandbox Distribution payable to Alaris.
About the Corporation:
Alaris provides alternative financing to the Partners in exchange for distributions with the principal objective of generating stable and predictable cash flows for dividend payments to its shareholders. Distributions from the Partners are adjusted each year based on the percentage change of a "top line" financial performance measure such as gross margin and same-store sales and rank in priority to the owners' common equity position.
Non-IFRS Measures
EBITDA refers to net earnings (loss) determined in accordance with IFRS, before depreciation and amortization, net of gain or loss on disposal of capital assets, interest expense and income tax expense. EBITDA is used by management and many investors to determine the ability of an issuer to generate cash from operations. Management believes EBITDA is a useful supplemental measure from which to determine the Corporation's ability to generate cash available for debt service, working capital, capital expenditures, income taxes and dividends. The Corporation has provided a reconciliation of net income to EBITDA in this news release.
Earnings Coverage Ratio refers to EBITDA of a Partner divided by such Partner's sum of debt servicing (interest and principal), unfunded maintenance capital expenditures and distributions to Alaris.
Forward-Looking Statements
This news release contains forward-looking statements as defined under applicable securities laws. Statements other than statements of historical fact contained in this news release may be forward-looking statements under applicable securities legislation, including, without limitation, management's expectations, intentions and beliefs concerning: the return to Alaris on the Sandbox Contribution and the Sandbox earnings coverage ratio. 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. To the extent any forward-looking statements herein constitute a financial outlook, including, without limitation, estimates regarding the Sandbox earnings coverage ratio, 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 are material factors considered by Alaris management when setting the outlook for Alaris. Key assumptions include, but are not limited to, assumptions that the Canadian and U.S. economies will grow moderately over the next 12 months, that interest rates will not rise in a material way over the next 12 to 24 months, that the Partners will continue to make distributions to Alaris as and when required, that the businesses of the Partners will continue to grow, what the Corporation expects to experience regarding resets to its annual royalties and distributions from its Partners upon the reset dates for each Partner, and that Alaris will have the ability to raise required equity and/or debt financing on acceptable terms. Management of Alaris has also assumed that capital markets will remain stable and that the Canadian dollar will remain in a range of approximately plus or minus 10% relative to the U.S. dollar over a 12 month period. In determining expectations for economic growth, management of Alaris primarily considers historical economic data provided by the Canadian and U.S. governments and their agencies.
There can be no assurance that the assumptions, plans, intentions or expectations upon which these forward looking statements are based will occur. Forward looking statements are subject to risks, uncertainties and assumptions and should not be read as guarantees or assurances of future performance. The actual results of the Corporation and the Private Company Partners could materially differ from those anticipated in the forward looking statements contained herein as a result of certain risk factors, including, but not limited to, the following: the dependence of Alaris on the Private Company Partners; reliance on key personnel; general economic conditions; failure to complete or realize the anticipated benefit of Alaris' financing arrangements with the Private Company Partners; a failure to realize the anticipated benefits of the Sandbox Contribution; a failure to obtain required regulatory approvals on a timely basis or at all; changes in legislation and regulations and the interpretations thereof; a material adjustment to the unaudited financial information of a Private Company Partner provided to Alaris; and risks relating to the Private Company Partners and their businesses, including, without limitation, a material change in the operations of a Private Company Partner or the industries they operate in and a change in the ability of the Private Company Partners to continue to pay Alaris' preferred distributions. Additional risks that may cause actual results to vary from those indicated are discussed under the heading "Risk Factors" in the Corporation's Annual Information Form for the year ended December 31, 2014, which is filed under the Corporation's profile at www.sedar.com.
Accordingly, readers are cautioned not to place undue reliance on any forward-looking information contained in this news release as a number of factors could cause actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed in the forward-looking statements. Statements containing forward-looking information reflect management's current beliefs and assumptions based on information in its possession on the date of this news release. Although management believes that the assumptions reflected in the forward-looking statements contained herein are reasonable, there can be no assurance that such expectations will prove to be correct.
The forward-looking statements contained herein are expressly qualified in their entirety by this cautionary statement. The forward-looking statements included in this news release are made as of the date of this news release and Alaris does not undertake or assume any obligation to update or revise such statements to reflect new events or circumstances except as expressly required by applicable securities legislation.
Neither the TSX nor its Regulation Services Provider (as that term is defined in the policies of the TSX) accepts responsibility for the adequacy or accuracy of this release.
Contact
Alaris Royalty Corp.
Curtis Krawetz
Vice President, Investments and Investor Relations
(403) 221-7305
www.alarisroyalty.com