Alaris Equity Partners Income Trust Releases Q4 2020 Financial Results

/NOT FOR DISTRIBUTION IN THE UNITED STATES. 
FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF UNITED STATES SECURITIES LAW./

TSX-AD.UN 

CALGARY, AB, March 9, 2021 /CNW/ - Alaris Equity Partners Income Trust. (together, as applicable, with its subsidiaries, "Alaris" or the "Trust") is pleased to announce its results for the three months and year ended December 31, 2020. The results are prepared under International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). All amounts below are in Canadian dollars unless otherwise noted.

2020 Highlights:

• Capital deployment in 2020 of approximately $170.0 million, consistent with Alaris' five-year average. Subsequent to December 31, 2020, Alaris invested an incremental $180.0 million into three new Partners and one current Partner increasing the total capital deployed in the twelve months up to the date of this release to over $350.0 million. This was by far a record amount of deployment for Alaris in a twelve-month period. This deployment will generate, at a minimum, additional annualized distributions of approximately $42.0 million, or $0.93 per unit. These capital deployments in 2020 and up to the date of this release in 2021 include:
• New Partner contribution in June 2020 of US$17.0 million to Carey Electric Contracting, LLC ("Carey Electric"), (US$16.1 million of preferred equity and a US$0.9 million minority common equity investment). Common distributions received by Alaris in 2020 were US$0.4 million;
• Follow-on contribution in October 2020 of US$55.0 million to GWM Holdings Inc. and a subsidiary thereof (collectively "GWM");
• Follow-on contribution in December 2020 of US$20.0 million to Body Contour Centers ("BCC");
• New Partner contribution in late December 2020 of US$34.0 million to Edgewater Technical Associates, LLC ("Edgewater"), (US$30.6 million of preferred equity and a US$3.4 million minority common equity investment)

Subsequent to December 31, 2020

• New Partner contribution of US$40.0 million to Falcon Master Holdings LLC ("FNC"), (US$32.2 million of preferred equity and a US$7.8 million minority common equity investment). Based on FNC's past practice of declaring and paying distributions, Alaris expects to receive its pro-rata portion of common equity distributions in 2021 as cashflows permit, with US$0.1 million already haven been received up to the date of this release based on FNC's 2021 results to date;
• New Partner contribution of US$66.0 million to Brown & Settle Investments, LLC and a subsidiary thereof (collectively, "Brown & Settle"), (US$53.7 million of a combination of subordinated debt and preferred equity and a US$12.3 minority common equity investment). Common equity distributions in the near term are not expected as Brown & Settle will be re-investing excess cash flows into their business; however, in the longer-term period Alaris will be entitled to their ownership percentage of any common equity distributions declared;
• Follow-on contribution to Accscient, LLC ("Accscient") of US$8.0 million; and
• New Partner contribution of US$30.0 million to 3E, LLC ("3E"), US$22.5 million of preferred equity and US$7.5 million placed into escrow account to fund up to two additional preferred unit tranches, once escrow targets are met by 3E. Alaris' interest expense on the escrowed funds will be paid by 3E until the funds are released.
• Alaris generated revenue of $32.0 million in Q4 2020 and $109.6 million for the year ended December 31, 2020, along with Normalized EBITDA of $27.0 million and $85.7 million in each period, respectively. Compared to Q3 2020, revenue increased 32% on a per unit basis and Normalized EBITDA increased 30% per unit, as a result of:
• Kimco Holdings, LLC ("Kimco") paid $4.5 million of distributions during the quarter (US$3.5 million) inclusive of previously deferred distributions after achieving certain performance targets and their previously agreed upon Q4 2020 distribution payments. As a result, Kimco paid all contracted distributions in 2020 (US$4.4 million);
• BCC paid an incremental US$1.7 million of previously deferred distributions during Q4 2020. These distributions were deferred in Q2 2020 had not been accrued and were therefore included in revenue in the current quarter;
• Additional revenue of US$1.5 million from GWM following their follow-on contribution in October 2020; and
• Amur Financial Group Inc. ("Amur") and Carey paid common distributions totalling $0.8 million in Q4.
• Increases to the fair value of Alaris' investments totalled $23.2 million for the quarter or approximately $0.64 per unit, while the total net reduction to the fair value of Alaris' investments in 2020 was $41.5 million or $1.15 per unit;
• During Q4 2020 Alaris continued to defer distributions from PFGP due to the impact of COVID-19; however, subsequent to December 31, 2020, PFGP, Alaris and PFGP's senior lending syndicate came to an agreed upon amendment, wherein PFGP began to pay partial distributions of US$0.33 million per month (US$4.0 million per annum) in January 2021 and will continue to do so until June 2021. Beginning in July 2021 distributions would return to full contracted amounts, as long as PFGP is onside with all bank covenants at that time;
• Based on unaudited results from each of its Partners, Alaris estimates the weighted average performance metric reset of the annual distributions to be approximately 1% effective January 2021 resulting in approximately $1.0 million of new distribution revenue;
• After an overall positive Q4 2020 for Alaris' Partners, the weighted average combined Earnings Coverage Ratio ("ECR") has increased to greater than 1.7x, compared to 1.5x in early 2020 before any impacts of COVID-19. Of note, currently Alaris has 15/20 partners (75%) with an ECR over 1.5x (including six over 2x), compared to 9/16 (56%) over 1.5x (including three over 2x) at the same time one year ago;
• During Q4 2020, Alaris completed a bought deal short-form prospectus offering of 3,346,500 trust units at a price of $13.75 per unit, for aggregate gross proceeds of $46.0 million. Subsequent to December 31, 2020, in March 2021 Alaris completed an additional bought deal short-form prospectus offering of 5,909,375 trust units at a price of $16.00 per unit, for aggregate gross proceeds of $94.6 million; and
• Both Federal Resources Supply Company ("FED") and Kimco are actively evaluating the possibility of a full or partial redemption of Alaris' investment. Nothing is imminent, nor can any redemption be assured, but the redemption value of FED is approximately US$86.0 million and Kimco's is based upon a revised formula factoring in several valuation factors and is estimated to be between US$53.0 million and US$75.0 million.

President's Message

"While nobody could have foreseen the kind of year 2020 would become, looking back on the outcome for Alaris almost exactly one year after the world was essentially shut down by the virus, we are incredibly proud of how Alaris was able to perform.  The stock market sold our stock heavily during the panic of the shutdown, believing that we were a proxy to the overall economy which was expected to be hit hard by the forced closures of so many businesses.  What people understand better now is that we are actually a proxy to North America's required services and that our Partners were resilient and performed much better than expected, with an overall net positive reset.  We move into 2021 with the best underlying fundamentals within our portfolio that we've had in our 17-year history.  Based on our weighted average ECR, we have the largest average cashflow buffer at 70%, the lowest debt levels within our partner companies, eleventh straight year of net positive distribution resets, our best portfolio diversification ever with 20 partners - none more than 12% of our revenue and finally the company had its highest level of capital deployment in its history.  I can't thank our staff enough for the incredible effort that has gone into this kind of performance, especially under less than ideal conditions.

With a Run Rate Payout Ratio now below 70%, there are a couple of factors that we expect will push that number even lower in the coming months.  The first one is the continued improvements from PFGP who are showing improved performance indicators on a weekly basis.  Getting PFGP back to 100% distributions and also making up the distributions that were missed is a large swing factor for Alaris. 

The second factor is the growing contributions from the common equity portfolio that we have been building over the last two years.  This facet of Alaris is one of the most exciting things that has transpired in our recent history.  The addition of common equity along with our preferred equity on transactions has provided our unitholders with three benefits: 1) It is better aligning our risk profile on investments, allowing us to participate in all of the upside on companies during good times, helping to balance out the times where companies may struggle;  2) We believe that the common equity will provide a higher overall return than the preferred equity alone, which is based on a look back analysis on our prior investments over the last 17 years.  Early returns on our common equity have also shown this as Carey Electric, as one example, just paid us a common distribution equal to more than a 35% yield on our initial investment; and  3) The addition of common equity has allowed us to ramp up our capital deployment substantially by allowing us to be a larger portion of the capital structure to compete on deals where that's required, by removing the optics of being a debt provider as opposed to the equity investor that we are and by better aligning ourselves with the founders of our Partner companies by owning the same class of shares that they own.

Deploying over $350 million over the last twelve months during a pandemic has been a massive achievement for our team and will have a measurable affect on all of our performance measures for years to come.  2021 will see higher than average growth in revenue and earnings per unit because of the work done over these last six months.  We also believe that we are extremely well positioned to keep that growth rate going as opportunities to deploy our capital keep coming in.  Between our excess free cash flow that we generate, our expanded credit facility and the expected sale of a couple of our assets, we have the balance sheet capabilities to capitalize on those opportunities."

Per Unit Results	Three months ended			Year ended
Period ending December 31	2020	2019	% Change	2020	2019	% Change
Revenue	$ 0.87	$ 0.84	+3.6%	$ 3.03	$ 3.17	-4.4%
Earnings	$ 0.85	$ (0.49)	n.a	$ 0.56	$ 0.99	-43.4%
Normalized EBITDA	$ 0.74	$ 0.71	+4.2%	$ 2.37	$ 2.76	-14.1%
Net cash from operating activities	$ 0.59	$ 0.48	+22.9%	$ 1.99	$ 2.04	-2.5%
Distributions declared	$ 0.31	$ 0.41	-24.8%	$ 1.32	$ 1.65	-19.8%
Basic earnings / (loss)	$ 0.85	$ (0.49)	+273.8%	$ 0.56	$ 0.99	-43.4%
Fully diluted earnings / (loss)	$ 0.84	$ (0.49)	+272.1%	$ 0.56	$ 0.98	-42.9%
Weighted average basic units (000's)	36,472	36,688		36,121	36,597

For the three months ended December 31, 2020, revenue per unit increased by 3.6% due to receiving $4.7 million of distributions during the period from BCC, which included previously deferred distributions from Q2 2020 which were not recorded as revenue until received. There were also $4.5 million of distributions received from Kimco (including catch-up payments from earlier in 2020), distributions from Alaris' new investment in Carey Electric, including a $0.5 million common distribution, and additional distributions from GWM as a result of the follow-on contribution in October 2020. These were partially offset by distributions deferred during the quarter by PFGP as well as the redemption of Sales Benchmark Index LLC ("SBI") and sale of Sandbox Acquisitions, LLC and Sandbox Advertising LP (collectively, "Sandbox") in Q1 2020. For the year ended December 31, 2020, revenue per unit decreased by 4.4% due to the deferral of nine months of distributions from PFGP and redemptions of two Partners early in the year offset by the Kimco distributions noted above as well as new revenues from capital deployment in the last half of the year.

Earnings of $0.85 per unit in the quarter improved significantly due to the comparable 2019 period including a one-time loss on assets held for sale of $45.9 million related to the redemption of Sandbox in February 2020. Earnings for the full year were lower due to the net fair value reductions (most of which was in Q1 2020) as a result of the impact COVID-19 on certain Partners.

Normalized EBITDA of $0.74 per unit increased by 4.2% in the quarter primarily due to the increase in revenue during the period as discussed above. Additionally, the unit-based compensation expense related to the amortization of RTUs was lower in the current quarter compared to Q4 2019, due to the fact that the units that were issued in 2020 have a lower weighted average expense per unit than those that were collectively being amortized in Q4 2019, which is due to the change in the trust unit prices at the time of issuances. This was partially offset by the increase in legal expenses in Q4 2020 compared to Q4 2019. Normalized EBITDA for the full year was 14.1% less than the prior year due to the deferred revenues from PFGP and additional legal fees incurred for the conversion to an income trust.

Net cash from operating activities of $0.59 per unit increased by 22.9% in the quarter as a result of the increase in distributions during the period as well as the reduction in finance costs. This reduction in finance costs was due to lower weighted average debt outstanding as well as lower average interest rates compared to the prior year. Net cash from operating activities for the year was consistent with the prior year (a reduction of only 2.5%).

Outlook

In the last twelve months as of the date of this release, the Trust has invested over $350 million into a combination of new Partners (Carey Electric, Edgewater, FNC, Brown & Settle and 3E) as well as follow-on contributions into current Partners (GWM, BCC and Accscient). This productive period of capital deployment for Alaris, along with consistently positive results amongst the majority of the current portfolio, is contributing to Run Rate Revenue of approximately $136.7 million over the next twelve months. At this rate, Run Rate Revenue would exceed the 2020 actual revenue by $27.1 million, an approximate increase of 25%. Run Rate Revenue of $136.7 million includes current contracted amounts, agreed upon partial distributions of US$0.33 million per month from PFGP and no distributions from ccComm. Alaris has agreed with PFGP to receive monthly distributions of US$0.33 million between January 2021 and June 2021, which equates to approximately 40% of the contracted distributions. Commencing in July 2021, PFGP may resume full distributions to Alaris in the event they are compliant with bank covenants. This would add $6.9 million to Run Rate Revenue and reduce the Run Rate Payout Ratio by approximately 5%. Alaris expects total revenue from Partners in Q1 2021 of approximately $32.2 million.

Annual general and administrative expenses are currently estimated at $12.5 million and include all public company costs. The Trust's Run Rate Payout Ratio is expected to be within a range of 65% to 70% when including run rate distributions, overhead expenses and its existing capital structure. The table below sets out our estimated Run Rate Payout Ratio alongside the after-tax impact of additional PFGP distributions as well as positive net deployment.

Run Rate Cash Flow ($ thousands except per unit)		Amount ($)	$ / Unit
Revenue		$ 136,700	$ 3.04
General & Admin.		(12,500)	(0.28)
Interest & Taxes		(43,200)	(0.96)
Free cash flow		$ 81,000	$ 1.80
Annual Distribution		55,700	1.24
Excess Cash Flow		$ 25,300	$ 0.56
Run Rate Payout Ratio (excluding PFGP distributions)
Other Considerations (after taxes and interest):
PFGP	Full distributions of $12.0 million per year	+5,172	+0.12
Common Dividends	Every additional $1.0 million of common dividends	+1,000	+0.02
New Investments	Every $50 million deployed @ 14%	+3,188	+0.07

The senior debt facility was drawn to $231.4 million at December 31, 2020. Subsequent to December 31, 2020, Alaris drew an additional US$40.0 million for its investment in FNC, US$66.0 million for its investment in Brown and Settle and US$30.0 million for its investment in 3E. The Trust also repaid US$71.0 million of outstanding USD debt following the completion of a bought deal short-form prospectus offering of 5,909,375 trust units at a price of $16.00 per unit, for aggregate gross proceeds of $94.6 million.

Also subsequent to December 31, 2020, Alaris entered into amendments with the syndicate of senior lenders increasing the base of its credit facility from $330 million to $400 million, which included the addition of a seventh bank to the syndicate of lenders. Following this amendment and the transactions noted above, the senior debt facility was drawn to $320.0 million, with the capacity to draw up to another $80.0 million based on covenants and credit terms. The leverage covenant is approximately 2.6x with a maximum of 3.5x through the next two reporting periods March 31^st and June 30^th.

The annual interest rate on that debt, inclusive of the standby charges on available capacity, was approximately 5.1% for the year ended December 31, 2020. During Q4 2020, Alaris closed a two-year extension of its credit facility with its syndicate of senior lenders. The maturity of the credit facility is now extended to November 2023. Alaris also closed an amendment subsequent to December 31, 2020, that increased the base of its credit facility as noted, but additionally the amendment increased the Senior Debt to EBITDA leverage covenant by 0.5x EBITDA for the March 2021 and June 2021 measurement periods, bringing the maximum leverage to 3.5x through those two periods. Covenants return to previous levels from September 30, 2021 onwards.

Since converting to an income trust, the tax profile of distributions changed from 100% eligible dividends to a combination of eligible dividends, trust income, capital gains and return of capital. For 2020, the split of the distributions was as follows:

Tax Profile of Distributions
For the year ended December 31, 2020
Per unit	Q1		Q2		Q3		Q4		TOTAL
Dividends	$	0.41250	$	0.29000	$	0.02154	$	0.02154	$	0.74558
Trust Income	$	-	$	-	$	0.21677	$	0.21677	$	0.43354
Taxable Capital Gains	$	-	$	-	$	0.00336	$	0.00336	$	0.00672
Return of Capital	$	-	$	-	$	0.06833	$	0.06833	$	0.13666
Total paid	$    0.41250		$    0.29000		$    0.31000		$    0.31000		$    1.32250
As a percentage of total	Q1		Q2		Q3		Q4		TOTAL
Dividends	100.0%		100.0%		6.9%		6.9%		56.4%
Trust Income	0.0%		0.0%		69.9%		69.9%		32.8%
Taxable Cap Gains	0.0%		0.0%		1.1%		1.1%		0.5%
Return of Capital	0.0%		0.0%		22.0%		22.0%		10.3%
Total	100.0%		100.0%		100.0%		100.0%		100.0%

Environmental, Social and Governance ("ESG") Update

Alaris recognizes that integrating ESG factors into its investment decisions can help to mitigate risk and identify strong investment opportunities. Its due diligence procedures already include a review of the ESG policies and practices of potential Private Company Partners.  Alaris has taken significant steps to develop a more comprehensive approach to ESG. It has engaged external advisors to assist it in developing an ESG policy. The ESG policy will detail Alaris' approach to integrating ESG factors into its investment due diligence and its ongoing monitoring of its Private Company Partners. Alaris' approach will be focused on ensuring that it considers all financially material ESG factors for itself and its Partners. Alaris will be disclosing its ESG policy in April 2021 and will eventually publish an annual ESG report, which will provide its investors with more information on how that policy is being implemented. Alaris expects to release its first ESG report within the next twelve months.

The Consolidated Statement of Financial Position, Statement of Comprehensive Income, and Statement of Cash Flows are attached to this news release. Alaris' financial statements and MD&A are available on SEDAR at www.sedar.com and on our website at www.alarisequitypartners.com.

Earnings Release Date and Conference Call Details

Alaris management will host a conference call at 9am MT (11am ET), Wednesday, March 10, 2021 to discuss the financial results and outlook for the Trust.

Participants can access the conference call by dialing toll free 1-888-390-0546. Alternatively, to listen to this event online, please click the webcast link and follow the prompts given: Q4 Webcast.  Please connect to the call or log into the webcast at least 10 minutes prior to the beginning of the event.

For those unable to participate in the conference call at the scheduled time, it will be archived for instant replay for a week. You can access the replay by dialing toll free 1-888-390-0541 and entering the passcode 415842#.  The webcast will be archived and is available for replay by using the same link as above or by finding the link we'll have stored under the "Investor" section – "Presentation and Events", on our website 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-IFRS Measures
The terms EBITDA, Normalized EBITDA, Run Rate Payout Ratio, Actual Payout Ratio, Run Rate Revenue, Earnings Coverage Ratio, Per Unit and IRR 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, Normalized EBITDA, Run Rate Payout Ratio, Actual Payout Ratio, Run Rate Revenue, Earnings Coverage Ratio, Per Unit and IRR may differ from the methods used by other issuers. Therefore, the Trust's EBITDA, Normalized EBITDA, Run Rate Payout Ratio, Actual Payout Ratio, Run Rate Revenue, Earnings Coverage Ratio, Per Unit and IRR may not be comparable to similar measures presented by other issuers.

Run Rate Payout Ratio refers to Alaris' total distribution per unit expected to be paid over the next twelve months divided by the estimated net cash from operating activities per unit that Alaris expects to generate over the same twelve month period (after giving effect to the impact of all information disclosed as of the date of this report).

Actual Payout Ratio refers to Alaris' total cash distributions paid during the period (annually or quarterly) divided by the actual net cash from operating activities Alaris generated for the period.

Run Rate Revenue refers to Alaris' total revenue expected to be generated over the next twelve months.

EBITDA refers to earnings 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 Trust's ability to generate cash available for debt service, working capital, capital expenditures, income taxes and distributions.

Normalized EBITDA refers to EBITDA excluding items that are non-recurring in nature and is calculated by adjusting for non-recurring expenses and gains to EBITDA. Management deems non-recurring items to be unusual and/or infrequent items that Alaris incurs outside of its common day-to-day operations. For the year ended December 31, 2020, these include the distributions received upon redemption of SBI, the non-recurring legal expenses related to the income trust conversion, the non-cash impact of trust conversion and the unit-based compensation expense related to the quarterly re-valuation of the outstanding unit-based compensation. For the year ended December 31, 2019, these include a bad debt recovery related to Phoenix and the loss on assets held for sale relating to Sandbox. Transaction diligence costs are recurring but are considered an investing activity. Foreign exchange realized and unrealized gains and losses are recurring but not considered part of operating results and excluded from normalized EBITDA on an ongoing basis. Changes in investments at fair value are non-cash and although recurring are also removed from normalized EBITDA. Adjusting for these non-recurring items allows management to assess cash flow from ongoing operations.

Earnings Coverage Ratio refers to the Normalized 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.

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.

IRR 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 terms EBITDA, Normalized EBITDA, Run Rate Payout Ratio, Actual Payout Ratio, Earnings Coverage Ratio, Per Unit and IRR should only be used in conjunction with the Trust's annual audited financial statements, excerpts of which are available below, while complete versions are 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 impact of COVID-19 on the operations of the Trust and those of the Partners; the timing and impact of restarting or increasing Distributions from Partners not currently paying the full amount or at all; the Trust's Run Rate Payout Ratio and Run Rate Revenue; the continued deferral of PFGP's Distributions and the timing to restart full distributions; the impact of the new investments in Carey Electric, FNC, Edgewater, Brown & Settle, 3E as well as the follow-on investments in GWM, BCC and Accscient, including, without limitation, the expected yield therefrom and the impact on the Trust's net cash from operating activities, Run Rate Revenue and Run Rate Payout Ratio; expected resets of Distributions in 2021; the Trust's consolidated expenses; expectations regarding receipt (and amount of) any common equity distributions from Partners in which Alaris holds common equity, including the impact on the Trust's net cash from operating activities, Run Rate Revenue and Run Rate Payout Ratio; the impact of investing in common equity on Alaris' ability to deploy more capital, overall return and Run Rate Payout Ratio; the amount of the Trust's distributions to unitholders (both quarterly and on an annualized basis); the use of proceeds from the senior credit facility; the Trust's ability to deploy capital; potential Partner redemptions, including the timing, if at all, thereof and the amounts to be received by the Trust; Alaris' new ESG policy and future reporting of ESG matters; and impact of new deployment and restarting Distributions from Partners not paying full contractual amounts. 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, 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, the 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 recover from the ongoing economic downturn created by the response to COVID-19 within the next twelve months, interest rates will not rise in a material way over the next 12 to 24 months, that those Alaris Partners detrimentally affected by COVID-19 will recover from the pandemic's impact and return to their pre-COVID-19 operating environments; following a recovery from the COVID-19 impact, 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 on the Trust and the Partners (including how many Partners will experience a slowdown or closure of their business and the length of time of such slowdown or closure); management's ability to assess and mitigate the impacts of COVID-19; the dependence of Alaris on the Partners; leverage and restrictive covenants under credit facilities; reliance on key personnel; general economic conditions, including the 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 for the year ended December 31, 2020, 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. 

Alaris Equity Partners Income Trust
Consolidated statements of financial position

	31-Dec		31-Dec
$ thousands	2020		2019
Assets
Cash and cash equivalents	$	16,498	$	17,104
Prepayments	177		1,509
Derivative contracts	1,489		555
Accounts receivables	804		1,226
Income taxes receivable	12,669		4,205
Investment tax credit receivable	-		1,032
Assets acquired held for sale	-		97,173
Promissory notes receivable	4,000		6,580
Current Assets	$	35,637	$	129,384
Promissory notes and other receivables	19,233		19,663
Deposits	20,206		20,206
Property and equipment	846		1,053
Investments	880,512		881,037
Investment tax credit receivable	-		2,243
Deferred income taxes	-		986
Non-current assets	$	920,797	$	925,188
Total Assets	$	956,434	$	1,054,572
Liabilities
Accounts payable and accrued liabilities	$	5,351	$	2,713
Distributions payable	12,089		5,047
Liabilities acquired held for sale	-		60,297
Office Lease	659		837
Income tax payable	723		384
Current Liabilities	$	18,822	$	69,278
Deferred income taxes	16,112		4,715
Loans and borrowings	229,477		285,193
Convertible debenture	86,029		90,939
Other long-term liabilities	980		-
Non-current liabilities	$	332,598	$	380,847
Total Liabilities	$	351,420	$	450,125
Equity
Unitholders' capital	$	659,988	$	625,313
Equity component of convertible debenture	-		4,059
Equity reserve	17,621		14,763
Translation reserve	12,431		17,076
Retained earnings / (deficit)	(85,026)		(56,764)
Total Equity	$	605,014	$	604,447
Total Liabilities and Equity	$	956,434	$	1,054,572

Alaris Equity Partners Income Trust
Condensed consolidated statements of comprehensive income / (loss)

	Year ended December 31
$ thousands except per unit amounts	2020		2019
Revenues, net of realized foreign exchange gain or loss	$	109,568	$	114,956
Net realized gain / (loss) from investments	(26,863)		11,724
Net unrealized loss of investments at fair value	(14,623)		(11,304)
Loss on assets held for sale	-		(45,883)
Total revenue and other operating income	$	68,082	$	69,493
General and administrative	14,519		10,718
Transaction diligence costs	5,532		2,754
Unit-based compensation	2,708		4,315
Bad debt expense / (recovery)	(183)		(2,018)
Depreciation and amortization	222		384
Total operating expenses	22,798		16,153
Earnings from operations	$	45,284	$	53,340
Finance costs	18,103		19,294
Unrealized (gain) / loss on foreign exchange	(729)		6,069
Non-cash impact of trust conversion	(7,138)		-
Earnings before taxes	$	35,048	$	27,977
Current income tax expense / (recovery)	(875)		5,347
Deferred income tax expense / (recovery)	15,632		(13,628)
Total income tax expense / (recovery)	14,757		(8,281)
Earnings	$	20,291	$	36,258
Other comprehensive income
Foreign currency translation differences	(4,645)		(15,649)
Total comprehensive income	$	15,646	$	20,609
Earnings per unit
Basic	$ 0.56		$ 0.99
Fully diluted	$ 0.56		$ 0.98
Weighted average units outstanding
Basic	36,121		36,597
Fully Diluted	36,482		36,889

Alaris Equity Partners Income Trust
Condensed consolidated statements of cash flows

	Year ended December 31
$ thousands	2020		2019
Cash flows from operating activities
Earnings for the period	$	20,291	$	36,258
Adjustments for:
Finance costs	18,103		19,294
Deferred income tax expense / (recovery)	15,632		(13,628)
Depreciation and amortization	222		384
Loss on assets held for sale	-		45,883
Net realized gain / (loss) from investments	26,863		(11,724)
Net unrealized loss of investments at fair value	14,623		11,304
Unrealized (gain) / loss on foreign exchange	(729)		6,069
Non-cash impact of trust conversion	(7,138)		-
Transaction diligence costs	5,532		2,754
Unit-based compensation	2,708		4,315
Changes in working capital (operating):
- accounts receivables	422		(4,428)
- income tax receivable / payable	(11,424)		(3,594)
- prepayments	(605)		672
- accounts payable, accrued liabilities	2,327		(957)
Cash generated from operating activities	86,827		92,602
Cash interest paid	(14,965)		(17,824)
Net cash from operating activities	$	71,862	$	74,778
Cash flows from investing activities
Acquisition of investments	$	(170,465)	$	(193,357)
Transaction diligence costs	(5,532)		(2,754)
Proceeds from partner redemptions	117,698		20,089
Proceeds on disposal of assets and liabilities held for sale	39,196		-
Promissory notes issued	-		(8,823)
Promissory notes repaid	2,499		4,916
Changes in working capital - investing	-		-
Net cash used in investing activities	$	(16,604)	$	(179,929)
Cash flows from financing activities
Repayment of loans and borrowings	$	(228,970)	$	(68,030)
Proceeds from loans and borrowings	184,465		134,005
Issuance of unitholders' capital, net of unit issue costs	43,375		-
Proceeds from convertible debenture, net of fees	-		95,527
Distributions paid	(41,511)		(60,367)
Trust unit repurchases	(10,051)		-
Office lease payments	(178)		(253)
Net cash from / (used in) financing activities	$	(52,870)	$	100,882
Net increase / (decrease) in cash and cash equivalents	$	2,388	$	(4,269)
Impact of foreign exchange on cash balances	(2,994)		(1,401)
Cash and cash equivalents, Beginning of year	17,104		22,774
Cash and cash equivalents, End of year	$	16,498	$	17,104
Cash taxes paid	$	7,616	$	8,759

SOURCE Alaris Equity Partners Income Trust

Investor Relations, Alaris Equity Partners Income Trust, 403-260-1457, [email protected]

Related Links

www.alarisroyalty.com