Alaris Royalty Corp. Releases Second Quarter Financial Results

CALGARY, ALBERTA--(Marketwire - July 28, 2011) - Alaris Royalty Corp. ("Alaris" or the "Corporation") (TSX:AD) today announced its results for the three and six months ended June 30, 2011. The results are prepared under International Financial Reporting Standards ("IFRS").

As previously announced on June 9, 2011, Alaris reduced its interest in LifeMark Health Limited Partnership ("LifeMark") and sold its interest in MEDIchair Ltd ("MEDIchair") for total proceeds of $65 million and as a result, realized a significant gain (the "LifeMark/MEDIchair Transaction"). During the quarter, the Corporation realized a $23.8 million gain on the LifeMark portion, and a $3.9 million gain on the MEDIchair portion. The LifeMark/MEDIchair Transaction enabled Alaris to repay all amounts outstanding under its revolving senior credit facility ($26.2 million), resulting in the Corporation having no debt at June 30, 2011. At June 30, 2011, Alaris also had over $40 million cash on hand, $27.25 million of which was contributed to the previously announced newly-formed Killick Limited Partnership ("Killick") which transaction closed on July 6, 2011, just days after the quarter ending June 30, 2011 (the "Killick Transaction").

Partner revenues for the three and six months ended June 30, 2011 increased by 34% as expected to $5.2 million and $10.9 million, respectively, compared to $3.9 million and $8.1 million in the prior year periods. The increase was due to the addition of two new private company partners, KMH Limited Partnership ("KMH") in May 2010 and Solowave Design Limited Partnership ("Solowave") in December 2010. Additionally, a 6.5% increase in same clinic sales for LifeMark increased the annual distributions from LifeMark effective January 1, 2011.

For the three and six months ended June 30, 2011, the Corporation recorded net income of $22.7 million and $25.6 million, respectively; EBITDA of $30.9 million and $35.4 million, respectively; and Normalized EBITDA of $3.2 million and $7.7 million, respectively, compared to net income of $1.8 million and $3.7 million, and EBITDA and Normalized EBITDA of $3.0 million and $6.2 million in the prior year periods. Most of the increase was due to the significant gains realized on the Corporation's interests in LifeMark and MEDIchair, while the increase in Normalized EBITDA was due to having full periods of revenues from KMH and Solowave.

Total dividends paid for the three and six months ended June 30, 2011 equaled $0.255 per share and $0.51 per share, respectively ($4,312,446 and $8,621,337 in aggregate), representing 92% of cash flow from operations (excludes the gain on the LifeMark/MEDIchair Transaction).

"We had an exceptional quarter for our shareholders as we realized significant gains, improved the diversification and balance of our revenue base, and sit debt free today." said Stephen King, CEO, Alaris Royalty Corp. "On top of the gains, both our normal operating revenues from our partner companies and our Normalized EBITDA are up over 20%. With the addition of a new partner in Killick just after quarter end, along with the strength of our balance sheet, we are well positioned to continue a successful 2011."

Reconciliation of Net Income to EBITDA (thousands) 3 months ending
June 30
2011
,
3 months ending
June 30
2010
,
6 months ending
June 30
2011
,
6 months ending
June 30
2010
,
Net Income $ 22,711 $ 1,820 $ 25,636 $ 3,719
Adjustments to Net Income:
Amortization 42 47 90 94
Interest 424 385 843 869
Income tax expense 7,724 757 8,844 1,540
EBITDA $ 30,904 $ 3,009 $ 35,413 $ 6,222
Normalizing Adjustments:
Gain on reduction of LifeMark interest 23,816 - 23,816 -
Gain on sale of intangible assets 3,892 - 3,892 -
Normalized EBITDA $ 3,196 $ 3,009 $ 7,705 $ 6,222

Outlook

After taking into account the LifeMark/MEDIchair Transaction and the Killick Transaction, Alaris' agreements with its partner companies (its "Private Company Partners") provide for estimated revenues to Alaris of approximately $20.8 million for 2011. Revenues from our Private Company Partners for the three months ended September 30, 2011 are expected to be $4.9 million. The Corporation still has over $10 million in cash remaining from the proceeds of the LifeMark/MEDIchair Transaction, as well as $30 million available on its revolving senior credit facility for use in future transactions. General and administrative expenses are currently estimated to be $3.5 million for 2011, inclusive of all public company costs. Cash requirements after net income are expected to be minimal, as current capital expenditures consist of office furniture and computer equipment. The Corporation has no debt at June 30, 2011.

The Condensed 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.alarisroyalty.com.

About the Corporation:

Alaris provides alternative financing to the Private Company Partners in exchange for royalties or distributions with the principal objective of generating stable and predictable cash flows for dividend payments to its shareholders. Royalties or distributions from the Private Company Partners are structured as a percentage 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

The terms EBITDA and Normalized EBITDA are financial measures used in this news release that are not standard measures under International Financial Reporting Standards ("IFRS"). The Corporation's method of calculating EBITDA and Normalized EBITDA may differ from the methods used by other issuers. Therefore, the Corporation's EBITDA and Normalized EBITDA may not be comparable to similar measures presented by other issuers.

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.

Normalized EBITDA refers to EBITDA excluding items that are non-recurring in nature, such as gains on the reduction of interests in Private Company Partners.

The terms EBITDA and Normalized EBITDA should only be used in conjunction with the Corporation's annual audited and quarterly reviewed 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 statements under applicable securities laws. 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 Corporation and the Private Company Partners, the, the future financial position or results of the Corporation, business strategy, and plans and objectives of or involving the Corporation or the Private Company 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 Private Company Partners in 2011, the revenues to be received by Alaris and its general and administrative expenses in 2011, and the cash requirements of the Corporation

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 in 20101and how that will affect Alaris' business and that of its Private Company 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 in 2011, that interest rates will remain low, that the Private Company Partners will continue to make distributions to Alaris as and when required, that the businesses of the Private Company Partners will continue to grow, that the Corporation will experience positive resets to its annual royalties and distributions from its Private Company Partners in 2011, 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 continue to improve and that the Canadian dollar will strengthen modestly relative to the U.S. dollar. In determining expectations for economic growth, management of Alaris primarily consider 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; government regulations; and risks relating to the Private Company Partners and their businesses. 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, 2010, 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. 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 expectations represented in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct.

Alaris Royalty Corp.
Condensed consolidated statement of financial position (unaudited)
June 30 December 31
Note 2011 2010
Assets
Cash and cash equivalents $ 41,162,460 $ 1,816,868
Prepayments 57,008 343,184
Trade and other receivables 39,504 688,514
Current Assets 41,258,972 2,848,566
Equipment 7 67,013 69,671
Intangible assets 5 6,706,606 12,896,916
Preferred LP Units 5 130,608,132 182,907,000
Investment tax credit receivable 6 10,922,392 10,922,393
Deferred income taxes 6 12,081,021 18,158,192
Non-current assets 160,385,164 224,954,172
Total Assets $ 201,644,136 $ 227,802,738
Liabilities
Accounts payable and accrued liabilities $ 1,881,574 1,421,992
Dividends payable 1,437,901 1,396,262
Current Liabilities 3,319,475 2,818,254
Loans and borrowings 9 - 29,200,000
Non-current liabilities - 29,200,000
Total Liabilities 3,319,475 32,018,254
Equity
Share capital 8 $ 161,466,495 157,402,328
Warrants 8 49,377 405,306
Contributed Surplus 4,132,150 3,174,831
Accumulated other comprehensive income 3,332,034 22,350,157
Retained Earnings 29,344,605 12,451,862
Total Equity $ 198,324,661 $ 195,784,484
Total Liabilities and Equity $ 201,644,136 $ 227,802,738
Alaris Royalty Corp.
Condensed consolidated statement of comprehensive income (unaudited)
Three months ended
June 30
Six months ended
June 30
Note 2011 2010 2011 2010
Revenues
Royalties and distributions 5 $ 5,235,584 3,895,625 10,870,903 $ 8,088,487
Interest and other 13,778 1,030 13,778 2,190
Gain on reduction of partner interests 23,815,973 - 23,815,973 -
Gain on sale of intangible assets 3,891,560 - 3,891,560 -
Total Revenue 32,956,895 3,896,655 38,592,214 8,090,677
Salaries and benefits 1,212,670 205,614 1,436,007 423,826
Corporate and office 191,012 124,887 468,151 335,955
Legal and accounting fees 130,518 99,033 243,568 202,771
Non-cash stock-based compensation 10 518,353 456,781 1,031,418 905,929
Depreciation and amortization 42,459 47,256 89,631 94,386
Subtotal 2,095,012 933,571 3,268,775 1,962,867
Earnings from operations 30,861,883 2,963,084 35,323,439 6,127,810
Finance cost 423,994 385,341 843,393 868,991
Earnings before taxes 30,437,889 2,577,743 34,480,046 5,258,818
Deferred income tax expense 6 7,727,380 757,261 8,844,033 1,539,668
Earnings $ 22,710,509 1,820,482 25,636,013 $ 3,719,150
Other comprehensive income
Net change in fair value of available-for-sale financial assets 5 544,429 3,145,466 2,280,975 3,145,466
Tax impact of change in fair value (68,054 ) (393,183 ) (285,122 ) (393,183 )
Realized gain on reduction of partnership interest (24,015,973 ) - (24,015,973 ) -
Tax impact of realized gain 3,001,997 - 3,001,997 -
Other comprehensive income for the period, net of income tax (20,537,601 ) 2,752,283 (19,018,123 ) 2,752,283
Total comprehensive income for the period $ 2,172,908 $ 4,572,765 $ 6,617,890 $ 6,471,433
Earnings per share
Basic earnings per share $ 1.34 $ 0.14 $ 1.52 $ 0.31
Fully diluted earnings per share $ 1.30 $ 0.14 $ 1.47 $ 0.29
Weighted average shares outstanding
Basic 16,913,163 12,684,074 16,863,856 12,135,093
Fully Diluted 17,492,075 13,231,666 17,419,316 12,676,376
Alaris Royalty Corp.
Condensed consolidated statement of cash flows (unaudited)
For the six months ended June 30
Note 2011 2010
Cash flows from operating activities
Earnings from the period $ 25,636,013 $ 3,719,150
Adjustments for:
Finance costs 843,393 868,992
Deferred income taxes 6 8,844,033 1,539,668
Depreciation and amortization 7 89,630 94,386
Gain on intangible asset sale and reduction of partnership interest (27,707,533 ) -
Non-cash stock based compensation 10 1,031,418 905,929
8,736,954 7,128,125
Change in:
-trade and other receivables 649,010 (293,322 )
-prepayments 286,176 (128,642 )
-trade and other payables 460,723 (501,484 )
Cash generated from operating activities 10,132,863 6,204,677
Interest paid (843,393 ) (868,992 )
Net cash from operating activities $ 9,289,470 5,335,685
Cash flows from investing activities
Acquisition of equipment (5,104 ) (3,360 )
Acquisition/disposition of Preferred LP Units (670,145 ) (13,244,533 )
Proceeds from reduction in Preferred LP Units 65,000,000 -
Net cash from/(used in) investing activities $ 64,324,751 $ (13,247,893 )
Cash flows from financing activities
New share capital 8 - 15,313,346
Proceeds from exercise of warrants 8 3,633,000 3,282,375
Repayment of Senior debt 9 (29,200,000 ) (1,900,000 )
Repayment of Subordinated debt 9 - (5,300,000 )
Dividends paid 8 (8,579,697 ) (5,397,645 )
Payments in lieu of dividends on RSUs 10 (121,932 ) (107,591 )
Net cash used in financing activities ($34,268,629 ) $ (5,890,485 )
Net increase/(decrease) in cash and cash equivalents 39,345,592 (2,021,723 )
Cash and cash equivalents, Beginning of period 1,816,868 3,826,000
Cash and cash equivalents, End of period $ 41,162,460 $ 1,804,277

For more information please contact:

Alaris Royalty Corp.
Curtis Krawetz
Manager, Investor Relations
403.221.7305

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