Alaris Royalty Corp. Releases Third Quarter Financial Results

CALGARY, ALBERTA--(Marketwire - Nov. 4, 2008) - Alaris Royalty Corp. ("Alaris" or the "Corporation") today announced its results for the three and nine months ended September 30, 2008. 

Revenues for the three and nine months ended September 30, 2008 were $4.8 million and $14.2 million, respectively, and increased 97% and 67%, respectively, over the prior year periods reflecting a new investment that closed in December 2007 bringing the total to four investments. Additionally, each of Alaris' other three investments recorded same store sales increases in 2008 that increased the annual royalty or distribution compared to the prior year. 

The Corporation recorded a net loss of $7.4 million and $5.5 million and normalized EBITDA of $4.2 million and $12.9 million for the three and nine months ended September 30, 2008, respectively, compared to $785,000 and $3.4 million of net income and $2.1 million and $7.4 million of normalized EBITDA, respectively, for the same prior year periods. The increase in normalized EBITDA is attributed to the increase in revenues as the costs of the Corporation did not change significantly. 

On July 31, 2008, Alaris completed the acquisition (the "Acquisition") of Alaris Income Growth Fund L.P. ("Alaris L.P."). Alaris has continued the business and operations of Alaris L.P. The Acquisition has been accounted for as a reverse take-over with Alaris L.P. being considered the acquiring entity. 

As a result of the Acquisition, there were several significant charges recorded in the financial statements during the period. For the three and nine months ended September 30, 2008, Alaris recorded a non-cash stock based compensation expense of $7.9 million that represents the difference in the exercise price and fair value of management options that were granted and exercised prior to the Acquisition. As well, in the same periods the Corporation incurred $491,000 of tax and financial due diligence costs relating to the transaction that were expensed in the period. Both of these items are non-recurring expenses and have been added back to EBITDA to present a normalized result. The Corporation also recorded a future income tax expense of $1.5 million for the three and nine months ended September 30, 2008 that represents the timing difference between the book value and the tax value of its two royalty investments (End of the Roll and MEDIchair). 

/T/

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Reconciliation of Net Income to       3 months ending       3 months ending
EBITDA (thousands)                       Sept 30,2008          Sept 30,2007
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Net Income (Loss)                          $   (7,355)            $     785
Adjustments to Net Income:
 Amortization                                      59                    60
 Interest                                       1,552                 1,288
 Income tax timing difference
  expense                                       1,544                     -
EBITDA                                     $   (4,200)           $    2,133
Normalizing Adjustments:
 Non-cash stock option expense                  7,933                     -
 Tax and financial diligence
  costs                                           491                     -
Normalized EBITDA                          $    4,224            $    2,133
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Reconciliation of Net Income to    Nine months ending    Nine months ending
EBITDA (thousands)                       Sept 30,2008          Sept 30,2007
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Net Income (Loss)                          $   (5,543)           $    3,387
Adjustments to Net Income:
 Amortization                                     176            $      179
 Interest                                       8,278            $    3,868
 Income tax timing difference
  expense                                       1,544                     -
EBITDA                                     $    4,455            $    7,434
Normalizing Adjustments:
 Non-cash option expensed                       7,933                     -
 Tax and financial diligence
  costs                                           491                     -
Normalized EBITDA                          $   12,879            $    7,434
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/T/

"We are very pleased to be reporting our first quarterly report as a public company," said Steve King, President and CEO. "The results to date reflect the predictable nature of Alaris' revenue stream. As distributions from our portfolio companies are set for a year in advance, quarter-to-quarter volatility is very low as is demonstrated in our financial results. Distributions from our portfolio companies also represent well under 50% of the earnings and cash flow being generated by these companies so our confidence in the future revenue streams and the buffer on volatility is very high."

Outlook

Alaris' agreements with the Portfolio Companies provide for payments estimated to provide the Corporation approximately $19.1 million of revenues on an annual basis. General and administrative expenses are expected to increase as a result of public company costs and are estimated at $2 million annually. Alaris' senior debt facility is fully drawn to $25 million and the interest rate on that debt was 6.75% at September 30, 2008 (subsequently reduced to 6.0% at October 31, 2008). $6.5 million of subordinated debt is outstanding with an interest rate of 13%. Cash requirements after net income are expected to be minimal, as current capital expenditures will consist of office furniture and computer equipment. In August and September, the Corporation declared its first two monthly dividends of $0.12 per voting and non-voting common share that were paid on September 15, 2008 and October 15, 2008 respectively.

"Our revenue and cost outlook for the rest of the year does not vary from the previous quarters. Beyond that, all of the companies in our portfolio continue to do well even in these challenging economic times. We believe that the nature and structure of our investments provides a very defensive platform for our shareholders," said Mr. King. Alaris plans to continue to seek out and make investments accretive to the Corporation's earnings per share in the current Portfolio Companies and other private businesses that meet Alaris' investment criteria.

The Consolidated Balance Sheet, Statement of Operations and Deficit 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:

The Corporation invests in a diversified portfolio of private businesses ("Portfolio Companies") in exchange for royalties or distributions from the Portfolio Companies, with the principal objective of generating stable and predictable cash flows for dividend payments to its shareholders. Royalties or distributions to Alaris LP from the Portfolio Companies 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-GAAP Measures

The terms EBITDA and normalized EBITDA (collectively the "Non-GAAP Measures"), are financial measures used in this news release that are not standard measures under Canadian generally accepted accounting principles ("GAAP"). The Corporation's method of calculating Non-GAAP Measures may differ from the methods used by other issuers. Therefore, the Corporations Non-GAAP Measures may not be comparable to similar measures presented by other issuers.

EBITDA refers to net earnings (loss) determined in accordance with GAAP, 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 (loss) to EBITDA in this news release.

Normalized EBITDA refers to EBITDA excluding items that are non-recurring in nature. Items include expenses incurred in connection with the Acquisition and include non-cash stock option and other transaction related costs.

These Non-GAAP measures 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. Statements other than statements of historical fact contained in this news release may be forward looking statements, including, without limitation, management's expectations, intentions and beliefs concerning the growth, results of operations, performance and business prospects and opportunities of the Corporation and the Portfolio Companies, the general economy, the amount and timing of the payment of dividends by the Corporation, the future financial position or results of the Corporation, business strategy, proposed acquisitions, growth opportunities, budgets, litigation, projected costs and plans and objectives of or involving the Corporation or the Portfolio Companies. 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. There can be no assurance that the 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. 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.

Statements containing forward-looking information by their nature involve numerous assumptions and significant known and unknown facts and uncertainties of both a general and a specific nature. Some of the factors that could affect future results and could cause results to differ materially from those expressed in the forward looking statements contained herein include risks relating to: the dependence of the Corporation on the Portfolio Companies; risks relating to the Portfolio Companies and their businesses; reliance on key personnel; general economic conditions; failure to complete or realize the anticipated benefits of investments; limited diversification of Alaris' investments; management of future growth; availability of future financing; competition; government regulation; leverage and restrictive covenants under credit facilities; the ability of the Portfolio Companies to terminate the Investment Agreements; unpredictability and potential volatility of the trading price of the Common Shares; fluctuations of cash dividends; restrictions on the potential growth of the Corporation as a consequence of the payment by the Corporation of substantially all of its operating cash flow; income tax related risks; future sales of Common Shares by significant shareholders; ability to recover from the Portfolio Companies for defaults under the Investment Agreements; potential conflicts of interest; dilution ; and liquidity of Common Shares. The information contained in this news release, including the information set forth under "Risk Factors" in the MD&A, identifies additional factors that could affect the operating results and performance of the Corporation.

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.

For more information please contact:

Alaris Royalty Corp. Curtis Krawetz Manager, Investor Relations (403) 221-7305 Website: www.alarisroyalty.com

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