Alaris Royalty Corp. Releases Second Quarter Financial Results

CALGARY, ALBERTA--(Marketwire - July 29, 2010) - Alaris Royalty Corp. (TSX:AD) ("Alaris" or the "Corporation") today announced its results for the three and six months ended June 30, 2010.

After paying dividends of $0.07 per share in January and February, the Corporation increased the dividend rate by 14.3% to $0.08 per share in each of March, April, May and June. Total dividends paid for the three and six months ended June 30, 2010 equaled $0.24 per share ($3,135,470 in aggregate) and $0.46 per share ($5,695,090 in aggregate), respectively, resulting in a payout ratio of approximately 90% of operating cash flow.

Revenues for the three months ended June 30, 2010 were $3.9 million compared to $4.3 million in the prior year period, but nonetheless, were slightly better than expected as a result of new purchases of preferred units in the quarter.  The decrease of 10% was due to the net impact of performance adjustments to the annual distributions received from the Corporation's Private Company Partners (as defined herein), most notably the expected decline in distributions from LMS Reinforcing Steel Group ("LMS"). A significant portion of the LMS decrease was offset by an increase in distributions from LifeMark Health Limited Partnership ("LifeMark") as a result of its 4.5% same clinic sales adjustment effective January 1, 2010 and the impact of additional purchases of preferred units in LifeMark in October 2009 and May 2010. As well, the addition of a new Private Company Partner in May 2010, namely KMH Limited Partnership ("KMH"), added $126,000 of new revenue in the quarter.

For the three months ended June 30, 2010, the Corporation recorded net income of $2.5 million and EBITDA of $3.0 million compared to net income of $2.6 million and EBITDA of $3.4 million for the prior year period. The decrease in net income and EBITDA can be attributed to the decline in the distributions received from LMS which were partially offset by an increase in distributions received from LifeMark and new distributions received from KMH. The expenses of the Corporation did not change materially from the prior year period.


                                                        3 months   3 months
Reconciliation of Net Income to                           ending     ending
EBITDA (thousands)                                       June 30,   June 30,
                                                            2010       2009
Net Income (Loss)                                         $2,478     $2,630
Adjustments to Net Income:
 Amortization                                                 47         56
 Interest                                                    385        533
 Income tax expense                                           55        176
EBITDA                                                    $2,965     $3,395


"We continue to see positive results from each of our Private Company Partners, and in particular LMS.  LMS has seen meaningful increases to its production volumes in each of the past several months, margins are returning to more normal levels and year to date nine month gross profit is 19% ahead of last year's pace." said Steve King, President and CEO, Alaris Royalty Corp. "Additionally, LifeMark is well on the way to delivering another solid same clinic sales performance for its 2010 fiscal year. The recent monthly results for KMH, End of the Roll Carpet & Vinyl ("EOTR") and MEDIchair Ltd. ("MEDIchair") show that these companies are also performing well compared to the prior year".


Alaris' agreements with LifeMark, LMS, EOTR, MEDIchair and KMH (collectively, the "Private Company Partners") are estimated to provide the Corporation approximately $16.4 million of revenues for fiscal 2010. In the next quarter, such agreements call for approximately $4.15 million of revenues for Alaris. General and administrative expenses are estimated at $600,000 per quarter, including all public company costs.  Alaris' senior debt facility is drawn to $20.65 million and the interest rate on that debt was 5.50% at June 30, 2010. $1.2 million of subordinated debt is also outstanding with an interest rate of 13%.

"With the addition of our new partner KMH, and the further purchase of preferred units in LifeMark in the second quarter, we have added over $500,000 per quarter in new revenues and the same amount in net income as there are no additional recurring business expenses that come with the addition of a new Partner. We will continue to seek new partnerships in order to further diversify our asset base and add accretive value for our shareholders," said Mr. King.

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 and on our website at

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-GAAP Measure

The term EBITDA is a financial measure used in this news release that is not a standard measure under Canadian generally accepted accounting principles ("GAAP"). The Corporation's method of calculating EBITDA may differ from the methods used by other issuers. Therefore, the Corporation's EBITDA 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 to EBITDA in this news release.

The term 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

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 and business prospects and opportunities of the Corporation and the Private Company Partners, the general economy, 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 2010, the revenues to be received by Alaris in its next fiscal quarter and its general and administrative expenses, the ability of the Private Company Partners to pay anticipated distributions to the Corporation, the Corporation's intention to add new Private Company Partners, as well as statements concerning the Corporation's ability to pay monthly dividends to its shareholders.

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 2010 and how that will affect Alaris' business and our ability to identify and close new opportunities with new 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 2010, 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, 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 improve somewhat 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, 2009, which is filed under the Corporation's profile at  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.


Consolidated Balance Sheets, Unaudited

                                                     June 30,   December 31,
                                                        2010           2009

Current assets:
 Cash                                          $   1,804,277 $    3,826,000
 Accounts receivable                                 295,792          2,470
 Prepaid expenses                                    232,114        103,472
 Future income taxes (note 10)                     3,141,429      2,996,000
                                                   5,473,612      6,927,942

Investment tax credit receivable (note 10)        11,030,007     11,030,007
Future income taxes (note 10)                     23,720,065     22,248,900
Equipment (note 4)                                    70,068         74,477

Investments (note 3)
 Preferred LP units                              124,369,176    111,124,642
 Intangible assets                                12,983,531     13,070,150
                                                 137,352,707    124,194,792

                                               $ 177,646,459 $  164,476,118

Liabilities and Shareholders'
Current liabilities:
 Accounts payable and accrued liabilities      $     437,599  $     939,085
 Dividends payable                                 1,100,059        802,604
 Future income taxes (note 10)                        47,808         47,808
 Bank indebtedness (note 5)                        4,233,333      2,850,000
 Subordinated debt (note 5)                        1,200,000      6,500,000
                                                   7,018,799     11,139,497

Bank indebtedness (note 5)                        16,416,667     19,700,000
Future income taxes (note 10)                      4,177,635      1,347,755
Deferred credit (note 10)                         22,215,040     23,661,017

Shareholders' equity/(deficit):
 Shareholder's capital (note 6)                  130,435,919    111,125,039
 Warrants (note 6)                                   523,415        845,000
 Contributed surplus                               2,290,133      1,471,333
 Deficit                                          (5,431,149)    (4,813,523)
                                                 127,818,318    108,627,849

Commitments (note 12)
                                               $ 177,646,459  $ 164,476,118

Consolidated Statements of Operations and Deficit, Unaudited

                            Three months ended           Six months ended
                                    June 30,                  June 30,
                              2010          2009         2010          2009

 Royalties and
  distributions       $  3,895,625  $  4,342,389  $ 8,088,487  $  8,941,000
 Interest and other          1,030         1,800        2,190         3,637
                         3,896,655     4,344,189    8,090,677     8,944,637

 Interest                  385,341       533,482      868,992     1,108,961
 Non-cash stock based
  compensation (note 8)    444,500       426,776      886,000       867,820
 Salaries and benefits     205,614       237,766      423,826       450,677
 Corporate and office      124,887       113,686      335,955       265,147
 Legal and accounting
  fees                      99,033       120,986      202,771       258,258
 Stock based compensation
  (note 8)                  57,378        49,687      107,591       123,028
 Depreciation and
  amortization              47,256        55,600       94,386       113,538
                         1,364,009     1,537,983    2,919,521     3,187,429

Net Income before taxes  2,532,646     2,806,206    5,171,156     5,757,208

Future income tax
 expense (note 10)          54,665       175,834       93,692       230,209

Net Income and other
 comprehensive income for
 the period              2,477,981     2,630,372    5,077,464     5,526,999

Deficit, beginning of
 period                 (4,773,660)  (13,171,811)  (4,813,523)  (13,239,854)

Dividends to
 shareholders (note 7)  (3,135,470)   (1,916,840)  (5,695,090)   (4,745,424)

Deficit, end of period $(5,431,149) $(12,458,279) $(5,431,149) $(12,458,279)

Earnings per share,
 basic                 $      0.20  $       0.29  $      0.42  $       0.61
Earnings per share,
 fully diluted         $      0.19  $       0.27  $      0.40  $       0.57

Weighted average shares
 outstanding, basic     12,684,074     9,127,403   12,135,093     9,125,711
Weighted average shares
 outstanding, fully
 diluted                13,231,666     9,730,953   12,676,376     9,729,261

Consolidated Statements of Cash Flows, Unaudited

                            Three months ended          Six months ended
                                  June 30,                   June 30,
                            2010          2009           2010          2009
Cash provided by
 (used in):

 Net Income for
  the period       $   2,477,981  $  2,630,372  $   5,077,464  $  5,526,999
 Add non-cash
  Depreciation and
   amortization           47,256        55,600         94,386       113,538
  Non-cash stock based
   (note 8)              444,500       426,776        886,000       867,820
  Income tax
   expense                54,665       175,834         93,692       230,209
                       3,024,402     3,288,582      6,151,542     6,738,566

 Change in
  non-cash working
  capital               (141,521)     (186,126)      (923,448)      (54,551)
                       2,882,881     3,102,456      5,228,094     6,684,015

 Purchase of
  capital assets          (3,360)      (13,121)        (3,360)      (13,121)
 Purchase of
  Preferred LP units (13,194,534)            -    (13,244,533)            -
                     (13,197,894)      (13,121)   (13,247,893)      (13,121)

 Proceeds from
  exercise of
  warrants             1,065,750             -      3,282,375             -
 New share capital    15,313,346             -     15,313,346             -
 Dividends to
  shareholders        (2,976,603)   (1,916,664)    (5,397,645)   (5,201,039)
 Repayment of debt    (6,250,000)     (700,000)    (7,200,000)   (1,000,000)
                       7,152,493    (2,616,664)     5,998,076    (6,201,039)

 in cash              (3,162,520)      472,671     (2,021,723)      469,855

Cash, beginning of
 period                4,966,797     1,741,120      3,826,000     1,743,936

Cash, end of
 period            $   1,804,277  $  2,213,791  $   1,804,277  $  2,213,791


For more information please contact:

Alaris Royalty Corp. Curtis Krawetz Manager, Investor Relations 403.221.7305

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