Alaris Royalty Corp. Releases Third Quarter Financial Results

CALGARY, ALBERTA--(Marketwire - Nov. 2, 2010) - Alaris Royalty Corp. (TSX:AD) ("Alaris" or the "Corporation") today announced its results for the three and nine months ended September 30, 2010.

Total dividends paid for the three and nine months ended September 30, 2010 equaled $0.24 per share ($3,312,575 in aggregate) and $0.70 per share ($9,007,666 in aggregate), respectively, resulting in a payout ratio of approximately 93% of operating cash flow.

Revenues for the three months ended September 30, 2010 were as expected at $4.17 million compared to $4.33 million in the prior year period. The decrease of 3.9% 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 $219,000 of new revenue in the quarter.

For the three months ended September 30, 2010, the Corporation recorded net income of $2.8 million and EBITDA of $3.2 million compared to net income of $2.5 million and EBITDA of $3.0 million for the previous quarter and $3.3 million of net income and $4.0 million of EBITDA in the prior year period. The increase in net income and EBITDA from the previous quarter is due to a full quarter of KMH revenues. The decrease in net income and EBITDA from the prior year period 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. Additionally, there was a recovery of previously expensed non-cash stock based compensation expenses in the third quarter of 2009 that resulted in higher than expected net income in that period. The cash expenses of the Corporation did not change materially from the prior year period.

  Reconciliation of Net Income to 3 months ending 3 months ending
  EBITDA (thousands) September 30, 2010 September 30, 2009
  Net Income (Loss) $2,787 $3,349
  Adjustments to Net Income:    
    Amortization 48 48
    Interest 308 533
    Income tax expense 66 53
  EBITDA $3,209 $3,983

"We're pleased to provide another quarter of results that are in line with the outlook we provided in our last quarterly results, further demonstrating the predictability and visibility provided by

our unique structure." said Darren Driscoll, CFO, Alaris Royalty Corp. "Additionally, each of our Partners are having positive years compared to the previous year thus we expect positive resets to the annual royalties and distributions from all five of our Partners in 2011".


Alaris' agreements with 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 $4.19 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 $19.7 million and the interest rate on that debt was 6.0% at September 30, 2010. $1.2 million of subordinated debt is also outstanding with an interest rate of 13%.

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, and management's expectations of positive resets to annual royalties and distributions from its Private Company Partners in 2011.

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 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 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 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, 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

    September 30, December 31,
      2010   2009
Current assets:        
  Cash $ 1,466,858 $ 3,826,000
  Accounts receivable   177,166   2,470
  Prepaid expenses   324,847   103,472
  Future income taxes (note 10)   3,201,429   2,996,000
      5,170,300   6,927,942
Investment tax credit receivable (note 10)   11,030,007   11,030,007
Future income taxes (note 10)   22,812,505   22,248,900
Equipment (note 4)   78,544   74,477
Investments (note 3)        
  Preferred LP units   124,414,079   111,124,642
  Intangible assets   12,940,223   13,070,150
      137,354,302   124,194,792
    $ 176,445,658 $ 164,476,118
Liabilities and Shareholders' Equity/(Deficit)        
Current liabilities:        
  Accounts payable and accrued liabilities $ 543,090 $ 939,085
  Dividends payable   1,106,085   802,604
  Future income taxes (note 10)   47,808   47,808
  Bank indebtedness (note 5)   4,925,000   2,850,000
  Subordinated debt (note 5)   1,200,000   6,500,000
      7,821,983   11,139,497
Bank indebtedness (note 5)   14,775,000   19,700,000
Future income taxes (note 10)   4,166,813   1,347,755
Deferred credit (note 10)   21,423,570   23,661,017
Shareholders' equity/(deficit):        
  Shareholder's capital (note 6)   131,023,606   111,125,039
  Warrants (note 6)   470,702   845,000
  Contributed surplus   2,699,533   1,471,333
  Deficit   (5,935,549)   (4,813,523)
      128,258,292   108,627,849
Commitments (note 12)        
    $ 176,445,658 $ 164,476,118


Consolidated Statements of Operations and Deficit, Unaudited

        Three months ended September 30,      Nine months ended September 30, 
        2010   2009     2010   2009
  Royalties and distributions $ 4,165,073 $ 4,334,814 $12,253,560 $13,275,814
  Interest and other     -   -     2,190   3,637
        4,165,073   4,334,814 12,255,750 13,279,451
  Interest     307,642   532,529     1,176,634   1,641,490
  Non-cash stock based                        
  compensation (note 8)     444,500   (103,551)     1,330,500   764,269
  Salaries and benefits     204,787   207,093     628,612   657,770
  Corporate and office     131,271   88,402     467,226   353,354
  Legal and accounting fees     118,446   111,315     321,217   359,573
  Stock based compensation (note 8)     57,378   49,163     164,969   172,191
  Depreciation and amortization     47,611   47,830     141,997   161,369
        1,311,635   932,781     4,231,155   4,110,016
Net Income before taxes     2,853,438   3,402,033     8,024,595   9,169,435
Future income tax expense (note 10)     45,263   52,710     138,955   282,919
Net Income and other                        
comprehensive income for the period     2,808,175   3,349,323     7,885,640   8,886,516
Deficit, beginning of period     (5,431,149) (12,458,279)     (4,813,523) (13,239,854)
Dividends to shareholders (note 7)     (3,312,575)   (1,917,362)     (9,007,666)   (6,662,782)
Deficit, end of period $ (5,935,549) $(11,026,318) $ (5,935,549) $ (11,026,318)
Earnings per share, basic $ 0.20 $ 0.37 $ 0.62 $ 0.97
Earnings per share, fully diluted $ 0.20 $ 0.34 $ 0.59 $ 0.91
Weighted average shares                        
outstanding, basic 13,790,008   9,129,890 12,692,793   9,127,124
Weighted average shares                        
outstanding, fully diluted 14,376,132   9,723,458 13,278,917   9,727,304


Consolidated Statements of Cash Flows, Unaudited

        Three months ended September 30,    Nine months ended September 30, 
      2010 2009 2010 2009
Cash provided by (used in):                
    Net Income for the period $ 2,808,175 $ 3,349,323 $ 7,885,640 $ 8,876,318
    Add non-cash items:                
    Depreciation and amortization 47,611 47,831 141,997 161,370
    Non-cash stock based compensation            
    (note 8) 444,500 (103,551) 1,330,500 764,269
    Income tax expense 45,263 52,710 138,955 282,919
      3,345,549 3,346,313 9,497,092 10,084,876
    Change in non-cash working capital 131,383 (19,193) (792,064) (73,740)
      3,476,932 3,327,120 8,705,028 10,011,136
    Purchase of capital assets (12,778) (128) (16,141) (13,249)
    Purchase of Preferred LP units (44,904) (1,000,000) (13,289,437) (1,000,000)
      (57,682) (1,000,128) (13,305,578) (1,013,249)
    Proceeds from exercise of warrants 538,125   3,820,500  
    New share capital (38,250)   15,275,096  
    Dividends to shareholders (3,306,544) (1,917,190) (8,704,188) (7,118,230)
    Repayment of subordinated debt -   (5,300,000)  
    Repayment of senior debt (950,000) (500,000) (2,850,000) (1,500,000)
      (3,756,669) (2,417,190) 2,241,408 (8,618,230)
Increase/(decrease) in cash (337,419) (90,198) (2,359,142) 379,657
Cash, beginning of period 1,804,277 2,213,791 3,826,000 1,743,936
Cash, end of period $ 1,466,858 $ 2,123,593 $ 1,466,858 $ 2,123,593

For more information please contact:

Alaris Royalty Corp.
Curtis Krawetz
Manager, Investor Relations

Printable Version | Back to News