Alaris Royalty Corp. Releases Second Quarter Financial Results

CALGARY, ALBERTA--(Marketwire - July 27, 2012) - Alaris Royalty Corp. ("Alaris" or the "Corporation") (TSX:AD) today announced its results for the three and six months ended June 30, 2012. The second quarter included:

  • The Corporation added a new partner company, Labstat International Limited Partnership ("Labstat") for a contribution of $41.2 million with a first year distribution of $6.18 million.
  • The Corporation raised the monthly dividend by 5.3% to $0.10 per common share.
  • The Corporation raised $49.04 million in a bought deal financing in June with proceeds used to repay the debt used to fund the Labstat contribution.

For the three and six months ended June 30, 2012, the Corporation's revenue from partner companies increased 40% and 31%, respectively, to $7.34 million and $14.27 million compared to the prior year periods. The increases were due to the addition of three new private company partners in the past 12 months: Killick Aerospace Limited Partnership ("Killick") in July 2011, Quetico, LLC ("Quetico") in December 2011, and Labstat in June 2012. The Corporation also completed a follow on contribution into KMH Limited Partnership ("KMH") in October 2011. Each of these transactions added new revenues in the first six months of 2012 compared to the prior year.

For the three and six months ended June 30, 2012, the Corporation recorded earnings of $4.16 million and $8.13 million, and Normalized EBITDA of $5.22 million and $10.7 million compared to earnings of $22.7 million and $25.6 million; and Normalized EBITDA of $3.2 million and $7.7 million in the prior year periods. June 2011 saw the Corporation realize significant gains on the reduction of interest in LifeMark Health Limited Partnership ("LifeMark") and the sale of intangible assets which increased the earnings in 2011. The 63% and 39% increases in Normalized EBITDA in the three and six month current periods is due to the new revenue streams noted above as they were added with minimal additional costs.

"Our second quarter was highlighted by adding our eighth partner, our fourth dividend increase in the past two years and another successful equity offering. Our balance sheet is in great shape with only $0.5 million drawn on a $50 million credit facility as we continue to evaluate new opportunities in Canada and the United States" said Darren Driscoll, CFO, Alaris Royalty Corp.

Reconciliation of Net Income to EBITDA (thousands) 3 months ending
June 30, 2012
3 months ending
June 30, 2011
6 months ending
June 30, 2012
6 months ending
June 30, 2011
Net Income $4,160 $22,711 $8,135 $25,636
Adjustments to Net Income:
Amortization 27 42 53 90
Interest 497 424 623 843
Income tax expense 533 7,727 1,934 8,844
EBITDA $5,217 $30,904 $10,745 $35,413
Normalizing Adjustments:
Gain on reduction of LifeMark interest - 23,816 - 23,816
Gain on sale of intangible assets - 3,892 - 3,892
Normalized EBITDA $5,217 $3,196 $10,745 $7,705

Outlook

Alaris' agreements with its partner companies (its "Private Company Partners") provide for estimated revenues to Alaris of approximately $31.3 million for 2012. Revenues from our Private Company Partners for the three months ended September 30, 2012 are expected to be $8.5 million. The Corporation has $49.5 million remaining on its $50 million credit facility for use in future transactions. General and administrative expenses are currently estimated to be $3.5 million for 2012, inclusive of all public company costs. Cash requirements after earnings are expected to remain at minimal levels.

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.alarisroyalty.com.

About the Corporation:

Alaris provides alternative financing to the Private Company Partners in exchange for distributions with the principal objective of generating stable and predictable cash flows for dividend payments to its shareholders. 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 revenues to be received by Alaris and its general and administrative expenses in 2012, and the cash requirements of Alaris in 2012.

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 2012 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 2012, 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 2012, 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 considers 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, 2011, 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
2012 2011
Assets
Cash and cash equivalents $4,892,646 $3,888,465
Prepayments 62,397 119,508
Trade and other receivables 251,756 3,443,679
Current Assets 5,206,799 7,451,652
Promissory note receivable 1,250,000 -
Equipment 66,271 66,743
Intangible assets 6,615,669 6,661,138
Preferred LP Units 249,288,757 207,408,290
Investment tax credit receivable 10,922,393 10,922,393
Deferred income taxes 12,689,362 13,967,984
Non-current assets 280,832,452 239,026,548
Total Assets $286,039,251 $246,478,200
Liabilities
Accounts payable and accrued liabilities $2,378,672 $1,546,705
Dividends payable 2,199,466 1,850,145
Income taxes payable 102,018 67,590
Loans and borrowings 83,333 -
Current Liabilities 4,763,489 3,464,440
Loans and borrowings 416,667 6,500,000
Non-current liabilities 416,667 6,500,000
Total Liabilities $5,180,156 $9,964,440
Equity
Share capital $247,943,285 $200,822,160
Equity reserve 5,242,677 4,626,500
Fair value reserve 2,330,439 2,292,939
Translation reserve (96,145 ) (124,947 )
Retained Earnings 25,438,839 28,897,108
Total Equity $280,859,095 $236,513,760
Total Liabilities and Equity $286,039,251 $246,478,200
Alaris Royalty Corp.
Condensed consolidated statement of comprehensive income (unaudited)
Three months ended
June 30
Six months ended
June 30
2012 2011 2012 2011
Revenues
Royalties and distributions $ 7,337,772 $ 5,235,584 $ 14,268,991 $ 10,870,903
Interest and other (99,175 ) 13,778 7,360 13,778
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 7,238,597 32,956,895 14,276,351 38,592,214
Salaries and benefits 1,218,740 1,212,670 1,451,550 1,436,007
Corporate and office 216,745 191,012 513,372 468,151
Legal and accounting fees 343,672 130,518 528,998 243,568
Non-cash stock-based compensation 349,488 518,353 698,977 1,031,418
Depreciation and amortization 26,818 42,459 53,357 89,631
Subtotal 2,155,463 2,095,012 3,246,254 3,268,775
Earnings from operations 5,083,134 30,861,883 11,030,097 35,323,439
Finance cost 496,846 423,994 623,025 843,393
Unrealized foreign exchange (gain)/loss (335,812 ) - (27,525 ) -
Earnings before taxes 4,922,100 30,437,889 10,434,597 34,480,046
Current income tax expense 228,890 - 365,563 -
Deferred income tax expense 533,231 7,727,380 1,934,189 8,844,033
Earnings $ 4,159,979 $ 22,710,509 $ 8,134,845 $ 25,636,013
Other comprehensive income
Net change in fair value of available-for-sale financial assets 50,000 544,429 50,000 2,280,975
Tax impact of change in fair value (12,500 ) (68,054 ) (12,500 ) (285,122 )
Realized gain on reduction of partnership interest - (24,015,973 ) - (24,015,973 )
Tax impact of realized gain 3,001,997 - 3,001,997
Foreign currency translation differences 238,418 - 28,802 -
Other comprehensive income for the period, net of income tax 275,918 (20,537,601 ) 66,302 (19,018,123 )
Total comprehensive income for the period $ 4,435,897 $ 2,172,908 $ 8,201,147 $ 6,617,890
Earnings per share
Basic earnings per share $0.21 $1.34 $0.42 $1.52
Fully diluted earnings per share $0.20 $1.30 $0.40 $1.47
Weighted average shares outstanding
Basic 19,589,153 16,913,163 19,532,881 16,863,856
Fully Diluted 20,301,799 17,492,075 20,214,649 17,419,316
Alaris Royalty Corp.
Condensed consolidated statement of cash flows (unaudited)
For the six months ended June 30
2012 2011
Cash flows from operating activities
Earnings from the period $8,134,845 $25,636,013
Adjustments for:
Finance costs 623,025 843,393
Deferred income tax expense 1,934,189 8,844,033
Depreciation and amortization 53,357 89,631
Unrealized foreign exchange loss/(gain) (27,525 ) -
Gain on forward contracts (7,360 ) -
Gain on intangible asset sale and reduction of partnership interest - (27,707,533 )
Non-cash stock based compensation 698,977 1,031,418
11,409,508 8,736,955
Change in:
-trade and other receivables 3,194,749 649,010
-prepayments 57,111 286,176
-trade and other payables 866,395 460,722
Cash generated from operating activities 15,527,763 10,132,863
Interest paid (623,025 ) (843,393 )
Net cash from operating activities $14,904,738 $9,289,470
Cash flows from investing activities
Acquisition of equipment (7,417 ) (5,104 )
Acquisition/disposition of Preferred LP Units (41,775,150 ) (670,145 )
Proceeds from reduction in Preferred LP Units - 65,000,000
Net cash from/(used in) investing activities $(41,782,567 ) $64,324,751
Cash flows from financing activities
New share capital 49,042,500 -
Share issue costs (2,672,241 ) -
Proceeds from exercise of warrants - 3,633,000
Borrowing of senior debt 43,000,000 -
Repayment of Senior debt (49,000,000 ) (29,200,000 )
Promissory notes issued 1,250,000 -
Dividends paid (11,101,954 ) (8,579,697 )
Payments in lieu of dividends on RSUs (136,295 ) (121,932 )
Net cash used in financing activities $27,882,010 ($34,268,629 )
Net increase in cash and cash equivalents 1,004,181 39,345,592
Cash and cash equivalents, Beginning of period 3,888,465 1,816,868
Cash and cash equivalents, End of period $4,892,646 $41,162,460

Contact Information:

Alaris Royalty Corp.
Curtis Krawetz
Manager, Investor Relations
403.221.7305


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