Alaris Royalty Corp. Releases 2011 Financial Results

CALGARY, ALBERTA--(Marketwire - March 15, 2012) - Alaris Royalty Corp. ("Alaris" or the "Corporation") (TSX:AD) today announced its results for the year ended December 31, 2011. The results are prepared under International Financial Reporting Standards ("IFRS").

2011 was a significant year for the Corporation as it continued to focus on five main "pillars" aimed at providing a more secure dividend stream to Alaris shareholders. They are as follows:

  1. Diversification
  • Alaris realized a $27.7 million gain on the reduction of its financial interest in LifeMark Health Limited Partnership ("LifeMark").
  • The proceeds from the LifeMark transaction, as well as additional capital sources, were used to add two new partners as well as to make a further contribution to an existing partner. As a result, Alaris' largest revenue stream went from 68% in 2010 to 43% in 2011 and will be under 25% in 2012 based on current contractual revenue sources.
  1. Growth
  • The addition of two new partners, Killick Aerospace Limited Partnership ("Killick") in July 2011 and Quetico, LLC ("Quetico") in December 2011 provided for growth to Alaris' distributable cash.
  • The Corporation completed a follow on contribution into KMH Limited Partnership ("KMH") in October 2011.
  • Alaris increased its monthly dividend by 12% and provided a total annual return to shareholders of over 60%.
  1. Reducing Volatility
  • The Corporation locked in a fixed growth metric for LifeMark's annual distribution at 4% per year and negotiated collars on the maximum increase or decrease of the annual distributions from Killick and Quetico.
  1. Visibility
  • Revenues from the Corporation's seven partners for 2012 are already determined.
  • The Corporation has predictable and low general and administrative expenses.
  1. Liquidity
  • The Corporation's float increased by 15% in 2011 and daily trading volume continues to grow.

The Corporation's focus on these five pillars translated into partner revenues for the year ended December 31, 2011 increasing 29% to $21.5 million from $16.7 million in 2010. The increase was due to the addition of three new private company partners in the past thirteen months: Solowave Design Limited Partnership ("Solowave") in December 2010; Killick and Quetico in 2011. The Corporation also recorded a significant gain on the reduction of the Corporation's financial interests in LifeMark and MEDIchair Ltd ("MEDIchair") in June of the current year.

For the year ended September 30, 2011, the Corporation recorded earnings of $34.7 million and EBITDA of $43.8 million, and Normalized EBITDA of $16.1 million compared to earnings of $7.4 million and EBITDA and Normalized EBITDA of $12.7 million in the prior year. The increase to Normalized EBITDA in the current period is due to having a full year of revenues from Solowave, a half year from Killick and just over a month from Quetico while the gain on the LifeMark transaction contributed to the more significant increases in earnings and EBITDA.

"2011 was a tremendous year for Alaris and its shareholders. The LifeMark deal was important to show the complete life cycle of our structure as it enabled the owners of LifeMark to realize a sizeable gain, which was attainable because of the unique structure Alaris offers entrepreneurs. We added some great new partners in established and profitable businesses with high quality management teams. We had another successful bought deal financing in December and have a balance sheet that has us well positioned for further successes in 2012" said Stephen King, CEO, Alaris Royalty Corp.

Reconciliation of Earnings to EBITDA (thousands)
Dec 31, 2011

Dec 31, 2010
Earnings $34,712 $7,401
Adjustments to Earnings:
Amortization 143 190
Interest 1,235 1,708
Deferred income tax expense 7,729 3,411
EBITDA $43,819 $12,710
Normalizing Adjustments:
Gain on reduction of LifeMark interest 23,816 -
Gain on sale of intangible assets 3,892 -
Normalized EBITDA $16,111 $12,710

Outlook

Alaris' agreements with its partner companies (its "Private Company Partners") provide for estimated revenues to Alaris of approximately $27.8 million for 2012. Revenues from our Private Company Partners for the three months ended March 31, 2012 are expected to be $6.9 million. The Corporation still has $25.5 million remaining on its $30 million credit facility for use in future transactions. General and administrative expenses are currently estimated to be $3.2 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 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 2012, the revenues to be received by Alaris and its general and administrative expenses in 2012, and the cash requirements of the Corporation 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.
Consolidated statement of financial position
December 31 December 31 January 1
Note 2011 2010 2010
Assets
Cash and cash equivalents $3,888,465 $1,816,868 $ 3,826,000
Prepayments 119,508 343,184 103,472
Trade and other receivables 3,443,679 688,514 2,470
Current Assets 7,451,652 2,848,566 3,931,942
Equipment 7 66,743 69,671 74,477
Intangible assets 5 6,661,138 12,896,916 13,070,150
Preferred LP Units 5 207,408,290 182,907,000 122,286,000
Investment tax credit receivable 6 10,922,393 10,922,393 11,030,007
Deferred income taxes 6 13,967,984 18,158,192 22,454,167
Non-current assets 239,026,548 224,954,172 168,914,801
Total Assets $246,478,200 $227,802,738 $172,846,743
Liabilities
Accounts payable and accrued liabilities $1,546,705 $1,421,992 $939,085
Dividends payable 1,850,145 1,396,262 802,604
Income taxes payable 67,590 - -
Loans and borrowings 9,11 - - 9,350,000
Current Liabilities 3,464,440 2,818,254 11,091,689
Loans and borrowings 9 6,500,000 29,200,000 19,700,000
Non-current liabilities 6,500,000 29,200,000 19,700,000
Total Liabilities 9,964,440 32,018,254 30,791,689
Equity
Share capital 8 200,822,160 157,402,328 111,663,148
Warrants 8 - 405,306 845,000
Equity reserve 4,626,500 3,174,831 1,869,901
Fair value reserve 2,292,939 22,350,157 9,766,188
Translation reserve (124,947 ) - -
Retained Earnings 28,897,108 12,451,862 17,910,817
Total Equity 236,513,760 195,784,484 142,055,054
Total Liabilities and Equity $246,478,200 $227,802,738 $172,486,743
Alaris Royalty Corp.
Consolidated statement of comprehensive income
Years ended Dec 31
Note 2011 2010
Revenues
Royalties and distributions 5 $21,497,960 $16,657,034
Interest and other 68,408 2,190
Gain on reduction of partner interests 5 23,815,973
Gain on sale of intangible assets 5 3,891,560 -
Total Revenue 49,273,901 16,659,224
Salaries and benefits 11 1,875,508 1,060,915
Corporate and office 859,727 626,990
Legal and accounting fees 556,621 443,262
Non-cash stock-based compensation 10,11 1,978,727 1,817,981
Depreciation and amortization 143,244 190,028
Subtotal 5,413,827 4,139,176
Earnings from operations 43,860,074 12,520,048
Finance cost 1,235,348 1,707,713
Unrealized foreign exchange loss 183,060 -
Earnings before taxes 42,441,666 10,812,335
Deferred income tax expense 6 7,661,200 3,411,119
Current income tax expense 6 68,022 -
Earnings 34,712,444 $7,401,216
Other comprehensive income
Net change in fair value of Preferred LP units 5 1,093,437 14,381,679
Tax impact of change in fair value (136,679 ) (1,797,710 )
Realized gain on reduction of partnership interest 5 (24,015,973 ) -
Tax impact of realized gain 3,001,997 -
Foreign currency translation differences (124,947 ) -
Other comprehensive income for the period, net of income tax (20,182,165 ) 12,583,969
Total comprehensive income for the period $ 14,530,279 $ 19,985,185
Earnings per share
Basic earnings per share $2.04 $0.56
Fully diluted earnings per share $1.97 $0.54
Weighted average shares outstanding
Basic 17,036,346 13,104,165
Fully Diluted 17,595,740 13,651,879
Alaris Royalty Corp.
Consolidated statement of cash flows
For the years ended December 31
Note 2011 2010
Cash flows from operating activities
Earnings from the year $34,712,444 $7,401,216
Adjustments for:
Finance costs 1,235,348 1,707,713
Deferred income taxes 6 7,661,200 3,411,119
Depreciation and amortization 7 143,244 190,028
Gain on intangible asset sale and reduction of partnership interest (27,707,533 ) -
Gain on foreign exchange forward contract (21,864 ) -
Unrealized foreign exchange loss 183,060 -
Non-cash stock based compensation 10 1,978,727 1,817,981
18,184,626 14,528,057
Change in:
-trade and other receivables (2,755,165 ) (686,044 )
-prepayments 223,676 (239,712 )
-trade and other payables 192,303 482,907
Cash generated from operating activities 15,845,440 14,085,208
Finance costs (1,235,348 ) (1,707,713 )
Net cash from operating activities 14,610,092 12,377,495
Cash flows from investing activities
Acquisition of equipment (12,979 ) (11,989 )
Acquisition of Preferred LP Units (78,948,286 ) (46,239,320 )
Proceeds from reduction in Preferred LP Units and Intangible asset sale 65,000,000 -
Net cash used in investing activities $(13,961,265 ) $(46,251,309 )
Cash flows from financing activities
New share capital, net of share issue costs 8 37,830,223 39,487,617
Proceeds from exercise of warrants 8 3,988,875 4,488,000
Proceeds from exercise of options 8 112,675 -
Repayment of debt 9 (66,700,000 ) (9,350,000 )
Proceeds from debt 9 44,000,000 9,500,000
Dividends paid 8 (17,560,350 ) (12,034,829 )
Payments in lieu of dividends on RSUs 10 (248,653 ) (226,105 )
Net cash used in financing activities $1,422,770 $31,864,683
Net increase in cash and cash equivalents 2,071,597 (2,009,132 )
Cash and cash equivalents, Beginning of year 1,816,868 3,826,000
Cash and cash equivalents, End of year $3,888,465 $1,816,868

Contact Information:

Alaris Royalty Corp.
Curtis Krawetz
Manager, Investor Relations
403.221.7305


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