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Press release from Marketwire

Alaris Royalty Corp. Releases Third Quarter Financial Results

Tuesday, November 02, 2010

Alaris Royalty Corp. Releases Third Quarter Financial Results08:59 EDT Tuesday, November 02, 2010CALGARY, 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 to3 months ending3 months endingEBITDA (thousands)September 30, 2010September 30, 2009Net Income (Loss)$2,787$3,349Adjustments to Net Income:Amortization4848Interest308533Income tax expense6653EBITDA$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 byour 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".OutlookAlaris' 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 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-GAAP MeasureThe 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 www.sedar.com.Forward-Looking StatementsThis 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 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 Balance Sheets, UnauditedSeptember 30,December 31,20102009AssetsCurrent assets:Cash$1,466,858$3,826,000Accounts receivable177,1662,470Prepaid expenses324,847103,472Future income taxes (note 10)3,201,4292,996,0005,170,3006,927,942Investment tax credit receivable (note 10)11,030,00711,030,007Future income taxes (note 10)22,812,50522,248,900Equipment (note 4)78,54474,477Investments (note 3)Preferred LP units124,414,079111,124,642Intangible assets12,940,22313,070,150137,354,302124,194,792$176,445,658$ 164,476,118Liabilities and Shareholders' Equity/(Deficit)Current liabilities:Accounts payable and accrued liabilities$543,090$939,085Dividends payable1,106,085802,604Future income taxes (note 10)47,80847,808Bank indebtedness (note 5)4,925,0002,850,000Subordinated debt (note 5)1,200,0006,500,0007,821,98311,139,497Bank indebtedness (note 5)14,775,00019,700,000Future income taxes (note 10)4,166,8131,347,755Deferred credit (note 10)21,423,57023,661,017Shareholders' equity/(deficit):Shareholder's capital (note 6)131,023,606111,125,039Warrants (note 6)470,702845,000Contributed surplus2,699,5331,471,333Deficit(5,935,549)(4,813,523)128,258,292108,627,849Commitments (note 12)$176,445,658$ 164,476,118ALARIS ROYALTY CORP.Consolidated Statements of Operations and Deficit, UnauditedThree months ended September 30, Nine months ended September 30, 2010200920102009Revenues:Royalties and distributions$ 4,165,073$ 4,334,814$12,253,560$13,275,814Interest and other--2,1903,6374,165,0734,334,81412,255,75013,279,451Expenses:Interest307,642532,5291,176,6341,641,490Non-cash stock basedcompensation (note 8)444,500(103,551)1,330,500764,269Salaries and benefits204,787207,093628,612657,770Corporate and office131,27188,402467,226353,354Legal and accounting fees118,446111,315321,217359,573Stock based compensation (note 8)57,37849,163164,969172,191Depreciation and amortization47,61147,830141,997161,3691,311,635932,7814,231,1554,110,016Net Income before taxes2,853,4383,402,0338,024,5959,169,435Future income tax expense (note 10)45,26352,710138,955282,919Net Income and othercomprehensive income for the period2,808,1753,349,3237,885,6408,886,516Deficit, beginning of period(5,431,149)(12,458,279)(4,813,523)(13,239,854)Dividends to shareholders (note 7)(3,312,575)(1,917,362)(9,007,666)(6,662,782)Deficit, end of period$ (5,935,549)$(11,026,318)$ (5,935,549)$ (11,026,318)Earnings per share, basic$0.20$0.37$0.62$0.97Earnings per share, fully diluted$0.20$0.34$0.59$0.91Weighted average sharesoutstanding, basic13,790,0089,129,89012,692,7939,127,124Weighted average sharesoutstanding, fully diluted14,376,1329,723,45813,278,9179,727,304ALARIS ROYALTY CORP.Consolidated Statements of Cash Flows, UnauditedThree months ended September 30, Nine months ended September 30, 2010200920102009Cash provided by (used in):Operations:Net Income for the period$ 2,808,175$ 3,349,323$ 7,885,640$ 8,876,318Add non-cash items:Depreciation and amortization47,61147,831141,997161,370Non-cash stock based compensation(note 8)444,500(103,551)1,330,500764,269Income tax expense45,26352,710138,955282,9193,345,5493,346,3139,497,09210,084,876Change in non-cash working capital131,383(19,193)(792,064)(73,740)3,476,9323,327,1208,705,02810,011,136Investing: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)Financing:Proceeds from exercise of warrants538,125- 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)379,657Cash, beginning of period1,804,2772,213,7913,826,0001,743,936Cash, end of period$ 1,466,858$ 2,123,593$ 1,466,858$ 2,123,593FOR FURTHER INFORMATION PLEASE CONTACT: Curtis KrawetzAlaris Royalty Corp.Manager, Investor Relations403.221.7305www.alarisroyalty.com