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Press release from Marketwire

Alaris Royalty Corp. Releases Second Quarter Financial Results

Friday, July 27, 2012

Alaris Royalty Corp. Releases Second Quarter Financial Results08:00 EDT Friday, July 27, 2012CALGARY, 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, 20123 months ending June 30, 20116 months ending June 30, 20126 months ending June 30, 2011Net Income$4,160$22,711$8,135$25,636Adjustments to Net Income:Amortization27425390Interest497424623843Income tax expense5337,7271,9348,844EBITDA$5,217$30,904$10,745$35,413Normalizing Adjustments:Gain on reduction of LifeMark interest-23,816-23,816Gain on sale of intangible assets-3,892-3,892Normalized EBITDA$5,217$3,196$10,745$7,705OutlookAlaris' 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 30December 3120122011AssetsCash and cash equivalents$4,892,646$3,888,465Prepayments62,397119,508Trade and other receivables251,7563,443,679Current Assets5,206,7997,451,652Promissory note receivable1,250,000-Equipment66,27166,743Intangible assets6,615,6696,661,138Preferred LP Units249,288,757207,408,290Investment tax credit receivable10,922,39310,922,393Deferred income taxes12,689,36213,967,984Non-current assets280,832,452239,026,548Total Assets$286,039,251$246,478,200LiabilitiesAccounts payable and accrued liabilities$2,378,672$1,546,705Dividends payable2,199,4661,850,145Income taxes payable102,01867,590Loans and borrowings83,333-Current Liabilities4,763,4893,464,440Loans and borrowings416,6676,500,000Non-current liabilities416,6676,500,000Total Liabilities$5,180,156$9,964,440EquityShare capital$247,943,285$200,822,160Equity reserve5,242,6774,626,500Fair value reserve2,330,4392,292,939Translation reserve(96,145)(124,947)Retained Earnings25,438,83928,897,108Total Equity$280,859,095$236,513,760Total Liabilities and Equity$286,039,251$246,478,200Alaris Royalty Corp.Condensed consolidated statement of comprehensive income (unaudited)Three months ended June 30Six months ended June 302012201120122011RevenuesRoyalties and distributions$ 7,337,772$ 5,235,584$ 14,268,991$ 10,870,903Interest and other(99,175)13,7787,36013,778Gain on reduction of partner interests-23,815,973-23,815,973Gain on sale of intangible assets-3,891,560-3,891,560Total Revenue7,238,59732,956,89514,276,35138,592,214Salaries and benefits1,218,7401,212,6701,451,5501,436,007Corporate and office216,745191,012513,372468,151Legal and accounting fees343,672130,518528,998243,568Non-cash stock-based compensation349,488518,353698,9771,031,418Depreciation and amortization26,81842,45953,35789,631Subtotal2,155,4632,095,0123,246,2543,268,775Earnings from operations5,083,13430,861,88311,030,09735,323,439Finance cost496,846423,994623,025843,393Unrealized foreign exchange (gain)/loss(335,812)-(27,525)-Earnings before taxes4,922,10030,437,88910,434,59734,480,046Current income tax expense228,890-365,563-Deferred income tax expense533,2317,727,3801,934,1898,844,033Earnings$ 4,159,979$ 22,710,509$ 8,134,845$ 25,636,013Other comprehensive incomeNet change in fair value of available-for-sale financial assets50,000544,42950,0002,280,975Tax 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 gain3,001,997-3,001,997Foreign currency translation differences238,418-28,802-Other comprehensive income for the period, net of income tax275,918(20,537,601)66,302(19,018,123)Total comprehensive income for the period$ 4,435,897$ 2,172,908$ 8,201,147$ 6,617,890Earnings per shareBasic earnings per share$0.21$1.34$0.42$1.52Fully diluted earnings per share$0.20$1.30$0.40$1.47Weighted average shares outstandingBasic19,589,15316,913,16319,532,88116,863,856Fully Diluted20,301,79917,492,07520,214,64917,419,316Alaris Royalty Corp.Condensed consolidated statement of cash flows (unaudited)For the six months ended June 3020122011Cash flows from operating activitiesEarnings from the period$8,134,845$25,636,013Adjustments for:Finance costs623,025843,393Deferred income tax expense1,934,1898,844,033Depreciation and amortization53,35789,631Unrealized 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 compensation698,9771,031,41811,409,5088,736,955Change in:-trade and other receivables3,194,749649,010-prepayments57,111286,176-trade and other payables866,395460,722Cash generated from operating activities15,527,76310,132,863Interest paid(623,025)(843,393)Net cash from operating activities$14,904,738$9,289,470Cash flows from investing activitiesAcquisition of equipment(7,417)(5,104)Acquisition/disposition of Preferred LP Units(41,775,150)(670,145)Proceeds from reduction in Preferred LP Units-65,000,000Net cash from/(used in) investing activities$(41,782,567)$64,324,751Cash flows from financing activitiesNew share capital49,042,500-Share issue costs(2,672,241)-Proceeds from exercise of warrants-3,633,000Borrowing of senior debt43,000,000-Repayment of Senior debt(49,000,000)(29,200,000)Promissory notes issued1,250,000-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 equivalents1,004,18139,345,592Cash and cash equivalents, Beginning of period3,888,4651,816,868Cash and cash equivalents, End of period$4,892,646$41,162,460FOR FURTHER INFORMATION PLEASE CONTACT: Curtis KrawetzAlaris Royalty Corp.Manager, Investor Relations403.221.7305