Alaris Royalty Corp.
TSX : AD

Alaris Royalty Corp.

March 11, 2010 08:00 ET

Alaris Royalty Corp. Increases Monthly Dividend By 14.3% and Announces 2009 Financial Results

CALGARY, ALBERTA--(Marketwire - March 11, 2010) - Dividend Increase -Alaris Royalty Corp. ("Alaris" or the "Corporation") (TSX:AD) announced today that effective immediately, the Board of Directors of the Corporation has determined to increase the monthly dividend on the Corporation's outstanding voting common shares and non-voting common shares (collectively, the "ARC Shares") by $0.01 per ARC Share to $0.08 per ARC Share (or $0.96 on an annualized basis) from $0.07 per ARC Share ($0.84 on an annualized basis). "This represents an increase of 14.3% in our monthly dividend and reflects the visibility and confidence that Alaris has in our operations as well as our future growth opportunities", said Steve King, President and CEO of the Corporation.

As such, the Board of Directors of the Corporation has declared a dividend of $0.08 per ARC Share to be payable on April 15, 2010 to holders of ARC Shares of record at the close of business on March 31, 2010. This dividend is designated by the Corporation to be an eligible dividend for the purpose of the Income Tax Act (Canada) and any similar provincial or territorial legislation. An enhanced dividend tax credit applies to eligible dividends paid to Canadian residents.

Financial Results for the Year Ended December 31, 2009

Alaris is also pleased to announce its results for the year ended December 31, 2009. The Corporation paid dividends of $0.94 per share ($9.4 million in aggregate) for the year ended December 31, 2009, resulting in a payout ratio of 68% of operating cash flow for the year.

Revenues for the year ended December 31, 2009 were as expected at $18.1 million compared to $19.0 million in 2008. The 5.0% decrease was due to the net impact of performance adjustments to the annual royalties and distributions from the Corporation's four current private companies (collectively, the "Private Company Partners"). Fourth quarter revenues were marginally higher than the previous quarter as a result of an additional $12 million transaction with LifeMark Health Limited Partnership ("LifeMark Health") in October 2009 with an 18.2% yield based on the first year of scheduled distributions.

For the year ended December 31, 2009, the Corporation recorded net income of $17.5 million, EBITDA of $14.0 million and Normalized EBITDA of $15.7 million compared to a net loss of $3.0 million, $7.8 million of EBITDA and $16.5 million of Normalized EBITDA for the year ended December 31, 2008. The significant increase in net income can be attributed to the $7.9 million in non-cash stock option expenses in July 2008, a $5.9 million recovery in future income tax expense as a result of the extension of expiry dates for investment tax credits (more information below), decreased interest costs resulting from the repayment of $83.5 million in subordinated debt in July of 2008, and $1.5 million in future income tax expenses recorded in September 2008. The modest decline in Normalized EBITDA is a result of increased administrative costs that come from being a public company and the net impact of performance metric adjustments to the annual royalties and distributions from the Private Company Partners.

Net income exceeded EBITDA in 2009 as a result of the accounting impact of the amendments in federal tax legislation which resulted in extending expiry dates for investment tax credits ("ITCs"). The impact on Alaris was positive as ITCs that were previously deemed unusable, due to expiry under the previous rules, are now available for use by the Corporation. The accounting impact is significant as Alaris was required to book the "recovery" of those new income tax assets, resulting in an income tax recovery of $5.9 million rather than a future income tax expense as has been typical since July 2008.



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Reconciliation of Net Income to EBITDA Year ending Year ending
(thousands) December 31, 2009 December 31, 2008
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Net Income $17,497 $(3,052)
Adjustments to Net Income:
Amortization 209 235
Interest 2,166 8,881
Income tax expense (5,904) 1,697
EBITDA $13,968 $ 7,761
Normalizing Adjustments:
Non-cash stock based compensation 1,715 8,232
Tax and financial diligence costs - 491
Normalized EBITDA $15,683 $16,484
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"While 2009 was a challenging year at the outset, Alaris exits the year well positioned for growth," said Darren Driscoll, CFO of Alaris. "Using our unique "top-line" structure to provide financing to companies with healthy balance sheets and a proven track record of performance proved beneficial in each of our four Private Company Partners through a difficult economic environment. LifeMark, MEDIchair and End of the Roll have had robust results throughout 2009 and LMS is recovering as we expected with margins returning to close to historical levels and volumes to recover gradually as indicated by a significant increase in recent project bid activity".

Outlook

Alaris' agreements with the Private Company Partners provide for royalties and distributions estimated to provide the Corporation with approximately $15.2 million of revenues for 2010. General and administrative expenses are currently estimated at $2.4 million annually and include all public company costs. The senior debt facility is almost fully drawn at $22.55 million and the annual interest rate on that debt is 5.25% at December 31, 2009. $2.85 million of the senior facility will be repaid in 2010 as per the terms of the December 2009 facility renewal. $6.5 million of demand, subordinated debt is outstanding with an annual interest rate of 13%. Cash requirements after net income are expected to be minimal, as current capital expenditures consist of office furniture and computer equipment.

Alaris' revenue outlook for 2010 includes a drop in revenues from current operations of approximately 16% compared to 2009 due mostly to the decline in 2010 distributions from LMS partially offset by increases in distributions from LifeMark. These results are expected to improve with the addition of new partners in 2010. "We are seeing a significant increase in the number of companies interested in our unique brand of capital and we look forward to diversifying our company with new partners in the near term", said Steve King, President and CEO of Alaris.

The Consolidated Balance Sheet, Statement of Operations and Deficit and Statement of Cash Flows of Alaris, 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 Measures

The terms EBITDA and Normalized EBITDA ("Non-GAAP Measures"), are financial measures used in this news release that are not standard measures under Canadian generally accepted accounting principles ("GAAP"). The Corporation's method of calculating the Non-GAAP Measures may differ from the methods used by other issuers. Therefore, the Corporation's Non-GAAP Measures 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.

Normalized EBITDA refers to EBITDA excluding items that are non-recurring in nature. Items include expenses incurred in connection with the Acquisition and include non-cash stock based compensation and other transaction related costs.

These Non-GAAP measures 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

Alaris' public communications often include written or oral statements which contain forward-looking information. Statements of this type are included in this news release and may be included in our other filings with Canadian securities regulators, or in our other communications. 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 of such words. All such statements are made pursuant to the applicable provisions of, and are intended to be forward-looking statements under applicable Canadian securities legislation. Statements containing forward-looking information include, but are not limited to, comments with respect to Alaris' revenue and expense outlook, expected debt repayments, objectives and priorities for 2010 and beyond, growth strategies, expectations or future actions, and the results of or outlook for our operations and those of our Private Company Partners, or for the Canadian and U.S. economies.

By their nature, forward-looking statements require us 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 our ability to identify and close new opportunities with new Private Company Partners are material factors considered when setting Alaris' strategic priorities and objectives, and the outlook for Alaris' business. 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, and that Alaris will have the ability to raise required equity and/or debt financing on acceptable terms. Alaris has also assumed that capital markets will improve somewhat and that the Canadian dollar will strengthen modestly relative to the U.S. dollar. In determining expectations for economic growth, Alaris primarily considered historical economic data provided by the Canadian and U.S. governments and their agencies.

There can be no assurance that the 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. 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

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December 31,
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2009 2008
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Assets
Current assets:
Cash $ 3,826,000 $ 1,743,936
Accounts receivable 2,470 11,307
Prepaid expenses 103,472 35,417
Future income taxes (note 10) 2,996,000 3,649,476
Investment tax credit receivable (note
10) - 150,798
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6,927,942 5,590,934

Investment tax credit receivable (note
10) 11,030,007 6,441,259
Future income taxes (note 10) 22,248,900 25,528,693
Equipment (note 4) 74,477 90,458

Investments (note 3)
Preferred LP units 111,124,642 98,124,642
Intangible assets 13,070,150 13,243,384
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124,194,792 111,368,026

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$ 164,476,118 $ 149,019,370
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Liabilities and Shareholders'
Equity/(Deficit)
Current liabilities:
Accounts payable and accrued
liabilities $ 939,085 $ 443,553
Dividends payable 802,604 1,094,620
Future income taxes (note 10) 47,808 42,932
Bank indebtedness (note 5) 2,850,000 -
Subordinated debt (note 5) 6,500,000 6,500,000
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11,139,497 8,081,105

Bank indebtedness (note 5) 19,700,000 25,000,000
Future income taxes (note 10) 1,347,755 3,136,988
Deferred credit (note 10) 23,661,017 27,497,912

Shareholders' equity/(deficit):
Shareholder's capital (note 6) 111,125,039 98,278,747
Warrants (note 6) 845,000 -
Contributed surplus 1,471,333 264,472
Deficit (4,813,523) (13,239,854)
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108,627,849 85,303,365

Commitments (note 13)
Subsequent event (note 14)

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$ 164,476,118 $ 149,019,370
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ALARIS ROYALTY CORP.
Consolidated Statements of Operations and Deficit

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Year ended
December 31,
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2009 2008
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Revenues:
Royalties and distributions (note 3) $ 18,066,783 $ 18,934,364
Interest and other 4,787 96,380
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18,071,570 19,030,744

Expenses:
Interest 2,166,257 8,881,023
Non-cash stock based compensation (Note
8) 1,714,209 8,232,105
Stock based compensation (Note 8) 221,703 102,306
Salaries and benefits 984,933 994,676
Legal and accounting fees 471,848 664,922
Corporate and office 460,018 520,047
Restructuring and financing (Note 1) - 491,032
Financing 250,000 265,000
Depreciation and amortization 209,449 234,896
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6,478,417 20,386,007

Net Income (Loss) before taxes 11,593,153 (1,355,263)

Future income tax expense (recovery)
(note 10) (5,903,511) 1,696,676

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Net Income (Loss) and other
comprehensive income for the year 17,496,664 (3,051,939)

Deficit, beginning of year (13,239,854) (2,542,839)

Distributions to unitholders (note 7) - (2,166,000)

Dividends to shareholders (note 7) (9,070,333) (5,479,076)

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Deficit, end of year $ (4,813,523) $ (13,239,854)
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Earnings per share, basic $ 1.83 $ (0.65)
Earnings per share, fully diluted $ 1.83 $ (0.65)

Weighted average shares outstanding,
basic 9,574,916 4,691,024
Weighted average shares outstanding,
fully diluted 9,574,916 4,691,024
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ALARIS ROYALTY CORP.
Consolidated Statements of Cash Flows

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Year ended
December 31,
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2009 2008
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Cash provided by (used in):

Operations:
Net Income (Loss) for the year $ 17,496,664 $ (3,051,939)
Add non-cash items:
Depreciation and amortization 209,449 234,896
Stock based compensation (note 8) 1,714,209 8,232,105
Income tax expense (recovery) (5,903,511) 1,696,676
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13,516,811 7,111,738

Change in non-cash working capital 436,314 (278,512)
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13,953,125 6,833,226

Investing:
Purchase of Preferred LP Units (13,000,000) -
Purchase of capital assets (20,234) (10,239)
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(13,020,234) (10,239)

Financing:
Distributions to unitholders - (2,166,000)
Dividends to shareholders (9,362,348) (4,384,456)
New share capital 12,961,521 51,730,998
Repayment of debt (2,450,000) (51,500,000)
Repurchase odd-lot shares - (358,932)
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1,149,173 (6,678,390)

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Increase in cash 2,082,064 144,597

Cash, beginning of year 1,743,936 1,599,339

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Cash, end of year $ 3,826,000 $ 1,743,936
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Contact Information

  • Alaris Royalty Corp.
    Investor Relations
    Curtis Krawetz
    403.221.7305