Alaris Royalty Corp.
TSX : AD

Alaris Royalty Corp.

May 04, 2010 17:47 ET

Alaris Royalty Corp. Releases First Quarter Financial Results

CALGARY, ALBERTA--(Marketwire - May 4, 2010) - Alaris Royalty Corp. ("Alaris" or the "Corporation") (TSX:AD) today announced its results for the three months ended March 31, 2010.

After paying dividends of $0.07 per share in January and February, the Corporation increased the dividend rate by 14.3% to $0.08 per share in March totaling $0.22 per share ($2,559,618 in aggregate) for the three months ended March 31, 2010, resulting in a payout ratio of 83% of operating cash flow.

Revenues for the three months ended March 31, 2010 were as expected at $4.2 million compared to $4.6 million in the prior year period. The decrease of 8.8% was due to the net impact of performance adjustments to the annual royalties, most notably the expected decline in distributions from LMS Reinforcing Group ("LMS") partially 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 further purchases of preferred units in LifeMark in October 2009.

For the three months ended March 31, 2010, the Corporation recorded net income of $2.6 million and EBITDA of $3.2 million compared to net income of $2.9 million and EBITDA of $3.6 million for the prior year period. The decrease in net income and EBITDA is due to the decline in revenues as expenses were not materially different compared to the prior year period.

Reconciliation of Net Income to EBITDA (thousands) 3 months ending March 31, 2010 3 months ending March 31, 2009
Net Income (Loss) $ 2,599 $ 2,951
Adjustments to Net Income:        
  Amortization   47   58
  Interest   484   575
  Income tax expense   39   54
EBITDA $ 3,169 $ 3,638

"While the first quarter of 2010 saw the first real impact on our revenues from the challenging year LMS had in 2009, we are encouraged by its recent performance." said Steve King, President and CEO, Alaris Royalty Corp. "Additionally, LifeMark delivered another solid same clinic sales increase of 4.5% for its 2009 fiscal year which increases revenue from LifeMark effective January 1, 2010. The recent monthly results for End of the Roll Carpet & Vinyl ("EOTR") and MEDIchair Ltd. ("MEDIchair") are consistent with the overall recovery of the economy. Also, with the addition of a new partner in the healthcare industry, namely KMH Limited Partnership ("KMH"), we are looking forward to delivering solid and predictable financial results throughout 2010".

Outlook
Alaris' agreements with LifeMark, LMS, EOTR, MEDIchair and KMH (collectively, the "Private Company Partners") are estimated to provide the Corporation approximately $16.3 million of revenues for fiscal 2010. In the next quarter, such agreements call for $3.9 million of revenues for Alaris. General and administrative expenses are estimated at $600,000 per quarter and include all public company costs. Alaris' senior debt facility is drawn to $21.6 million and the interest rate on that debt was 5.25% at March 31, 2010. $6.5 million of subordinated debt is also outstanding with an interest rate of 13% but proceeds from the bought deal financing, announced on April 27, 2010, are expected to be used to reduce the subordinated debt.

"We were pleased to have recently announced a new partner in KMH and following that, a bought deal to finance that transaction as well as to provide more capital to our largest partner, LifeMark. We continue to seek new partnerships in order to further diversify our asset base," said Mr. King.

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 Measure

The term EBITDA ("Non-GAAP Measure"), 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 the Non-GAAP Measure may differ from the methods used by other issuers. Therefore, the Corporation's Non-GAAP Measure 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.

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

This news release contains forward-looking statements. 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, the use of proceeds of the previously announced equity offering as well as statements concerning the Corporation's ability to pay monthly dividends to its shareholders.

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 our ability to identify and close new opportunities with new 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 improve somewhat 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. 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, Unaudited            
             
    March 31,     December 31,  
    2010     2009  
             
Assets            
Current assets:            
  Cash $ 4,966,797   $ 3,826,000  
  Accounts receivable   158,184     2,470  
  Prepaid expenses   138,012     103,472  
  Future income taxes (note 10)   3,075,125     2,996,000  
    8,338,118     6,927,942  
             
Investment tax credit receivable (note 10)   11,030,007     11,030,007  
Future income taxes (note 10)   24,228,085     22,248,900  
Equipment (note 4)   70,656     74,477  
             
Investments (note 3)            
  Preferred LP units   111,174,642     111,124,642  
  Intangible assets   13,026,840     13,070,150  
    124,201,482     124,194,792  
             
  $ 167,868,348   $ 164,476,118  
             
Liabilities and Shareholders' Equity/(Deficit)            
Current liabilities:            
  Accounts payable and accrued liabilities $ 347,412   $ 939,085  
  Dividends payable   941,187     802,604  
  Future income taxes (note 10)   47,808     47,808  
  Bank indebtedness (note 5)   3,541,667     2,850,000  
  Subordinated debt (note 5)   6,500,000     6,500,000  
    11,378,074     11,139,497  
             
Bank indebtedness (note 5)   18,058,333     19,700,000  
Future income taxes (note 10)   4,188,467     1,347,755  
Deferred credit (note 10)   22,917,637     23,661,017  
             
Shareholders' equity/(deficit):            
  Shareholder's capital (note 6)   113,590,934     111,125,039  
  Warrants (note 6)   627,830     845,000  
  Contributed surplus   1,880,733     1,471,333  
  Deficit   (4,773,660 )   (4,813,523 )
    111,325,837     108,627,849  
             
Commitments (note 12)            
Subsequent event (note 13)            
             
  $ 167,868,348   $ 164,476,118  
ALARIS ROYALTY CORP.            
Consolidated Statements of Operations and Deficit, Unaudited            
             
    Three months     Three months  
    ended     ended  
    March 31,     March 31,  
    2010     2009  
             
Revenues:            
  Royalties and distributions $ 4,192,862   $ 4,598,615  
  Interest and other   1,160     1,837  
    4,194,022     4,600,452  
             
Expenses:            
  Interest   483,651     575,479  
  Non-cash stock based compensation (note 8)   441,500     441,044  
  Salaries and benefits   218,212     212,911  
  Corporate and office   211,069     151,465  
  Legal and accounting fees   103,739     137,272  
  Stock based compensation (note 8)   50,213     73,341  
  Depreciation and amortization   47,130     57,938  
    1,555,514     1,649,450  
             
Net Income before taxes   2,638,508     2,951,002  
             
Future income tax expense (note 10)   39,027     54,375  
             
Net Income and other comprehensive income for the period   2,599,481     2,896,627  
             
Deficit, beginning of period   (4,813,523 )   (13,239,854 )
             
Dividends to shareholders (note 7)   (2,559,618 )   (2,828,584 )
             
Deficit, end of period $ (4,773,660 ) $ (13,171,811 )
             
Earnings per share, basic $ 0.22   $ 0.32  
Earnings per share, fully diluted $ 0.21   $ 0.30  
             
Weighted average shares outstanding, basic   11,581,030     9,124,004  
Weighted average shares outstanding, fully diluted   12,133,003     9,727,554  
ALARIS ROYALTY CORP.            
Consolidated Statements of Cash Flows, Unaudited            
             
    Three months     Three months  
    ended     ended  
    March 31,     March 31,  
    2010     2009  
             
Cash provided by (used in):            
             
Operations:            
  Net Income for the period $ 2,599,481   $ 2,896,627  
  Add non-cash items:            
    Depreciation and amortization   47,130     57,938  
    Non cash stock based compensation (note 8)   441,500     441,044  
    Income tax expense   39,027     54,375  
    3,127,138     3,449,984  
             
  Change in non-cash working capital   (781,924 )   131,575  
    2,345,214     3,581,559  
             
Investing:            
  Purchase of preferred LP units   (50,000 )    
    (50,000 )    
             
Financing:            
  Proceeds from exercise of warrants   2,216,625     -  
  Dividends to shareholders   (2,421,042 )   (3,284,375 )
  Repayment of debt   (950,000 )   (300,000 )
    (1,154,417 )   (3,584,375 )
             
Increase/(decrease) in cash   1,140,797     (2,816 )
             
Cash, beginning of period   3,826,000     1,743,936  
             
Cash, end of period $ 4,966,797   $ 1,741,120  

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