Alaris Royalty Corp.
TSX : AD

Alaris Royalty Corp.

July 30, 2009 09:00 ET

Alaris Royalty Corp. Releases Second Quarter Financial Results

CALGARY, ALBERTA--(Marketwire - July 30, 2009) - Alaris Royalty Corp. ("Alaris" or the "Corporation") (TSX:AD) today announced its results for the three and six months ended June 30, 2009.

The Corporation paid dividends of $0.21 per share ($1,916,840 in aggregate) for the three months ended June 30, 2009, resulting in a payout ratio of 58% of operating cash flow.

Revenues for the three months ended June 30, 2009 were as expected at $4.35 million compared to $4.74 million in the prior year period - the decrease of 8.5% was due to the net impact of performance adjustments to the annual royalties. Revenues for the six months ended June 30, 2009 were $8.9 million compared to $9.4 million in the prior year period.

For the three and six months ended June 30, 2009, the Corporation recorded net income of $2.6 million and $5.5 million and EBITDA of $3.4 million and $7.0 million, respectively, compared to $896,000 and $1.8 million of net income and $4.3 million and $8.6 million of EBITDA, respectively, for the prior year period. The increase in net income is due to the restructuring in July 2008 that reduced debt by $83.5 million significantly reducing interest expenses. The decrease in EBITDA is attributed to the increase in corporate expenses due to additional public company costs, non-cash stock based compensation expenses recorded in 2009 as a result of amortizing the fair value of corporate long-term incentive plans (Options and Restricted Share Units), and net decrease in royalty revenues in the period. Revenues were down 5% from the first quarter in 2009, as expected, due to the timing of one of the annual royalty resets.



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Reconciliation of Net Income to 3 months 3 months 6 months 6 months
EBITDA (thousands) ending ending ending ending
June 30, June 30, June 30, June 30,
2009 2008 2009 2008
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Net Income $ 2,630 $ 896 $ 5,527 $ 1,811
Adjustments to Net Income:
Amortization 56 58 114 117
Interest 533 3,342 1,109 6,726
Income tax expense 175 - 230 -
EBITDA $ 3,394 $ 4,296 $ 6,980 $ 8,654
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"We are pleased to be reporting another strong quarter that was in line with estimates that we provided in our first quarter financial results press release," said Steve King, President and CEO. "The visibility of our revenues combined with a simple cost structure, makes it very easy for our shareholders to follow our progress."

Outlook

Alaris' agreements with the private businesses to which it provides alternative financing (the "Private Company Partners" and individually a "Private Company Partner") provide for payments estimated to provide the Corporation approximately $17.7 million of revenues for fiscal 2009. In each of the next two quarters the agreements call for $4.35 million of revenues for Alaris. General and administrative expenses have increased as a direct result of public company costs and are estimated at $2.2 million annually. Alaris' senior debt facility is almost fully drawn to $25 million ($24 million drawn at June 30, 2009) and the interest rate on that debt was 5.25% at June 30, 2009. $6.5 million of subordinated debt is also outstanding with an interest rate of 13%. Cash requirements after net income are expected to continue to be minimal.

"We know what our revenues are scheduled to be for the next two quarters, and we are comfortable with our Partners' ability to pay those royalties. As such, we are confident in our ability to continue to pay monthly dividends to our shareholders", said Mr. King. Alaris plans to continue to seek out new Private Company Partners accretive to the Corporation's earnings per share in the current Private Company Partners and other private businesses that meet Alaris' investment criteria.

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 Corporations 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.

This Non-GAAP measure 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 amount and timing of the payment of dividends by the Corporation, the future financial position or results of the Corporation, business strategy, proposed acquisitions, growth opportunities, budgets, litigation, projected costs 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 2009 and their ability to pay anticipated distributions to the Corporation, as well as statements concerning the Corporation's ability to pay monthly dividends to its shareholders.

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, Unaudited

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June 30, December 31,
2009 2008
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Assets

Current assets:
Cash $ 2,213,791 $ 1,743,936
Accounts receivable 82,133 11,307
Prepaid expenses 29,722 35,417
Future income taxes (note 10) 979,476 3,649,476
Investment tax credit receivable (note 10) - 150,798
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3,305,122 5,590,934

Investment tax credit receivable (note 10) 6,441,259 6,441,259
Future income taxes (note 10) 25,927,218 25,528,693
Equipment (note 4) 76,658 90,458

Investments (note 3):
Preferred LP units 98,124,642 98,124,642
Intangible assets 13,156,766 13,243,384
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111,281,408 111,368,026

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$ 147,031,665 $ 149,019,370
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Liabilities and Shareholders'
Equity/(Deficit)

Current liabilities:
Accounts payable and accrued liabilities $ 447,047 $ 443,553
Dividends payable 639,006 1,094,620
Future income taxes (note 10) 55,000 42,932
Bank indebtedness (note 5) 4,000,000 -
Subordinated debt (note 5) 6,500,000 6,500,000
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11,641,053 8,081,105

Bank indebtedness (note 5) 20,000,000 25,000,000
Future income taxes (note 10) 3,081,988 3,136,988
Deferred credit (note 10) 25,348,780 27,497,912

Shareholders' equity/(deficit):
Shareholder's capital (note 6) 98,360,219 98,278,747
Contributed surplus 1,057,904 264,472
Deficit (12,458,279) (13,239,854)
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86,959,844 85,303,365

Commitments (note 13)
Subsequent events (note 14)

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$ 147,031,665 $ 149,019,370
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ALARIS ROYALTY CORP.
Consolidated Statements of Operations and Deficit, Unaudited

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Three months ended Six months ended
June 30, June 30,
-------------------------- -----------------------------
2009 2008 2009 2008
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Revenues:
Royalties and
distributions $ 4,342,389 $ 4,737,408 $ 8,941,000 $ 9,418,233
Interest and
other 1,800 6,733 3,637 8,233
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4,344,189 4,744,141 8,944,637 9,426,466

Expenses:
Interest 533,482 3,341,893 1,108,961 6,725,708
Non-cash stock
based compensation
(note 8) 426,776 - 867,820 -
Salaries and
benefits 237,766 197,825 450,677 434,911
Corporate and
office 113,686 93,358 265,151 169,866
Legal and
accounting fees 120,986 156,513 258,258 167,878
Stock based
compensation
(note 8) 49,687 - 123,028 -
Depreciation and
amortization 55,600 58,382 113,538 116,762
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1,537,983 3,847,971 3,187,433 7,615,125

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Net Income
before taxes 2,806,206 896,170 5,757,208 1,811,341

Future income
tax expense
(note 10) 175,834 - 230,209 -

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Net Income and
other
comprehensive
income for the
period 2,630,372 896,170 5,526,999 1,811,341

Deficit,
beginning of
period (13,171,811) (13,239,854) (2,542,839)

Distributions
to unitholders
(note 7) - (810,000) - (1,620,000)

Dividends to
shareholders
(note 7) (1,916,840) - (4,745,424) -

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Deficit, end of
period $ (12,458,279) $ $ (12,458,279) $ (2,351,496)
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Earnings per
share, basic $ 0.29 $ 0.60 $ 0.61 $ 1.21
Earnings per
share, fully
diluted $ 0.27 $ 0.60 $ 0.57 $ 1.21

Weighted
average shares
outstanding,
basic 9,127,403 1,500,010 9,125,711 1,500,010
Weighted
average shares
outstanding,
fully diluted 9,730,953 1,500,010 9,729,261 1,500,010
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ALARIS ROYALTY CORP.
Consolidated Statements of Cash Flows, Unaudited

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Three months ended Six months ended
June 30, June 30,
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2009 2008 2009 2008
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Cash provided by
(used in):

Operations:
Net Income for the
period $ 2,630,372 $ 896,170 $ 5,526,999 $ 1,811,341
Add non-cash items:
Depreciation and
amortization 55,600 58,380 113,538 116,762
Stock based
compensation(note 8) 426,776 - 867,820 -
Income tax expense 175,834 - 230,209 -
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3,288,582 954,550 6,738,566 1,925,103

Change in non-cash
working capital (186,126) 172,529 (54,551) (376,014)
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3,102,456 1,127,079 6,684,015 1,552,089

Investing:
Purchase of capital
assets (13,121) - (13,121) -

Financing:
Distributions to
unitholders - (810,000) - (1,620,000)
Dividends to
shareholders (1,916,664) - (5,201,039) -
Repayment of debt (700,000) - (1,000,000) -
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(2,616,664) (810,000) (6,201,039) (1,620,000)

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Increase/(decrease)
in cash 472,671 317,079 469,855 (67,912)

Cash, beginning of
period 1,741,120 1,214,348 1,743,936 1,599,339

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Cash, end of period $ 2,213,791 $ 1,531,427 $ 2,213,791 $ 1,531,427
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Contact Information

  • Alaris Royalty Corp.
    Curtis Krawetz
    Manager, Investor Relations
    (403) 221-7305
    Website: www.alarisroyalty.com