Alaris Royalty Corp.
TSX : AD

Alaris Royalty Corp.

November 03, 2009 09:00 ET

Alaris Royalty Corp. Releases Third Quarter Financial Results

CALGARY, ALBERTA--(Marketwire - Nov. 3, 2009) - Alaris Royalty Corp. (TSX:AD) ("Alaris" or the "Corporation") today announced its results for the three and nine months ended September 30, 2009.

The Corporation paid dividends of $0.21 per share ($1,917,362 in aggregate) for the three months ended September 30, 2009, resulting in a payout ratio of 58% of operating cash flow, the same percentage as was paid out in the previous quarter.

Revenues for the three and nine months ended September 30, 2009 were as expected at $4.33 million and $13.3 million compared to $4.76 million and $14.2 million in the prior year periods - the decreases of 8.9% and 6.4% respectively, were due to the net impact of performance adjustments to the annual royalties. Revenues were unchanged compared to the previous quarter.

For the three and nine months ended September 30, 2009, the Corporation recorded net income of $3.3 million and $8.9 million and EBITDA of $4.0 million and $11.0 million, respectively, compared to net losses of $7.4 million and $5.5 million and Normalized EBITDA of $4.2 million and $12.9 million respectively, for the prior year periods. The increase in net income is due to the restructuring in July 2008 that reduced debt by $83.5 million significantly reducing interest expenses; and non-cash stock based compensation expenses incurred in the third quarter of 2008. 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 a net decrease in royalty revenues in the period. Net income increased by $0.4 million in the current quarter compared to the previous quarter as administrative expenses declined and there was a recovery of non-cash stock based compensation costs previously expensed.



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Reconciliation of Net Income 3 months 3 months 9 months 9 months
to EBITDA (thousands) ending ending ending ending
Sept 30, Sept 30, Sept 30, Sept 30,
2009 2008 2009 2008
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Net Income $ 3,349 ($7,355) $ 8,876 ($5,543)
Adjustments to Net Income:
Amortization 48 59 161 176
Interest 533 1,552 1,641 8,278
Income tax expense 53 1,544 283 1,544
EBITDA $ 3,394 ($4,224) $ 10,961 $ 4,455
Normalizing Adjustments:
Non-cash stock based
compensation - 7,933 - 7,933
Tax and financial diligence
costs - 491 - 491
Normalized EBITDA $ 3,394 $ 4,224 $ 10,961 $ 12,879
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"We are pleased with the recent performance of each of our Private Company Partners," said Steve King, President and CEO, Alaris Royalty Corp. "LifeMark and MEDIchair have had robust results throughout the economic events of the past twelve months and LMS and End of the Roll's recent monthly results are consistent with the overall recovery of the economy. We remain confident in our Partners ability to grow their businesses and in turn our ability to pay consistent dividends to our shareholders".

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 $18.0 million of revenues for fiscal 2009. In the fourth quarter, the agreements call for $4.78 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 ($23.5 million drawn at September 30, 2009) and the interest rate on that debt was 5.25% at September 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 were pleased to have successfully raised $13.8 million in a bought deal in October which provided further capital to our strongest performing Partner, LifeMark Health, and look forward to diversifying our company with new Partnerships in the near term", 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 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. The Corporation did not use Normalized EBITDA when disclosing any 2009 results.

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 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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September 30, December 31,
2009 2008
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Assets

Current assets:
Cash $ 2,123,593 $ 1,743,936
Accounts receivable 35,854 11,307
Prepaid expenses 73,564 35,417
Future income taxes (note 10) 670,986 3,649,476
Investment tax credit receivable (note 10) 1,623,342 150,798
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4,527,339 5,590,934
Investment tax credit receivable (note 10) 4,817,917 6,441,259
Future income taxes (note 10) 23,568,017 25,528,693
Equipment (note 4) 72,264 90,458

Investments (note 3):
Preferred LP units 99,124,642 98,124,642
Intangible assets 13,113,457 13,243,384
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112,238,099 111,368,026

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$ 145,223,636 $ 149,019,370
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Liabilities and Shareholders' Equity

Current liabilities:
Accounts payable and accrued liabilities $ 425,418 $ 443,553
Dividends payable 639,178 1,094,620
Future income taxes (note 10) 55,000 42,932
Bank indebtedness (note 5) 5,875,000 -
Subordinated debt (note 5) 6,500,000 6,500,000
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13,494,596 8,081,105

Bank indebtedness (note 5) 17,625,000 25,000,000
Future income taxes (note 10) 1,392,925 3,136,988
Deferred credit (note 10) 24,422,862 27,497,912

Shareholders' equity:
Shareholder's capital (note 6) 98,389,739 98,278,747
Contributed surplus 924,832 264,472
Deficit (11,026,318) (13,239,854)
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88,288,253 85,303,365

Commitments (note 13)
Subsequent events (note 14)
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$ 145,223,636 $ 149,019,370
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ALARIS ROYALTY CORP.
Consolidated Statements of Operations and Deficit, Unaudited


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Three months ended Nine months ended
September 30, September 30,
-----------------------------------------------------------
2009 2008 2009 2008
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Revenues:
Royalties
and
distributions $ 4,334,814 $ 4,759,438 $ 13,275,814 $ 14,177,670
Interest and
other - 65,617 3,637 73,850
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4,334,814 4,825,055 13,279,451 14,251,520

Expenses:
Interest 532,529 1,552,536 1,641,490 8,278,244
Non-cash
stock based
compensation
(note 8)
RSUs and
Options (103,550) - 764,296 -
Acquisition
(note 1) - 7,933,333 - 7,933,333
Salaries and
benefits 207,093 332,899 657,770 767,810
Corporate
and office 88,402 123,608 353,552 293,475
Legal and
accounting
fees 111,315 143,403 369,573 311,280
Bank fees - 491,049 - 491,049
Stock based
compensation
(note 8) 49,163 - 172,191 -
Depreciation
and
amortization 47,830 59,242 161,369 176,003
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932,781 10,636,070 4,120,214 18,251,194
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Net Income
before taxes 3,402,033 (5,811,015) 9,159,237 (3,999,674)
Future
income tax
expense
(note 10) 52,710 1,543,735 282,919 1,543,735
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Net Income
and other
comprehensive
income for
the period 3,349,323 (7,354,750) 8,876,318 (5,543,409)
Deficit,
beginning of
period (12,458,279) (2,351,498) (13,239,854) (2,542,839)
Distributions
to unitholders
(note 7) - (546,000) - (2,166,000)
Dividends to
shareholders
(note 7) (1,917,362) (2,195,733) (6,662,782) (2,195,733)
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Deficit, end
of period $(11,026,318) $ (12,447,981) $ (11,026,318) $ (12,447,981)
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Earnings per
share, basic $ 0.37 $ (1.12) $ 0.97 $ (1.73)
Earnings per
share, fully
diluted $ 0.34 $ (1.12) $ 0.91 $ (1.73)
Weighted
average
shares
outstanding,
basic 9,129,890 6,571,541 9,127,124 3,202,853
Weighted
average
shares
outstanding,
fully
diluted 9,723,458 6,971,721 9,727,304 3,337,220
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ALARIS ROYALTY CORP.
Consolidated Statements of Cash Flows, Unaudited

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Three months ended Nine months ended
September 30, September 30,
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2009 2008 2009 2008
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Cash provided by
(used in):
Operations:
Net Income for the
period $ 3,349,323 $ (7,354,750) $ 8,876,318 $ (5,543,409)
Add non-cash
items:
Depreciation and
amortization 47,831 59,242 161,370 176,003
Stock based
compensation
(note 8) (103,551) 7,933,333 764,269 7,933,333
Income tax expense 52,710 1,543,735 282,919 1,543,735
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3,346,313 2,181,560 10,084,876 4,109,662
Change in non-cash
working capital (19,193) (44,333) (73,740) (420,347)
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3,327,120 2,137,227 10,011,136 3,689,315

Investing:
Purchase of
equipment (128) (7,985) (13,249) (7,985)
New preferred
interests (1,000,000) - (1,000,000) -

Financing:
Distributions to
unitholders - (546,000) - (2,166,000)
Dividends to
shareholders (1,917,190) (1,097,867) (7,118,230) (1,097,867)
Repayment of debt (500,000) (51,500,000) (1,500,000) (51,500,000)
New share capital - 51,730,998 - 51,730,998
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(2,417,190) (1,412,869) (8,618,230) (3,032,869)
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Increase/(decrease)
in cash (90,198) 716,373 379,657 648,461
Cash, beginning of
period 2,213,791 1,531,427 1,743,936 1,599,339
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Cash, end of
period $ 2,123,593 $ 2,247,800 $ 2,123,593 $ 2,247,800
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