Contact Information: Alaris Royalty Corp. Curtis Krawetz Manager, Investor Relations 403.221.7305 www.alarisroyalty.com
CALGARY, ALBERTA--(Marketwire - March 28, 2011) - Alaris Royalty Corp. (TSX:AD) ("Alaris" or the "Corporation") is pleased to announce its financial results for the year ended December 31, 2010.
The Corporation paid dividends of $0.93 per share ($12.0 million in aggregate) for the year ended December 31, 2010. The current annual dividend rate is $1.02 per share.
Revenues for the year ended December 31, 2010 were as expected at $16.7 million compared to $18.1 million in 2009. The 7.7% decrease was due to the lagged effect from the previously announced outlook on March 13, 2009, in which Alaris management concluded that the performance adjustment metric for LMS Reinforcing Steel Group (or "LMS) would be materially impacting distributions starting January 1, 2010 as a result of the temporary problems it faced during the global financial crisis of 2008 and 2009. Please refer to the March 13, 2009 press release titled, "Alaris Royalty Corp. Releases 2008 Financial Results and Reduces Monthly Dividend Starting March, 2009" for a full explanation of the adjustment. This press release can be found on the Corporation's website at www.alarisroyalty.com or on SEDAR under the Corporation's profile at www.sedar.com.
The net adjustments to the annual distributions and royalties from the Corporation's current private companies (collectively, the "Private Company Partners") resulted in the revenue decrease of 7.7% for 2010. Fourth quarter revenues were marginally higher than the previous quarter as a result of the previously-announced $32.5 million transaction involving the formation of Solowave Design Limited Partnership in mid-December 2010 with a 15.4% yield based on the first year of scheduled distributions.
For the year ended December 31, 2010, the Corporation recorded net income of $10.0 million, EBITDA of $12.2 million and Normalized EBITDA of $14.1 million compared to a net income of $17.5 million, EBITDA of $14.0 million and Normalized EBITDA of $15.7 million for the year ended December 31, 2009. The decrease in EBITDA and Normalized EBITDA was also expected by management because of the circumstances regarding LMS which were explained above. The decrease in the LMS distribution was offset by growth in the year over year distributions from LifeMark Health Limited Partnership (+35%) as well as new transactions with Solowave Design Limited Partnership and KMH Limited Partnership during the year. Most of the decrease in net income can be attributed to a $5.9 million non-cash recovery of future income tax expense in the prior year which increased net income in 2009 as a result of the extension of expiry dates for investment tax credits in the prior year. Interest costs were down 30% from 2009, a direct result of the repayment of the remaining $6.5 million in subordinated debt.
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Reconciliation of Net Income to EBITDA Year ending Year ending
(thousands) December 31, 2010 December 31, 2009
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Net Income $ 9,986 $17,497
Adjustments to Net Income:
Amortization 190 209
Interest 1,514 2,166
Income tax expense (recovery) 546 (5,904)
EBITDA $12,236 $13,968
Normalizing Adjustments:
Non-cash stock based compensation 1,873 1,715
Normalized EBITDA $14,109 $15,683
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"2010 was an important year for Alaris as we added two new high quality Private Company Partners, increased our position in a current Private Company Partner, and increased our revenue and EBITDA in each of our last three quarters. We continue to see strong, consistent performance from each of our six Private Company Partners including continued improvement in the financial results of LMS," said Darren Driscoll, CFO of Alaris. "In 2010, we increased our monthly dividend rate twice (in March and again in December), repaid all of our subordinated debt, increased our diversification and are poised for continued growth in 2011".
Outlook
Alaris' agreements with its Private Company Partners provide for royalties and distributions estimated to provide the Corporation with approximately $22.4 million of revenues for 2011. General and administrative expenses are currently estimated at $2.5 million annually and include all public company costs. The senior debt facility is at $29.2 million and the annual interest rate on that debt is 6.5% at December 31, 2010. $3 million has been repaid subsequent to year end with warrant proceeds. 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 2011 includes an increase in revenues from current operations of approximately 34% compared to 2010 due mostly to the addition of Solowave late in 2010 along with consistent growth from the other Private Company Partners. "With every new Private Company Partner we add, and every successful financing we close, we see an increase in the number of companies interested in our unique brand of capital and we look forward to continuing to diversifying our company in 2011", 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 under the Corporation's profile at www.sedar.com and the Corporation's 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, objectives and priorities for 20112 and beyond, growth strategies 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 2011 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 continue to grow moderately in 2011, that further quality opportunities will exist for Alaris with new Private Company Partners, 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.
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ALARIS ROYALTY CORP.
Consolidated Balance Sheets
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December 31,
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2010 2009
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Assets
Current assets:
Cash $ 1,816,868 $ 3,826,000
Accounts receivable 688,514 2,470
Prepaid expenses 343,184 103,472
Future income taxes (note 10) - 2,996,000
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2,848,566 6,927,942
Investment tax credit receivable (note 10) 10,922,393 11,030,007
Future income taxes (note 10) 25,527,962 22,248,900
Equipment (note 4) 69,671 74,477
Investments (note 3)
Preferred LP units 157,363,963 111,124,642
Intangible assets 12,896,916 13,070,150
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170,260,879 124,194,792
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$209,629,471 $ 164,476,118
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Liabilities and Shareholders' Equity/(Deficit)
Current liabilities:
Accounts payable and accrued liabilities $ 1,421,992 $ 939,085
Dividends payable 1,396,262 802,604
Future income taxes (note 10) - 47,808
Bank indebtedness (note 5) - 2,850,000
Subordinated debt (note 12) - 6,500,000
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2,818,254 11,139,497
Bank indebtedness (note 5) 29,200,000 19,700,000
Future income taxes (note 10) 4,176,890 1,347,755
Deferred credit (note 10) 20,795,507 23,661,017
Shareholders' equity/(deficit):
Shareholder's capital (note 6) 156,858,637 111,125,039
Warrants (note 6) 405,306 845,000
Contributed surplus 2,831,112 1,471,333
Deficit (7,456,235) (4,813,523)
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152,638,820 108,627,849
Commitments (note 14)
Subsequent event (note 15)
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$209,629,471 $ 164,476,118
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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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2010 2009
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Revenues:
Royalties and distributions (note 3) $ 16,657,034 $ 18,066,783
Interest and other 2,190 4,787
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16,659,224 18,071,570
Expenses:
Interest 1,513,863 2,166,257
Non-cash stock based compensation (Note 8) 1,872,830 1,714,209
Stock based compensation (Note 8) 226,105 221,703
Salaries and benefits 1,060,915 984,933
Legal and accounting fees 443,262 471,848
Corporate and office 626,990 460,018
Financing 193,850 250,000
Depreciation and amortization 190,028 209,449
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6,127,843 6,478,417
Net Income before taxes 10,531,381 11,593,153
Future income tax expense/(recovery) (note 10) 545,609 (5,903,511)
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Net Income and other
comprehensive income for the year 9,985,772 17,496,664
Deficit, beginning of year (4,813,523) (13,239,854)
Dividends to shareholders (note 7) (12,628,484) (9,070,333)
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Deficit, end of year $ (7,456,235) $ (4,813,523)
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Earnings per share, basic $ 0.76 $ 1.83
Earnings per share, fully diluted $ 0.73 $ 1.83
Weighted average shares outstanding, basic 13,104,165 9,574,916
Weighted average shares outstanding,
fully diluted (note 13) 13,651,879 9,574,916
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ALARIS ROYALTY CORP.
Consolidated Statements of Cash Flows
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Year ended December 31,
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2010 2009
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Cash provided by (used in):
Operations:
Net Income for the year $ 9,985,772 $ 17,496,664
Add non-cash items:
Depreciation and amortization 190,028 209,449
Stock based compensation (note 8) 1,872,830 1,714,209
Income tax expense/(recovery) (note 10) 545,609 (5,903,511)
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12,594,239 13,516,811
Change in non-cash working capital (442,850) 436,314
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12,151,389 13,953,125
Investing:
Purchase of Preferred LP Units (46,239,320) (13,000,000)
Purchase of capital assets (11,989) (20,234)
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(46,251,309) (13,020,234)
Financing:
Dividends to shareholders (12,034,829) (9,362,348)
New share capital 39,487,617 12,961,521
Proceeds from exercise of warrants 4,488,000 -
Repayment of senior debt (2,850,000) (2,450,000)
Repayment of subordinated debt (6,500,000) -
New borrowing of senior debt 9,500,000 -
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32,090,788 1,149,173
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Increase (decrease) in cash (2,009,132) 2,082,064
Cash, beginning of year 3,826,000 1,743,936
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Cash, end of year $ 1,816,868 $ 3,826,000
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