TerraVest announces third quarter results for fiscal 2015

VEGREVILLE, AB, Aug. 11, 2015 /CNW/ - TerraVest Capital Inc. (TSX: TVK) ("TerraVest" or the "Company") a manufacturer of fuel containment and pressure vessels as well as an oil field service provider is pleased to announce its results for three months ended June 30th 2015.

The third quarter is generally TerraVest's slowest quarter on a seasonal basis, which was further impacted by reduced activity levels in the oil and sector. However, despite these challenges, Management is pleased with the overall performance in the quarter and remains positive of the long-term outlook for the Company. During the quarter, TerraVest closed on the acquisition of Signature Truck Systems, which further diversified the Company's cash flows away from the Oil & Gas segment and contributed to the overall growth in revenue, EBITDA and cash flow of the Company versus the comparable period ended June 30th, 2014. The Dividend Payout ratio of the Company remains strong at 33% for the quarter.

Highlights in the quarter include:

  • Revenues of $46,305 which represents an increase of 56% over the third quarter of fiscal 2014;
  • Adjusted EBITDA of $7,285 which represents an increase of 54% over the third quarter of fiscal 2014;
  • Free cash flow of $5,745 which represents an increase of 73% over the third quarter of fiscal 2014;
  • Earnings per share of $0.12 for the quarter and $0.53 for the nine months ended June 30th, 2015 compared to $0.12   and $0.42 for the comparable period last year, strong performance despite the economic conditions facing the Western Canadian economy;
  • Closing of the Signature Truck Systems acquisition which further enhanced TerraVest's exposure to the U.S. market as well as non-oil and gas related operations; and
  • Issuance of a 5 year, $25,000 principal, 7.0% coupon, convertible debenture.
  • Repayment of $19,000 promissory note and $6,000 bridge loan for acquisition of Signature Truck Systems.


"Although our oil & gas segments continue to face the challenges of today's macroeconomic trends, TerraVest is performing well and maintains a strong balance sheet. We are continuing to benefit from our U.S. geographic exposure and the fuel containment segment's diversity away from declining world oil prices. We expect that in excess of 50% of our EBITDA will continue to be generated from non-oil and gas related businesses. Further to this, we continue to integrate our existing business and feel we are in a strong position to take advantage of the current oil and gas downturn and augment the existing portfolio of businesses." said Charles Pellerin, Executive Chairman of TerraVest.

 





Three months ended
June 30

Nine months ended
June 30


2015

2014

2015

2014


$

$

$

$

Revenue

46,305

29,732

140,750

80,628

Net income

2,238

1,838

10,022

6,150

Add (subtract):





Income taxes

846

326

3,598

1,941

Financing costs

973

785

2,186

1,389

Amortization and depreciation

2,678

1,669

8,023

4,290

EBITDA

6,735

4,618

23,829

13,770

Impairment of property, plant and equipment

882

31

882

462

Loss (gain) on disposal of property, plant and equipment

(332)

69

(513)

24

Adjusted EBITDA

7,285

4,718

24,198

14,256

Maintenance Capital Expenditures

(323)

(1,082)

(2,834)

(2,955)

Cash income taxes (paid) recovered

(862)

(417)

(2,119)

(340)

Financing costs paid

(695)

(977)

(2,108)

(1,389)

Distribution to non-controlling interest

-

(23)

(829)

(337)

Cash Available for Distribution

5,405

2,219

16,308

9,235

Dividends Paid in the Period

1,808

1,442

5,430

5,118

Dividend Payout Ratio

33%

65%

33%

55%

Free Cash Flow 





Cash flow from operations before changes in non-cash Working Capital

5,785

3,315

20,101

12,904

Changes in non-cash Working Capital

(5,175)

2,362

270

(7,302)

Cash flow from operations

610

5,677

20,371

5,602

Add (subtract):






Purchase of property, plant and equipment

(2,370)

(1,021)

(4,881)

(3,955)


Proceeds on disposal of property, plant and equipment

446

389

886

796

Free Cash Flow

(1,314)

5,045

16,376

2,443

 

TerraVest's third quarter ended June 30th, 2015 saw increases in revenue and adjusted EBITDA of approximately 56% and 54%, respectively, versus the comparable period ended June 30th, 2014. These increases were primarily the result of organic growth in the Fuel Containment segment; improved results in the Service segment versus comparable quarter last year; the inclusion of Signature Truck System's results in the Fuel containment Segment and the addition of NWP to the Fabrication segment for the full quarter in 2015.

Outlook

TerraVest continues to focus on pursuing opportunities to expand the Company's existing portfolio of businesses and add new businesses where current operational and management expertise can be leveraged. 

The Fuel Containment segment is experiencing strong demand for its entire suite of propane products both in the U.S. and Canada.  Management expects this demand will continue well into the winter months.  With the acquisition of Signature, this segment is working diligently to sell more propane tanks and trailers into the U.S. and expects that this will bear fruit in the coming quarters in conjunction with the expansion of the propane manufacturing facilities.  The current backlog in the Fuel Containment segment's propane tank business is approximately $24,700, which includes approximately $11,400 from the recently acquired Signature, and stretches well into 2015. Separate from propane, with the strong US dollar and low oil price environment, management expects equally strong performance from the residential oil tank business which is expected to generate significant EBITDA in the coming winter months. Demand for fiberglass tanks has been encouraging as this division continues to ramp up capacity.

The Fabrication Segment is experiencing pricing pressure and reduced demand from certain of its customers paralleling the state of the oil & gas market. In an effort to mitigate the impacts of a negative outlook for the Western Canadian economy, management has reduced staffing levels by approximately 35% in the Fabrication Segment and continues to evaluate all cost saving opportunities. Additionally, the Fabrication segment continues to take advantage of this economic slowdown to improve manufacturing processes through investment in equipment and changes to our plant layouts and work flow. These changes should result in cost rationalization, shorter lead times and increased capacity that will persist beyond an eventual recovery in oil prices. The Fabrication Segment's backlog is approximately $20,400, up from the previous quarter, but not as strong as the comparable period last year as the continuation of the low oil prices impacts the industry in its entirety. Management expects the continued low oil price environment will be challenging for this segment.

The Service segment's results were stronger than the prior year's quarter, excluding an impairment related to the decommissioning of certain rigs. Although management continues to face pricing pressure from its major customers, management is working diligently to ensure rig utilization and cost optimization. The Service segment generally has stronger performance in the final quarter of fiscal 2015, however, poor July weather has impacted the initial fourth quarter results. Even with such impact, management is confident that the fourth quarter results will be similar to those in the current quarter pending any unforeseen circumstances. The Service segment is a resilient business and as oil companies cut their capital budgets an emphasis is placed on well optimization which helps mitigate the cyclicality for this segment. We remain confident in the long-term outlook for this business and its ability to withstand the current downturn.

Conference Call

TerraVest will hold a conference call on Thursday August 13th at 10:00 am Eastern Standard Time to discuss its financial results for the quarter ended June 30th, 2015.

To participate in the call, please dial: 416.695.7806 or 866.696.5910 using Participant code: 1832475

For those unable to attend the call, an instant replay of the call will be available until the 27th of August, 2015 at 905.694.9451 using Participant code: 3480667

Dividend

TerraVest is also pleased to announce that The Board of Directors has declared its quarterly dividend of 10 cents per share upon the outstanding Common Shares in the capital stock of the Company being payable on October 9, 2015 to shareholders of record as at the close of business on September 30, 2015. The ex-dividend date is October 7, 2015. The dividend is designated an "eligible dividend" for Canadian income tax purposes.

Additional information can be found in TerraVest's unaudited interim condensed consolidated financial statements and MD&A which are available on SEDAR at www.sedar.com.

Caution Regarding Forward-Looking Statements
This news release contains forward-looking statements.  All statements other than statements of historical fact contained in this news release are forward-looking statements, including, without limitation, statements regarding our strategic direction and evaluation of the business segments and TerraVest as a whole, and other plans and objectives of or involving TerraVest. Readers can identify many of these statements by looking for words such as "expects" and "will" and similar words or the negative thereof. 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.

By their nature, forward-looking statements require us to make assumptions and, accordingly, forward looking statements are subject to inherent risks and uncertainties. There is significant risk that the forward-looking statements will not prove to be accurate. We caution readers of this news release not to place undue reliance on our forward-looking statements because a number of factors may cause actual future circumstances, results, conditions, actions or events to differ materially from the plans, expectations, estimates or intentions expressed in the forward-looking statements and the assumptions underlying the forward-looking statements. 

Assumptions and analysis about the performance of TerraVest as a whole and its business segments, the markets in which the business segments compete and the prospects and values of the business segments are considered in setting the business plan for TerraVest, plans and/or ability to pay dividends, outlook for operations, financial position, results and cash flow, other plans and objectives and in making related forward-looking statements. Such assumptions include, without limitation, demand for products and services of the business segments in respect of the Canadian and other markets in which the businesses are active will be stable, and that input costs to business segments do not vary significantly from levels experienced historically. Should any of these factors or assumptions vary, actual results may differ materially from the forward-looking statements.

The information set forth under "Risk Factors" in the annual information form of TerraVest dated December 9, 2014 and under "Risk Factors" in the MD&A of TerraVest for the year ended September 30, 2014, identifies risk factors that could affect the operating results and performance of TerraVest and its business segments and the values of the business segments and TerraVest as a whole. We caution that the lists of factors discussed in such information is not exhaustive and that, when relying on forward-looking statements to make decisions with respect to TerraVest, investors and others should carefully consider the factors discussed, as well as other uncertainties and potential events, and the inherent risks and uncertainties of forward-looking statements.  The forward-looking statements herein are made based on the assumption that TerraVest will not be affected by such risks, but that, if TerraVest is affected by such risks, the forward-looking statements may become inaccurate.

The forward-looking statements contained herein are expressly qualified in their entirety by this cautionary statement.  The forward-looking statements included in this news release are made as of the date of this news release.  Except as required by applicable securities laws, TerraVest does not undertake to update such forward-looking statements.

Non-GAAP Financial Measures

For Non-GAAP financial measures please refer to the definitions outlined the TerraVest Management's Discussion and Analysis dated August 11, 2015.

 

SOURCE TerraVest Capital Inc.

For further information: Mitchell Gilbert, TerraVest Capital Inc., Chief Investment Officer, (416) 364 -0064, mitchell.gilbert@terravestcapital.com OR Paul A. Casey, CA, TerraVest Capital Inc., Chief Financial Officer, (780) 632-2040, pcasey@terravestcapital.com

RELATED LINKS
www.terravestindustries.com

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