VEGREVILLE, AB, May 13, 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 March 31st 2015 and the declaration of its quarterly dividend.

In spite of the volatility in the oil and gas sector, TerraVest’s strategy of diversifying its cash flows has assisted the Company in producing another quarter of positive EBITDA and Free Cash Flow.  The quarter was impacted by reduced activity levels in the oil and gas sector, an early onset of spring bring-up and heavy snow storms in Eastern Canada and the North-eastern United States (which delayed deliveries in the Fuel Containment Segment). However, even with these challenges, Management is pleased with the overall performance in the quarter and remains positive of the long-term outlook for TerraVest.

Highlights in the quarter include:

  • Revenues of $41,441 which represents an increase of 37% over the second quarter of fiscal 2014;
  • EBITDA of $5,985 which represents an increase of 26% over the second quarter of fiscal 2014;
  • Free Cash Flow of $5,093 which represents an increase of 237% over the second quarter of fiscal 2014;
  • Earnings per share of $0.13 for quarter and $0.41 cents for the six months ended March 31st, 2015 compared to $0.12 and$0.31 for the comparable period last year;
  • Continued integration between the oil & gas fabrication businesses, including inventory management initiatives, purchasing and financial reporting;
  • Commencement of an expansion program at our Propane manufacturing facilities to increase capacity and better manage organic growth opportunities; and
  • Awarded the Company’s first purchase order for oil & gas processing equipment to be delivered to the U.S. Market;

 

Subsequent to the quarter end, TerraVest closed a $25.0 million convertible debenture offering (TSX: TVK.DB) and acquired Signature Truck Systems, Inc. and Lakeshore Metal Works, Inc. (“Signature”) a leading propane product assembler in the U.S. which enlarged the geographic footprint for propane products as well as provided TerraVest with a number of propane product cross-selling opportunities. With the acquisition of Signature, Management estimates that more than half of TerraVest’s EBITDA will now be derived from non-oil & gas segments of the business.

“Although our oil & gas segments continue to face the challenges of today’s macroeconomic trends, TerraVest continues to perform well and maintains a strong balance sheet. In a little over a year we have acquired three businesses, two of which are uncorrelated with oil and gas, raised $20 million of equity, and termed out our debt profile. TerraVest is in a strong position to take advantage of the current oil and gas downturn and augment its existing portfolio of businesses.” said Charles Pellerin, Executive Chairman of TerraVest.

 

FINANCIAL INFORMATION

Three months ended

March 31

Six months ended

March 31

2015

2014

2015

2014

$

$

$

$

Revenue

41,441

30,228

94,445

50,896

Net income

2,450

1,729

7,784

4,312

Add (subtract):

Income taxes

282

827

2,752

1,615

Financing costs

555

499

1,213

604

Amortization and depreciation

2,698

1,713

5,346

2,621

EBITDA

5,985

4,768

17,095

9,152

Impairment of property, plant and equipment

431

431

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

34

12

(182)

(45)

Adjusted EBITDA

6,019

5,211

16,913

9,538

Maintenance Capital Expenditures

(1,419)

(712)

(2,511)

(1,873)

Cash income taxes (paid) recovered

(973)

4

(1,256)

77

Financing costs paid

(469)

(283)

(1,413)

(412)

Distribution to non-controlling interest

(453)

(238)

(829)

(238)

Cash Available for Distribution

2,705

3,982

10,904

7,092

Dividends Paid in the Period

1,811

2,680

3,621

3,676

Dividend Payout Ratio

67%

67%

33%

52%

Free Cash Flow

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

4,626

5,295

14,316

9,589

Changes in non-cash Working Capital

1,822

(3,017)

5,445

(9,664)

Cash flow from operations

6,448

2,278

19,761

(75)

Add (subtract):

Purchase of property, plant and equipment

(1,419)

(773)

(2,511)

(2,934)

Proceeds on disposal of property, plant and equipment

64

5

440

407

Free Cash Flow

5,093

1,510

17,690

(2,602)

 

TerraVest’s second quarter ended March 31, 2015 saw increases in revenue and EBITDA of approximately 37% and 26%, respectively, versus the comparable period ended March 31, 2014. The increases were primarily the result of the Gestion Jerico and NWP acquisitions of which Gestion Jerico was partially included in the comparable period and NWP was not. Overall, TerraVest maintained growth through acquisitions which was partially offset by a decline in performance in the oil and gas segments of the businesses related to reduced activity levels in the sector and an early onset of spring break-up.

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. For the remainder of 2015 Management will focus on achieving operational efficiencies between TerraVest’s portfolio companies, and look to take advantage of undervalued assets in the oil and gas sector; and add additional businesses that are complementary to the existing portfolio.

The Fuel Containment segment is experiencing strong demand for all of its product lines. The strong US dollar and low oil price continues to buoy demand for residential oil tanks and demand for fiberglass tanks has been encouraging as this division continues to ramp up capacity. The current backlog in the Fuel Containment segment’s propane tank business stretches well into the spring of 2015, which is stronger than usual and recent capital investments to expand manufacturing capacity are expected to bear fruit in the second half of fiscal 2015 and beyond. We are excited about the recently acquired Signature Truck Systems and expect to see benefits from cross-selling as the year progresses.

The Fabrication Segment is experiencing some pricing pressure from its customers paralleling the state of the oil & gas market. However, Management has reduced staffing levels by 24% and continues to evaluate all cost saving opportunities in an effort to mitigate the reduction in activity levels in the industry. Additionally, we have taken this opportunity 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 $19,100, which is not as strong as the comparable period last year, however, the recent rally in oil pricing has caused a small uptick in customer demand, although we still expect the remainder of fiscal 2015 to be challenging for this segment.

The Service segment’s results were weaker than the prior year. This was primarily the result of an early onset of spring break-up with road bans being put in place in early March. This segment continued to see pricing pressures in the quarter from its major customers due to the continued soft oil prices. Management has reduced wages and staffing levels to accommodate new pricing expectations, and expects that pricing has now stabilized. Ultimately, the Service segment is a resilient business as they provide services to the largest oil and gas producers in the region, which tend to have more robust capital spending programs. Additionally, 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 the Service segment and its ability to withstand the current downturn.

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 July 10th, 2015 to shareholders of record as at the close of business on June 30th, 2015. The ex-dividend date is June 26th, 2015. The dividend is designated an “eligible dividend” for Canadian income tax purposes.

Conference Call

TerraVest will hold a conference call on Friday May 15th at 10:00 am Eastern Standard Time to discuss its financial results for the quarter ended March 31st, 2015.

To participate in the call, please dial: 416.695.7806 or 1.866.696.5910 using Participant code: 4019886

For those unable to attend the call, an instant replay of the call will be available until the 29th of May, 2015 at 905.694.9451 using Participant code: 5952291

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 December 9, 2014.