VEGREVILLE, ALBERTA (May 13th, 2016) ‐ 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 and six months ended March 31st, 2016.
The second quarter is generally one of TerraVest’s stronger quarters, on a seasonal basis, however dramatic reductions in oil and gas activity have impacted certain segments. Despite these impacts, the Fuel Containment division performed well year‐to‐ date and the Company maintains a strong balance sheet. TerraVest is well‐positioned to capitalize on opportunities that arise as a result of the oil and gas downturn and management continues to remain optimistic in the long‐term outlook for the Company.
Highlights in the quarter include:
Revenues of $43,415 for the quarter up 5% from the comparable period in fiscal 2015;
Adjusted EBITDA of $4,821 down 20% from the comparable period in fiscal 2015;
Repurchased convertible debentures with a face value of $155 at an average price of $90.90;
Repurchased 31,700 common shares at an average price of $6.25.
“Although our oil and gas segments continue to face the challenges of today’s macroeconomic trends, we feel we are in a strong position to take advantage of any opportunities that may arise during this downturn. At the present time, we have in excess of $10.0 million in cash on the balance sheet, and we continue to deleverage throughout the downturn.” said Charles Pellerin, Executive Chairman of TerraVest.
TerraVest’s second quarter ended March 31st, 2016 saw an increase in revenue of approximately 5% versus the comparable period ended March 31st, 2015. Adjusted EBITDA decreased by approximately 20% in the same periods. While revenue increased primarily due to the addition of Signature Truck Systems, strong demand for certain Fuel Containment segment products and the weaker Canadian dollar relative to the US dollar, EBITDA declines were primarily the result of declines in the Fabrication and Service Segments.
The first two quarters of fiscal 2016 have been weaker than the prior year and we expect this to continue throughout the remainder of the year. The company’s Western Canadian business units are experiencing dramatic declines in business activity as a result of one of the worst oil downturns in history and management expects to see this to continue for some time. The company’s focus for 2016 has been and will continue to be cost cutting and process optimization in an effort to prevent its oil and gas exposed businesses from consuming cash during the downturn. Leaving aside the Fabrication and Services segments, TerraVest’s Fuel Containment segment has performed well year to date, as a result of strong demand for its residential and commercial fuel tanks. Management expects the trend to continue with these product lines, but cautions that the recent unseasonably warm winter will likely dampen demand for its propane truck product line over the near term. All in all, the company has a strong balance sheet, is well‐positioned to capitalize on opportunities that arise as a result of the downturn and is actively looking to do so.
Thus far in 2016 the Fuel Containment segment has experienced healthy demand for its entire suite of propane products both in the U.S. and Canada. In addition, the low price of oil has resulted in increased demand for this segments residential and commercial heating tanks, both metal and fibreglass. Sales of these products grew by 38% in the quarter and by 13% year‐to‐ date. However, during the second quarter, warmer weather conditions in parts of the Northeast impacted demand for propane related products and demand is expected to be lower in the short‐term. Most recently, the Fuel Containment segment developed the capability to assemble larger propane trailers out of its U.S. facilities (in addition to assembly of Bobtail propane trucks). Management expects that these additional capabilities will only enhance the segment’s long‐term growth prospects for propane related products in the U.S. The current backlog in the Fuel Containment segment’s propane tank business is approximately $7,849.
The Fabrication segment continues to experience pricing pressures and project cancellations or deferrals, 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 took steps in 2015 and in the second quarter of 2016 to reduce staffing levels 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 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 $14,576 which is not as strong last year and has been impacted by the continuation of the low oil prices affecting the oil and gas industry in its entirety.
The Service segment’s results in the first half of fiscal 2016 were weaker than the prior year’s comparable period as a result of pricing pressures and reduced activity due to the continued depressed oil and natural gas prices. Although this segment has faced pricing pressure from its major customers, management is working diligently to maintain rig utilization levels and reduce operating costs. 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 expect the low oil price environment will continue to put pressure on field rates and utilization levels for the foreseeable future.
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 11, 2016 to shareholders of record as at the close of business on June 30, 2016. The ex‐dividend date is June 28], 2016. 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 10, 2015 and under “Risk Factors” in the MD&A of TerraVest for the year ended September 30, 2015, 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 10, 2015.
FOR FURTHER INFORMATION PLEASE CONTACT:
TerraVest Capital Inc.
Chief Investment Officer
(416) 364 ‐0064
Paul A. Casey, CA
TerraVest Capital Inc.
Chief Financial Officer