TORONTO, Aug. 14, 2019 /CNW/ - TerraVest Industries Inc,
(TSX: TVK) ("TerraVest" or the "Company") announces its results for
the third quarter ended June 30, 2019.
THIRD QUARTER AND NINE MONTHS REVIEW AND OUTLOOK
Business Performance
Management believes that there are certain non‐IFRS financial
measures that can be used to assist shareholders in analyzing the
performance of the Company. The table below highlights certain
financial results and reconciles net income to adjusted EBITDA for
the third quarter and nine months ended June 30, 2019 and
the comparative periods in fiscal 2018.
|
|
|
|
|
Third quarters
ended
|
|
Nine months
ended
|
|
June 30, 2019
|
June 30, 2018
|
|
June 30, 2019
|
June 30, 2018
|
|
$
|
$
|
|
$
|
$
|
|
|
|
|
|
|
Sales
|
70,751
|
65,459
|
|
225,941
|
190,630
|
|
|
|
|
|
|
Net
Income
|
4,603
|
1,867
|
|
16,247
|
8,886
|
Add
(substract):
|
|
|
|
|
|
Income tax
expense
|
1,995
|
990
|
|
6,277
|
3,790
|
Financing
costs
|
1,329
|
1,440
|
|
4,421
|
3,930
|
Depreciation and
amortization
|
2,873
|
2,703
|
|
8,839
|
7,856
|
Change in fair value
of derivative financial
instruments
|
(483)
|
588
|
|
306
|
1,384
|
Acquisition‑related
cost
|
-
|
426
|
|
-
|
618
|
(Gain) loss on
disposal of property, plant and
equipment
|
120
|
268
|
|
(86)
|
464
|
(Gain) loss on
disposal of assets held for sale
|
-
|
17
|
|
-
|
(28)
|
Adjusted
EBITDA
|
10,437
|
8,299
|
|
36,004
|
26,900
|
Sales for the quarter ended June 30, 2019 were
$70,751 versus $65,459 for the prior comparable quarter. This
represents an increase of 8%. The Company's portfolio of businesses
for the three-month periods ending June 30, 2019 and 2018
were the same. The increase in sales is attributable to increased
demand for LPG storage and distribution equipment, as well as
timing of deliveries for oil and gas process equipment, as spring
break-up occurred earlier than usual this year. Sales for the nine
months ended June 30, 2019 were $225,941 versus $190,630 for the prior comparable period,
representing an increase of 19%. However,
MaXfield Group Inc. ("MaXfield") was acquired on
January 1, 2018 and only partially contributed to the prior
comparable period. Excluding MaXfield, sales for the nine months
ended June 30, 2019 were $176,313 versus $169,927 for the prior comparable period. This
represents an increase of 4%. The growth in sales of TerraVest's
base portfolio (excluding MaXfield) is a result of stronger demand
for LPG storage and distribution equipment as well as home heating
products in both Canada and
the United States, partially
offset by weaker demand for oil and gas process equipment and
services in Western Canada.
Net Income for the third quarter and nine months ended
June 30, 2019 was $4,603 and
$16,247 versus $1,867 and $8,886
for the prior comparable periods. This represents increases of 147%
and 83% respectively. The increases are a result of increased sales
activity, as described above, as well as a change in the fair value
of derivative financial instruments and ongoing cost control
initiatives. Additionally, acquisition costs in the prior periods
related to the MaXfield acquisition did not repeat in the current
periods.
Adjusted EBITDA for the third quarter and nine months ended
June 30, 2019 were $10,437
and $36,004 versus $8,299 and $26,900
for the prior comparable periods. This represents increases of 26%
and 34% respectively, which are a result of the reasons highlighted
above.
The table below reconciles cash flow from operating activities
to cash available for distribution for the third quarter and nine
months ended June 30, 2019 and the comparative periods in
fiscal 2018.
|
|
|
|
|
Third quarters
ended
|
|
Nine months
ended
|
|
June 30, 2019
|
June 30, 2018
|
|
June 30, 2019
|
June 30, 2018
|
|
$
|
$
|
|
$
|
$
|
|
|
|
|
|
|
Cash Flow from
Operating Activities
|
6,486
|
7,484
|
|
18,729
|
15,177
|
Add
(substract):
|
|
|
|
|
|
Change in non‑cash
operating working capital
|
924
|
(1,510)
|
|
6,311
|
2,477
|
Maintenance
Capital Expenditures
|
(997)
|
(762)
|
|
(3,376)
|
(2,457)
|
Cash Available for
Distribution
|
6,413
|
5,212
|
|
21,664
|
15,197
|
Dividends Paid in the
Period
|
1,729
|
1,847
|
|
5,197
|
5,521
|
Dividend Payout
Ratio
|
27%
|
35%
|
|
24%
|
36%
|
Cash flow from operating activities for the third quarter and
nine months ended June 30, 2019 were $6,486 and $18,729
versus $7,484 and $15,177 for the prior comparable periods. This
represents a decrease of 13% for the third quarter and is
attributable to changes in working capital levels. The increase of
23% for the nine months is primarily a result of increased
profitability from operations.
Maintenance capital expenditures were $997 for the third quarter versus $762 for the prior comparable period. During the
third quarter ended June 30, 2019, the Company's total
purchases of property, plant and equipment was $3,119 of which $2,122 is considered growth capital. During the
third quarter, the Company completed a major capital project that
involved transferring petroleum tank production to a new facility.
Additionally, the Company expanded its desanding rental fleet.
These growth projects are expected to result in increased capacity
and greater efficiencies in several of TerraVest's businesses.
Cash available for distribution for the third quarter and nine
months ended June 30, 2019 increased by 23% and 43%
respectively versus the prior comparable periods. The increases are
a result of reasons explained above.
The dividend payout ratio for the third quarter and nine months
ended June 30, 2019 were 27% and 24% versus 35% and 36%
for the prior comparable periods.
Outlook
Year-to-date, the Company continues to experience improved
results over the prior year. Management expects this trend to
continue for the remainder of the fiscal year. The Fuel Containment
segment has benefited from a strong winter heating season and is
still experiencing increased demand for its LPG storage and
distribution equipment product lines. The situation for the
Processing Equipment segment remains mixed as strong demand for NGL
storage and distribution equipment is expected to persist
throughout the remainder of the fiscal year. However, demand for
this segment's oil and gas processing equipment is stable but faces
pricing pressure. The outlook for the Service segment remains
challenging as pricing pressure continues to persist despite
moderately improving commodity prices.
CONSOLIDATED RESULTS OF OPERATIONS
The following section provides the financial results of
TerraVest's operations for the third quarter and nine months ended
June 30, 2019 and the comparative periods in fiscal
2018.
|
|
|
|
|
Third quarters
ended
|
|
Nine months
ended
|
|
June 30, 2019
|
June 30, 2018
|
|
June 30, 2019
|
June 30, 2018
|
|
$
|
$
|
|
$
|
$
|
|
|
|
|
|
|
Sales
|
70,751
|
65,459
|
|
225,941
|
190,630
|
Cost of
sales
|
54,607
|
52,007
|
|
173,927
|
148,469
|
Gross
profit
|
16,144
|
13,452
|
|
52,014
|
42,161
|
Administration
expenses
|
7,040
|
6,619
|
|
20,929
|
19,383
|
Selling
expenses
|
1,378
|
1,986
|
|
4,226
|
5,091
|
Financing
costs
|
1,329
|
1,440
|
|
4,421
|
3,930
|
Other (gains)
losses
|
(201)
|
550
|
|
(86)
|
1,081
|
Earnings before
income taxes
|
6,598
|
2,857
|
|
22,524
|
12,676
|
Income tax
expense
|
1,995
|
990
|
|
6,277
|
3,790
|
Net Income
|
4,603
|
1,867
|
|
16,247
|
8,886
|
Allocated to
non-controlling interest
|
(7)
|
(33)
|
|
72
|
(114)
|
Net income
attributable to common shareholders
|
4,610
|
1,900
|
|
16,175
|
9,000
|
|
|
|
|
|
|
Weighted average
shares outstanding – Basic
|
17,295,368
|
17,770,371
|
|
17,188,907
|
18,129,426
|
Weighted average
shares outstanding – Diluted
|
19,127,339
|
20,239,076
|
|
19,132,007
|
20,841,898
|
Net income per share
– Basic
|
$0.27
|
$0.11
|
|
$0.94
|
$0.50
|
Net income per share
– Diluted
|
$0.25
|
$0.11
|
|
$0.89
|
$0.47
|
Sales for the third quarter and nine months ended
June 30, 2019 increased by 8% and 19% respectively versus
the prior comparable periods. The reasons for these increases have
been explained previously in this MD&A.
Gross profit for the third quarter and nine months ended
June 30, 2019 increased by 20% and 23% respectively versus the
prior comparable periods. These increases are largely attributable
to the increases of sales for the periods as well as ongoing cost
control efforts.
Administration expenses for the third quarter and nine months
ended June 30, 2019 increased by 6% and 8% respectively versus
the prior comparable periods. The increase for the third quarter is
attributable to increased expenses associated with the transfer of
petroleum tank production into a new facility. The increase for the
nine months is a result of the transfer to a new facility as well
as MaXfield only partially contributing to the prior period.
Selling expenses for the third quarter and nine months ended
June 30, 2019 decreased by 31% and 17% respectively versus the
prior comparable periods as a result of staffing reductions and
cost control initiatives.
Financing costs for the third quarter and nine months ended
June 30, 2019 decreased by 8% and increased by 13%
respectively versus the prior comparable periods. The decrease is
primarily a result of non-repeating debenture retirement costs in
the third quarter of 2018, partially offset by higher interest
rates. The increase for the nine months is a result of increased
levels of debt as a result of several growth capital projects and
increased levels of working capital.
Income tax expense for the third quarter and nine months ended
June 30, 2019 increased, which is the result of increased
profitability. The Company has tax loss carry-forwards which are
available to shelter taxes in certain subsidiaries.
As a result of the above, net income attributable to common
shareholders for the third quarter and nine months ended
June 30, 2019 increased 143% and 80% respectively versus the
prior comparable periods.
DIVIDENDS
TerraVest is also pleased to announce that The Board of
Directors has declared its quarterly dividend of 10 cents per Common share payable on
October 10, 2019 to shareholders of record as at the close of
business on September 30, 2019. The dividend is designated an
"eligible dividend" for Canadian income tax purposes.
EXECUTIVE APPOINTMENT
The Board of Directors is pleased to appoint Marilyn Boucher as Chief Financial Officer of
TerraVest. Ms. Boucher has been with the company since 2017
and has played a major role in supporting the growth of the
Company. "Ms. Boucher is a talented executive who will
continue to contribute to TerraVest on many levels. I am very
pleased to welcome Ms. Boucher in her new role as CFO and I look
forward to continuing to work alongside as the Company grows." Said
Dustin Haw, CEO of TerraVest.
Additional information can be found in TerraVest's interim
condensed consolidated financial statements and MD&A which are
available on SEDAR at www.sedar.com.
Non‑IFRS Financial Measures
This news
release makes reference to certain non‑IFRS financial measures.
These measures are not recognized measures under IFRS and do not
have a standardized meaning prescribed by IFRS. TerraVest's
definitions may differ from those of other issuers and therefore
may not be comparable to similarly titled measures used by other
issuers. The Company uses non‑IFRS financial measures including
adjusted EBITDA, cash available for distribution, dividend payout
ratio and maintenance capital expenditures.
Adjusted EBITDA: is defined as net income adjusted for
income tax expense, financing costs, depreciation, amortization,
gains or losses on disposal of property, plant and equipment and on
disposal of assets held for sale, change in fair value of
derivative financial instruments, non-recurring acquisition‑related
costs, impairment charges and other non‑recurring and/or
non‑operations related items that do not reflect the current
ongoing operations of TerraVest. Management believes this is a
useful metric in evaluating the ongoing operating performance of
the Company. Readers are cautioned that adjusted EBITDA should not
be construed as an alternative to net income determined in
accordance with IFRS as an indicator of the Company's
performance.
Cash Available for Distribution: is defined as cash
flow from operating activities adjusted for changes in non-cash
operating working capital and maintenance capital expenditures.
Management believes that cash available for distribution, as a
liquidity measure, is a useful metric that provides an indication
of the cash available from ongoing operations that can be
distributed to shareholders as a dividend. Readers are cautioned
that cash available for distribution should not be construed as an
alternative to cash flow from operating activities determined in
accordance with IFRS as an indicator of the Company's liquidity and
cash flows.
Dividend Payout Ratio: is defined as dividends paid in
cash during the period divided by cash available for distribution
for the period. Management believes that dividend payout ratio is a
useful metric as it provides an indication of the Company's ability
to sustain its current dividend policy. There is no directly
comparable IFRS measure for dividend payout ratio.
Maintenance Capital Expenditures: is defined as
capital expenditures made to sustain the operations of TerraVest's
operating businesses and to maintain the productive capacity of the
businesses over an economic cycle, whether or not they yield
significant cost or production efficiencies. Management believes
that maintenance capital expenditures should be funded by cash flow
from existing operating activities and, therefore, deducted in
determining cash available for distribution. There is no directly
comparable IFRS measure for maintenance capital
expenditures.
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" or similar terms
or variations of these words. 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 flows, 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.
SOURCE TerraVest Industries Inc.