TerraVest Announces First Quarter Results for Fiscal 2018

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VEGREVILLE, AB, Feb. 14, 2018 /CNW/ – TerraVest Capital Inc. (TSX: TVK) (“TerraVest” or the “Company”) announces its results for the first quarter ended December 31, 2017. The Company’s financial results for the first quarter of fiscal 2018 represent an improvement over the first quarter of fiscal 2017 and were generally in line with management’s expectations.

FIRST QUARTER REVIEW AND OUTLOOK

Business Performance

Management believes that there are certain non‐IFRS financial measures that can be used to assist shareholders in determining the performance of the Company. The table below highlights certain financial results and reconciles net income to EBITDA, EBITDA to Adjusted EBITDA and Adjusted EBITDA to Cash Available for Distribution for the first quarter ended December 31, 2017 and the comparative quarter in fiscal 2017.


		First quarters ended December 31
		2017	2016
		$	$

Sales		62,603	48,278

Net income		5,147	3,741
Add (subtract):
	Income tax expenses	1,941	1,377
	Financing costs	1,077	887
	Amortization and depreciation	2,467	2,519
EBITDA		10,632	8,524
Loss (gain) on disposal of property, plant and equipment		45	(76)
Loss on foreign exchange contracts		177	–
Adjusted EBITDA		10,854	8,448
Maintenance Capital Expenditures		(813)	(2,355)
Income taxes paid		(1,424)	(1,484)
Financing costs paid		(1,425)	(710)
Cash Available for Distribution		7,192	3,899
Dividends Paid in the Period		1,842	1,832
Dividend Payout Ratio		26%	47%

Sales for the quarter were $62,603 compared to $48,278 for the prior comparable period representing an increase of 30%. This increase primarily results from the additions of Vilco and Fischer Tanks, which did not contribute in the prior comparable period, as well as increased demand for Fuel Containment’s propane storage and distribution equipment. The Processing Equipment segment also experienced an increase in activity versus the prior comparable period.

Adjusted EBITDA for the quarter was $10,854, which represents an increase of 28% versus the prior comparable quarter. This increase is a result of the reasons highlighted above including: positive contributions from Vilco and Fischer Tanks, increased demand for propane equipment, and higher levels of activity in the Processing Equipment segment, which is partially offset by pricing pressure in both the Processing Equipment and Service segments.

Maintenance Capital Expenditures were $813 for the quarter versus $2,355 for the prior comparable period. This reduction is largely due to timing of required capital projects, which can vary greatly from quarter to quarter. During the period, the Company’s total purchases of property, plant and equipment were $1,578 of which $765 is considered growth capital. This growth capital includes additions to the Company’s desanding rental fleet, equipment for a new domestic propane tank manufacturing line, as well as equipment to support a new manufacturing facility for one of the Processing Equipment’s segment.

Cash Available for Distribution increased 84% over the prior comparable period. This increase is due to better operating results (explained above) and reduced Maintenance Capital Expenditures, which were partially offset by increased Financing costs, as debt levels increased to support the acquisition of Fischer Tanks.

Outlook

The Fuel Containment segment is experiencing increased levels of demand this year for its product lines. Demand for propane storage and distribution equipment continues to strengthen as many of this segment’s customers are playing catch up as a result of delayed capital investments due to prior unseasonably warm winters. Management is also expecting positive contributions from recent acquisitions. One factor that could weigh on results in fiscal 2018 is the continued increase in global steel prices as this is a major input in many of this segment products.

Management continues to expect that fiscal 2018 will be a stronger year than prior for the Processing Equipment segment. Backlogs remain higher than the previous year and management is expecting positive contributions from the desanding equipment business, which should benefit from a larger rental fleet compared to the prior year. That being said, a recent divergence in natural gas and oil prices has created a situation difficult to forecast for this segment. Several natural gas producers, which are customers of this segment have announced reduced capital budgets as a result of weak natural gas pricing, while others with liquids rich production are benefitting from the increased oil prices. Pricing pressure continues to be an issue for this segment for its oil and gas processing equipment product lines, and this is expected to continue as long as there remains excess manufacturing capacity in Western Canada.

The outlook for the Service segment is not materially different than the prior year. Pricing pressure has been major challenge for this segment. Management is optimistic that the increase in oil prices will bring higher rates for its service rigs, as many of this segment’s customers are oil producers. However, increasing operating expenses and labour challenges could mitigate the benefits.

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 April 9, 2018 to shareholders of record as at the close of business on March 30, 2018. The ex-dividend date is March 28, 2018. The dividend is designated an “eligible dividend” for Canadian income tax purposes.

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.

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.

SOURCE TerraVest Capital Inc.