TerraVest Announces Third Quarter Results For Fiscal 2021 and Dividend Declaration
TORONTO, ONTARIO (August 11th, 2021) – TerraVest Industries Inc., (TSX: TVK) (“TerraVest” or the “Company”) announces
its results for the third quarter ended June 30, 2021 and the declaration of its quarterly dividend.
THIRD QUARTER AND NINE MONTHS REVIEW AND OUTLOOK
Management believes that there are certain non‐IFRS financial measures that can be used to assist shareholders in analyzing
the performance of TerraVest. The table below highlights certain financial results and reconciles net income to adjusted earnings before interests, income taxes, depreciation and amortization (“EBITDA”) for the third quarter and nine months
ended June 30, 2021 and the comparative periods in fiscal 2020.
Sales for the third quarter and nine months ended June 30, 2021 were $67,830 and $226,647 versus $61,019 and $236,022
for the prior comparable periods. This represents an increase of 11% and a decrease of 4% respectively. However, TerraVest
acquired all of the assets of Argo Sales Inc. (“Argo”) in December 2019, which only partially contributed to the prior
comparable period of nine months. Excluding Argo, sales for the nine months ended June 30, 2021 were $200,164 versus
$209,685 for the prior comparable period. This represents a decrease of 5% for TerraVest’s base portfolio (excluding Argo).
Sales for the third quarter ended June 30, 2021 have increased versus the prior comparable period as TerraVest’s end‐markets
are starting to show signs of recovery from the COVID‐19 pandemic. Demand for home heating and commercial fiberglass
products as well as for oil and gas processing equipment and service in Western Canada have increased for the third quarter
of fiscal 2021 compared to prior comparable period. These increases were partially offset by weaker demand for TerraVest’s
LPG and NGL storage and distribution equipment. The net decrease in sales for the nine‐month period is a result of weaker
demand for most of TerraVest’s products lines except home heating products versus the prior comparable period.
Net income for the third quarter and nine months ended June 30, 2021 were $4,347 and $27,022 versus $3,854 and $15,546
for the prior comparable periods. This represents increases of 13% and 74% respectively. The increases are a result of a more
favorable product mix, government wage subsidies to help maintain employment during the COVID‐19 pandemic and other
government subsidies available for entities experiencing significant revenue decreases as well as cost control measures put
in place. Increased sales for the third quarter and a favorable change in the fair value of investment in equity instruments
also contributed to the increases. The increases in net income were partially offset by decreased sales activities for the nine
months as explained above and are also a result of the variations highlighted in the table above.
Adjusted EBITDA for the third quarter and nine months ended June 30, 2021 were $11,939 and $48,562 versus $11,854 and
$37,284 for the prior comparable periods. This represents increases of 1% and 30% respectively, which are a result of the
reasons explained above.
During the first nine months, TerraVest recognized $9,112 in net income in relation to the Canada Emergency Wage Subsidy
(“CEWS”) as part of the Federal Government’s response to the COVID‐19 pandemic. Had the CEWS program not been
available, TerraVest would have made incremental significant personnel reductions to mitigate reduced business activity.
TerraVest also recognized $3,065 in net income during the first nine months in relation to other various government subsidies
available in response to the COVID‐19 pandemic.
The table below reconciles cash flow from operating activities to cash available for distribution for the third quarter and nine
months ended June 30, 2021 and the comparative periods in fiscal 2020.
Cash flow from operating activities for the third quarter and nine months ended June 30, 2021 were $2,245 and $24,545
versus $16,921 and $48,219 for the prior comparable periods. This represents decreases of 87% and 49% respectively. The
decreases in cash flow are a result of working capital fluctuations and increased income taxes paid, partially offset by
increased net income.
Maintenance capital expenditures were $2,342 for the third quarter ended June 30, 2021 versus $495 for the prior
comparable period representing an increase of 373%. This variation is due to the timing of certain larger capital projects that
fell within the period. During the third quarter, TerraVest’s total purchase of property, plant and equipment paid was $6,436
of which $4,094 is considered growth capital. The growth capital incurred during the third quarter consisted of additions to
the Company’s rental fleet and deposits on new robotic equipment to automate certain production lines. 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, 2021 decreased by 39% and increased
by 6% respectively versus the prior comparable periods. The decrease and increase are a result of reasons explained above
and previously in this press release.
The dividend payout ratio for the third quarter and nine months ended June 30, 2021 were 27% and 21% versus 17% and 22%
respectively for the prior comparable periods.
The current global pandemic continues to create a challenging business environment for TerraVest on many fronts. Over the
past year, the Company and its employees have done an excellent job managing through COVID‐19 pandemic related
restrictions, all while keeping tight control on operating costs and improving manufacturing efficiency. However, new
challenges continue to present themselves, as a result of the COVID‐19 pandemic, such as disrupted global supply chains
resulting in rising raw material prices and, in many cases, supply shortages. In addition, many sectors are experiencing a much
longer recovery profile which continues to weigh on energy activity level and ultimately certain of TerraVest’s businesses.
Navigating these challenges, while continuing to keep our employees, our customers and our vendors safe will be the primary
focus for the Company for the remainder of the year. Additionally, TerraVest will remain vigilant in managing its cost structure
and will make targeted investments in manufacturing efficiency improvements as well as continue to pursue its
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, 2021 and the comparative periods in fiscal 2020.
Sales for the third quarter and nine months ended June 30, 2021 increased by 11% and decreased by 4% respectively versus
the prior comparable periods. The reasons have been explained previously in this press release.
Gross profit for the third quarter and nine months ended June 30, 2021 increased by 6% and 12% respectively versus the
prior comparable periods. This is primarily explained by a more favorable product mix, partially offset by decreased sales
volume for some of TerraVest’s base portfolio businesses creating pressure on gross profit as there is less volume to absorb
fixed operating costs. The amount of government subsidies recognized during the third quarter ended June 30, 2021 is also
less than the prior comparable period.
Administration expenses for the third quarter and nine months ended June 30, 2021 decreased by 8% and 22% respectively
versus the prior comparable periods. The variation is mainly the result of government wage subsidies, cost control measures
and non‐recurring acquisition‐related expenses incurred in fiscal 2020, offset by the addition of Argo to TerraVest’s results.
Selling expenses for the third quarter and nine months ended June 30, 2021 increased by 60% and 10% respectively versus
the prior comparable periods. The increase over the prior comparable quarter is primarily a result of increased commissions
due to increased sales.
Financing costs for the third quarter and nine months ended June 30, 2021 decreased by 20% and 32% respectively versus
the prior comparable periods. The decreases are primarily explained by lower interest expense because of the prime rate
reductions in March 2020 and April 2020 and by reduced debt balances.
Other (gains) losses variance for the third quarter and nine months ended June 30, 2021 is a result of favorable changes in
the fair value of derivative financial instruments (unfavorable for the third quarter) and investment in equity instruments as
well as a gain on disposal of property, plant and equipment which were partially offset by a loss on foreign exchange.
Income tax expense decreased for the third quarter and increased for the nine months ended June 30, 2021 versus the prior
comparable periods. The marginal decrease for the third quarter ended June 30, 2021 is mainly explained by the timing of
income tax expense adjustments and non‐taxable items while the increase for the nine months ended June 30, 2021 is the
result of increased taxable earnings, partially offset by a reduction of the tax rates for certain subsidiaries of TerraVest.
As a result of the above, net income attributable to common shareholders for the second quarter and six months ended
March 31, 2021 increased by 103% and 94% respectively versus the prior comparable periods.
TerraVest is pleased to announce that The Board of Directors has declared its quarterly dividend of 10 cents per common
share payable on October 12, 2021 to shareholders of record as at the close of business on September 30, 2021. The dividend
is designated an “eligible dividend” for Canadian income tax purposes.
Additional information can be found in TerraVest’s annual consolidated financial statements and MD&A which are available
on SEDAR at www.sedar.com.
FOR FURTHER INFORMATION PLEASE CONTACT:
TerraVest Industries Inc.
Chief Executive Officer
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, change in fair value of investment in equity instruments, gains or losses on foreign exchange, 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 TerraVest. 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 TerraVest’s performance.
Cash Available for Distribution: is defined as cash flow from operating activities adjusted for changes in non-cash operating working capital, maintenance capital expenditures and repayment of lease liabilities. 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 TerraVest’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 TerraVest’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.