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Terra Nova Royalty Corporation Reports Year End Results for 2010

March 31, 2011

NEW YORK, March 31, 2011 /PRNewswire/ — Terra Nova Royalty Corporation (“Terra Nova”) (NYSE: TTT) today announced results for the year ended December 31, 2010. Our financials statements are now prepared in accordance with International Financial Reporting Standards. Unless otherwise noted, all dollar amounts are in United States dollars.

2010 has been a year of transition for our company. During the year, we completed the distribution of our former subsidiary, KHD Humboldt Wedag International AG to our shareholders and we acquired Mass Financial Corp. (“Mass”). This has allowed us to create a very interesting platform for future growth. Our current goal is to expand our existing businesses and to grow by our traditional acquisition method, with a focus on larger projects.

Here is how we look in a simple way:


    Book value                  $        548 million

    Book value per share                       $8.76

    Cash & securities           $        426 million

    Working capital             $        412 million

    2011 Projected revenues               410 to 425
     with Mass*                 $            million

                               New York Stock
    Common share listing       Exchange

* note: This projection, without new projects, is being provided for illustrative purposes for our company going forward after the acquisition of Mass and is based on various assumptions made by management, including that the financial results of the businesses remain consistent with the preceding year and is based on current economic and operating conditions. Readers are cautioned that such information is subject to various risks and uncertainties, including those set forth under Risk Factors in our annual report on Form 20-F, is not indicative of actual results and is not appropriate for other purposes.

Results

It should be clearly noted that our results of operations for 2010 only include the results of the businesses acquired through our acquisition of Mass from November 16, 2010, or less than 30 working days. Accordingly, they are not comparable to prior periods.

The results also include expenses for the period and negative goodwill in the amount of $41.1 million, which do not have a direct relationship to our business platform going forward.

For the year ended December 31, 2010, our total revenues were $85.4 million (excluding negative goodwill of $41.1 million) with net income to our shareholders of $30.3 million or $0.85 per diluted share.

Revenues for 2009 from our continuing operations were $14.7 million, and net income to our shareholders was $36.7 million, or $1.21 per share.

At December 31, 2010, we had $426 million in cash and securities, our current ratio was 3.77 and our long-term debt-to-shareholders’ equity ratio was 0.09. Our acid test ratio (cash, receivable and short term investments, divided by current liabilities) was 3.07 and book value was $8.76 per share.

Our total revenues by operating segment were as follows for each of the years ended December 31, 2010 (which includes less than 30 working days for the consolidation of Mass and excludes the negative goodwill described below) and 2009.


                      All amounts in thousands
                                            2010         2009
                                                           --
    Commodities and resources            $76,478      $13,530
    Merchant banking                       4,821
    Other                                  4,131        1,188

        Total revenues                   $85,430      $14,718
                                         =======      =======

Negative Goodwill

In 2010, we recognized negative goodwill in the amount of $41.1 million, which arose as the market price of our shares on the acquisition dates being $7.99 was less than the fair value of the net identifiable assets acquired from Mass. Also, Mass had positive goodwill on its books, in the amount of $5.4 million, which was offset against such negative goodwill.

Pro Forma Consolidated Results for 2010

The following table presents the results of our continuing operations as if the businesses of Mass had been acquired and consolidated as of January 1, 2010. The amounts include the results of Mass, depreciation, amortization and depletion of the acquired fixed assets and intangible assets recognized on acquisition. The amounts do not include any possible synergies from the acquisition. The results of Mass for the period before acquisition have not been adjusted to reflect our accounting policies nor to reflect the fair value adjustments made on acquisition. The information is provided for illustrative purposes only and does not necessarily reflect the actual results that would have occurred, nor is it necessarily indicative of our future results and is not appropriate for other purposes.


               All amounts in thousands (unaudited)
    Revenues                                       $379,695
    Net income                                      $29,307
    Net income attributable to equity
     shareholders                                   $28,619

Liquidity

Our management believes we currently have adequate liquidity and acceptable financial ratios. As at December 31, 2010, we had cash and securities of $426 million, working capital of $412 million, total assets of $854 million and our shareholders’ equity was $548 million.

We also have lines of credit in the amount of $379 million. As part of our activities, we establish, utilize and maintain various kinds of credit lines and facilities with banks, insurers and finance providers, including accounts receivable financing and letters of credit. We often enhance the credit of such facilities through insurance. Trade finance is often layered with varying limitations and exceptions.

We believe that cash flow from operating activities together with cash on hand and borrowings available under our credit facilities will be sufficient to fund currently anticipated capital spending and debt service requirements. We generally fund our operations from cash generated by operations.

Business

We are active in a broad spectrum of activities related to the integrated combination of commodities and resources and merchant banking. Our business is divided into three reportable segments: (i) commodities and resources, which includes our commodities trading activities and mineral and royalty interests; (ii) merchant banking, which includes our trading, trade finance, financial services and proprietary investing activities; and (iii) other, which encompasses our corporate and other investments, including our medical supplies and services businesses.

Trading of Commodities and Resources

Our commodities and resources operations include our integrated commodities trading activities and our mineral interests. We conduct trading primarily through our subsidiaries based in Vienna, Austria and supply various commodities, including minerals and metals, chemicals and plastics and wood products to our customers. Such commodities originate either from our directly or indirectly held interests in resource projects or are secured by us from third parties. Our commodities trading activities are globally focused. We also derive production royalty revenue from a mining sub-lease of the lands upon which the Wabush iron ore mine is situated.

Through our commodities and resources business, we also provide logistics and other services to producers and consumers of commodities. These activities are supported by strategic direct or indirect investments in resource assets operating in our core commodities, including plastics, non-ferrous metals and minerals, including iron ore.

Our commodities trading activities include purchasing, selling and conducting product swaps of various commodities. To a lesser extent, we also act as a trading agent for clients. Our trading activities often utilize innovative trading strategies and structures. We currently trade with commodity and other producers who are unable to effectively realize sales due to their specific circumstances.

Generally we purchase or produce the underlying commodity and sell it to an end buyer or further trade it for another commodity which will subsequently be sold. Further, commodity producers and end customers often work with us to better manage their internal supply, distribution risk, and currency and capital requirements. In such trading activities, we try to capture various trading, financing and currency spreads. Through our trading activities, we have been able to develop ongoing relationships with commodity producers, end customers and trade financiers.

We generally source commodities from Asia, Africa, Europe, the United States and the Middle East. Our commodities sales for the most part include the European, Middle Eastern, Asian and North and South American markets.

Through our commodities trading activities, we have sourced, supplied and traded, primarily for our own account, the following commodities:


    Metals and
     Minerals               Chemicals and Plastics     Wood Products
    ----------              ----------------------     -------------
       iron-ore             polystyrene                pulp
                            high density
       bauxite               polyethylene              saw logs
                            linear low density
       manganese-ore         polyethylene              round logs
                            low density
       cobalt                polyethylene              sawn timber
                            polyethylene
       base metals           terephthalate             plywood
                                                       medium density
       magnesium            polypropylene               fiberboard
       steel products       polyvinyl chloride         wood pellets
       zinc alloys
       aluminum foils
        aluminum sheets
       coal
       clinker
       cement
       ferrous alloys
       silicon metals

Merchant Banking

Our merchant banking business includes merchant banking and financial services, including specialized banking, corporate finance, trade finance and other services, proprietary investing and our real estate and investment properties. We seek to invest in many industries, emphasizing those businesses or assets where the perceived intrinsic value is not properly recognized nor properly reflected in their share price valuation. Our investments are generally not passive. We seek investments where our management and financial expertise can be used to actively add or unlock value. Our merchant banking activities also include our trading and financial experience and relationships to provide trading services, such as transportation and logistics and trade finance services to our trading customers.

Other

Our other segment encompasses corporate and our investments in joint ventures through our subsidiary which provides medical equipment and supplies. Specifically, we are engaged in the operation of technically advanced eye care centers through cooperative joint ventures with government-controlled hospitals in China. These hospitals provide the necessary space and medical staff to operate the centers, and we provide the specialized medical equipment and supplies, training and supervision with respect to certain surgical procedures. We also sell and service medical equipment.

Cash Dividend

We have established an annual cash dividend policy as follows:

  • The annual dividend is based on the annual dividend yield of the New York Stock Exchange Composite Index for the preceding year plus 25 basis points.
  • On January 15, 2011, we announced the declaration of an aggregate cash dividend for 2011 of $0.20 per common share, representing a dividend yield of 2.58 percent, payable in quarterly installments.
  • The first payment of $0.05 per common share was paid on January 31, 2011 to shareholders of record on January 20, 2011. The second payment will be made on April 11, 2011 to shareholders of record on March 31, 2011. In the future, we plan to announce and declare the cash dividend during the first full week of each year. The declaration, timing and payment of future dividends will depend on, among other things, our financial results.

Corporate Tax

We are a company organized under the laws of Canada, with operations through a subsidiary that is organized under the laws of Barbados and licensed as an “international business company” under Barbados laws. As an international business company, it is subject to Barbados income tax at regressive rates ranging from 2.5% to 1%. Such rates being 2.5% on all profits and gains up to Barbados dollars (“Bds”) $10 million, 2% on all profits and gains exceeding Bds$10 million but not exceeding Bds$20 million, 1.5% on all profits and gains exceeding Bds$20 million but not exceeding Bds$30 million and 1% on all profits and gains in excess of Bds$30 million. Barbados does not levy any form of tax on capital gains, nor does it tax earnings of foreign corporations in which there is an equity interest. In 2010 we recorded a mining royalty tax of $6.7 million and tax on other income of $231,000.

Chairman Michael Smith commented: “Our prime objective is simply to do good business. Given our liquid resources, we are well positioned to take advantage of opportunities arising from the global market downturn. These are interesting times for business opportunities but we must maintain our financial discipline. As we progress this year, we plan to change our name and image to better reflect our new direction and platform.

We did have some disappointments last year which were that:

  • Our general and administrative expenses are still way too high. It should now come down as we have completed all our major transactions in 2010;
  • we also had several new projects that we were working on, but have yet to complete. We are however pleased that we controlled our risk in assessing these new opportunities; and
  • we did not cut off all expenses related to the former industrial business quickly enough.

These are the key areas we need to improve upon.”

Mr. Smith concluded: “We believe that the growth of our asset base and net worth are the only true valuation measures of our performance. Going forward, we will utilize our foundation of commodities and resources and merchant banking and our strategy of operating businesses to vigorously pursue international opportunities for future growth. We will continue to manage our business activities for the long term, investing on the basis of our traditional disciplined approach while paying particular attention to the potential value to be realized by applying our financial expertise and patience. I would like to thank our shareholders for their support and look forward to generating a return on our assets.”

Shareholders are encouraged to read the entire Form 20-F, which will be filed with the SEC, for a greater understanding of Terra Nova.

Today at 10:00 a.m. EDT (7:00 a.m. PDT), a conference call will be held to review Terra Nova’s announcement and results. This call will be broadcast live over the Internet at www.terranovaroyalty.com. An online archive will be available immediately following the call and will continue for seven days. You may also to listen to the audio replay by phone by dialing: 1 (877) 660 6853 using conference ID number: 369104, account number #356. International callers should dial: 1 (201) 612 7415.

About Terra Nova

Terra Nova is active in a broad spectrum of activities related to the integrated combination of commodities and resources, including commodity trading and resource interests, and merchant banking, including trade finance, financial services and proprietary investing. To obtain further information on the Company, please visit our website at: http://www.terranovaroyalty.com.

Disclaimer for Forward-Looking Information

This document contains statements which are, or may be deemed to be, “forward-looking statements” which are prospective in nature. Forward-looking statements are not based on historical facts, but rather on current expectations and projections about future events, and are therefore subject to risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of forward-looking words such as “plans”, “expects” or “does not expect”, “is expected”, “scheduled”, “estimates”, “forecasts”, “projects”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “should”, “would”, “might” or “will” be taken, occur or be achieved. Such statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, revenues, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Important factors that could cause our actual results, revenues, performance or achievements to differ materially from our expectations include, among other things: (i) periodic fluctuations in financial results as a result of the nature of our business; (ii) commodities price volatility; (iii) economic and market conditions; (iv) competition in our business segments; (v) decisions and activities of operators of our resource interests; (vi) the availability of commodities for our commodities and resources operations; (vii) the availability of suitable acquisition or merger or other proprietary investment candidates and the availability of financing necessary to complete such acquisitions; (viii) our ability to realize the anticipated benefits of our acquisitions; (ix) additional risks and uncertainties resulting from strategic investments, acquisitions or joint ventures; (x) counterparty risks related to our trading activities; (xi) unanticipated grade, geological, metallurgical, processing or other problems experienced by the operators of our resource interests; and (xii) other factors beyond our control.. Such forward-looking statements should therefore be construed in light of such factors. Other than in accordance with its legal or regulatory obligations, the Company is not under any obligation and the Company expressly disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Additional information about these and other assumptions, risks and uncertainties are set out in our MD&A for the year ended December 31, 2010, which will be filed with Canadian securities regulators and filed on Form 20-F with the United States Securities and Exchange Commission.

AUDITED FINANCIAL TABLES FOLLOW -

    TERRA NOVA ROYALTY CORPORATION
    CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
    December 31, 2010 and 2009
    (Audited)
    (United States Dollars in Thousands)
    ASSETS

                                                2010          2009
                                                ----          ----
     Current Assets

       Cash and cash equivalents            $397,697       $38,046
       Securities                             27,894        11,212
       Restricted cash                         3,464            --
       Loan receivable                         5,792            --
       Trade receivables                      13,088            --
       Other receivables                      12,107         5,666
       Inventories                            67,102            --
       Real estate held for sale              12,480            --
       Contract deposits, prepaid and
        other                                 20,847           774
       Current assets of discontinued
        operations                                --       681,049
                                                 ---       -------
          Total current assets               560,471       736,747

     Non-current Assets

       Note receivable                            --         1,672
       Securities                              7,262            --
       Equity method investments               5,713            --
       Investment property                    38,584            --
       Property, plant and equipment           4,202           152
       Interests in resource properties      231,297       191,488
       Deferred income tax assets              6,727        12,115
       Non-current assets of
        discontinued operations                              9,546
                                                 ---         -----
          Total non-current assets           293,785       214,973
                                             -------       -------
             Total assets                   $854,256      $951,720
                                            ========      ========

    TERRA NOVA ROYALTY CORPORATION
    CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (con't)
    December 31, 2010 and 2009
    (Audited)
    (United States Dollars in Thousands)
    LIABILITIES AND EQUITY

                                                2010          2009
                                                ----          ----
     Current Liabilities

       Short-term bank borrowings            $69,979           $--
       Debt, current portion                   4,144            --
       Accounts payables and accrued
        expenses                              47,130         6,022
       Provisions                                362            --
       Income tax liabilities                  3,803           278
       Deferred sale liabilities              23,133            --
       Current liabilities relating to
        discontinued operations                    -       359,626
                                                 ---       -------
          Total current liabilities          148,551       365,926

     Long-term Liabilities

       Debt, less current portion             48,604            --
       Provisions                                232            --
       Deferred income tax liabilities        64,436        48,664
       Deferred sale liabilities              39,993            --
       Long-term liabilities relating to
        discontinued operations                    -        96,038
                                                 ---        ------
          Total long-term liabilities        153,265       144,702
                                             -------       -------
          Total liabilities                  301,816       510,628

    EQUITY

       Capital stock                         381,673       141,604
       Treasury stock                        (67,501)      (83,334)
       Contributed surplus                     5,775         7,232
       Retained earnings                     213,519       354,334
       Accumulated other comprehensive
        income                                14,290        15,853
                                              ------        ------
          Total shareholders' equity         547,756       435,689
       Non-controlling interests               4,684         5,403
                                               -----         -----
          Total equity                       552,440       441,092
                                             -------       -------
                                            $854,256      $951,720
                                            ========      ========

    TERRA NOVA ROYALTY CORPORATION
    CONSOLIDATED STATEMENTS OF OPERATIONS
    For the Years Ended December 31, 2010 and 2009
    (Audited)
    (United States Dollars in Thousands, Except Per Share Amounts)

                                                             2010        2009
                                                             ----        ----

    Net Sales                                             $84,476     $14,718
    Equity income                                             954          --
                                                              ---
          Gross revenues                                   85,430      14,718

    Costs and Expenses:
          Costs of sales                                   49,352       8,525
          Selling, general and administrative              18,316      16,474
          Share-based compensation (recovery) -
           selling, general and administrative                 72      (2,713)
          Interest                                            974         477
          Loss on derivative contracts                      2,010
                                                            -----         ---
                                                           70,724      22,763
                                                           ------      ------
                                                           14,706      (8,045)
     Other items:
          Currency transaction loss, net                   (3,608)     (3,208)
          Loss on settlement of investment in
           preferred shares of former subsidiaries             --      (9,538)
          Negative goodwill                                41,058          --
                                                           ------
     Income (loss) before income taxes                     52,156     (20,791)
     Income tax (expense) recovery:
           Income taxes                                      (231)      7,510
           Resource property revenue taxes                 (6,744)     (3,039)
                                                           ------      ------
                                                           (6,975)      4,471
                                                           ------       -----
     Income (loss) from continuing operations              45,181     (16,320)
     Income (loss) from discontinuing
      operations                                          (15,449)     54,042
                                                          -------      ------

     Net income for the year                               29,732      37,722
      Less: Net (income) loss attributable to
       non-controlling interests                              584      (1,050)
                                                              ---      ------
     Net income attributable to owners of the
      parent company                                      $30,316     $36,672
                                                          =======     =======

     Consisting of:  Continuing operations                $45,839    $(16,320)
                             Discontinued operations      (15,523)     52,992
                                                          -------      ------
                                                          $30,316     $36,672
                                                          =======     =======
     Basic and diluted earnings (loss) per
      share:
                             Continuing operations          $1.28      $(0.54)
                             Discontinued operations        (0.43)       1.75
                                                            -----        ----
                                                            $0.85       $1.21
                                                            =====       =====
     Weighted average number of common shares          35,857,873  30,354,207
    outstanding - basic
                        - diluted                      35,858,911  30,354,207

    TERRA NOVA ROYALTY CORPORATION
    FINANCIAL HIGHLIGHTS
    December 31, 2010
    (Audited)
    (United States Dollars in Thousands, Except Per Share Amounts)

       Cash and cash equivalents                   $397,697
       Securities                                    27,894
       Trade receivables                             13,088
       Current assets                               560,471
       Total assets                                 854,256
       Current liabilities                          148,551
       Working capital                              411,920
       Current ratio                                   3.77
       Acid test ratio                                 3.07
       Long term debt, less current portion          48,604
       Long-term debt-to-shareholders'
        equity                                         0.09
       Total Liabilities                            301,816
       Shareholders' equity                         547,756
       Equity per common share                         8.76


    Corporate                          Investors           Media
                                        Allen & Caron
    Terra Nova Royalty Corp             Inc.               Allen & Caron Inc.
    Rene Randall                       Joseph Allen        Len Hall
    1 (604) 683-8286 ex 224               1 (212) 691-8087   1 (949) 474-4300
     rene.randall@terranovaroyalty.com  joe@allencaron.com len@allencaron.com

SOURCE Terra Nova Royalty Corporation


Source: newswire



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