Terra Nova Royalty Corporation Reports First Quarter Results for 2011
NEW YORK, May 16, 2011 /PRNewswire/ — Terra Nova Royalty Corporation (“Terra Nova”) (NYSE: TTT) today announced results for the three months ended March 31, 2011. All figures are in US dollars.
Revenues for our commodities and resources business were $113.3 million for the three months ended March 31, 2011, compared to $3.8 million for the same period in 2010, primarily as a result of the inclusion of the integrated commodities operations of Mass Financial Corp. (“Mass”), which we acquired in the fourth quarter of 2010.
- Included in our commodities and resources business are the revenues generated by the Wabush royalty, which increased to approximately $5.5 million for the three months ended March 31, 2011, from approximately $3.8 million in the same period of 2010. This increase in royalty income was mainly attributable to a higher royalty rate. A total of 719,350 tons of iron ore pellets were shipped from Pointe Noire, Quebec during the three months ended March 31, 2011.
Revenues for our merchant banking business were $16.9 million for the three months ended March 31, 2011, compared to $nil for the same period in 2010, primarily as a result of the inclusion of Mass in the current quarter.
Other revenues, which encompass our corporate and other investments, were $3.7 million for the three months ended March 31, 2011, compared to $0.2 million for the same period in 2010, primarily as a result of the inclusion of Mass in the current quarter.
Costs of sales increased to $106.4 million during the three months ended March 31, 2011 from $2.7 million for the same period in 2010, primarily as a result of the consolidation of Mass’s operations. Selling, general and administrative expenses, excluding a share-based compensation expense, increased to $11.4 million for the three months ended March 31, 2011 from $2.6 million for the same period of 2010. The increase is primarily linked to the inclusion of Mass’s operations in the current quarter.
In the three months ended March 31, 2011, we recorded non-cash share-based compensation expense of $7.3 million in connection with options awarded under our incentive plans.
Our total revenues by operating segment and income from continuing operations were as follows for each of the quarters ended March 31, 2011 and 2010.
REVENUES All amounts in thousands 2011 2010* ---- ----- Commodities and resources $113,285 $3,819 Merchant banking 16,861 - Other 3,691 193 ----- --- Total revenues $133,837 $4,012 ======== ======
Note* 2010 revenues do not include the operations of Mass
INCOME FROM CONTINUING OPERATIONS All amounts in thousands 2011 2010* ---- ----- Commodities and resources $4,861 $1,192 Merchant banking 11,980 - Other (12,262) (2,317) Income (loss) before income taxes 4,579 (1,125) Income tax (1,777) 191 Resource property revenue tax (1,181) (867) Income (loss) from continuing operations $1,621 $(1,801) Earning (loss) per share $0.05 $(0.06)
Note* 2010 amounts do not include the operations of Mass
EFFECTS OF ONE-TIME & NON-CASH DISCRETIONARY EXPENSES All amounts in thousands 2011 ---- Share-based compensation $7,291 Other 1,472 ----- Total $8,763 ====== Per share impact, diluted $0.14 =====
SHARE- BASED COMPENSATION
With the acquisition of Mass in the last quarter of 2010 we believe it prudent to have a stock option plan for the combined company. As such during the three months ended March 31, 2011 we issued stock options at an exercise price of $7.81 per share. We incurred a non-cash discretionary share-based compensation expense of $7.3 million. All of the options granted were expensed in the current quarter to eliminate the future expense recognition.
We monitor capital on the basis of our debt-to-adjusted capital ratio and long-term debt-to-equity ratio. The debt-to-adjusted capital ratio is calculated as net debt divided by adjusted capital. Net debt is calculated as total debt less cash and cash equivalents. The long-term debt-to-equity ratio is calculated as long-term debt divided by shareholders’ equity.
LIQUIDITY All amounts in thousands March 31, December 31, 2011 2010 Total debt $54,477 $52,748 Less: cash and cash equivalents (396,753) (397,697) -------- -------- Net debt (net cash and cash equivalents) (342,276) (344,949) Shareholders' equity 551,583 547,756 Debt-to-adjusted capital Not ratio applicable Not applicable
The debt-to-adjusted capital ratio as at March 31, 2011 and December 31, 2010 were not applicable as we had a net cash and cash equivalents balance.
All amounts in thousands March 31, December 31, 2011 2010 Long-term debt $29,737 $48,604 Shareholders' equity 551,583 547,756 Long-term debt-to- equity ratio 0.05 0.09
We had a net cash and cash equivalent balance after deduction of our total debt. Our long-term debt-to-equity ratio was 0.05 and 0.09 as at March 31, 2011 and December 31, 2010, respectively.
We maintain various kinds of credit lines and facilities with banks. Most of these facilities are short-term. These facilities are used for day-to-day business, trade financing and activities in commodities, and structured trade finance.
As at March 31, 2011, we had credit facilities aggregating $395.0 million, of which we had unsecured revolving credit facilities aggregating $178.5 million. We had revolving credit facilities aggregating $8.7 million for our structured trade finance. The margin is negotiable when the facility is used. We also had a foreign exchange credit facility of $87.2 million with a bank. In addition, we had a non-recourse factoring arrangement with a bank for up to $120.6 million based on receivables for commodities activities. All of these facilities are renewable on a yearly basis.
In the first quarter of 2011 we 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. In January 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 as of January 20, 2011.
- The second payment of $0.05 per common share was made on April 11, 2011 to shareholders of record as of March 31, 2011.
- Additional payments of $0.05 per common share are expected to be made in each of the last two quarters of 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.
Michael Smith, Terra Nova’s Chairman, commented “We have now spent some of our money. Our growth strategy is now underway in several areas. This includes growing our business through strategic acquisitions that complement our integrated commodities supply chain focus. The principal challenge that faces us is to identify and execute on the acquisitions we need to make in order to have the growth that our asset base entitles us to. We have a record of profitability and cash generation – and now our task is to acquire and integrate new operations that will make Terra Nova a larger, more profitable corporation. It is our intention to concentrate our efforts and our financial resources on building an important international supplier of resource commodities and infrastructure materials.
“Our resources and commodities segment comprises the bulk of our first-quarter results, and that dominance is not likely to change, although we believe we can add operations and capabilities that will give us the ability to grow and prosper.
“There are several gates that potential acquisitions must pass through for us. First, the acquisition pricing must be attractive; we are risk-averse acquirers. Second, the acquisition must bring some synergies with our current operations, either by adding geographies or by adding complementary products or services. Third, we must be able to see a financial return on the acquisition in a reasonable time frame. We have a history of acquiring operations that are foundering for one reason or another, in spite of having a good base of business and/or assets; there is no reason for us to abandon that strategy, and we believe we bring expertise to rehabilitating assets and making money for our shareholders.
“We are optimistic that 2011 will be a watershed year for Terra Nova as we pursue our acquisition strategy. We have a much stronger financial base than other companies our size, and many decades of experience in buying good assets and realizing profits. I would like to thank our shareholders for their support.”
Shareholders are encouraged to read the entire Form 6-K, which includes our unaudited financial statements and management’s discussion and analysis for the three months ended March 31, 2011 and has been filed with the Securities and Exchange Commission (“SEC”), for a greater understanding of Terra Nova.
Terra Nova’s annual report for the fiscal year ended December 31, 2010 on Form 20-F was filed with the SEC and Canadian securities regulators on March 31, 2011. Terra Nova will provide a hard copy of its complete audited financial statements included in the annual report, free of charge, upon request. Requests can be sent by mail to: Terra Nova Royalty Corporation, Suite 1620, 400 Burrard Street, Vancouver, British Columbia, Canada V6C 3A6.
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: 371888, 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 has been 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 March 31, 2011 and December 31, 2010 (Unaudited) (United States Dollars in Thousands)
ASSETS March 31 December 31 Current Assets 2011 2010 Cash and cash equivalents $396,753 $397,697 Securities 26,113 27,894 Restricted cash 535 3,464 Loan receivable 14,512 5,792 Trade receivables 19,529 13,088 Other receivables 10,057 12,107 Inventories 75,520 67,102 Real estate held for sale 13,218 12,480 Contract deposits, prepaid and other 16,087 20,847 ------ ------ Total current assets 572,324 560,471 Non-current Assets Securities 21,479 7,262 Equity method investments 5,826 5,713 Investment property 40,774 38,584 Property, plant and equipment 4,241 4,202 Interests in resource properties 227,896 231,297 Deferred income tax assets 4,827 6,727 ----- ----- Total non-current assets 305,043 293,785 ------- ------- Total assets $877,367 $854,256 ======== ========
TERRA NOVA ROYALTY CORPORATION CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (con't) March 31, 2011 and December 31, 2010 (Unaudited) (United States Dollars in Thousands)
LIABILITIES AND EQUITY March 31 December 31 2011 2010 ---- ---- Current Liabilities Short-term bank borrowings $95,239 $69,979 Debt, current portion 24,740 4,144 Dividend payable 3,125 - Accounts payables and accrued expenses 44,202 47,130 Provisions 363 362 Income tax liabilities 3,531 3,803 Deferred sale liabilities 31,914 23,133 ------ ------ Total current liabilities 203,114 148,551 Long-term Liabilities Debt, less current portion 29,737 48,604 Deferred income tax liabilities 63,621 64,436 Provisions 181 232 Deferred sale liabilities 25,716 39,993 ------ ------ Total long-term liabilities 119,255 153,265 ------- ------- Total liabilities 322,369 301,816 EQUITY Capital stock 381,673 381,673 Treasury stock (67,501) (67,501) Contributed surplus 13,028 5,775 Retained earnings 210,189 213,519 Accumulated other comprehensive income 14,194 14,290 ------ ------ Total shareholders' equity 551,583 547,756 Non-controlling interests 3,415 4,684 ----- ----- Total equity 554,998 552,440 ------- ------- $877,367 $854,256 ======== ========
TERRA NOVA ROYALTY CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS For the Three Months Ended March 31, 2011 and 2010 (Unaudited) (United States Dollars in Thousands, Except Per Share Amounts)
2011 2010 ---- ---- Net Sales $132,582 $4,012 Equity income 1,255 - ----- --- Gross revenues 133,837 4,012 Costs and Expenses: Costs of sales 106,446 2,692 Selling, general and administrative 11,410 2,604 Share-based compensation - selling, general and administrative 7,219 - Interest 1,968 7 ----- --- 127,043 5,303 ------- ----- 6,794 (1,291) Other items: Foreign currency transaction gain (loss), net (2,215) 166 ------ --- Income (loss) before income taxes 4,579 (1,125) Income tax (expense) recovery: Income taxes (1,777) 191 Resource property revenue taxes (1,181) (867) ------ ---- (2.958) (676) ------ ---- Income (loss) from continuing operations 1,621 (1,801) Loss from discontinuing operations - (17,403) --- ------- Net income (loss) for the period 1,621 (19,204) Net (income) loss attributable to non- controlling interests 1,299 (74) --- Net income (loss) attributable to owners of the parent company $2,920 $(19,278) ====== ======== Consisting of: Continuing operations $2,920 $(1,801) Discontinued operations - (17,477) --- ------- $2,920 $(19,278) ====== ======== Basic and diluted earnings (loss) per share: Continuing operations $0.05 $(0.06) Discontinued operations - (0.58) --- ----- $0.05 $(0.64) ===== ====== Weighted average number of common shares outstanding - basic - diluted 62,561,421 30,270,355 62,626,861 30,270,355
TERRA NOVA ROYALTY CORPORATION FINANCIAL HIGHLIGHTS March 31, 2011 (Unaudited) (United States Dollars in Thousands, Except Per Share Amounts)
Cash and cash equivalents $396,753 Securities 26,113 Trade receivables 19,529 Current assets 572,324 Total assets 877,367 Current liabilities 203,114 Working capital 369,210 Current ratio 2.82 Acid test ratio 2.30 Long term debt, less current portion 29,737 Long-term debt-to-shareholders' equity 0.05 Total Liabilities 322,369 Shareholders' equity 551,583 Equity per common share 8.82
Corporate Investors Media Terra Nova Royalty Corp Allen & Caron Inc. Allen & Caron Inc. Rene Randall Joseph Allen Len Hall 1 (604) 683-8286 ex 224 1 (212) 691-8087 1 (949) 474-4300 firstname.lastname@example.org email@example.com firstname.lastname@example.org
SOURCE Terra Nova Royalty Corporation