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Terra Nova Royalty Corporation Reports First Quarter Results for 2011

May 16, 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.

RESULTS

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.

LIQUIDITY

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.

CASH DIVIDEND

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.

GROWTH PLANS

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
    rene.randall@terranovaroyalty.com  joe@allencaron.com  len@allencaron.com

SOURCE Terra Nova Royalty Corporation


Source: newswire



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