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 Terra Nova Royalty Corporation Reports 2011 Second Quarter Results
   Monday, August 15, 2011 7:30:00 AM ET

Terra Nova Royalty Corporation ("Terra Nova" or the "Company") (TTT ) today announced results for the six months and second quarter ended June 30, 2011. Unless otherwise noted, all dollar amounts are in United States dollars.

RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2011

Revenues for our commodities and resources business were $257.0 million for the six months ended June 30, 2011, compared to $8.8 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 revenues generated by our royalty interest, which increased to approximately $12.3 million for the six months ended June 30, 2011, compared to $8.8 million for the same period in 2010. The increase in royalty revenue was mainly attributable to a higher royalty rate. A total of 1,515,120 tons of iron ore pellets were shipped during the six-month period ended June 30, 2011.

Revenues for our merchant banking business were $12.5 million for the six months ended June 30, 2011, compared to $nil for the same period in 2010, primarily as a result of the inclusion of Mass’s results.

Other revenues, which encompass our corporate and other investments, were $8.1 million for the six months ended June 30, 2011, compared to $1.1 million for the same period in 2010, primarily as a result of the inclusion of Mass’ results.

Costs of sales increased to $226.9 million during the six months ended June 30, 2011 from $6.0 million for the same period in 2010. Selling, general and administrative expenses increased to $21.8 million for the six months ended June 30, 2011 from $4.3 million for the same period in 2010. The increases were primarily linked to the inclusion of Mass’s operations.

RESULTS FOR THE THREE MONTHS ENDED JUNE 30, 2011

Revenues for our commodities and resources business were $138.2 million for the three months ended June 30, 2011, compared to $4.9 million for the same period in 2010, primarily as a result of the inclusion of the integrated commodities operations of Mass. Included in our commodities and resources business are revenues generated by our royalty interest of approximately $6.8 million for the three months ended June 30, 2011. A total of 795,770 tons of iron ore pellets were shipped during the three months ended June 30, 2011.

Revenues for our merchant banking business were $1.1 million for the three months ended June 30, 2011, compared to $nil for the same period in 2010 as a result of the inclusion of the activities of Mass.

Other revenues, which encompass our corporate and other investments, were $4.4 million for the three months ended June 30, 2011, compared to $0.9 million for the same period in 2010, and are attributable to the inclusion of Mass in the current quarter.

Costs of sales increased to $120.5 million during the three months ended June 30, 2011 from $3.3 million for the same period in 2010, while selling, general and administrative expenses increased to $10.4 million from $1.7 million for the same period of 2010. These increases are primarily linked to the inclusion of Mass’s operations in the current period.

OVERVIEW OF RESULTS FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2011

The table below shows our total revenues by operating segment for the six months ended June 30, 2011, as well as each of the three month periods ended June 30, 2011 and March 31, 2011 were:

REVENUES (2011)                                          All amounts in thousands
                          June 30              June 30              March 31
                          six months           three months         three months
Commodities and resources $       256,955      $       138,210      $       118,745
Merchant banking          12,511               1,110                11,401
Other                     8,056                4,365                3,691
Total revenues            $       277,522      $       143,685      $       133,837

The table below shows our income from continuing operations for the six months ended June 30, 2011, as well as each of the three month periods ended June 30, 2011 and March 31, 2011 were:

INCOME FROM CONTINUING OPERATIONS (2011)      All amounts in thousands, except per share amounts
                                         June 30                  June 30                  March 31
                                         six months               three months             three months
Commodities and resources                $     17,314             $    12,453              $     4,861
Merchant banking                         12,610                   630                      11,980*
Other                                    (13,739)                 (1,477)                  (12,262)
Income before income taxes               16,185                   11,606                   4,579
Income tax                               (1,959)                  (182)                    (1,777)
Resource property revenue                (679)                    502                      (1,181)
tax recovery (expenses)
Net loss attributable to non-controlling 1,370                    71                       1,299
interest
Net income from continuing               $    14,917              $    11,997              $      2,920
operations to shareholders
Earning per share                        $        0.24            $        0.19            $        0.05

*Note: The income before income tax from the merchant banking segment was higher than its revenue in the three months ended March 31, 2011, which was due to a gain not recognised in revenue.

ONE-TIME NON-CASH EXPENSES

The following table shows the effects of one-time and non-cash discretionary expenses on 2011 earnings.

EFFECTS OF ONE-TIME & NON-CASH DISCRETIONARY EXPENSES IN 2011
All amounts in thousands, except per share amount
                          June 30              March 31
                          three months         three months
Share-based compensation  $              -     $       7,291
Other                     145                  1,472
Total                     $          145       $       8,763
Per share impact, diluted $              -     $         0.14

FINANCIAL HIGHLIGHTS

The following table highlights certain selected key numbers and ratio in order to better understand Terra Nova’s financial position.

FINANCIAL HIGHLIGHTS AS OF JUNE 30, 2011        All amounts in thousands, except per share amount and ratio
Cash and cash equivalents                             $  413,857
Short-term securities                                 21,379
Working capital                                       371,116
Acid test ratio*                                      2.23
Shareholders’ equity                                  557,658
Equity per common share                               8.91

*Note: Calculated as cash and cash equivalents plus short-term cash deposits, short-term securities and receivables, divided by total current liabilities.

LIQUIDITY

As at June 30, 2011, we had cash and short-term securities of $435.2 million. We monitor our 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, while 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
                                         June 30, 2011                December 31 2010
Total debt                               $  55,007                    $  52,748
Less: cash and cash equivalents          (413,857)                    (397,697)
Net debt (net cash and cash equivalents) (358,850)                    (344,949)
Shareholders’ equity                     557,658                      547,756
Debt-to-adjusted capital ratio           Not applicable*              Not applicable*

*Note: The debt-to-adjusted capital ratio as at June 30, 2011 and December 31, 2010 were not applicable as we had a net cash and cash equivalents balance at such dates.

LONG-TERM DEBT-TO-EQUITY RATIO                 All amounts in thousands, except ratios
                                     June 30,  2011               December 31 2010
Long-term debt, less current portion $  29,668                    $  48,604
Shareholders’ equity                 557,658                      547,756
Long-term debt-to-equity ratio       0.05                         0.09

We had a net cash and cash equivalents balance after deduction of our total debt, and our long-term debt-to-equity ratio was 0.05 and 0.09 as at June 30, 2011 and December 31, 2010 respectively.

CREDIT FACILITIES

We maintain various types of credit lines and facilities with various banks, and most of these are short-term. These facilities are used for day-to-day business, structured finance and various other activities in both the commodities and finance areas.

As at June 30, 2011 we had credit facilities aggregating $379.0 million, of which unsecured revolving credit facilities totalled $181.9 million. We also had revolving credit facilities of $9.8 million for our structured trade finance activities with the margin charged by the lender being negotiable when the facility is used. We also had (i) a foreign exchange credit facility of $63.9 million and (ii) a non-recourse factoring arrangement with a bank for up to $123.4 million based on receivables from commodities operations. All of these facilities are renewable on a yearly basis.

SALE / DIVESTITURE OF ASSETS

We have completed a comprehensive review of our assets and identified some merchant banking and other non-core net assets in the amount of approximately $102.0 million, or $1.63 per share, which are not required for our future operations. We believe it is in the best interest of our shareholders to receive this value directly, by way of a special cash and/or spinout dividend or distribution. We are completing the final plan to do so in the most tax efficient manner for both the Company and its shareholders. We expect to complete this in November.

All of our assets are under constant review to assess the risk and acceptable returns for the Company.

DIRECTIONAL FOCUS

After considerable review and discussions, the Board of Directors has determined that the Company should primarily focus its efforts on building our existing commodities activities into a global commodities supply chain business that will source and deliver commodities and materials to all industries, with an emphasis on the financing and risk management aspect of the business. They have also approved a name change to MFC Industrial Ltd. We believe, by committing our capital and personnel, that this strategy will allow us to capitalize on our sourcing, finance, risk management and logistics capabilities and experience to maximize returns throughout the commodities supply chain. We still need to penetrate other markets and enhance our product lines.

We view the major advantages of the commodities supply chain business to be:

Turnaround cycle is generally short, resulting in a minimum risk profit realization.

Requires a minimal investment in fixed assets.

Generates long-term customer loyalty.

Allows us to leverage our ability, arrange and/or finance suppliers for the long-term.

Enables us to capitalize on our risk management expertise.

The Company plans to implement the name change promptly upon receipt of regulatory approvals and our shares will continue to trade on the New York Stock Exchange under a new trading symbol, beginning in mid-September.

CORPORATE TAXATION

The Company continued to be fiscally responsible and paid minimal corporate income taxes during the first six months of 2011.

ANNUAL CASH DIVIDEND

The Company’s annual cash 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 quarterly.

To date we have paid total cash dividends of $0.15 per share, with an additional payment of $0.05 per common share expected to be announced in the third quarter 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.

EXPANSION PLANS

Michael Smith, Chairman, commented "We are pleased with our new focus on building a global commodities supply chain company together with all of our corporate changes and emphasis on expansion of our operations. We have now identified several strategic acquisitions that will complement our new business focus. This strategy is now underway.

"Our task now is to acquire and integrate new operations that will make us larger and, most important, more profitable.

"We are generally optimistic that 2011 will be a watershed year as we pursue our acquisition strategy. We have a much stronger financial base than many other companies our size, and years of experience in buying good assets and realizing value. With the current financial uncertainty in the market, we believe that many interesting opportunities may present themselves."

Shareholders are encouraged to read the entire Form 6-K, which includes our unaudited financial statements and management’s discussion and analysis for the six months ended June 30, 2011 and has been filed with the Securities and Exchange Commission ("SEC"), for a greater understanding of the Company.

Our 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. The Company will provide a hard copy of the annual report, free of charge, upon request. Requests can be sent by mail to: 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) 344 7529, using conference number 10002970. International callers should dial: 1 (412) 317 0088.

ABOUT OUR COMPANY

Terra Nova is active in a broad spectrum of activities related to the integrated combination of commodities and resources and merchant banking. To obtain further information, 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.

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
UNAUDITED FINANCIAL TABLES FOLLOW -
TERRA NOVA ROYALTY CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
June 30, 2011 and December 31, 2010
(Unaudited)
(United States Dollars in Thousands)
------------------------------------------------------------------
ASSETS                               June 30         December 31
Current Assets                       2011            2010
Cash and cash equivalents            $   413,857     $   397,697
Short-term cash deposits             672             -
Securities                           21,379          27,894
Restricted cash                      720             3,464
Loan receivable                      18,188          5,792
Trade receivables                    17,578          13,088
Other receivables                    14,285          12,107
Inventories                          76,472          67,102
Real estate held for sale            13,537          12,480
Contract deposits, prepaid and other 12,144          20,847
Total current assets                 588,832         560,471
Non-current Assets
Securities                           16,938          7,262
Equity method investments            13,605          5,713
Investment property                  39,944          38,584
Property, plant and equipment        4,179           4,202
Interests in resource properties     224,261         231,297
Deferred income tax assets           7,737           6,727
Total non-current assets             306,664         293,785
Total assets                         $   895,496     $   854,256
TERRA NOVA ROYALTY CORPORATION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (cont’d)
June 30, 2011 and December 31, 2010
(Unaudited)
(United States Dollars in Thousands)
------------------------------------------------------------------------
LIABILITIES AND EQUITY                 June 30,          December 31
                                       2011              2010
Current Liabilities
Short-term bank borrowings             $ 107,145         $   69,979
Debt, current portion                  25,339            4,144
Dividend payable                       3,125             -
Account payables and accrued expenses  41,259            47,130
Provisions                             93                362
Income tax liabilities                 3,703             3,803
Deferred sale liabilities              37,052            23,133
Total current liabilities              217,716           148,551
Long-term Liabilities
Debt, less current portion             29,668            48,604
Deferred income tax liabilities        62,832            64,436
Provisions                             3                 232
Deferred sale liabilities              25,902            39,993
Total long-term liabilities            118,405           153,265
Total liabilities                      336,121           301,816
EQUITY
Capital stock                          381,981           381,673
Treasury stock                         (67,809)          (67,501)
Contributed surplus                    13,028            5,775
Retained earnings                      219,052           213,519
Accumulated other comprehensive income 11,406            14,290
Total shareholders’ equity             557,658           547,756
Non-controlling interests              1,717             4,684
Total equity                           559,375           552,440
                                       $ 895,496         $ 854,256
TERRA NOVA ROYALTY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Six Months Ended June 30, 2011 and 2010
(Unaudited)
(United States Dollars in Thousands, Except Per Share Amounts)
------------------------------------------------------------------------------------------------------
                                                               2011                 2010
Net Sales                                                      $  274,614           $      9,848
Equity income                                                  2,908                -
Gross revenues                                                 277,522              9,848
Costs and Expenses:
Costs of sales                                                 226,904              6,004
Selling, general and administrative                            21,798               4,269
Share-based compensation - selling, general and administrative 7,219                -
Interest                                                       4,153                7
                                                               260,074              10,280
                                                               17,448               (432)
Other item:
Foreign currency transaction loss, net                         (1,263)              (306)
Income (loss) before income taxes                              16,185               (738)
Income tax (expense) recovery:
Income taxes                                                   (1,959)              1,897
Resource property revenue taxes                                (679)                (1,956)
                                                               (2,638)              (59)
Income (loss) from continuing operations                       13,547               (797)
Loss from discontinued operations                              -                    (20,128)
Net income (loss) for the period                               13,547               (20,925)
Net (income) loss attributable to non-controlling interests    1,370                (74)
Net income (loss) attributable to owners of the parent company $   14,917           $    (20,999)
Consisting of:  Continuing operations                          $   14,917           $      (797)
Discontinued operations                                        -                    (20,202)
                                                               $   14,917           $    (20,999)
Basic and diluted earnings (loss) per share:
Continuing operations                                          $       0.24         $       (0.03)
Discontinued operations                                        -                    (0.67)
                                                               $       0.24         $       (0.70)
Weighted average number of common shares
outstanding
- basic                                                        62,561,421           30,277,673
- diluted                                                      62,610,166           30,277,673
TERRA NOVA ROYALTY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended June 30, 2011 and 2010
(Unaudited)
(United States Dollars in Thousands, Except Per Share Amounts)
------------------------------------------------------------------------------------------------------
                                                               2011                 2010
Net Sales                                                      $  142,032           $      5,836
Equity income                                                  1,653                -
Gross revenues                                                 143,685              5,836
Costs and Expenses:
Costs of sales                                                 120,458              3,312
Selling, general and administrative                            10,388               1,665
Interest                                                       2,185                -
                                                               133,031              4,977
                                                               10,654               859
Other item:
Foreign currency transaction gain (loss), net                  952                  (472)
Income before income taxes                                     11,606               387
Income tax (expense) recovery:
Income taxes                                                   (182)                1,706
Resource property revenue taxes                                502                  (1,089)
                                                               320                  617
Income from continuing operations                              11,926               1,004
Loss from discontinuing operations                             -                    (2,725)
Net income (loss) for the period                               11,926               (1,721)
Net loss attributable to non-controlling interests             71                   -
Net income (loss) attributable to owners of the parent company $   11,997           $     (1,721)
Consisting of: Continuing operations                           $   11,997           $      1,004
Discontinued operations                                        -                    (2,725)
                                                               $   11,997           $     (1,721)
Basic and diluted earnings (loss) per share:
Continuing operations                                          $       0.19         $       0.03
Discontinued operations                                        -                    (0.09)
                                                               $       0.19         $       (0.06)
Weighted average number of common shares outstanding
- basic                                                        62,561,421           30,284,911
- diluted                                                      62,580,080           30,284,911
TERRA NOVA ROYALTY CORPORATION
FINANCIAL HIGHLIGHTS
As of June 30, 2011
(Unaudited)
(United States Dollars in Thousands, Except Per Share Amount and Ratios)
--------------------------------------------------------------------------
Cash and cash equivalents              $ 413,857
Short-term securities                  21,379
Trade receivables                      17,578
Current assets                         588,832
Total assets                           895,496
Current liabilities                    217,716
Working capital                        371,116
Current ratio                          2.70
Acid test ratio                        2.23
Long term debt, less current portion   29,668
Long-term debt-to-shareholders’ equity 0.05
Total Liabilities                      336,121
Shareholders’ equity                   557,658
Equity per common share                8.91

SOURCE Terra Nova Royalty Corporation



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