Terra Nova Royalty Corporation Reports Year End Results for 2010

Mar 31, 2011, 07:30 ET from Terra Nova Royalty Corporation

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 with Mass*

$

410 to 425 million

Common share listing

New York Stock 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

bauxite

manganese-ore

cobalt

base metals

magnesium

steel products

zinc alloys

aluminum foils aluminum sheets

coal

clinker

cement

ferrous alloys

silicon metals

polystyrene

high density polyethylene

linear low density polyethylene

low density polyethylene

polyethylene terephthalate

polypropylene

polyvinyl chloride

pulp

saw logs

round logs

sawn timber

plywood

medium density fiberboard

wood pellets

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 outstanding - basic

35,857,873

30,354,207

                   - 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

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



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