TERRAVEST INCOME FUND
TSX : TI.UN

TERRAVEST INCOME FUND

March 23, 2010 16:01 ET

TerraVest Income Fund Releases 2009 Annual Financial Results

VEGREVILLE, ALBERTA--(Marketwire - March 23, 2010) - TerraVest Income Fund (TSX:TI.UN) today released its financial results for the fiscal year ended December 31, 2009.

For the fiscal year ended December 31, 2009, the Fund reported:

- Revenue of $223.9 million and net income of $4.4 million or $0.22 per Unit, compared with revenue of $241.7 million and a net loss of $22.2 million or $1.20 per Unit for the fiscal year ended December 31, 2008

- Adjusted distributable cash of $2.8 million ($0.14 per Unit) compared to $14.4 million ($0.72 per Unit) in 2008

The reduction in adjusted distributable cash for the year reflects reduced cash earnings from all businesses except Stylus.

The Fund's payout ratio, which is defined as the percentage of Adjusted Distributable Cash that is paid as distributions to Unitholders, was 191% for the fiscal year ended December 31, 2009, compared with 83% for the fiscal year ended December 31, 2008. The increase in the Fund's payout ratio is a reflection of the reduced earnings from all businesses except Stylus. In response to the difficult operating environment of its businesses, the Fund suspended distributions on July 22, 2009. Under the terms of the Fund's credit agreement, the Fund requires approval from its lenders before reinstating distributions.

"Although the Fund's operating subsidiaries faced a challenging environment in 2009, improved working capital management allowed the Fund to meaningfully reduce total debt" said John Maynard, CEO of the Fund. "Our outlook for 2010 is guarded as a result of the continued weakness in many sectors of the economy. We will continue to manage our costs accordingly and expect 2010 to be a challenging year on the whole, although we do see some signs of stabilization within Diamond and Don Park. Diamond's acquisition of four service rigs in Unity, Saskatchewan in the fourth quarter of 2009 and the previously announced divestiture of Stylus subsequent to year end, reflects the ongoing commitment on the part of Fund management and trustees to maximizing Unitholder value by allocating capital towards the highest return opportunities."




Highlights from the Fund's fiscal year ended December 31, 2009 are as
follows:
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thousands of dollars

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Year ended December 31,
2009 2008
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Sales
RJV $ 18,835 $ 29,491
Ezee-On 12,688 13,036
Stylus 26,416 30,438
Don Park 92,566 93,822
Diamond 19,566 26.019
Beco 53,848 48,905
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223,919 241,711
Cost of sales 183,123 186,040
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Gross profit $ 40,796 $ 55,671
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Net earnings/(loss) for the year $ 4,409 $ (22,221)
Gain on acquisition of RNCI (3,748) (2,505)
Impairment of goodwill - 33,683
Impairment of intangible assets - 692
RNCI recovery related to impairment charges - (967)
Impairment of property, plant and equipment 187 -
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Earnings before gain on RNCI and impairment
charges $ 848 $ 8,682
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Earnings/(Loss) per Unit
Basic and diluted $ 0.22 $ (1.20)
Earnings per Unit before impairment charges and RNCI
Basic and diluted $ 0.04 $ 0.47
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STANDARDIZED DISTRIBUTABLE CASH AND ADJUSTED DISTRIBUTABLE CASH
Standardized Distributable Cash

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Three months ended Year ended Cumulative
December 31 December 31 since
2009 2008 2009 2008 inception
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Cash flow provided
by operating
activities $ 11,343 $ 15,341 $ 28,589 $ 26,364 $ 113,374
Adjustments:
Net capital
expenditures (544) (2,483) (2,461) (4,030) (18,665)
Cash portion of
RNCI (568) (1,142) (568) (1,142) (2,893)
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Standardized
distributable cash
before credit
agreement
restrictions 10,231 11,716 25,560 21,192 91,816
Adjustment for
credit agreement
restrictions (10,231) - (20,151) - (20,151)
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Standardized
distributable cash
available for
distribution - 11,716 5,409 21,192 71,665
Distributions
declared - 4,281 5,409 11,916 71,330
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Standardized
distributable cash
surplus $ - $ 7,435 $ - $ 9,276 $ 335
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Standardized
distributable cash
per Unit $ 0.52 $ 0.59 $ 1.30 $ 1.25 $ 5.02
Distributions
declared per Unit $ - $ 0.22 $ 0.28 $ 0.79 $ 5.22
Standardized payout
ratio 0% 37% 21% 64% 78%
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Adjusted Distributable Cash
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Three months ended Year ended Cumulative
December 31 December 31 since
2009 2008 2009 2008 inception
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Standardized
distributable cash
before credit
agreement
restrictions $ 10,231 $ 11,716 $ 25,560 $ 21,192 $ 91,816
Adjustments:
Change in non-cash
operating working
capital (13,634) (12,432) (23,997) (8,558) (22,026)
Net capital
expenditures 544 2,483 2,461 4,030 18,665
Maintenance
capital
expenditures (395) (1,228) (1,196) (2,273) (11,169)
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Adjusted
distributable cash
(deficiency) (3,254) 539 2,828 14,391 77,286
Distributions
declared - 4,281 5,409 11,916 71,330
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Adjusted
distributable cash
surplus (deficit) $ (3,254) $ (3,742) $ (2,581) $ 2,475 $ 5,956
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Adjusted
distributable cash
per Unit $ (0.17) $ 0.03 $ 0.14 $ 0.72 $ 5.22
Distributions
declared per Unit $ - $ 0.22 $ 0.28 $ 0.63 $ 4.86
Adjusted payout NM (1)
ratio 794% 191% 83% 92%
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(1) Not measurable


During the year, the Fund acquired 144,000 Units at an average cost of $2.64 under its normal course issuer bid instituted on October 2, 2008. The normal course issuer bid terminated on October 1, 2009. As at March 23, 2010, there are 19,620,466 Units issued and outstanding.

The Fund's consolidated financial statements and MD&A are available on SEDAR at www.sedar.com and on the Fund's website at www.terravestincomefund.com.

About TerraVest Income Fund

The Fund has investments in five businesses:

- RJV is one of the largest providers of wellhead processing equipment for the natural gas industry in western Canada.

- Diamond is a market leader in providing well servicing to the oil and natural gas sector in south-western Saskatchewan.

- Don Park is one of Canada's largest manufacturers and suppliers of heating, ventilation and air conditioning (HVAC) products.

- Beco is one of the largest Canadian designers, manufacturers and importers of home textile products.

- Ezee-On manufactures heavy-duty equipment for large acreage grain farms and livestock operations.

Caution Regarding Forward-Looking Statements

All statements other than statements of historical fact contained in this news release are forward-looking statements, including, without limitation, statements regarding the future financial position and results, resources, cash flow, operations, business strategy, proposed acquisitions, budgets, distributions, projected costs, plans and objectives of or involving the Fund. Readers can identify many of these statements by looking for words such as "believe", "expects", "will", "intends", "projects", "anticipates", "estimates", "continues" and similar words or the negative thereof. Although Management believes that the expectations represented in such forward looking statements are reasonable, there can be no assurance that such expectations will prove to be correct.

By their nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties. There is significant risk that the forward-looking statements will not prove to be accurate. A number of factors could cause actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed in the forward-looking statements and the assumptions underlying the forward-looking statements.

Assumptions and analysis about the performance of the Fund, as a whole, and the Fund's portfolio businesses and the markets in which they compete are considered in setting the business plan for the Fund, in forecasting the Fund's expected future financial position and results, resources, cash flow, operations, business strategy, proposed acquisitions, budgets, distributions, projected costs, plans and objectives of or involving the Fund and in making related forward-looking statements. The key assumption in respect of the Fund's level of distributions is that the cumulative distributable cash will be able to support the Fund's current level of distributions. The Fund receives distributable cash from its portfolio businesses. In respect of the portfolio businesses, key assumptions are that demand for products and services of the portfolio businesses in respect of the Canadian and other markets in which the Fund's businesses are active (and in particular, but without limitation, the Canadian oil and natural gas industry in western Canada and the North American markets for construction materials and household goods) and that the input costs to the portfolio businesses do not vary significantly from the costs experienced historically. Should any of these factors or assumptions vary, actual results may differ materially from the forward-looking statements.

The information set forth in the MD&A of the Fund for the year ended December 31, 2009 and in the annual information form of the Fund dated March 23, 2010 identifies risk factors that could affect the Fund and its portfolio businesses. The forward-looking statements herein are made based on the assumption that the Fund will not be affected by such risks, but that, if the Fund is affected by such risks, the forward-looking statements may become inaccurate.

Standardized and Adjusted Distributable Cash

The calculation of standardized distributable cash is, in all material respects, in accordance with the recommendations provided in the CICA publication Standardized Distributable Cash in Income Trusts and Other Flow-Through Entities: Guidance on Preparation and Disclosure. Standardized distributable cash is not a defined term under Canadian generally accepted accounting principles ("GAAP") and does not have a standardized meaning prescribed by GAAP. Standardized distributable cash is defined as cash flow from operations after non-cash working capital items, less: gross capital expenditures; restrictions on distributions arising from compliance with financial covenants restrictive at the time of reporting; and limitations arising from the existence of a minority interest. Net capital expenditures represent all capital expenditures incurred during the reporting period, net of proceeds received on disposal of property, plant and equipment..

Adjusted distributable cash is not a defined term under GAAP and does not have a standardized meaning. Adjusted distributable cash is defined as standardized distributable cash adjusted for changes in non-cash working capital, items that may be of a non-recurring nature and reflecting only maintenance capital expenditures and not growth-related capital expenditures.

Management believes that adjusted distributable cash as a liquidity measure is a useful supplemental measure as it provides the independent Trustees with an indication of the amount of cash available for distribution to Unitholders before the effects of seasonal fluctuations in working capital. Investors are cautioned, however, that adjusted distributable cash should not be construed as an alternative to using net earnings as a measure of profitability or to using information contained in the unaudited interim Consolidated Statements of Cash Flows as a measure of liquidity. Further, the Fund's method of calculating adjusted distributable cash may not be comparable to measures used by other entities.

Standardized distributable cash and adjusted distributable cash are discussed in the Fund's MD&A.

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