Divestco Inc.
TSX VENTURE : DVT

Divestco Inc.

April 05, 2006 18:49 ET

Divestco Reports 50% Increase in Revenue and 139% Increase in Funds from Operations for Fiscal 2005

CALGARY, ALBERTA--(CCNMatthews - April 5, 2006) - Divestco Inc. (TSX VENTURE:DVT) ("Divestco" or the "Company") is pleased to announce that it has generated record revenues and exceeded its previously released guidance for the year ended December 31, 2005. The Company generated $38.8 million in revenues, an increase of $12.9 million or 50% from $25.9 million generated in 2004. Earnings before interest, taxes, depreciation and amortization (EBITDA) was a record $16.1 million compared to $6.7 million in 2004, a 139% increase year over year. Divestco generated a record $15.5 million in funds from operations, a 139% increase from $6.5 million generated in 2004. Net income for 2005 increased by 31% to a record $5.2 million from $3.9 million earned in 2004. The Company earned a record 20 cents per share basic (19 cents diluted) for fiscal 2005. This compares to 16 cents per share (basic & diluted) for fiscal 2004. Divestco closed fiscal 2005 with $3.5 million in working capital compared to a $3.0 million deficiency at the end of 2004, an improvement of $6.5 million.



SUMMARY FINANCIAL RESULTS ($THOUSANDS EXCEPT PER SHARE AMOUNTS)

Quarter Ended December 31 Year Ended December 31
------------------------------------------------------------------------
% %
2005 2004 Change 2005 2004 Change
------------------------------------------------------------------------

Revenue $ 12,874 $ 8,234 56% $ 38,754 $ 25,912 50%

EBITDA 5,288 3,168 67% 16,117 6,746 139%

Operating income 2,826 2,042 38% 8,283 3,520 135%

Income tax
expense
(reduction) 1,163 (83) N/A 3,137 (283) N/A

Net income 1,666 2,135 (22)% 5,178 3,947 31%
Per share
- basic 0.06 0.08 (25)% 0.20 0.16 25%
Per share
- diluted 0.05 0.08 (38)% 0.19 0.16 19%

Funds from
operations 5,083 3,070 66% 15,498 6,497 139%
Per share
- basic 0.17 0.12 42% 0.58 0.26 123%
Per share
- diluted 0.16 0.12 33% 0.57 0.26 119%
------------------------------------------------------------------------

Shares
outstanding
(000's) 29,875 24,985 29,875 24,985

Weighted average
shares
outstanding
(000's)
Basic 29,848 25,126 26,521 25,308
Diluted 30,829 25,214 27,046 25,392
------------------------------------------------------------------------


2005 Operational Highlights

- Significantly increased 2D and 3D seismic data licence sales by over $13 million

- Acquired an additional 700 gross kilometers of 2D and close to 1500 gross kilometers of 3D seismic

- Completed five corporate acquisitions:

1) Petro Data Source, Inc.

2) Canamera Equities Ltd.

3) Canamera Corporation (2 & 3 collectively known as Drilling Records in the oil and gas industry)

4) Focus Holdings and Investments Ltd.

5) Laser Software Ltd.

- Successfully raised $10 million in gross proceeds from a brokered private placement

- Successfully secured $10 million in committed long-term debt financing

Fourth Quarter 2005 Results

During the fourth quarter of 2005, Divestco generated a record $12.9 million in revenue, a 56% increase compared to $8.2 million generated in 2004. EBITDA was a record $5.3 million, a $2.1 million or 67% increase from $3.2 million recorded for same period in 2004. The Company generated a record $5.1 million in funds from operations, a 66% increase from $3.1 million generated in 2004. Net income for the quarter decreased by 22% to $1.7 million from $2.1 million earned in 2004. The Company earned 6 cents per share basic and 5 cents per share diluted for the quarter. This compares with 8 cents per share (basic & diluted) earned during the fourth quarter of 2004.

The decrease in comparative net income over the fourth quarter is entirely due to a $1.2 million (non-cash) tax expense recorded during the fourth quarter of 2005. In the same period in 2004 the Company recorded a $0.1 million (non-cash) tax reduction arising from the recognition of a previously unrecognized tax asset. Operating income, which excludes the recording of income taxes, increased 38% from $2.0 million in 2004 to $2.8 million in 2005.

Mr. Stephen Popadynetz, CEO of Divestco commented: "I am pleased to report our record 2005 results to our shareholders, Board and employees. We began the year with a mandate to grow both organically and through acquisitions, while continuing to generate profitable software, data and services. Divestco has been successful on all fronts. Our shareholders have been rewarded with our ninth consecutive profitable quarter and our most impressive fiscal year-end results to date. I look forward to continued growth, innovation and profitability as we enter 2006."

Acquisition Update

On March 28, 2006, the Company announced that it had entered into a Letter of Intent to acquire a division of a service company for consideration of C$11.5 million plus the assumption of certain liabilities. The Company is pleased to announce that it is in the process of disposing of its short-term investments and will be able to fund the acquisition (should it close) with the proceeds, internally generated cash flow and bank debt (if required).



Divestco Inc.
Consolidated Balance Sheets

December 31 ($Thousands) 2005 2004
------------------------------------------------------------------------

Assets

Current Assets
Cash and cash equivalents $ 1,382 $ -
Short-term investments 5,512 -
Accounts receivable 27,053 13,981
Prepaid expenses, supplies and deposits 427 337
Investment tax credits recoverable - 500
------------------------------------------------------------------------
34,374 14,818

Long-term accounts receivable 960 312
Future income taxes - 2,317
Investment in affiliated company 79 85
Data libraries 31,459 15,337
Property and equipment 3,495 2,933
Deferred development costs 1,863 1,151
Deferred finance costs 409 -
Intangibles 4,128 2,652
Goodwill 3,431 1,949
------------------------------------------------------------------------

$ 80,198 $ 41,554
------------------------------------------------------------------------
------------------------------------------------------------------------

Liabilities and Shareholders' Equity

Current Liabilities
Bank indebtedness $ - $ 2,321
Accounts payable and accrued liabilities 17,624 10,197
Current portion of deferred revenue 10,355 4,565
Current portion of long-term debt obligations 2,880 727
------------------------------------------------------------------------
30,859 17,810

Deferred revenue 402 737
Long-term debt obligations 8,724 648
Future income taxes 2,989 -
------------------------------------------------------------------------
42,974 19,195
------------------------------------------------------------------------

Shareholders' Equity
Equity instruments 27,195 17,779
Contributed surplus 1,269 662
Retained earnings 8,760 3,918
------------------------------------------------------------------------
37,224 22,359
------------------------------------------------------------------------

$ 80,198 $ 41,554
------------------------------------------------------------------------
------------------------------------------------------------------------


Divestco Inc.
Consolidated Statements of Income and Retained Earnings

For the year ended December 31
($Thousands, except per share amounts) 2005 2004
------------------------------------------------------------------------

Revenue $ 38,754 $ 25,912
------------------------------------------------------------------------

Operating expenses
Salaries and benefits 16,172 13,103
General and administrative 5,740 5,643
Research and development 360 203
Stock compensation expense 365 217
------------------------------------------------------------------------
22,637 19,166

Earnings before interest,
taxes, depreciation and amortization 16,117 6,746

Interest expense 324 371

Depreciation and amortization 7,510 2,855
------------------------------------------------------------------------

Operating income 8,283 3,520
------------------------------------------------------------------------

Other income (loss)
Foreign exchange gain 12 126
Gain on sale of property and equipment 26 -
Equity investment income (loss) (6) 18
------------------------------------------------------------------------
32 144
------------------------------------------------------------------------

Income before income taxes 8,315 3,664
------------------------------------------------------------------------

Income taxes (reduction)
Current 1,304 -
Future 1,833 (283)
------------------------------------------------------------------------
3,137 (283)
------------------------------------------------------------------------

Net income for the year 5,178 3,947

Retained earnings, beginning of year 3,918 62
Purchase price of common shares
repurchased in excess of book value (336) (91)
------------------------------------------------------------------------

Retained earnings, end of year $ 8,760 $ 3,918
------------------------------------------------------------------------
------------------------------------------------------------------------

Earnings per share
Basic $ 0.20 $ 0.16
Diluted $ 0.19 $ 0.16

Weighted average number of shares
Basic 26,521 25,308
Diluted 27,046 25,392

------------------------------------------------------------------------
------------------------------------------------------------------------


Divestco Inc.
Consolidated Statements of Cash Flows

For the year ended December 31 ($Thousands) 2005 2004
------------------------------------------------------------------------

Cash flows from operating activities
Net income $ 5,178 $ 3,947
Items not affecting cash:
Equity investment loss (income) 6 (18)
Gain on sale of property and equipment (26) -
Depreciation and amortization 7,510 2,855
Future income taxes (reduction) 1,833 (283)
Investment tax credits utilized 631 -
Unrealized foreign exchange loss (gain) 1 (221)
Stock compensation expense 365 217
------------------------------------------------------------------------
Funds from operations 15,498 6,497
Changes in non-cash working capital balances (2,431) 17
Increase in long-term accounts receivable (648) (312)
Increase (decrease) in non-current deferred
revenue (335) 737
------------------------------------------------------------------------
12,084 6,939
------------------------------------------------------------------------

Cash flows from financing activities

Bank indebtedness (2,687) (653)
Repayment of long-term debt obligations (1,539) (250)
Proceeds received from long-term debt
obligations 10,783 1,197
Repayment of Focus shareholder loans (213) -
Issue of common shares, net of related expenses 9,584 (22)
Repurchase of common shares (822) (418)
Deferred financing costs (120) -
Advance to affiliated company - (13)
Repayment of debentures - (4,250)
Proceeds received from issuance of debentures - 4,250
Proceeds received from non-revolving demand loan - 3,055
------------------------------------------------------------------------
14,986 2,896
------------------------------------------------------------------------

Cash flows from investing activities
Purchase of investment securities (5,512) -
Purchase of data libraries (15,307) (9,271)
Purchase of property and equipment (1,132) (1,453)
Proceeds on sale of property and equipment 44 -
Acquisitions (6,641) (84)
Deferred development costs (712) (1,151)
Changes in non-cash working capital balances 3,588 -
------------------------------------------------------------------------
(25,672) (11,959)
------------------------------------------------------------------------

Foreign exchange loss on cash held in a foreign
currency (16) -
------------------------------------------------------------------------

Increase (decrease) in cash and cash equivalents 1,382 (2,124)

Cash and cash equivalents, beginning of year - 2,124
------------------------------------------------------------------------

Cash and cash equivalents, end of year $ 1,382 $ -
------------------------------------------------------------------------
------------------------------------------------------------------------


Divestco is an innovative software, data, services, brokerage and consulting company providing integrated solutions for the oil and gas industry. By implementing a strategy of integration between our software, services, and datasets, and potentially all three together, we are creating a unique set of offerings. Divestco is headquartered in Calgary, Alberta, Canada and trades on the TSX Venture Exchange under the symbol "DVT".

Statements in this document that may be considered forward-looking are based on management's current expectations that involve a number of risks and uncertainties, which could cause actual results to differ from those anticipated.

Divestco Inc. was recognized as a TSX Venture 50™ company in 2005. TSX Venture 50 is a trademark of TSX Inc. and is used under licence. The TSX Venture 50™ are the top 10 companies in each of five major industry sectors - mining, oil & gas technology, life science and diversified industries - based on a ranking formula with equal weighting given to one-year revenue (last reported 12 months), return on investment, market cap growth and trading volume. All data was as of August 31, 2005. The 2005 TSX Venture 50™ is not an invitation to purchase securities listed on Toronto Stock Exchange and/or TSX Venture Exchange. TSX Group Inc. and its affiliates do not endorse or recommend any securities referenced in this ranking. Neither TSX Group Inc. nor its affiliated companies represent, warrant or guarantee the accuracy or the completeness of the information. You should not rely on this information contained herein for any trading, business or financial purposes. TSX Group Inc. and its affiliates assume no liability for any errors or inaccuracies herein or any use or reliance upon this information.

Earnings before interest, taxes, depreciation and amortization ("EBITDA"); "operating income"; "funds from operations", and "funds from operations per share (basic and diluted)" are not measures that have any standardized meaning prescribed by Canadian GAAP and are considered non-GAAP measures. Therefore, these measures may not be comparable to similar measures presented by other issuers. These measures have been described and presented in this press release in order to provide shareholders and potential investors with additional information regarding the Company's results, liquidity, and its ability to generate funds to finance its operations.

Management believes that in addition to net income, EBITDA and operating income are useful supplemental measures for providing an indication of the results generated by the Company's principle business activities prior to the consideration of how those activities are financed or how the results are taxed. Management also utilizes funds from operations and funds from operations per share - basic and diluted as key measures to assess the ability of the Company to finance operating activities and capital expenditures.

Operating income is calculated by deducting interest and amortization from EBITDA. Funds from operations is calculated by adding or deducting non-cash items from net income (loss). Funds from operations per share (basic and diluted) is calculated by dividing funds from operations by the weighted average number of shares outstanding (basic and diluted) for the relevant period.

The TSX Venture Exchange has not reviewed nor accepts responsibility for the adequacy or accuracy of this news release.

Contact Information

  • Divestco Inc.
    Mr. Stephen Popadynetz
    Chief Executive Officer
    (403) 218-6466
    or
    Divestco Inc.
    Mr. Roderick Chisholm
    Chief Financial Officer
    (403) 218-6450
    Website: www.divestco.com