May 13, 2011 08:35 ET

TerraVest Income Fund Announces 2011 First Quarter Financial Results

VEGREVILLE, ALBERTA--(Marketwire - May 13, 2011) - TerraVest Income Fund (TSX:TI.UN) announced today its results for the first quarter of 2011, the Fund's first under International Financial Reporting Standards (IFRS). A comprehensive summary of all of the significant changes, including reconciliations of Canadian GAAP financial statements to those presented under IFRS, is presented in Note 26 "Transition to IFRS" of the Fund's unaudited consolidated interim financial statements for the three months ended March 31, 2011.

Adopting IFRS did not impact the cash the Fund generated. However the adoption of IFRS had an impact on the Fund's Statement of Financial Position (or balance sheet) and Statement of Comprehensive Income (or income statement). For a more detailed discussion of the changes and the impact on these financial statements please refer to the Fund's Management's Discussion and Analysis for the three months ended March 31, 2011. The Fund's consolidated financial statements and MD&A will be available on SEDAR at www.sedar.com and on the Fund's website at www.terravestincomefund.com.

For the three months ended March 31, 2011, the Fund reported:

Sales from continuing operations$27,600$22,851
Gross profit from continuing operations5,0983,794
Earnings from continuing operations695106
(loss) earnings from discontinued operations(642)1,904
Net earnings$532,010
Earnings (loss) per Unit, basic and diluted continuing operations$0.04$0.01
Earnings per Unit, basic and diluted, discontinued operations$(0.03)$0.12
Earnings per Unit, basic and diluted$0.01$0.11
Total assets$125,038$142,722

On a segmented basis sales for the sales from continuing operations for the three months ended March 31, 2011 and 2010 were:

Don Park USA723993

The Fund's management is actively reviewing options for the maximization of value to the unitholders of their investment in the Fund. This includes the continuing evaluation of the remaining portfolio businesses, separately and the Fund as a whole, in order to determine fair values. The board of trustees and management have also reviewed the future strategic direction of the Fund, and, as a result of this review, the board of trustees has determined that it is in the best interests of the Fund and its unitholders that management continue to identify and negotiate with potential purchasers. This process may result in the future sale of one or more portfolio businesses or the assets thereof. Subject to the Fund's cash requirements at the relevant times, the Fund plans to use proceeds received from such sale of portfolio businesses to pay one or more special distributions to Unitholders.

As a result of the value testing process described above, the Fund sold the assets and business operations of Stylus on March 2, 2010, Don Park Canada on October 7, 2010 and Ezee-On Manufacturing on February 7, 2011. In addition, Diamond has repaid to the Fund an operating loan made to Diamond in 2009 to fund the purchase of four service rigs. Subsequent to March 31, 2011, the Fund also received the balance of the proceeds from the sale of Don Park Canada. As a result of these activities, the Fund currently has cash or equivalents on deposit of $22.4 million. $5.0 million of this cash currently secures letters of credit issued by the Fund (i) to satisfy certain indemnification provisions contained in the asset purchase and sale agreement for the sale of Don Park Canada and (ii) to secure raw materials for Beco.

The Fund has entered into a commitment letter with HSBC Bank Canada by which the bank has agreed to provide up to $15 million in operating loans, letters of guarantee and letters of credit, subject to certain covenants and margin requirements. With this new credit facility, the Fund's cash will no longer be required to secure its outstanding letters of credit with cash. The Fund expects to enter into a definitive credit agreement with HSBC by mid June 2011. After the closing of this new credit facility, the Trustees will review the current and expected future obligations of the Fund and consider the matter of a special distribution.

About TerraVest Income Fund

The Fund has investments in four portfolio businesses:

  • RJV Gas Field Services ("RJV"), one of Canada's largest providers of wellhead processing equipment for the natural gas industry in western Canada;
  • Diamond Energy Services ("Diamond"), a market leader in providing well servicing to the oil and natural gas sector in south-western Saskatchewan, with a growing presence in Alberta;
  • Beco Industries ("Beco"), one of Canada's largest designers and importers of home textile products; and
  • Don Park USA ("Don Park USA"), a small US manufacturer and supplier of heating, ventilation and air conditioning products.

Caution Regarding Forward-Looking Statements

This news release contains 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 our strategic direction and evaluation of the portfolio businesses and the Fund as a whole, the sale or potential sale of portfolio businesses or assets thereof, the availability of credit, the Fund's planned credit facility, special distributions, and other plans and objectives of or involving the Fund. Readers can identify many of these statements by looking for words such as "expects" and "will" 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, accordingly, forward looking statements are subject to inherent risks and uncertainties. There is significant risk that the forward-looking statements will not prove to be accurate. We caution readers of this news release not to place undue reliance on our forward-looking statements because a number of factors may cause actual future circumstances, results, conditions, actions or events to differ materially from the plans, 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, the markets in which the portfolio businesses compete and the prospects and values of the portfolio businesses are considered in setting the business plan for the Fund, in evaluating and forecasting availability of credit, ability to pay distributions, tax horizon, capital investments, outlook for operations, financial position, results and cash flow, other plans and objectives and in making related forward-looking statements. Statements about the Fund's planned credit facility assume that the facility will close on the terms in the commitment letter. Statements concerning the Trustee's consideration of a special distribution do not necessarily indicate that any such special distribution will be declared. Should any of these factors or assumptions vary, actual results may differ materially from the forward-looking statements.

The information set forth under "Risk Factors" in the annual information form of the Fund dated March 1, 2011 and under "Financial Instruments" in the MD&A of the Fund for the period ended March 31, 2011, identifies risk factors that could affect the operating results and performance of the Fund and its portfolio businesses and the values of the portfolio businesses and the Fund as a whole. We caution that the lists of factors discussed in such information is not exhaustive and that, when relying on forward-looking statements to make decisions with respect to the Fund, investors and others should carefully consider the factors discussed, as well as other uncertainties and potential events, and the inherent risks and uncertainties of forward-looking statements. 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.

The forward-looking statements contained herein are expressly qualified in their entirety by this cautionary statement. The forward-looking statements included in this news release are made as of the date of this news release. Except as required by applicable securities laws, the Fund does not undertake to update such forward-looking statements.

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