TerraVest Industries — Interim / Quarterly Report 2021

Aug 11, 2021

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INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the third quarter ended June 30, 2021

TERRAVEST INDUSTRIES INC.

Interim Condensed Consolidated Statements of Financial Position

(In thousands of Canadian dollars)

(In thousands of Canadian dollars)
		As at		As at
		June 30,	2021	September	30, 2020
	Note	(Unaudited)		(Audited)
		$		$
ASSETS
Current
Cash			8,622		27,452
Accounts receivable			44,141		44,610
Income taxes receivable			315		783
Inventories			94,999		83,955
Other current assets	6		9,218		3,790
			157,295		160,590
Non-Current
Property, plant and equipment			77,573		76,359
Right-of-use assets			28,845		32,411
Intangible assets			17,740		21,404
Deferred income tax assets			7,543		8,587
Investments	7		9,228		7,470
Other non-current assets			346		150
Goodwill			12,248		12,654
			310,818		319,625
LIABILITIES
Current
Bank overdrafts			325		735
Revolving credit facility			-		864
Accounts payable and accrued liabilities			28,812		24,536
Deferred revenues			14,122		15,888
Dividends payable	9		1,757		1,868
Income taxes payable			1,346		2,833
Current portion of long-term debt			5,801		5,251
Current portion of lease liabilities			4,564		4,374
			56,727		56,349
Non-Current
Long-term debt	8		95,864		98,400
Lease liabilities			27,159		30,523
Deferred income tax liabilities			7,786		8,211
			187,536		193,483
SHAREHOLDERS’ EQUITY
Share capital	9		141,712		149,284
Share premium			21,027		35,191
Share-based payments reserve			321		417
Accumulated other comprehensive income (loss)			(2,208)		393
Accumulated deficit			(37,581)		(59,355)
			123,271		125,930
Non-controlling interest			11		212
			123,282		126,142
			310,818		319,625

See accompanying notes to the interim condensed consolidated financial statements

On behalf of the Board:

/s/ Charles Pellerin, Director /s/ Blair Cook, Director

1

TERRAVEST INDUSTRIES INC.

Interim Condensed Consolidated Statements of Income

(Unaudited – in thousands of Canadian dollars, except share and per share amount)

		Third quarters ended	Third quarters ended	Nine months ended	Nine months ended
	Note	June 30, 2021	June 30, 2020	June 30, 2021	June 30, 2020
		$	$	$	$
SALES	14
Products		64,163	59,979	216,251	227,781
Services		3,667	1,040	10,396	8,241
		67,830	61,019	226,647	236,022
Cost of sales		51,776	45,915	167,668	183,136
Grossprofit		16,054	15,104	58,979	52,886
EXPENSES
Administration		6,914	7,491	19,381	24,850
Selling		1,662	1,040	4,945	4,482
Financing costs	11	940	1,175	2,857	4,202
Share of associates and joint venture
net loss		295	-	295	-
Other(gains)losses	12	22	(487)	(3,046)	(1,412)
		9,833	9,219	24,432	32,122
EARNINGS BEFORE INCOME TAXES		6,221	5,885	34,547	20,764
INCOME TAX EXPENSE
Current		1,709	1,199	6,911	4,673
Deferred		165	832	614	545
		1,874	2,031	7,525	5,218
NET INCOME		4,347	3,854	27,022	15,546
Net income (loss) attributable to:
Common shareholders		4,420	3,882	27,223	15,666
Non-controllinginterest		(73)	(28)	(201)	(120)
		4,347	3,854	27,022	15,546
Weighted average number of common shares:
Basic	10	17,870,820	18,685,491	18,279,415	18,420,527
Diluted	10	18,130,103	18,995,139	18,552,523	19,071,235
Net income per share:
Basic	10	$0.25	$0.21	$1.49	$0.85
Diluted	10	$0.24	$0.20	$1.47	$0.83

See accompanying notes to the interim condensed consolidated financial statements

2

TERRAVEST INDUSTRIES INC.

Interim Condensed Consolidated Statements of Comprehensive Income

(Unaudited – in thousands of Canadian dollars)

(Unaudited – in thousands of Canadian dollars)
	Third quarters ended			Nine months ended
	**June 30, **	2021	June 30, 2020	June 30, 2021	**June 30, **	2020
	$		$	$	$
NET INCOME	4,347		3,854	27,022	15,546
Other comprehensive income (loss), net of income tax:
Item that may be reclassified subsequently to profit
or loss:
Exchange difference on translating
foreign operations		(537)	(1,508)	(2,601)		980
COMPREHENSIVE INCOME	3,810		2,346	24,421	16,526
Attributable to:
Common shareholders	3,883		2,374	24,622	16,646
Non-controllinginterest		(73)	(28)	(201)		(120)
	3,810		2,346	24,421	16,526

See accompanying notes to the interim condensed consolidated financial statements

3

TERRAVEST INDUSTRIES INC.

Interim Condensed Consolidated Statements of Changes in Shareholders’ Equity

(Unaudited – in thousands of Canadian dollars)

(Unaudited – in thousands of Canadian dollars)
			Nine months ended
	Note	**June 30, **	2021 June	**30, **	2020
		$		$
Share capital
Common shares:	9
Balance, beginning of year			149,284		139,290
Issued on conversion of convertible debentures			-		10,690
Issued on exercise of stock options			2,304		-
Repurchased and cancelled duringtheperiod			(9,876)		(696)
Balance,end ofperiod			141,712		149,284
Share premium
Balance, beginning of year			35,191		36,513
Carrying value of common shares and convertible debentures
repurchased lower than consideration paid			(11,227)		(259)
Reduction on exercise of stock options			(2,937)		-
Excess considerationpaid on settlement of stock options			-		(1,063)
Balance,end ofperiod			21,027		35,191
Share-based payments reserve
Balance, beginning of year			417		432
Share-based payments expense			57		71
Reduction on exercise of stock options			(153)		-
Reduction on settlement of stock options			-		(115)
Balance,end ofperiod			321		388
Accumulated other comprehensive income (loss)
Balance, beginning of year			393		163
Other comprehensive income(loss)			(2,601)		980
Balance,end ofperiod			(2,208)		1,143
Equity component of convertible debentures
Balance, beginning of year			-		1,451
Conversion of convertible debentures			-		(1,311)
Convertible debentures repurchased,net of income tax			-		(140)
Balance,end ofperiod			-		-

4

TERRAVEST INDUSTRIES INC.

Interim Condensed Consolidated Statements of Changes in Shareholders’ Equity – Continued

(Unaudited – in thousands of Canadian dollars)

(Unaudited – in thousands of Canadian dollars)
		Nine months ended
	**June 30, **	2021 June	**30, **	2020
	$		$
Accumulated deficit
Balance, beginning of year		(59,355)		(77,346)
Impact of change in accounting policy		-		(1,407)
Adjusted balance, beginning of year		(59,355)		(78,753)
Net income attributable to common shareholders		27,223		15,666
Dividends declared duringtheperiod		(5,449)		(5,573)
Balance,end ofperiod		(37,581)		(68,660)
Total shareholders’ equity attributable to common shareholders		123,271		117,346
Non-controlling interest
Balance, beginning of year		212		423
Net loss attributable to non-controllinginterest		(201)		(120)
Balance,end ofperiod		11		303
Total shareholders’ equity		123,282		117,649

See accompanying notes to the interim condensed consolidated financial statements

5

TERRAVEST INDUSTRIES INC.

Interim Condensed Consolidated Statements of Cash Flows

(Unaudited – in thousands of Canadian dollars)

			Nine months ended
	Note	**June 30, **	2021 June	**30, **	2020
		$		$
OPERATING ACTIVITIES
Net income			27,022		15,546
Adjustments for:
Current income tax expense			6,911		4,673
Interest expense			2,647		3,876
Convertible debentures retirement costs			-		9
Items not affecting cash	13		8,099		13,730
Interest paid			(2,513)		(4,050)
Income taxes paid			(7,940)		(3,294)
Settlement of derivative financial instruments			72		(232)
Change in non-cash operatingworkingcapital items	13		(9,753)		17,961
			24,545		48,219
INVESTING ACTIVITIES
Consideration paid on business combinations, net of
cash acquired			-		(10,491)
Payment of contingent consideration			-		(1,988)
Purchase of property, plant and equipment			(13,560)		(7,311)
Proceeds from disposal of property, plant and equipment			1,293		1,113
Proceeds from disposal of assets held for sale			-		3,065
Purchase of intangible assets			(491)		-
Investment in equity instruments			(309)		(4,412)
Proceeds from disposal of investment in equity instruments			10,034		-
Investment in associates			(7,616)		-
Investment injoint venture			(200)		-
			(10,849)		(20,024)
FINANCING ACTIVITIES
Net change in current revolving credit facility			(864)		(1,915)
Net change in long-term revolving operating loans, net of
transaction costs			(9,485)		(10,984)
Issuance of long-term debt, net of transaction costs			11,632		5,410
Repayment of long-term debt			(2,895)		(1,563)
Repayment of lease liabilities			(3,258)		(2,571)
Common shares repurchased and cancelled	9		(21,103)		(1,080)
Convertible debentures repurchased			-		(1,093)
Settlement of stock options			-		(1,178)
Dividendspaid			(5,560)		(5,469)
			(31,533)		(20,443)
Net inflows (outflows) for the period			(17,837)		7,752
Cash and bank overdrafts, beginning of year			26,717		9,093
Impact of foreign exchange on cash and bank overdrafts			(583)		183
CASH AND BANK OVERDRAFTS, END OF PERIOD			8,297		17,028

See accompanying notes to the interim condensed consolidated financial statements

6

TERRAVEST INDUSTRIES INC. Notes to the Interim Condensed Consolidated Financial Statements For the third quarter ended June 30, 2021 (Unaudited – in thousands of Canadian dollars, except share and per share amount)

1. DESCRIPTION OF THE BUSINESS

TerraVest Industries Inc. (“TerraVest” or the “Company”) is incorporated under the laws of Alberta and is listed on the Toronto Stock Exchange (equity symbol: TVK). TerraVest’s head office is located at 4901 Bruce Road in Vegreville, Alberta, Canada.

TerraVest is a diversified industrial company that manufactures and sells goods and services to various end markets including: energy, agriculture, mining, and transportation, among others. TerraVest is focused on acquiring and operating market-leading businesses that will benefit from TerraVest’s financial and operational support. These opportunities generally center on manufactured steel products that complement TerraVest’s existing operations and provide integration benefits.

TerraVest is comprised of three operating segments: Fuel Containment, Processing Equipment and Service.

2. STATEMENT OF COMPLIANCE

These interim condensed consolidated financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting (“IAS 34”) using the same accounting policies TerraVest disclosed in its audited consolidated financial statements for the year ended September 30, 2020.

These interim condensed consolidated financial statements do not include all the information required under International Financial Reporting Standards (“IFRS”) for complete set of financial statements. Therefore, these interim condensed consolidated financial statements should be read in conjunction with TerraVest’s audited consolidated financial statements for the year ended September 30, 2020.

These interim condensed consolidated financial statements were authorized for issue by the Board of Directors on August 10, 2021.

3. ESTIMATES

The preparation of financial statements requires management to make judgments, estimates and assumptions that may affect the application of policies and reported amounts of assets, liabilities, contingent assets and liabilities, income and expenses. Actual results could differ from these judgments, estimates and assumptions.

The judgments, estimates and assumptions applied in the interim condensed consolidated financial statements, including the key areas of estimation uncertainty, were the same as those applied in TerraVest’s audited consolidated financial statements for the year ended September 30, 2020, with the exception of:

• the estimate of income tax expense which is determined in the interim condensed consolidated financial statements using the estimated average annual effective income tax rate applied to the estimated taxable earnings of the interim period.

4. SEASONALITY

TerraVest’s operating segments are seasonal in nature. The strongest quarters for TerraVest are its first and last quarters. The Processing Equipment and Service segments generally experience higher sales in the first and second quarters as majority of the drilling in Western Canada occurs during this period. The Fuel Containment segment generally experiences higher revenues during the first and last quarters as demand for residential, commercial and industrial heating products increases heading into the winter months. The third quarter is typically the weakest across all segments. TerraVest takes advantage of this seasonality to build inventory levels during non-peak demand periods, thereby allowing TerraVest to more readily meet increased levels of demand during its regular peak demand periods.

7

TERRAVEST INDUSTRIES INC. Notes to the Interim Condensed Consolidated Financial Statements For the third quarter ended June 30, 2021 (Unaudited – in thousands of Canadian dollars, except share and per share amount)

5. FINANCIAL INSTRUMENTS

The fair value of the investment in equity instruments has been determined based on the quoted price in active markets and is classified in Level 1 of the fair value hierarchy. The fair values of revolving credit facilities and long-term debt have been determined based on discounted cash flows using interest rates for similar instruments. The fair values of the financial instruments measured at amortized cost are not significantly different to their carrying values. These items are classified in Level 2 of the fair value hierarchy.

TerraVest’s derivative financial instruments are forward exchange contracts and an interest rate swap agreement which are not traded in active markets. Forward exchange contracts have been fair valued using observable forward exchange rates and interest rates corresponding to the maturity of the contracts. The interest rate swap agreement has been fair valued using observable interest rates corresponding to the maturity of the agreement. The effects of non-observable inputs are not significant for forward exchange contracts and the interest rate swap agreement. These items are classified in Level 2 of the fair value hierarchy.

5.1 Forward exchange contracts

As at June 30, 2021, TerraVest had forward exchange contracts totaling $34,100 ($29,792 as at September 30, 2020) outstanding to sell, at various rates and expiring on various dates up to and including March 28, 2024. The fair value of forward exchange contracts was an asset of $1,095 as at June 30, 2021 included in other current assets (a liability of $391 as at September 30, 2020 was included in accounts payable and accrued liabilities).

5.2 Interest rate swap

As at June 30, 2021, TerraVest had an interest rate swap agreement expiring on June 9, 2025 for the notional amount of $25,000. Under the interest rate swap agreement, TerraVest receives interest on the notional amount at the 1-month CDOR rate in exchange for payments at a fixed rate of 0.87%, plus 140 to 265 basis points based on a prescribed ratio. The fair value of the interest rate swap agreement was an asset of $402 as at June 30, 2021 included in other current assets (a liability of $167 as at September 30, 2020 was included in accounts payable and accrued liabilities).

6. OTHER CURRENT ASSETS

	As at	As at
	June 30, 2021	September 30, 2020
	(Unaudited)	(Audited)
	$	$
Prepaid expenses	6,455	2,597
Derivative financial instruments	1,497	-
Other	1,266	1,193
	9,218	3,790

7. INVESTMENTS

	As at	As at
	June 30, 2021	September 30, 2020
	(Unaudited)	(Audited)
	$	$
Investment in associates	8,569	1,197
Investment in equity instruments	510	6,273
Investment injoint venturei)	149	-
	9,228	7,470

i) The investment in joint venture is accounted for using the equity method.

8

TERRAVEST INDUSTRIES INC. Notes to the Interim Condensed Consolidated Financial Statements For the third quarter ended June 30, 2021 (Unaudited – in thousands of Canadian dollars, except share and per share amount)

8. SHORT-TERM REVOLVING CREDIT FACILITY AND LONG-TERM DEBT

8.1 Loan

On June 9, 2021, a subsidiary of TerraVest operating in the Fuel Containment segment obtained an unsecured interest-bearing loan totaling $50,000 with a Canadian financial institution. The loan includes a $10,000 tranche that can be used to finance working capital for growth opportunities and a $40,000 tranche that can be used to finance business acquisitions which can be drawn by multiples of $10,000. The loan bears interest at 6% and is repayable in 59 equal and consecutive monthly instalments of $90 starting July 1, 2023 with a final payment for the remaining balance at maturity on July 1, 2028. As at June 30, 2021, $10,000 was drawn.

Transaction costs of $158, incurred during the nine months ended June 30, 2021 to obtain the loan, were recorded as prepaid expenses and are amortized on a straight-line basis over the 84-month term.

The loan contains an obligation to comply with the following financial covenants:

	Required
Financial covenants	measurements
Funded debt to EBITDA ratio	≤ 3.50:1
Interest coverage ratio	≥ 3.50:1

8.2 Revolving credit facilities

On March 31, 2021, certain subsidiaries of TerraVest operating in the Processing Equipment and Service segments extended the term of their credit facilities totaling $50,000 ($50,000 as at September 30, 2020) with a Canadian financial institution. The credit facilities now expire on February 15, 2023.

Transaction costs of $86, incurred during the nine months ended June 30, 2021 to extend the term, were recorded as prepaid expenses and are amortized on a straight-line basis over the remaining term.

8.3 Revolving operating credit facility

On March 17, 2021, certain subsidiaries of TerraVest operating in the Fuel Containment segment extended the term of their credit facility of $100,000 ($100,000 as at September 30, 2020) with a Canadian financial institution. The credit facility now expires on December 1, 2023.

8.4 Covenants

The quarterly financial covenants to comply with the revolving operating loan and long-term debt were as follows:

	Required	As at
Financial covenants	measurements	June 30, 2021
Total debt to equity ratio	≤ 2.50:1	1.38
Current ratio	≥ 1.15:1	1.56
Interest-bearing debt to EBITDA ratio	≤ 3.50:1	1.16
Interest coverage ratios	≥ 3.50:1 and ≥ 3.50:1	26.57 and 31.96
Funded debt to EBITDA ratios	≤ 3.00:1 and ≤ 3.50:1	2.60 and 1.42
Fixed charge coverage ratio	≥ 1.15:1	2.85

As at June 30, 2021, TerraVest was in compliance with all of its financial and non-financial covenants.

9

TERRAVEST INDUSTRIES INC. Notes to the Interim Condensed Consolidated Financial Statements For the third quarter ended June 30, 2021 (Unaudited – in thousands of Canadian dollars, except share and per share amount)

9. SHARE CAPITAL AND SHARE-BASED PAYMENTS

9.1 Common shares

Changes in the common shares issued and outstanding were as follows:

	As at June 30, 2021	As at June 30, 2021
	Number	Amount
		$
Balance, beginning of year	18,681,250	149,284
Issued on exercise of stock options	120,031	2,304
Repurchased and cancelled	(1,233,803)	(9,876)
Balance,end ofperiod	17,567,478	141,712

During the nine months ended June 30, 2021, TerraVest repurchased 1,233,803 common shares (87,170 during the nine months ended June 30, 2020) under its common shares normal course issuer bid (“NCIB”) for total consideration of $21,103 ($1,080 during the nine months ended June 30, 2020). The difference between the amount paid for the common shares and their carrying value was recorded in share premium.

On March 17, 2021, TerraVest renewed its common shares NCIB under which it may repurchase 1,028,726 common shares. The common shares NCIB expires on March 16, 2022. On April 15, 2021, TerraVest has entered into an Automatic Share Purchase Plan (“ASPP”) in order to facilitate, on any trading day, the repurchase of common shares under its common shares NCIB. The remaining number of common shares available for repurchase under the current common shares NCIB was 23 as at June 30, 2021.

9.2 Share-based payments arrangement

TerraVest has a stock option plan for which options are granted to key management personnel to purchase common shares of TerraVest. Of the 1,500,000 common shares reserved for issuance, 367,500 were available for issuance under the stock option plan as at June 30, 2021.

The stock options outstanding and the weighted average exercise prices as at June 30, 2021 were as follows:

		Exercise	Opening	Settled or	Closing	Vested and
Grant Date	Expiry Date	price	balance	exercised	balance	exercisable	Unvested
Feb. 9, 2017	Feb. 9, 2022	$9.10	333,000	(333,000)	-	-	-
Mar. 9, 2017	Mar. 9, 2024	$9.10	267,500	-	267,500	267,500	-
Jan. 20,2020	Jan. 20,2027	$13.12	100,000	-	100,000	33,333	66,667
			700,500	(333,000)	367,500	300,833	66,667
Weighted average		exerciseprice	$9.67	$9.10	$10.19	$9.55

During the nine months ended June 30, 2021, no stock options were granted or forfeited and 333,000 stock options were exercised by way of cashless exercise. As a result, TerraVest issued 120,031 common shares at a weighted average share price of $17.92 per common share based on the average trading price of the common shares on the Toronto Stock Exchange for the five trading days immediately preceding the exercise date of the stock options. In addition, TerraVest will remit $786,104, included in accounts payable and accrued liabilities, to the tax authority to pay the key management employee’s estimated personal tax obligation related to the transaction. The aggregate value of the issued common shares and the withholding tax obligation assumed by TerraVest represented the intrinsic value of the 333,000 stock options at the exercise date and was recorded in share premium.

10

TERRAVEST INDUSTRIES INC. Notes to the Interim Condensed Consolidated Financial Statements For the third quarter ended June 30, 2021 (Unaudited – in thousands of Canadian dollars, except share and per share amount)

9.3 Dividends

During the nine months ended June 30, 2021, TerraVest has declared dividends totaling $0.30 per common share ($0.30 per common share during the nine months ended June 30, 2020). As at June 30, 2021, $1,757 was included in dividends payable.

Subsequent to the end of the quarter, TerraVest declared a cash dividend of $0.10 per common share payable on October 12, 2021 to shareholders of record on September 30, 2021.

10. EARNINGS PER SHARE

The following table provides a breakdown of the numerator and denominator used in the calculation of earnings per share and diluted earnings per share:

	Third quarters ended	Third quarters ended	Nine months ended	Nine months ended
	June 30, 2021	June 30, 2020	June 30, 2021	June 30, 2020
Numerator
Net income attributed to
common shareholders	$4,420	$3,882	$27,223	$15,666
Financing costs on convertible debentures, net
of income tax	-	-	-	203
Diluted net income attributed to
common shareholders	$4,420	$3,882	$27,223	$15,869
Denominator
Common shares, beginning of period	18,447,615	18,737,420	18,681,250	17,642,489
Weighted average shares issued	44,847	-	14,949	813,986
Weighted average shares repurchased	(621,642)	(51,929)	(416,784)	(35,948)
Weighted average shares, end of period - basic	17,870,820	18,685,491	18,279,415	18,420,527
Dilutive effect of convertible debentures	-	-	-	362,717
Dilutive effect of stock options	259,283	309,648	273,108	287,991
Weighted average shares, end of
period - diluted	18,130,103	18,995,139	18,552,523	19,071,235
Net income per share - basic	$0.25	$0.21	$1.49	$0.85
Net incomeper share - diluted	$0.24	$0.20	$1.47	$0.83

11

TERRAVEST INDUSTRIES INC. Notes to the Interim Condensed Consolidated Financial Statements For the third quarter ended June 30, 2021

(Unaudited – in thousands of Canadian dollars, except share and per share amount)

11. FINANCING COSTS

	Third quarters ended	Third quarters ended	Third quarters ended	Nine months ended	Nine months ended
	**June 30, **	2021	June 30, 2020	June 30, 2021	**June 30, **	2020
	$		$	$	$
Interest on revolving credit facilities and
long-term debt		520	716	1,581	2,645
Interest on lease liabilities		344	378	1,066	1,077
Interest on convertible debentures		-	-	-		154
Accretion of convertible debentures		-	-	-		122
Amortization of financing costs		76	81	210		195
Convertible debentures retirement costs		-	-	-		9
		940	1,175	2,857	4,202

12. OTHER (GAINS) LOSSES

	Third quarters ended	Third quarters ended	Third quarters ended	Nine months ended	Nine months ended
	**June 30, **	2021	June 30, 2020	June 30, 2021	**June 30, **	2020
	$		$	$	$
(Gain) loss on foreign exchange		671	929	3,484	(1,094)
Change in fair value of derivative
financial instruments		(247)	(1,438)	(1,951)		927
Change in fair value of investment in
equity instruments		(18)	47	(3,991)		47
(Gain) loss on disposal of property, plant
and equipment		(384)	(25)	(588)		(300)
(Gain) loss on disposal of assets held for sale		-	-	-		(931)
(Gain)loss on contingent considerations		-	-	-		(61)
		22	(487)	(3,046)	(1,412)

12

TERRAVEST INDUSTRIES INC. Notes to the Interim Condensed Consolidated Financial Statements For the third quarter ended June 30, 2021 (Unaudited – in thousands of Canadian dollars, except share and per share amount)

13. SUPPLEMENTAL CASH FLOW INFORMATION

	Nine months	ended
	June 30, 2021	June 30, 2020
	$	$
Adjustments for items not affecting cash
Depreciation of property, plant and equipment	6,902	6,373
Depreciation of right-of-use assets	3,653	3,020
Amortization of intangible assets	3,649	4,068
Amortization of deferred development costs	-	98
Amortization of financing costs	210	195
Share-based compensation expense	57	71
Net change of inventory valuation allowance	(115)	36
Change in fair value of derivative financial instruments	(1,951)	927
Change in fair value of investment in equity instruments	(3,991)	47
(Gain) loss on disposal of property, plant and equipment	(588)	(300)
(Gain) loss on disposal of assets held for sale	-	(931)
(Gain) loss on contingent considerations	-	(61)
Share of associates and joint venture net loss	295	-
Deferred income tax expense	614	545
Accretion of convertible debentures	-	122
Cancellation of long-term debt	(1,363)	-
Other	727	(480)
	8,099	13,730
Change in non-cash operating working capital items
Accounts receivable	272	32,704
Inventories	(12,283)	(3,254)
Other current assets	(784)	(29)
Accounts payable and accrued liabilities	4,520	(13,436)
Deferred revenues	(1,478)	1,976
	(9,753)	17,961

13.1 Additional cash flow information

Deposits on purchase of property, plant and equipment (“PP&E”) of $3,162 were recorded in other current assets as at June 30, 2021 ($nil as at June 30, 2020).

Purchase of PP&E of $107 was unpaid and recorded as accounts payable and accrued liabilities as at June 30, 2021 ($nil as at June 30, 2020).

Leases, for which an amount of $253 was recognized in right-of-use assets and lease liabilities during the nine months ended June 30, 2021 ($9,247 during the nine months ended June 30, 2020), had no cash impact on investing and financing activities.

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TERRAVEST INDUSTRIES INC. Notes to the Interim Condensed Consolidated Financial Statements For the third quarter ended June 30, 2021 (Unaudited – in thousands of Canadian dollars, except share and per share amount)

14. SEGMENTED INFORMATION

14.1 Reportable segments

TerraVest determines its reportable segments based on the structure of its operations, which as at June 30, 2021 is divided into three operating business units: Fuel Containment, Processing Equipment and Service. Corporate is not a segment and is disclosed for reconciliation purposes.

The following tables also provide information on disaggregated revenue as part of its segmented information disclosure.

			Third	quarter ended	June 30, 2021
	Fuel	Processing
	Containment	Equipment	Service	Corporate	Total
	$	$	$	$	$
Sales	38,680	25,475	3,667	8	67,830
Depreciation and amortization	1,917	2,465	373	1	4,756
Financing costs (income)	463	428	50	(1)	940
Income tax expense (recovery)	1,635	(308)	(39)	586	1,874
Net income (loss)	5,098	638	357	(1,746)	4,347
Purchase of property, plant and
equipment,net ofproceeds	2,043	3,225	84	-	5,352
			Nine	months ended	June 30, 2021
	Fuel	Processing
	Containment	Equipment	Service	Corporate	Total
	$	$	$	$	$
Sales	131,508	84,719	10,396	24	226,647
Depreciation and amortization	5,742	7,310	1,151	1	14,204
Financing costs (income)	1,402	1,300	161	(6)	2,857
Income tax expense (recovery)	6,997	(83)	(67)	678	7,525
Net income	21,874	4,268	798	82	27,022
Goodwill and intangible assets	15,607	14,381	-	-	29,988
Segment assets	151,470	129,530	18,597	11,221	310,818
Segment liabilities	97,580	73,156	13,843	2,957	187,536
Purchase of property, plant and
equipment,net ofproceeds	5,801	6,103	363	-	12,267

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TERRAVEST INDUSTRIES INC. Notes to the Interim Condensed Consolidated Financial Statements For the third quarter ended June 30, 2021

(Unaudited – in thousands of Canadian dollars, except share and per share amount)

			Third	quarter ended	June 30, 2020
	Fuel	Processing
	Containment	Equipment	Service	Corporate	Total
	$	$	$	$	$
Sales	31,112	28,867	1,040	-	61,019
Depreciation and amortization	1,987	3,038	255	1	5,281
Financing costs (income)	544	563	70	(2)	1,175
Income tax expense	1,460	344	21	206	2,031
Net income (loss)	4,519	660	(217)	(1,108)	3,854
Purchase of property, plant and
equipment,net ofproceeds	(145)	3,018	8	-	2,881
			Nine	months ended	June 30, 2020
	Fuel	Processing
	Containment	Equipment	Service	Corporate	Total
	$	$	$	$	$
Sales	115,835	111,946	8,241	-	236,022
Depreciation and amortization	5,957	6,481	1,120	1	13,559
Financing costs	1,947	1,708	272	275	4,202
Income tax expense (recovery)	4,405	1,073	(38)	(222)	5,218
Net income (loss)	12,972	3,920	(694)	(652)	15,546
Goodwill and intangible assets	19,020	16,994	-	-	36,014
Segment assets	155,035	130,885	18,106	8,181	312,207
Segment liabilities	101,503	75,976	14,661	2,418	194,558
Purchase of property, plant and
equipment,net ofproceeds	2,565	3,468	165	-	6,198

14.2 Geographical information

TerraVest generates revenue from two segmental regions. The concentration of TerraVest’s revenue is derived from Canadian and U.S. sales.

	Third quarters ended	Third quarters ended	Nine months ended	Nine months ended
	June 30, 2021	June 30, 2020	June 30, 2021	June 30, 2020
	$	$	$	$
SALES
Canada	44,170	35,707	131,650	143,206
United States	23,660	25,312	94,997	92,816
	67,830	61,019	226,647	236,022

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TERRAVEST INDUSTRIES INC. Notes to the Interim Condensed Consolidated Financial Statements For the third quarter ended June 30, 2021

(Unaudited – in thousands of Canadian dollars, except share and per share amount)

Certain non-current assets and goodwill by geographic segment:

		As at June 30, 2021 – Unaudited	As at June 30, 2021 – Unaudited
	Canada	United States	Total
	$	$	$
Property, plant and equipment	64,378	13,195	77,573
Right-of-use assets	27,107	1,738	28,845
Intangible assets	11,814	5,926	17,740
Goodwill	6,915	5,333	12,248
	110,214	26,192	136,406

		As at September 30, 2020 – Audited	As at September 30, 2020 – Audited
	Canada	United States	Total
	$	$	$
Property, plant and equipment	62,672	13,687	76,359
Right-of-use assets	30,363	2,048	32,411
Intangible assets	13,948	7,456	21,404
Goodwill	6,915	5,739	12,654
	113,898	28,930	142,828

15. IMPACT OF COVID-19

Management continues to monitor and assess the ongoing development of the COVID-19 and respond accordingly. The impacts, if any, will be accounted for when they are known and may be assessed. During the nine months ended June 30, 2021, certain subsidiaries of TerraVest’s recognized government subsidies totaling $12,177 in net income. Government subsidies helped maintain employment during a period where revenues have been temporarily reduced.

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