The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Press release from CNW Group

Horizon North Logistics Inc. Announces Results For The Quarter Ended March 31, 2011

Wednesday, May 04, 2011

Horizon North Logistics Inc. Announces Results For The Quarter Ended March 31, 201118:59 EDT Wednesday, May 04, 2011TSX Symbol: HNLCALGARY, May 4 /CNW/ - Horizon North Logistics Inc. ("Horizon" or the "Corporation") reported its financial and operating results for the quarters ended March 31, 2011 and 2010.First Quarter HighlightsRevenues and EBITDAS(1) increased 136% and 154% respectively, as compared to Q1 2010;Camps & Catering revenues increased 145% compared to Q1 2010, driven by both camp rental and catering activity and strong camp manufacturing; andMatting revenues increased 88% compared to Q1 2010, driven by strong mat sales.Capital ProgramThe Corporation's 2011 capital program has been expanded from $61.3 million to $67.0 million, with.  The majority of this increase is related to the purchase of previously leased Camps & Catering service facilities, which include land and existing buildings in Nisku, Alberta.Financial Summary   (000's except per share amounts)Three Months EndedMarch 31, 2011Three Months EndedMarch 31, 2010(4)   Revenue$   103,159$    43,703EBITDAS(1)22,8058,970Operating earnings (1)15,5412,607   Total profit and comprehensive income10,9121,041Earnings per share - basic and diluted$          0.10$        0.01Total assets308,741249,803Long-term loans and borrowings33,83137,458Funds from operations(2)17,1676,538Capital spending25,8248,841Debt to total capitalization ratio(3)0.21:10.22:1Outlook Horizon's first quarter 2011 results reflect the continued growth of the Corporation's business with quarterly revenue and EBITDAS numbers again setting new records.  Increased investment and production levels in the Alberta oil sands will provide additional growth opportunities for our Camps & Catering segment and our Matting services segment for the foreseeable future, augmented by infrastructure and mineral mining projects.  The long-term nature of these projects should enhance the sustainability and growth of Horizon's cash flow streams.Definitions(1)     EBITDAS (Earnings before interest, taxes, depreciation, amortization, accretion of notes payable, gain/loss on disposal of property, plant and equipment and share based payments) and operating earnings are not recognized measures under International Financial Reporting Standards (IFRS). Management believes that in addition to net earnings, EBITDAS is a useful supplemental measure as it provides an indication of the Corporation's ability to generate cash flow in order to fund working capital, service debt, pay current income taxes, and fund capital programs.  Management believes that in addition to total profit and comprehensive income, operating earnings is a useful supplemental measure as it provides an indication of the results generated by the Corporation's principal business activities prior to consideration of how those activities are financed or taxed. Investors should be cautioned, however, that EBITDAS and operating earnings should not be construed as alternatives to total profit and comprehensive income determined in accordance with IFRS as an indicator of the Corporation's performance.  Horizon's method of calculating EBITDAS and operating earnings may differ from other entities and accordingly, EBITDAS and operating earnings may not be comparable to measures used by other entities.  For a reconciliation of EBITDAS and operating earnings to total profit and comprehensive income, please refer to page 3of the Management's Discussion and Analysis.(2)     Funds from operations is not a recognized measure under IFRS.  Management believes that in addition to cash flow from operations, funds from operations is a useful supplemental measure as it provides an indication of the cash flow generated by the Corporation's principal business activities prior to consideration of changes in working capital. Investors should be cautioned, however, that funds from operations should not be construed as an alternative to cash flow from operations determined in accordance with IFRS as an indicator of the Corporation's performance.  Horizon's method of calculating funds from operations may differ from other entities and accordingly, funds from operations may not be comparable to measures used by other entities.  Funds from operations is equal to cash flow from operations before changes in non-cash working capital items related to operations, interest and income taxes paid, financing costs, and income tax expense.(3)     Debt to total capitalization is calculated as the ratio of debt to total capitalization. Debt is defined as the sum of operating lines of credit and current and long-term portions of loans and borrowings. Total capitalization is calculated as the sum of debt and shareholder's equity (4)     All 2010 figures have been restated in accordance with International Financial Reporting Standards.Quarterly Financial Results   Three months ended March 31, 2011(000's)Camps &CateringMattingMarineServicesCorporateInter-segmentEliminationsTotalRevenue$     86,123$   17,841$      832$              -$  (1,637)$   103,159Expenses       Direct costs64,71813,468459-(1,585)77,061 Selling & administrative87499-2,320-3,293EBITDAS$    20,531$      4,274$      373$     (2,320)$      (53)$     22,805        Share based payments8410161-156 Depreciation & amortization5,4111,31010784(16)6,896 Loss on disposal of property, plant and equipment84128---212       Operating earnings (loss)$     14,952$    2,826$       265$     (2,465)$     (37)$     15,541       Finance costs     613Loss on equity investments     21Income tax expense     3,995Total profit and comprehensive income     $     10,912       Earnings per share - diluted     $         0.10          Three months ended March 31, 2010 (1)(000's)Camps &CateringMattingMarineServicesCorporateInter-segmentEliminationsTotalRevenue$     35,167$      9,490$        233$              -$      (1,188)$     43,702Expenses       Direct costs24,9467,3733739(1,114)31,587 Selling & administrative917112-2,116-3,145EBITDAS$       9,304$      2,005$       (140)$     (2,125)$          (74)$       8,970        Share based payments15224398-277 Depreciation & amortization4,2681,33530873(15)5,969 Loss on disposal of property, plant and equipment2097---117       Operating earnings (loss)$       4,864$         549$        (451)$     (2,296)$          (59)$      2,607       Finance costs     462Loss on equity investments     47Income tax expense     1,057Total profit and comprehensive income     $       1,041       Earnings per share - diluted     $          0.011) All 2010 figures have been restated in accordance with International Financial Reporting Standards.Camps & CateringCamps & Catering revenue is comprised of camp rental and catering revenue, camp and space unit sales, equipment and space rental revenue, and service revenue from transportation and installation. Three months ended March 31(000's except bed rental days and catering only days)2011 2010 (3)Camp rental and catering revenue$          42,263 $         22,267Camp and space sales revenue25,182 5,272Space rental revenue1,115 762Service revenue17,563 5,866Total revenue$          86,123 $        35,167EBITDAS$          20,531 $          9,304Operating earnings$          14,952 $          4,864    Bed rental days (1)209,555 116,524Catering only days (2)58,945 25,540(1)  One bed rental day equals the rental of one bed and the provision of related catering and housekeeping services for one day. (2)  One catering only day equals the provision of catering and housekeeping services with no related bed rental for one day. (3) 2010 revenue, EBITDAS and operating earnings have been restated in accordance with International Financial Reporting Standards.Revenues from operations in the Camps & Catering segment were $86.1 million for the three months ended March 31, 2011, compared to $35.2 million for the three months ended March 31, 2010, an increase of $50.9 million or 145%. EBITDAS from operations for the three months ended March 31, 2011 was $20.5 million or 24% of revenue compared to $9.3 million or 26% of revenue for the three months ended March 31, 2010, an increase of $11.2 million or 120%. The significant increase in both revenue and EBITDAS was related to higher activity in the oil sands and mining sectors for the first quarter of 2011 relative to the same period of 2010.The increased activity in the oil sands sector has been driven by the price of oil, which has remained consistently above $75 per barrel from mid 2010. This consistency in the price of oil has given oil sands operators the confidence to restart projects on hold and initiate new projects. In the mining sector, increasing mineral prices initiated several significant mine expansion projects in British Columbia and the Northwest Territories. In the first quarter of 2011, these mining projects were near the top of their manpower curve, as compared to the same period of 2010 when they were in the early stages of project initiation.Camp rental and catering revenueRevenues from camp rental and catering operations were $42.3 million for the three months ended March 31, 2011 compared to $22.3 million for the three months ended March 31, 2010, an increase of $20.0 million or 90%. Revenues are derived from the following main business areas: large camp operations, drill camp operations, catering only operations, and ancillary equipment rentals.The table below outlines the key performance metrics used by management to measure performance in the large camp and drill camp operations. Three months ended March 31(000's for revenue only)2011 2010  LargecampDrillcampTotal LargecampDrillcampTotalRevenue (1)$31,971$3,192$35,163 $17,480$2,319$19,799Bed rental days190,29519,260209,555 101,42915,095116,524Revenue per bed rental day$168$166$168 $172$154$170        Available beds (2)3,0351,0184,053 2,5171,0183,535Utilization (3)70%21%57% 45%16%37%(1)     2010 revenue has been restated in accordancewith International Financial Reporting Standards.(2)     Available beds is equal to total average beds in the fleet less beds required for staff.(3)     Utilization equals the total number of bed rental days divided by total rentable beds times days in the quarter.Revenues from the large camp operations for the three months ended March 31, 2011 increased $14.5 million, or 83% as compared to the three months ended March 31, 2010. The increase in revenue was driven by higher volumes as a result of increased demand from oil sands operators. With oil prices averaging above the $100 per barrel range, oil sands activity has increased significantly focusing on: increasing production levels at existing facilities, resumption of projects previously on hold and new oil sands projects.The average number of available beds in the large camp rental fleet increased by 518 at March 31, 2011 as compared to March 31, 2010. The number of bed rental days increased significantly for the three months ended March 31, 2011. Higher volumes were driven by improved fleet utilization which increase by 25% as compared to the same period in 2010. Stronger utilization was driven primarily by demand from the oil sands operators.Revenues from the drill camp operations increased for the three months ended March 31, 2011 as compared to the same period of 2010. Increased volumes and utilization were a result of overall higher drilling activity in Western Canada, with the Canadian Association of Oilwell Drilling Contractors (CAODC) reporting average rig utilization in Western Canada for the three months ended March 31, 2011, at 68% as compared to 54% in the same period of 2010. The increase in the revenue per bed day was from provision of additional services and equipment requested by customers while the camps were operational.The table below outlines the key performance metrics used by management to measure performance in the catering only and equipment rental operations. Three months ended March 31(000's for revenue only)2011 2010 (1) Catering onlyEquipmentrental Catering onlyEquipmentrentalRevenue$5,761$1,339 $2,000$468Catering only days58,945- 25,540-Revenue per catering  only day$98- $78-(1) 2010 revenue has been restated in accordance with International Financial Reporting Standards.Revenues from the provision of catering and housekeeping only services, with no associated bed rentals, for the three months ended March 31, 2011 increased significantly as compared to same period of 2010. The higher volume was primarily due to a significant mine expansion project in the Northwest Territories which was at much higher point in their manpower curve as compared to the same period of 2010 when it was in the early ramp-up phase. The remaining volume increase came from catering and housekeeping services on customer owned drill camps, which was consistent with the increased drilling activity in Western Canada. Higher revenue per catering only day also contributed to the revenue increase. The increased rate was due to stronger pricing and additional services requested by customers while the camps were operational.Camp and space sales revenueCamp and space sales revenues for the three months ended March 31, 2011 were $25.2 million as compared to $5.3 million for the same period in 2010, an increase of $19.9 million or 375%. The increase is attributable to two significant manufacturing projects which began production in the third quarter of 2010 and continued through the first quarter of 2011, with one of the two projects continuing into 2012. Camp and space sales revenue may not continue at the present level as some production capacity will be dedicated to internal fleet expansion.For the three months ended March 31, 2010, production capacity had been scaled back to align with the smaller projects and slower economic conditions that were still prevalent exiting 2009. With the higher manufacturing activity, production staff increased to an average of 360 people in the three months ended March 31, 2011 as compared to 200 people in the same period of 2010.Rental revenueSpace rental revenues for the three months ended March 31, 2011 remained relatively unchanged as compared to the same period of 2010. The British Columbia space rental market remains very competitive keeping pricing relatively unchanged in the three months ended March 31, 2011 as compared to the same quarter of 2010.Service revenueRevenues from camp mobilization, demobilization, transportation, and installation work for the three months ended March 31, 2011 were $17.6 million as compared to $5.9 million in the same period of 2010, an increase of $11.7 million or 198%. This revenue is largely driven by activity levels in both the camp rental and catering business and the camp and space sales business. For the three months ended March 31, 2011, activity in camp and space sales business increased significantly compared to the same period of 2010 as a result of the transport and installation work associated with two large manufacturing projects.Direct costsDirect costs in the Camps & Catering operations for the three months ended March 31, 2011 were $65.6 million or 76% of revenue as compared to $25.9 million or 74% of revenue for the same period of 2010. Direct costs are closely related to revenues, the increase in overall costs are a result of the higher activity levels seen in the three months ended March 31, 2011, as compared to the same period of 2010. As a percentage of revenue, direct costs were slightly higher than the same period of 2010. The increase was attributable to the revenue mix, with camp and space sales making up a higher proportion of total revenues which typically have a higher cost structure than rental and catering operations.MattingMatting revenue is comprised of mat rental revenue, mat sales revenue, installation, transportation, service, and other revenue as follows:   Three months ended March 31(000's except rental days and mats)2011 2010 (1)Mat rental revenue$               631 $              819Mat sales revenue10,588 3,659Installation, transportation, service and other revenue6,622 5,012Total revenue$          17,841 $            9,490EBITDAS$            4,274 $            2,005Operating earnings$            2,826 $               549    Mat rental days250,587 496,281Average mats in rental fleet7,232 13,156Mats sold      New mats12,385 2,055   Used mats2,382 4,351Total mats sold14,767 6,406(1) 2010 revenue, EBITDAS and operating earnings have been restated in accordance with International Financial Reporting Standards.Revenues from the Matting segment for the three months ended March 31, 2011 were $17.8 million as compared to $9.5 million for the same period of 2010, an increase of $8.3 million or 87%. EBITDAS for the three months ended March 31, 2011 were $4.3 million or 24% of revenue as compared to $2.0 million for the same period of 2010 or 21% of revenue, an increase of $2.3 million or 115%.Mat rental revenueMat rental revenues for the three months ended March 31, 2011 declined by $0.2 million as compared to same period of 2010. Rental volumes for the three months ended March 31, 2011 decreased by 245,694 rental days as compared to the same period of 2010. As a result of lower volumes, utilization of the oak mat rental fleet was 39% for the three months ended March 31, 2011 as compared 42% in the same period of 2010. A combination of two factors caused the lower rental volumes, colder weather and the changing preferences of customers to purchase rather than rent matting. The colder weather in the three months ended March 31, 2011 caused a later spring break-up allowing customers to operate longer in the frozen conditions. As highlighted in the previous quarter, customer drilling programs focused on steam assisted gravity drainage (SAGD) wells which are long-term projects. The long-term nature of these wells changes customer economics and favours purchasing rather than renting. Offsetting the lower rental volume was strengthening pricing. The average revenue per rental day for the traditional oak access mats, for the three months ended March 31, 2011 was $2.52 per day as compared to $1.65 per day in the same period of 2010.Mat sales revenueRevenues from mat sales, for the three months ended March 31, 2011, were significantly higher by $6.9 million, or 186% as compared the same period of 2010. The total number of mats sold increased compared to the same period of 2010, as overall customer demand and activity levels increased in 2011. The higher demand is from increased activity in long-term SAGD type of drilling pads, driving the preference to purchase rather than rent mats. Revenue per mat sold during the first quarter of 2011 was $717, up from $571 in the same period of 2010. The higher revenue per mat is reflective of the mix of new and used mats sold, as new mats have a higher selling price than used mats.Installation, transportation, service, and other revenueInstallation, transportation, service, and other revenues are driven primarily from the level of activity in the mat rental and mat sale businesses. Revenues for the three months ended March 31, 2011 were higher by $1.6 million as compared to the same period in 2010, the increase coming from stronger mat sales, partially offset by lower mat rentals.Direct costsDirect costs for the three months ended March 31, 2011 were $13.6 million or 76% of revenue as compared to $7.5 million or 79% of revenue for the same period of 2010. Direct costs are driven by the level of business activity. With the significant increase in revenue, as compared to the same period of 2010, direct costs have increased proportionately. Direct costs, as a percentage of revenue, decreased 3% for the three months ended March 31, 2011 as compared the same period of 2010. This decrease in direct cost, as a percentage of revenue, is attributable to the strengthening of pricing for the three months ended March 31, 2011 as compared to the same period of 2010 as the actual costs were relatively consistent.Marine ServicesMarine Services revenue is comprised of tug and barge revenue, barge camp revenue, and rental and other revenue as follows: Three months ended March 31(000's)2011 2010 (1)Tug revenue$             - $             -Barge revenue- -Barge camp revenue680 -Rental and other revenue152 233Total revenue$         832 $         233EBITDAS$         373 $      (140)Operating earnings (loss)$        265 $     (451)(1)  2010 revenue, EBITDAS and operating earnings (loss) have been restated in accordance with International Financial Reporting Standards.Revenues from the Marine Services segment for the three months ended March 31, 2011 were $0.8 million as compared to $0.2 million in the same period of 2010, an increase of $0.6 million or 257%. The increase was primarily due to the ongoing provision of two barge camps and associated service and support personnel at a customer's mining project in Nunavut.EBITDAS for the three months ended March 31, 2011 was $0.4 million or 50% of revenue as compared to a loss of $0.1 million for the same period of 2010. The increase in EBITDAS was due to the ongoing barge camp rental in 2011, whereas these barge camps were not working in the same period of 2010.CorporateCorporate costs are the costs of the head office which include the Executive Chairman, President and Chief Executive Officer, Chief Financial Officer, Vice President of Safety, Vice President of Aboriginal Relations, Corporate Secretary, Corporate Accounting staff, and associated costs of supporting a public company. Cash costs for the three months ended March 31, 2011 were $2.3 million as compared to $2.1 million in the same period in 2010. This increase of $0.2 million reflects the increased cost to support the higher level of business activity.Consolidated Statement of Financial Position (Unaudited) March 31, 2011, December 31, 2010 and January 1, 2010    (000's) March 31December 31January 1 201120102010Assets   Current assets:    Cash & cash equivalents $ - $ - $ 3,724 Trade and other receivables 67,250 52,003 26,614 Inventories  12,849 13,726 9,298 Prepayments 7,998 8,953 1,830 Income taxes receivable - - 990 88,097 74,682 42,456Non-current assets:    Property, plant and equipment 182,180 162,484 146,048 Intangible assets 24,832 26,892 35,320 Goodwill 2,136 2,136 2,136 Investments in equity accounted investees  2,230 2,251 2,463 Deferred tax assets 6,360 6,458 8,434 Other assets 2,906 2,934 3,061 220,644 203,155 197,462 $ 308,741$ 277,837 $ 239,918Liabilities and Shareholders' Equity   Current liabilities:    Bank indebtedness $ 605 $ 834 $ - Trade and other payables 32,831 25,377 12,391 Deferred revenue 13,981 7,206 2,068 Income taxes payable 3,572 1,344 - Current portion of loans and borrowings 15,603 11,773 8,839 66,592 46,534 23,298Non-current liabilities:    Provisions 1,237 1,223 1,169 Loans and borrowings 33,831 30,363 35,863 Deferred tax liabilities  20,127 20,918 18,326 121,787 99,038 78,656Shareholders' equity:    Share capital 247,153 245,353 245,353 Contributed surplus 11,104 11,446 10,339 Deficit (71,303) (78,000) (94,430) 186,954 178,799 161,262 $ 308,741 $ 277,837 $ 239,918    Consolidated Statement of Comprehensive Income (Unaudited)For the three months ended March 31, 2011 and 2010    March 31 March 31(000's) 2011 2010Revenue $ 103,159 $ 43,702Operating expenses:   Direct costs 77,061 31,587 Depreciation 4,836 3,831 Amortization of intangible assets 41 125 Share based compensation 95 180 Loss on disposal of property, plant and equipment 212 117Direct operating expenses 82,245 35,840Gross profit 20,914 7,862Selling & administrative expenses:   Selling & administrative expenses  3,293 3,145 Amortization of intangible assets 2,019 2,013 Share based compensation 61 97Selling & administrative expenses 5,373 5,255Operating earnings 15,541 2,607Finance costs 613 462Share of loss of equity accounted investees 21 47Profit before tax 14,907 2,098 Current tax expense 4,688 358 Deferred tax (recovery) expense (693) 699Income tax expense 3,995 1,057Total profit and comprehensive income $ 10,912 $ 1,041Earnings per share   Basic $ 0.10 $ 0.01 Diluted $ 0.10 $ 0.01 Consolidated Statement of Changes in Equity (Unaudited)March 31, 2011, December 31, 2010, March 31, 2010 and January 1, 2010(000's) Share Capital ContributedSurplus Deficit TotalBalance at January 1, 2010 $ 245,353 $ 10,339 $ (94,430) $ 161,262Total profit and comprehensive income - - 1,041 1,041Share based compensation - 277 - 277Balance at March 31, 2010  245,353  10,616  (93,389)  162,580Total profit and comprehensive income - - 15,389 15,389Share based compensation - 830 - 830Balance at December 31, 2010  245,353  11,446  (78,000)  178,799Total profit and comprehensive income - - 10,912 10,912Fair value of stock options exercised 498 (498) - -Cash from stock options exercised 1,302 - - 1,302Dividends declared - - (4,215) (4,215)Share based compensation - 156 - 156Balance at March 31, 2011 $ 247,153 $ 11,104 $ (71,303) $ 186,954 Consolidated Statements of Cash Flows (Unaudited)For the three months ended March 31, 2011 and 2010 March 31 March 31(000's) 2011 2010Cash provided by (used in): Operating activities:Profit for the period $ 10,912 $ 1,041Adjustments for: Depreciation 4,836 3,831 Amortization of intangible assets 2,060 2,138 Share based compensation 156 277 Amortization of other assets 28 27 Earnings on equity investments 21 47 Gain on sale of property, plant and equipment (846) (823) Finance costs 613 462 Income tax expense 3,995 1,057 21,775 8,057Income taxes paid (2,460) (300)Interest paid (414) (524)Changes in non-cash working capital items (1,997) (12,697) 16,904 (5,464)Investing activities:Purchase of property, plant and equipment (25,824) (8,841)Purchase of intangibles - (16)Proceeds on sale of property, plant and equipment 2,138 4,100 (23,686) (4,757)Changes in non-cash working capital items (1,550) 2,522 (25,236) (2,235)Financing activities:(Repayment of) proceeds from bank indebtedness (229) 2,633Shares issued 1,302 -Proceeds of loans and borrowings 7,135 1,391 8,208 4,024Changes in non-cash working capital items 124 (49) 8,332 3,975Decrease in cash position - (3,724)Cash, beginning of period - 3,724Cash, end of period $ - $ -Caution Regarding Forward-Looking Information and Statements Certain statements contained in this Press Release constitute forward-looking statements or information. These statements relate to future events or future performance of Horizon. All statements other than statements of historical fact are forward-looking statements. The use of any of the words "anticipate", "plan" "continue", "estimate", "expect", "may", "will", "project", "predict", "potential", "should", "believe" and similar expressions are intended to identify forward-looking statements.In particular, such forward- looking statements include: under the heading "Overview and Outlook" the statements that: "Increased investment and production levels in the Alberta oil sands will provide additional growth opportunities for our camp and catering segment and our matting services segment for the foreseeable future, augmented by infrastructure and mineral mining projects.  The long-term nature of these projects should enhance the sustainability and growth of Horizon's cash flow streams." and "Strong demand from oil sands operators for camp rental and catering services, as well as camp sales, hasstrengthened the Corporation's backlog, and as a resultthe current levelof activity is expected to continue well into 2011."The foregoing statements are based on the assumption that prices for oil and minerals will stay high enough to support ongoing high levels of exploration and development activities in Western Canada which in turn support high levels of activities for the Corporation's businesses.There are a number of risks which could impact these generally high levels of activity which could negatively impact the Corporation's business.  As such, many factors could cause the performance or achievements of the Corporation to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements.Corporate InformationAdditional information related to the Corporation, including the Corporation's annual information form, financial statements, and MD&A is available on SEDAR at www.sedar.com. Unless otherwise indicated, the consolidated financial statements have been prepared in accordance with IFRS and the reporting currency is in Canadian dollars.   For further information: Bob German, President and Chief Executive Officer, or Scott Matson, Vice President Finance and Chief Financial Officer, 1600, 505 - 3rd Street S.W., Calgary, Alberta T2P 3E6, Telephone: (403) 517-4654,  Fax: (403) 517- 4678; website: www.horizonnorth.ca