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Press release from CNW Group

Horizon North Logistics Inc. Announces Results For The Quarter Ended September 30, 2011

Wednesday, November 02, 2011

Horizon North Logistics Inc. Announces Results For The Quarter Ended September 30, 201117:54 EDT Wednesday, November 02, 2011TSX Symbol: HNLCALGARY, Nov. 2, 2011 /CNW/ - Horizon North Logistics Inc. ("Horizon" or the "Corporation") reported its financial and operating results for the three and nine months ended September 30, 2011 and 2010.Third Quarter HighlightsConsolidated revenues and EBITDAS increased significantly as compared to the same period of 2010 as a result of strong performance in the following segments;The Camps & Catering segment revenue increased by 64% as compared to the same period of 2010, led by rental and catering activity closely followed by camp and space sales and the associated service revenue. These higher levels of activity drove EBITDAS to increase by 84% as compared to the same period of 2010; andThe Matting segment revenue increased by 111% as compared to the same period of 2010. The increase was primarily in mat sales from continued strong customer demand. As a result of the strong sales, EBITDAS increased by 69% as compared to the same period of 2010.Financial Summary                       Three months ended September 30 Nine months ended September 30(000's except per share amounts)              2011              2010(4)   % Change              2011              2010(4)   % ChangeRevenue $      102,298 $      64,892         58% $      292,064 $      154,238         89%EBITDAS(1)              28,443              17,361         64%              73,267              33,602         118%EBITDAS as a % of revenue        28%        27%                  25%  22%    Operating earnings(1)              20,665              10,613         95%              50,858              13,732         270%Total profit              15,068              7,297         106%              36,213              8,279         337%Total comprehensive income              15,298              7,297         110%              36,443              8,279         340%Earnings per share - basic & diluted $      0.14 $      0.07   100% $      0.34 $      0.08   326%Total assets              328,928              270,179         22%              328,928              270,179         22%Long-term loans and borrowings              43,356              45,243         (4%)              43,356              45,243         (4%)Funds from operations(2)              22,452              13,607         65%              56,851              26,516         114%Capital spending              22,861              13,491                        79,108              40,300          Debt to total capitalization ratio(3)              0.17              0.22                  0.17              0.22    (1)  EBITDAS (Earnings before interest, taxes, depreciation, amortization, gain/loss on disposal of property, plant and equipment, and share based compensation) and operating earnings (earnings before interest, taxes, and earnings on equity investments) are not recognized measures under IFRS.  Management believes that in addition to total profit and total comprehensive income, 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, and it is regularly provided to and reviewed by the Chief Operating Decision Maker and operating earnings 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.  Horizon's method of calculating EBITDAS and operating earnings may differ from other entities and accordingly, may not be comparable to measures used by other entities. 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. For a reconciliation of EBITDAS and operating earnings to total profit and comprehensive income.(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 shareholders' equity (4)   All 2010 figures have been restated in accordance with International Financial Reporting Standards.Overview and OutlookHorizon continued to gain momentum in the third quarter of 2011, building on strong performance in the first half of the year with third quarter results setting new quarterly records for revenue, EBITDAS and earnings per share.Continued strong performance was driven by a number of factors, including Horizon's exposure to oil sands projects, with 61% of Horizon's consolidated third quarter revenues generated from oil sands related customers.  Continued strong commodity pricing resulted in improved drilling activity in western Canada while mining and infrastructure projects continue to move forward.Capital ProgramHorizon is on track to execute its 2011 capital program of $100 million.  The program is focused mainly on investment in camp rental fleet assets with the rentable bed count expected to exit 2011 at 6,000 beds.  Increasing activity levels through the last half of 2010 and through 2011 have allowed Horizon to fund the capital program primarily through operating cash flows while maintaining a strong and conservative balance sheet with similar levels of overall debt as compared to the same period of 2010.Dividend PaymentOctober 14, 2011 marked Horizon's second dividend payment of $0.04 per share, or $4.3 million, paid to shareholders of record as of September 30, 2011.  The Board of Directors of Horizon have declared a dividend for the fourth quarter of 2011 at $0.04 per share, payable to shareholders of record at close of business on December 31, 2011.  The dividend will be paid on January 16, 2012.Financial Results                          Three months ended September 30, 2011  (000's)  Camps &Catering   Matting   MarineServices   Corporate  Inter-segmentEliminations   TotalRevenue$ 85,273 $ 17,492 $ 1,554 $ - $(2,021) $ 102,298Expenses                       Direct costs  58,257   11,853   1,036   (3)  (1,983)   69,160 Selling & administrative  2,390   125   -   2,180  -   4,695EBITDAS  24,626   5,514   518   (2,177)  (38)   28,443Share based payments  71   14   2   56  -   143Depreciation & amortization  5,652   1,828   113   88  (22)   7,659Gain on disposal of property, plantand equipment  (21)   (3)   -   -  -   (24)Operating earnings (loss)$ 18,924 $ 3,675 $ 403 $ (2,321) $(16) $ 20,665Finance costs                     641Gain on equity investments                     (2)Income tax expense                     4,958Other comprehensive income                     (230)Total comprehensive income                   $ 15,298Earnings per share - basic & diluted                   $ 0.14                        Three months ended September 30, 2010(1)  (000's)  Camps &Catering   Matting   MarineServices   Corporate  Inter-segmentEliminations   TotalRevenue$ 51,864 $ 8,298 $ 4,954 $ - $(224) $ 64,892Expenses                       Direct costs  38,021   4,938   2,244   3  (225)   44,981 Selling & administrative  389   101   -   2,060  -   2,550EBITDAS  13,454   3,259   2,710   (2,063)  1   17,361Share based payments  145   24   1   112  -   282Depreciation & amortization  4,758   1,399   298   97  (21)   6,531Gain on disposal of property, plantand equipment  (65)   -   -   -  -   (65)Operating earnings (loss)$ 8,616 $ 1,836 $ 2,411 $ (2,272) $22 $ 10,613Finance costs                     602Loss on equity investments                     7Income tax expense                     2,707Other comprehensive income                     -Total comprehensive income                   $ 7,297Earnings per share - basic & diluted                   $ 0.07(1) All 2010 figures have been restated in accordance with International Financial Reporting Standards.                          Nine months ended September 30, 2011  (000's)  Camps &Catering   Matting   MarineServices   Corporate  Inter-segmentEliminations   TotalRevenue$ 246,091 $ 47,588 $ 3,361 $ - $(4,976) $ 292,064Expenses                       Direct costs  176,288   34,032   2,241   (1)  (4,847)   207,713 Selling & administrative  4,117   319   7   6,641  -   11,084EBITDAS  65,686   13,237   1,113   (6,640)  (129)   73,267Share based payments  245   33   4   170  -   452Depreciation & amortization  16,620   4,645   335   260  (60)   21,800Loss on disposal of property, plantand equipment  62   95   -   -  -   157Operating earnings (loss)$ 48,759 $ 8,464 $ 774 $ (7,070) $(69) $ 50,858Finance costs                     1,830Loss on equity investments                     39Income tax expense                     12,776Other comprehensive income                     (230)Total comprehensive income                   $ 36,443Earnings per share - basic & diluted                   $ 0.34                        Nine months ended September 30, 2010(1)  (000's)  Camps &Catering   Matting   MarineServices   Corporate  Inter-segmentEliminations   TotalRevenue$ 127,261 $ 23,474 $ 5,583 $ - $(2,080) $ 154,238Expenses                       Direct costs  94,558   16,133   3,587   7  (1,985)   112,300 Selling & administrative  2,274   330   7   5,725  -   8,336EBITDAS  30,429   7,011   1,989   (5,732)  (95)   33,602Share based payments  440   75   6   325  -   846Depreciation & amortization  13,516   4,078   889   290  (56)   18,717Loss on disposal of property, plantand equipment  219   76   -   12  -   307Operating earnings (loss)$ 16,254 $ 2,782 $ 1,094 $ (6,359) $(39) $ 13,732Finance costs                     1,293Loss on equity investments                     204Income tax expense                     3,956Other comprehensive income                     -Total comprehensive income                   $ 8,279Earnings per share - basic & diluted                   $ 0.08(1)     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, space rental revenue and service revenue from transportation and installation.                        Three months ended September 30  Nine months ended September 30(000's except bed rental days and catering only days)     2011   2010(3)    2011   2010(3)Camp rental and catering revenue   $ 41,381 $ 28,459  $ 123,462 $ 73,001Camp and space unit sales revenue     25,979   15,785    66,357   35,199Space rental revenues     1,271   1,108    3,925   2,927Service revenue     16,642   6,512    52,347   16,134Total revenue   $ 85,273 $ 51,864  $ 246,091 $ 127,261                    EBITDAS   $ 24,626 $ 13,454  $ 65,686 $ 30,429Operating earnings   $ 18,924 $ 8,616  $ 48,759 $ 16,254                    Bed rental days(1)     206,626   131,989    622,672   354,643Catering only days(2)     65,772   52,801    170,335   109,655(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 the Camps & Catering segment were $85.3 million for the three months ended September 30, 2011 compared to $51.9 million for the three months ended September 30, 2010, an increase of $33.4 million or 64%. EBITDAS from operations for the three months ended September 30, 2011 was $24.6 million or 29% of revenue compared to $13.5 million or 26% of revenue for the three months ended September 30, 2010, an increase of $11.2 million or 83%.The strong performance of Horizon's Camps & Catering segment in the third quarter of 2011, as compared to the same period of 2010, was a result of continuing high levels of investment by oil and gas producers in Western Canada. This investment is being driven by the price of oil, which has remained at levels high enough to support strong project economics. The investment in oil and gas exploration, development and oil sand construction is requiring operators to increase manpower levels resulting in higher demand for turnkey camp rental and catering services and for camp sales to project owners. For the nine months ended September 30, 2011, 61% of this segment's revenue was derived from oil sands related activity as compared to 50% in the same period of 2010.Camp rental and catering revenueRevenues from camp rental and catering operations were $41.4 million for the three months ended September 30, 2011 compared to $28.5 million for the three months ended September 30, 2010, an increase of $12.9 million or 45%. 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 September 30(000's for revenue only)   2011   2010(1)      Largecamp   Drillcamp   Total   Largecamp   Drillcamp   TotalRevenue   $ 31,586 $ 2,598 $ 34,184 $ 19,743 $ 1,077 $ 20,820Bed rental days     190,983   15,643   206,626   125,139   6,850   131,989Revenue per bed rental day   $ 165 $ 166 $ 165 $ 158 $ 157 $ 158Available beds(2)     3,861   1,000   4,861   2,741   1,000   3,741Utilization(3)     54%   17%   46%   50%   7%   38%(1)  2010 revenue has been restated in accordance with International Financial Reporting Standards.(2) Available beds is equal to total average beds in the fleet over the period less beds required for staff.(3) Utilization equals the total number of bed rental days divided by total available beds times days in the quarter.                                 Nine months ended September 30(000's for revenue only)   2011   2010(1)      Largecamp   Drillcamp   Total   Largecamp   Drillcamp   TotalRevenue   $ 97,420 $ 6,657 $ 104,077 $ 54,016 $ 3,631 $ 57,647Bed rental days     582,479   40,193   622,672   331,634   23,009   354,643Revenue per bed rental day   $ 167 $ 166 $ 167 $ 163 $ 158 $ 163                           Available beds(2)     3,614   1,000   4,614   2,641   1,000   3,641Utilization(3)     59%   15%   49%   46%   8%   36%(1) 2010 revenue has been restated in accordance with International Financial Reporting Standards.(2)  Available beds is equal to total average beds in the fleet over the period less beds required for staff.(3)  Utilization equals the total number of bed rental days divided by total available beds times days in the quarter.Revenues from large camp operations for the three months ended September 30, 2011 increased by $11.8 million or 60% as compared to the three same period in 2010. Increased revenues from large camps are reflective of the continued strong industry conditions in the oil sands sector. The increasing number of oil sands exploration and development projects is driving higher manpower requirements for oil sands operators and as such increased demand for Horizon's camp rental and catering services. The higher demand is reflected in 190,983 bed rental days for the quarter ended September 30, 2011 as compared to 125,139 in the same period in 2010, an increase of 65,844 or 53%.  Utilization increased to 54% as compared to 50% in the same period of 2010, while the number of available beds increased to 3,861 for the quarter as compared to 2,741 for the same period in 2010 reflecting ongoing investment in the rental fleet. Revenue per bed rental day increased by $7 reflecting competitive pricing related to increasing oil sands activity.Revenues from drill camp operations for the three months ended September 30, 2011 increased by $1.5 million or 141% as compared to the same period of 2010. Revenues in the drill camp operations are highly dependent on the level of drilling activity in Western Canada. Drilling activity has increased significantly in the three months ended September 30, 2011 as compared to the same period of 2010. The Canadian Association of Oilwell Drilling Contractors (CAODC) reported average rig utilization in Western Canada for the three months ended September 30, 2011 at 57% as compared to 41% in the same period of 2010. The increase in drilling activity is reflected in higher volumes and stronger utilization for the three months ended September 30, 2011 as compared to the same period of 2010. In addition to the higher volumes, revenue per bed rental day increased by $9 per day. The increase in rate is due to additional equipment and services requested by the customer once the camp is operational.The tables below outline the key performance metrics used by management to measure performance in the catering only and equipment rental operations.                          Three months ended September 30  Nine months ended September 30(000's for revenue only)     2011    2010(2)    2011    2010(2)Catering only revenue   $ 5,975  $ 5,996  $ 15,770  $ 12,780Catering only days(1)     65,772    52,801    170,335    109,655Revenue per catering only day   $ 91  $ 114  $ 93  $ 117                          Three months ended September 30  Nine months ended September 30(000's)     2011    2010(2)    2011    2010(2)Equipment rental   $ 1,222  $ 1,643  $ 3,615  $ 2,574(1) One catering only day equals the provision of catering and housekeeping services with no related bed rental for one day.(2)  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 September 30, 2011 remained relatively unchanged as compared to same period of 2010. Volumes for the comparative period increased primarily as a result of higher activity levels at a significant mine expansion project in the Northwest Territories. The higher volumes were offset by a decrease in the revenue per catering only day, a result of a longer term agreement with higher volumes at a preferred daily rate.Camp and space unit sales revenueCamp and space unit sales revenues for the three months ended September 30, 2011 were $26.0 million as compared to $15.8 million for the same period in 2010, an increase of $10.2 million or 65%. The increase was mainly due to a large manufacturing project which was in full production for the three months ended September 30, 2011 as compared to the ramp-up phase in the same period of 2010. Production staff increased to an average of 360 people in the three months ended September 30, 2011 as compared to 330 people in the same period of 2010. Revenue from camp and space unit sales is highly dependent on the allocation of production capacity between external customer orders and internal fleet requirements; this allocation of production capacity is reviewed by management on a regular basis.Space rental revenuesSpace rental revenues for the three months ended September 30, 2011 were $1.3 million as compared to $1.1 million for the same period in 2010, an increase of $0.2 million or 18%. The increase came from slightly higher volumes with fleet utilization for the three months ended September 30, 2011 at 89% compared to 87% for the same period in 2010.Service revenueRevenues from camp mobilization, demobilization, transportation and installation for the three months ended September 30, 2011 were $16.6 million as compared to $6.5 million in the same period of 2010, an increase of $10.1 million or 155%. These revenues were driven by activity levels in both the camp rental and catering business and the camp and space sales business. For the three months ended September 30, 2011, service revenues were derived primarily from the transport and installation of a large manufacturing project in the Fort McMurray, Alberta area and a 250 person camp in the interior of British Columbia. The same period of 2010 had several smaller installation projects.Direct costsDirect costs for the three months ended September 30, 2011 were $58.3 million or 68% of revenue as compared to $38.0 million or 73% of revenue for the same period of 2010. Direct costs are closely related to revenues with the increase in overall costs a result of the higher activity levels seen in the three months ended September 30, 2011 as compared to the same period of 2010. As a percentage of revenue, direct costs declined by 5% compared to the same period of 2010. The decrease was attributable, in part, to efficiency gains in the manufacturing process, which come from long production runs of the same product. At the beginning of these production runs, the manufacturing process typically experiences lower efficiency as the project ramps up, as was the case in the third quarter of 2010. Direct cost in the Camps & Catering declined as a percentage of revenue as a result of higher activity levels. As utilization of the camps increases, the fixed costs are spread over a larger revenue base. The fixed costs are comprised of costs such as rent, taxes, utilities and minimum staff levels.MattingMatting revenue is comprised of mat rental revenue, mat sales revenue, installation, transportation, service, and other revenue as follows:                       Three months ended September 30 Nine months ended September 30(000's except mat rental days and numbers of mats)     2011   2010(1)   2011   2010(1)Mat rental revenue   $ $3,546 $ 2,208 $ 6,846 $ 4,862Mat sales revenue     7,128   2,059   22,709   6,635Installation, transportation, service, and other revenue     6,818   4,031   18,033   11,977Total revenue   $ 17,492 $ 8,298 $ 47,588 $ 23,474                   EBITDAS   $ 5,514 $ 3,259 $ 13,237 $ 7,011Operating earnings   $ 3,675 $ 1,836 $ 8,464 $ 2,782                   Mat rental days     936,092   1,034,474   1,973,708   2,364,414Average mats in rental fleet     10,380   13,400   8,900   12,673                   Mat sold:                   New mats     8,861   2,305   27,465   5,019 Used Mats     660   951   3,153   6,312Total mats sold     9,521   3,256   30,618   11,331(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 September 30, 2011 were $17.5 million as compared to $8.3 million for the same period of 2010, an increase of $9.2 million or 111%. EBITDAS for the three months ended September 30, 2011 were $5.5 million or 32% of revenue as compared to $3.3 million or 39% of revenue for the same period of 2010, an increase of $2.2 million or 67%.Mat rental revenueMat rental revenues for the three months ended September 30, 2011 were $3.5 million as compared to $2.2 million for the same period of 2010, an increase of $1.3 million or 61%. The increase in rental revenue was driven by the mix of mats on rent and higher revenues per mat rental day for the oak access mats. As compared to the same period of 2010, the number of rig mat rental days was significantly higher and rented at an average daily rate of $38. The oak access mats averaged $2.80 per day for the three months ended September 30, 2011 as compared to $2.13 for the same period of 2010. The rental mix and higher daily rate combined for revenue per rental day of $3.79 for the three months ended September 30, 2011 as compared to $2.13 for the same period of 2010. This higher pricing was offset by lower volumes, with mat rental days for the three months ended September 30, 2011 at 936,092, or 98% utilization compared to 1,034,474 mat rental days or 84% utilization for the same period of 2010. The higher utilization was a result of the decreased rental mat fleet size for the three months ended September 30, 2011 as compared to the same period of 2010. The smaller fleet size is a result of two large used mat sales which occurred at the end of 2010 and early in 2011, with the strong mat sales throughout 2011 the growth of the fleet size has been gradual.Mat sales revenueRevenues from mat sales for the three months ended September 30, 2011 were higher by $5.1 million or 246% as compared the same period of 2010. The majority of the increase came from new mat sales where customers purchased them for their steam assisted gravity drainage (SAGD) drilling projects. Revenue per mat sold during the third quarter of 2011 was $749, up from $632 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 September 30, 2011 were higher by $2.8 million as compared to the same period in 2010. The increase is reflective of the higher volume of mat sales.Direct costsDirect costs for the three months ended September 30, 2011 were $11.9 million or 68% of revenue as compared to $4.9 million or 60% of revenue for the same period of 2010. Direct costs are driven by the level of business activity and with the significant increase in revenue, as compared to the same period of 2010, direct costs have increased accordingly. Direct costs, as a percentage of revenue, increased by 8% for the three months ended September 30, 2011, as compared the same period of 2010. This increase of direct cost, as a percentage of revenue, is mainly driven from the mix of the revenue as compared to the same period of 2010. A significantly higher proportion of revenue was generated from mat sales which have higher costs than rentals.Marine ServicesMarine Services revenue is comprised of barge camp revenue and rental and other revenue as follows:                                    Three months ended September 30  Nine months ended September 30(000's)          2011    2010(1)    2011    2010(1)Barge camp revenue        $ 885  $ 1,592  $ 2,206  $ 1,693Rental and other revenue          669    3,362    1,155    3,890Total revenue        $ 1,554  $ 4,954  $ 3,361  $ 5,583                           EBITDAS        $ 518  $ 2,710  $ 1,113  $ 1,989Operating earnings        $ 403  $ 2,411  $ 774  $ 1,094(1)  2010 revenue, EBITDAS and operating earnings have been restated in accordance with International Financial Reporting Standards.Revenues from the Marine Services segment for the three months ended September 30, 2011 were $1.6 million as compared to $5.0 million in the same period of 2010, a decrease of $3.4 million or 68%. The decrease was primarily due to lower levels of activity in the three months ended September 30, 2011 as compared to the same period of 2010.  In 2010 there was significant activity related to the repositioning of the two barge camps to a mining project in Nunavut.EBITDAS for the three months ended September 30, 2011 was $0.5 million or 33% of revenue as compared to $2.7 million or 55% of revenue for the same period of 2010. The decrease in EBITDAS was due to the overall lower activity.CorporateCorporate costs are the costs of the head office which include the President and Chief Executive Officer, Chief Financial Officer, Vice President of Health, Safety, and Environment, Vice President of Aboriginal Relations, Corporate Secretary, corporate accounting staff, and associated costs of supporting a public company. Costs for the three months ended September 30, 2011 were $2.2 million as compared to $2.1 million in the same period in 2010. This increase of $0.1 million reflects the increased cost to support the higher level of business activity. Corporate costs, as a percentage of revenue, decreased to 2% for the three months ended September 30, 2011, as compared to 3% in the same period of 2010.Other ItemsDepreciation and amortizationDepreciation and amortization costs for the three months ended September 30, 2011 were $7.7 million as compared to $6.5 million in the same period of 2010. The increase was mainly from net additions of $19.4 million in depreciable assets, primarily growth in the camp facilities. Amortization of intangibles remained relatively unchanged year over year.Financing costsFinancing costs on loans and borrowings for the three months ended September 30,2011 were $0.6 million as compared to $0.6 million in the same period of 2010. Although the interest expense remained consistent year over year, the weighted average debt held in the three months ended September 30,2011 was higher but was offset by a lower interest rate under the new credit facility.Income taxesIncome tax expense was $5.0 million, an effective tax rate of 25%, for the three months ended September 30, 2011 as compared to a tax expense of $2.7 million, an effective rate of 27% for the same period of 2010. The increase in tax expense is a result of the higher profit in the three months ended September 30, 2011 as compared to the same period of 2010. The effective tax rate decreased as a result of the 1.5% decrease in federal tax rates from 2010 to 2011.Selling and administrativeSelling and administrative expense was $4.7 million or 4.6% of revenue for the three months ended September 30, 2011 as compared to $2.6 million or 3.9% of revenue in the same period of 2010. The current quarter includes a charge to bad debt expense for $1.8 million. The expense represents the resolution of an outstanding contractual dispute with a customer in the Camps & Catering segment. Normalizing for this expense, selling and administration was $2.9 million or 2.8% of revenue.Share repurchaseThe Corporation was granted approval from the Toronto Stock Exchange for a Normal Course Issuer Bid to repurchase up to a maximum of 6,985,634 common shares of the Corporation over the period from September 14, 2010 to September 13, 2011. No shares were repurchased during the time period provided under the renewed program.Capital reductionAt the May 5, 2011 Annual and Special Meeting of Shareholders, a reduction of capital was approved by way of a special resolution, which eliminated the deficit of $78.0 million as at January 1, 2011 and reduced share capital.  Elimination of the deficit simplifies the Corporation's statement of financial position and provides a more representative view of the actual accumulated operating results, as the majority of the deficit had been attributable to the write-down of goodwill in the year ended December 31, 2008.Condensed consolidated statement of financial position (Unaudited)                      (000's)                September 30,2011   December 31,2010Assets                     Current assets:                      Trade and other receivables               $54,090  $52,003 Inventories                14,472   13,726 Prepayments                4,174   8,953                 72,736   74,682Non-current assets:                      Property, plant and equipment                221,577   162,484 Intangible assets                20,670   26,892 Goodwill                2,136   2,136 Investments in equity accounted investees                2,212   2,251 Deferred tax assets                6,754   6,458 Other assets                2,843   2,934                 256,192   203,155                $328,928  $277,837                      Liabilities and Shareholders' Equity                     Current liabilities:                      Bank indebtedness               $-  $834 Operating line of credits                -   10,200 Trade and other payables                38,837   25,377 Deferred revenue                1,888   7,206 Income taxes payable                5,746   1,344 Current portion of loans and borrowings                1,353   11,773                 47,824   46,534Non-current liabilities:                      Provisions                1,268   1,223 Loans and borrowings                43,356   30,363 Deferred tax liabilities                25,231   20,918                 117,679   99,038Shareholders' equity:                      Share capital                172,869   245,353 Contributed surplus                10,422   11,446 Accumulated other comprehensive income                230   - Retained earnings (Deficit)                27,728   (78,000)                 211,249   178,799                $328,928  $277,837                      Condensed consolidated statement of comprehensive income (Unaudited)Three and nine months ended September 30, 2011 and 2010                        Three months endedSeptember 30  Nine months endedSeptember 30(000's)     2011   2010   2011   2010Revenue    $102,298  $64,892  $292,064  $154,238                   Operating expenses:                   Direct costs     69,160   44,981   207,713   112,300 Depreciation     5,578   4,386   15,578   12,295 Amortization of intangible assets     41   131   123   382 Share based compensation     88   169   282   520 (Gain) loss on disposal of property, plant and Equipment     (24)   (65)   157   307Direct operating expenses     74,843   49,602   223,853   125,804Gross profit     27,455   15,290   68,211   28,434                   Selling & administrative expenses:                   Selling & administrative expenses     4,695   2,550   11,084   8,336 Amortization of intangible assets     2,040   2,014   6,099   6,040 Share based compensation     55   113   170   326Selling & administrative expenses     6,790   4,677   17,353   14,702Operating earnings     20,665   10,613   50,858   13,732                   Finance costs     641   602   1,830   1,293Share of (gain) loss of equity accounted investees     (2)   7   39   204Profit before tax     20,026   10,004   48,989   12,235                    Current tax expense     1,340   1,397   8,759   1,691 Deferred tax expense     3,618   1,310   4,017   2,265Income tax expense     4,958   2,707   12,776   3,956Total profit     15,068   7,297   36,213   8,279                   Other comprehensive income:                   Translation of foreign operations     230   -   230   -Other comprehensive income, net of income tax     230   -   230   -Total comprehensive income    $15,298  $7,297  $36,443  $8,279                   Earnings per share:                   Basic    $0.14  $0.07  $0.34  $0.08 Diluted    $0.14  $0.07  $0.34  $0.08                    Condensed consolidated statement of changes in equity (Unaudited)                         (000's)     ShareCapital    ContributedSurplus  AccumulatedOtherComprehensiveIncome    RetainedEarnings(Deficit)    TotalBalance at January 1, 2010   $ 245,353   $10,339 $-  $ (94,430)  $ 161,262Total profit     -    -  -    8,279    8,279Share based compensation     -    846  -    -    846Balance at September 30, 2010     245,353    11,185  -    (86,151)    170,387                         Total profit     -    -  -    8,151    8,151Share based compensation     -    261  -    -    261Balance at December 31, 2010     245,353    11,446  -    (78,000)    178,799                         Reduction of capital     (78,000)    -  -    78,000    -Total profit     -    -  -    36,213    36,213Share based compensation     -    452  -    -    452Fair value of stock options exercised     1,476    (1,476)  -    -    -Cash from stock options exercised     4,040    -  -    -    4,040Translation of foreign operations     -    -  230    -    230Dividends paid                  (4,236)    (4,236)Dividends declared     -    -  -    (4,249)    (4,249)Balance at September 30, 2011   $ 172,869   $10,422 $230  $ 27,728  $ 211,249                         Condensed consolidated statement of cash flows (Unaudited)Nine months ended September 30, 2011 and 2010                                       September 30,   September 30,(000's)                2011   2010Cash provided by (used in):                                           Operating activities:                     Profit for the period               $36,213  $8,279Adjustments for:                      Depreciation                15,578   12,295 Amortization of intangible assets                6,222   6,422 Share based compensation                452   846 Amortization of other assets                91   95 Loss on equity investments                39   204 Gain on sale of property, plant and equipment                (1,795)   (1,625) Unrealized foreign exchange                51   - Finance costs                1,830   1,293 Income tax expense                12,776   3,956                 71,457   31,765Income taxes paid                (4,356)   (10)Interest paid                (1,252)   (1,122)Changes in non-cash working capital items                5,795   (407)                 71,644   30,226Investing activities:                     Purchase of property, plant and equipment                (79,108)   (40,300)Purchase of intangibles                -   (89)Proceeds on sale of property, plant and equipment                6,412   7,684                 (72,696)   (32,705)Financing activities:                     Proceeds from bank indebtedness                2,696   -Shares issued                4,040   -(Repayment of) proceeds from loans and borrowings                (1,448)   3,251Payment of dividends                (4,236)   -                 1,052   3,251Increase in cash position                -   772Cash, beginning of period                -   3,724Cash, end of period               $-  $4,496Caution Regarding Forward-Looking Information and Statements There are no statements contained in this Management Discussion and Analysis ("MD&A") that constitute forward-looking statements or information.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