Feb. 24, 2011 (Canada NewsWire Group) --
TSX Symbol: HNL
CALGARY, Feb. 24 /CNW/ - Horizon North Logistics Inc. ("Horizon" or the "Corporation") reported its financial and operating results for the quarter ended December 31, 2010 and 2009.
Fourth Quarter Highlights
- Revenue and EBITDAS increase 167% and 1,206% respectively as compared to Q4 2009;
- 159% increase in camp rental and catering revenue as compared to Q4 2009;
- 181% increase in manufacturing revenue as compared to Q4 2009.
- 153% increase in matting revenue compared to Q4 2009;
Dividend Payment
Improved economic conditions and the resultant increase in commodity prices is providing opportunities for continued expansion of Horizon's business. With growing cash flow from operations and a strong balance sheet, the Corporation has reached the point where it's long held objective of providing another avenue of return to shareholders through the payment of a dividend has been achieved. The Board of Directors has declared the Corporation's first quarterly dividend at the rate of $0.04 per share, payable to shareholders of record at close of business on June 30, 2011. The intention is to continue to declare dividends on a quarterly basis at the rate of $0.04 per share.
Capital Program
The Corporation's 2011 capital program has been expanded from $41.3 million to $61.3 million with the increased spending to be directed to meeting workforce accommodation demand from growing oil sands development.
Financial Summary
| (000's except per share amounts) |
Three Months Ended December 31, 2010 |
Three Months Ended December 31, 2009 |
Year Ended December 31, 2010 |
Year Ended December 31, 2009 |
| Revenue from operations | $ 85,021 | $ 31,851 | $ 242,654 | $ 141,839 |
| Cancellation fee | - | - | - | 8,000 |
| Total revenue | $ 85,021 | $ 31,851 | $ 242,654 | $ 149,839 |
| EBITDAS(1) from operations | 18,882 | 1,446 | 53,343 | 26,527 |
| Cancellation fee | - | - | - | 8,000 |
| Total EBITDAS(1) | 18,882 | 1,446 | 53,343 | 34,527 |
|
Operating earnings (loss) (1) from operations |
12,045 | (4,847) | 25,940 | 1,496 |
| Cancellation fee | - | - | - | 8,000 |
| Total operating earnings (loss) (1) | 12,045 | (4,847) | 25,940 | 9,496 |
| Net earnings (loss) | 8,141 | (3,916) | 16,542 | 5,563 |
|
Net earnings (loss) per share - Basic/diluted |
$ 0.08 | $ (0.04) | $ 0.16 | $ 0.05 |
| Total assets | 281,046 | 241,002 | 281,046 | 241,002 |
| Total long-term financial liabilities(2) | 42,136 | 44,702 | 42,136 | 44,702 |
| Funds from operations(3) | 16,406 | 463 | 46,215 | 30,388 |
| Net capital spending(4) | 5,661 | 14,846 | 30,446 | 13,947 |
| Debt to total capitalization ratio(5) | 0.18:1 | 0.21:1 | 0.18:1 | 0.21:1 |
See definitions on page 2
Outlook
Horizon's fourth quarter results reflect the significant changes in the overall economic and business environment that have taken place since 2009. The fourth quarter 2009 results were impacted by the financial market crisis, world recession and slumping commodity prices which resulted in significantly reduced customer activity. The three months ended December 31, 2010 saw significantly increased levels of activity, fueled primarily by improving oil prices which in turn drove oil sands related projects and activity. Horizon's core business lines are strongly driven by oil sands activity, both through the provision of workforce accommodation and in our road and location matting business. Improved mineral pricing drove a resurgence of mining and related infrastructure projects, a market in which Horizon is also actively involved. Demand for our services is expected to grow in conjunction with the expansion of remote resource development projects.
Definitions
| (1) | EBITDAS (Earnings before interest, taxes, depreciation, amortization, accretion of notes payable, gain/loss on disposal of property, plant and equipment, stock based compensation and equity investments) and operating earnings are not recognized measures under Canadian generally accepted accounting principles (GAAP). Management believes that in addition to net earnings (loss), 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 net earnings (loss), 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 net earnings (loss) determined in accordance with GAAP 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 net earnings (loss), please refer to page 3 of the Press Release. |
| (2) | Long-term financial liabilities include operating lines of credit, and current and long-term portions of long-term debt. |
| (3) | Funds from operations is not a recognized measure under GAAP. 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 GAAP 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. For a reconciliation of Funds from operations please refer to the Consolidated Financial Statements, Consolidated Statements of Cash Flows. |
| (4) | Net capital spending represents spending on property plant and equipment net of the proceeds from sales of property plant and equipment. |
| (5) | 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 debt. Total capitalization is calculated as the sum of debt and shareholders' equity. |
Quarterly Financial Results
| Three months ended December 31, 2010 | ||||||||
| (000's) |
Camps & Catering |
Matting |
Marine Services |
Corporate |
Inter-segment Eliminations |
Total | ||
| Revenue | $ 70,698 | $ 13,891 | $ 1,135 | $ - | $ (703) | $ 85,021 | ||
| Expenses | ||||||||
| Cost of goods sold | 18,046 | 5,345 | - | - | - | 23,391 | ||
| Operating | 35,227 | 4,596 | 688 | - | (703) | 39,808 | ||
| General & administrative | 680 | 130 | - | 2,107 | - | 2,917 | ||
| Foreign exchange (gain) loss | (1) | 21 | - | 3 | - | 23 | ||
| EBITDAS | $ 16,746 | $ 3,799 | $ 447 | $ (2,110) | $ - | $ 18,882 | ||
| Stock based compensation | 62 | 15 | 2 | 84 | - | 163 | ||
| Depreciation & amortization | 4,898 | 1,431 | 298 | 32 | (21) | 6,638 | ||
| Loss on disposal of property, plant and equipment | 33 | 3 | - | - | - | 36 | ||
| Total operating earnings (loss) | $ 11,753 | $ 2,350 | $ 147 | $ (2,226) | $ 21 | $ 12,045 | ||
| Interest income | (16) | |||||||
| Interest expense on operating lines of credit | 118 | |||||||
| Interest expense on long-term debt | 316 | |||||||
| Loss on equity investments | 8 | |||||||
| Accretion of notes payable | 184 | |||||||
| Income tax expense | 3,294 | |||||||
| Net earnings | $ 8,141 | |||||||
| Earnings per share - basic and diluted | $ 0.08 | |||||||
| Three months ended December 31, 2009 | |||||||
| (000's) |
Camps & Catering |
Matting |
Marine Services |
Corporate |
Inter-segment Eliminations |
Total | |
| Revenue | $ 26,530 | $ 5,514 | $ 246 | $ - | $ (439) | $ 31,851 | |
| Expenses | |||||||
| Cost of goods sold | 6,681 | 743 | - | - | (95) | 7,329 | |
| Operating | 17,584 | 2,832 | 444 | - | (310) | 20,550 | |
| General & administrative | 776 | 145 | (16) | 1,603 | - | 2,508 | |
| Foreign exchange loss | 1 | 13 | - | 4 | - | 18 | |
| EBITDAS | $ 1,488 | $ 1,781 | $ (182) | $ (1,607) | $ (34) | $ 1,446 | |
| Stock based compensation | 109 | 39 | 2 | 189 | - | 339 | |
| Depreciation & amortization | 4,279 | 1,355 | 295 | 65 | (10) | 5,984 | |
|
Gain on disposal of property, plant and equipment |
(8) | (22) | - | - | - | (30) | |
| Total operating (loss) earnings | $ (2,892) | $ 409 | $ (479) | $ (1,861) | $ (24) | $ (4,847) | |
| Interest income | (61) | ||||||
| Interest expense on operating lines of credit | 76 | ||||||
| Interest expense on long-term debt | 369 | ||||||
| Loss on equity investments | 29 | ||||||
| Income tax recovery | (1,344) | ||||||
| Net loss | $ (3,916) | ||||||
| Loss per share - basic and diluted | $ (0.04) | ||||||
Annual Financial Results
| Year ended December 31, 2010 | |||||||
| (000's) |
Camp & Catering |
Matting |
Marine Services |
Corporate |
Inter-segment Eliminations |
Total | |
| Revenue | $ 201,354 | $ 37,365 | $ 6,718 | $ - | $ (2,783) | $ 242,654 | |
| Expenses | |||||||
| Cost of goods sold | 44,372 | 10,177 | - | - | (188) | 54,361 | |
| Operating | 105,998 | 15,960 | 4,272 | - | (2,500) | 123,730 | |
| General & administrative | 2,954 | 460 | 7 | 7,832 | - | 11,253 | |
| Foreign exchange (gain) loss | (5) | (42) | 4 | 10 | - | (33) | |
| EBITDAS | $ 48,035 | $ 10,810 | $ 2,435 | $ (7,842) | $ (95) | $ 53,343 | |
| Stock based compensation | 418 | 83 | 10 | 660 | - | 1,171 | |
| Depreciation & amortization | 18,948 | 5,509 | 1,187 | 322 | (77) | 25,889 | |
| Loss on disposal of property, plant and equipment | 252 | 79 | - | 12 | - | 343 | |
| Total operating earnings (loss) | $ 28,417 | $ 5,139 | $ 1,238 | $ (8,836) | $ (18) | $ 25,940 | |
| Interest income | (39) | ||||||
|
Interest expense on operating lines of credit |
331 | ||||||
| Interest expense on long-term debt | 1,250 | ||||||
| Loss on equity investments | 212 | ||||||
| Accretion of notes payable | 314 | ||||||
| Income tax expense | 7,330 | ||||||
| Net earnings | $ 16,542 | ||||||
| Earnings per share - basic and diluted | $ 0.16 | ||||||
| Year ended December 31, 2009 | ||||||||
| (000's) |
Camps & Catering |
Matting |
Marine Services |
Corporate |
Inter-segment Eliminations |
Total | ||
| Revenue | ||||||||
| Revenue from operations | $ 118,463 | $ 19,798 | $ 5,102 | $ - | $ (1,524) | $ 141,839 | ||
| Cancellation fee | 8,000 | - | - | - | - | 8,000 | ||
| Total revenue | $ 126,463 | $ 19,798 | $ 5,102 | $ - | $ (1,524) | $ 149,839 | ||
| Expenses | ||||||||
| Cost of goods sold | 22,474 | 3,264 | - | - | (104) | 25,634 | ||
| Operating | 68,053 | 10,011 | 3,638 | - | (1,386) | 80,316 | ||
| General & administrative | 2,565 | 479 | 4 | 6,251 | - | 9,299 | ||
| Foreign exchange loss (gain) | 19 | 190 | (3) | (143) | - | 63 | ||
| EBITDAS | ||||||||
| EBITDAS from operations | $ 25,352 | $ 5,854 | $ 1,463 | $ (6,108) | (34) | $ 26,527 | ||
| Cancellation fee | 8,000 | - | - | - | - | 8,000 | ||
| Total EBITDAS | $ 33,352 | $ 5,854 | $ 1,463 | $ (6,108) | (34) | $ 34,527 | ||
| Stock based compensation | 335 | 99 | 9 | 78 | - | 521 | ||
| Depreciation & amortization | 18,775 | 5,821 | 1,165 | 240 | (84) | 25,917 | ||
| Gain on disposal of property, plant and equipment | (1,398) | (9) | - | - | - | (1,407) | ||
| Earnings (loss) from operations | ||||||||
| Operating earnings (loss) | $ 7,640 | $ (57) | $ 289 | $ (6,426) | $ 50 | $ 1,496 | ||
| Cancellation fee | 8,000 | - | - | - | - | 8,000 | ||
| Total operating earnings (loss) | $ 15,640 | $ (57) | $ 289 | $ (6,426) | $ 50 | $ 9,496 | ||
| Interest income | (85) | |||||||
| Interest expense on operating lines of credit | 270 | |||||||
| Interest expense on long-term debt | 1,350 | |||||||
| Loss on equity investments | 171 | |||||||
| Income tax expense | 2,227 | |||||||
| Net earnings | $ 5,563 | |||||||
| Earnings per share - basic and diluted including cancellation fee | $ 0.05 | |||||||
| Earnings per share - basic and diluted excluding cancellation fee | $ 0.00 | |||||||
Camps & Catering
Camps & 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 December 31 |
Year ended December 31 |
||||||||
| (000's except bed rental days and catering only days) | 2010 | 2009 | 2010 | 2009 | |||||
| Camp rental and catering revenue | $ 33,117 | $ 12,765 | $ 105,785 | $ 65,807 | |||||
| Camp and space sales revenue | 23,265 | 8,277 | 59,093 | 31,669 | |||||
| Rental revenue | 956 | 1,149 | 4,089 | 4,006 | |||||
| Service revenue | 13,360 | 4,339 | 32,387 | 16,981 | |||||
| Revenue from operations | $ 70,698 | $ 26,530 | $ 201,354 | $ 118,463 | |||||
| Cancellation fee | - | - | - | 8,000 | |||||
| Total revenue | $ 70,698 | $ 26,530 | $ 201,354 | $ 126,463 | |||||
| EBITDAS | |||||||||
| Operations | $ 16,746 | $ 1,488 | $ 48,035 | $ 25,352 | |||||
| Cancellation fee | - | - | - | 8,000 | |||||
| Total EBITDAS | $ 16,746 | $ 1,488 | $ 48,035 | $ 33,352 | |||||
| Operating earnings | |||||||||
| Operations | $ 11,753 | $ (2,892) | $ 28,417 | $ 7,640 | |||||
| Cancellation fee | - | - | - | 8,000 | |||||
| Total operating earnings (loss) | $ 11,753 | $ (2,892) | $ 28,417 | $ 15,640 | |||||
| Bed rental days (1) | 145,119 | 67,026 | 499,762 | 324,925 | |||||
| Catering only days (2) | 59,233 | 19,180 | 168,585 | 119,228 | |||||
(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.
REVENUE
Revenue from operations in the Camps & Catering segment was $70.7 million for the three months ended December 31, 2010 compared to $26.5 million for the same period in 2009, an increase of $44.2 million or 167%. EBITDAS from operations for the three months ended December 31, 2010 was $16.7 million or 24% of revenue as compared to $1.5 million or 6% of revenue in the same period in 2009. The increase in revenue and EBITDAS over the prior year was driven by the overall improvement in economic conditions seen throughout 2010, primarily in the strengthening of oil and mineral pricing which drove a significant increase in demand for Horizon's Camps & Catering products and services.
Camp rental and catering revenue
Revenue from camp rental and catering operations was $33.1 million for the three months ended December 31, 2010 compared to $12.8 million for the same period in 2009, an increase of $20.3 million or 159%. Revenue is derived from the following main business areas: (a) the BlackSand facilities which include the Executive Lodge and craft camp facilities north of Fort McMurray, Alberta and (b) the Conventional camp rental and catering operations which include open camps, drill camps, catering only work, and ancillary equipment rentals.
| (a) | BlackSand |
| Revenue from the BlackSand facilities for the three months ended December 31, 2010 was $19.1 million as compared to $7.1 million for the same period in 2009, an increase of $12.0 million or 169%. | |
| Higher volumes accounted for the majority of the revenue increase, with 113,239 bed rental days in the three months ended December 31, 2010 as compared to 46,612 bed rental days for the same period in 2009. The increase in volume was the result of an increased level of activity by oil sands operators as compared to the same period of 2009. Activity in the Fort McMurray, Alberta oil sands region was focused on increasing production levels at existing operations and on operational maintenance work, while in the same period of 2009 many oil sands operators had reduced activity waiting for signs of a more stable economy. | |
| Utilization for the three months ended December 31, 2010 increased to 95% as compared to 48% for the same period in 2009, on an increased number of available beds. Throughout the second quarter of 2010, 144 newly manufactured beds were added to the BlackSand Executive Lodge and 191 beds were redeployed from the existing conventional camp fleet and added to the Blacksand craft camp. Total beds available in the fourth quarter of 2010 were 1,300 as compared to 965 for the same period in 2009. | |
| Revenue per bed rental day for the three months ended December 31, 2010 was $169 compared to $152 for the same period in 2009, the result of a rate increase on a large long-term contract which adjusted the rate for inflation and additional costs associated with operating in a unionized environment. Additionally, the fourth quarter of 2010 included several short-term contracts which typically had significantly higher revenue per bed day due to their short-term nature. | |
| (b) | Conventional camp rental and catering |
| Revenue from open camp operations was $3.8 million for the three months ended December 31, 2010 as compared to $2.1 million for the same period in 2009, an increase of $1.7 million or 81%. The increase in revenue was driven by higher volumes with 23,644 bed days for the three months ended December 31, 2010 as compared to 12,354 bed rental days for the same period in 2009 reflecting an increase in demand driven by improved economic conditions and strengthening oil and mineral pricing. Offsetting increased volumes was a decrease in the revenue per bed rental day which was $161 for the three months ended December 31, 2010 as compared to $170 for the same period in 2009. The rate decrease was mainly a result of fewer opportunities to sell additional services in these operations. | |
| Revenue from drill camp operations remained unchanged at $1.3 million for the three months ended December 31, 2010 and 2009. Volumes were consistent, with utilization improving to 8% for the three months ended December 31, 2010 as compared to 7% in the same period of 2009 as a result of an ongoing review and rationalization of the drill camp fleet. The Canadian Association of Oilwell Drilling Contractors (CAODC) statistics indicate drilling activity in western Canada was higher in the fourth quarter of 2010 with approximately 50% of available rigs utilized as compared to 33% in the same period of 2009. However, this higher activity did not translate into increased demand for short-term drill camps as a significant portion of the drilling activity was focused on longer-term steam assisted gravity drainage (SAGD) drilling projects which generally use larger more permanent camps. Geographically, exploratory drilling is being done closer to urban centres and service companies tend to use the local motels and hotels to house crews. Revenue on a per bed rental day basis remained relatively unchanged at $155 per bed rental day for the three months ended December 31, 2010 as compared to $156 per bed day for the same period of 2009. The static rate was due to the continuing soft demand for drill camps. | |
| Revenue from ancillary equipment rentals was $1.8 million for the three months ended December 31, 2010 as compared to $0.3 million for the same period in 2009. This increase was due to two large equipment rental contracts in British Columbia in the mining and forestry sector. | |
| Revenue from the provision of catering and housekeeping only services, with no associated bed rentals, for the three months ended December 31, 2010 was $7.1 million as compared to $2.0 million in the same period of 2009, an increase of $5.1 million or 255%. The increase was due to higher volumes, with catering only days of 59,233 in the three months ended December 31, 2010 as compared to 19,180 for the same period in 2009. The majority of the increased volume was from a customer-owned camp at a gold mine under construction in the Northwest Territories. The mine project has completed its mobilization and ramp-up phase and the revenue is expected to continue at the current level well into 2011. The remainder of the increase in volume came from catering and housekeeping only on customer-owned drill camps as a result of adding a significant new client. |
Camp and space sales revenue
Camp and space sales revenue for the three months ended December 31, 2010 was $23.3 million as compared to $8.3 million for the same period in 2009, an increase of $15.0 million or 181%.
Of the $23.3 million in revenue, the majority is attributable to two large manufacturing projects which were in full production throughout the three months ended December 31, 2010. In contrast, revenue for the three months ended December 31, 2009 was derived from several smaller projects that comprised the $8.3 million in the same period of 2009. Our manufacturing plants ramped up through the third quarter of 2010 to full production with a production staff of 285 at December 31, 2010 as compared to 123 in the same period of 2009. This production level is expected to continue well into 2011 on the strength of ongoing and expected projects.
Rental revenue
Space rental revenue for the three months ended December 31, 2010 was $1.0 million as compared to $1.1 million in the same period 2009. Rental fleet utilization was 80% for the three months ended December 31, 2010 as compared to 73% in the same period 2009. The increase in utilization came from the changing mix of the rental fleet as market demand changes. Revenue remained static with the increased volumes offset by competitive pricing conditions.
Service revenue
Service work is comprised of camp mobilization, demobilization, transportation and installation work. Revenue from service work for the three months ended December 31, 2010 was $13.4 million as compared to $4.3 million in the same period of 2009, an increase of $9.1 million or 212%. The majority of the increase came from the transport and install associated with two large manufacturing projects and the demobilization and installation work on customer-owned camps in British Columbia and the Northwest Territories. The remainder of the increase in service revenue is related to the activity in the other operations.
EBITDAS
EBITDAS from the Camps & Catering operations for the three months ended December 31, 2010 was $16.7 million or 24% of revenue as compared to $1.5 million or 6% of revenue for the same period of 2009. In the fourth quarter of 2009, one-time costs of $1.9 million were incurred to remediate moisture accumulation issues at the BlackSand Lodge. On an adjusted basis, EBITDAS in the three months ended December 31, 2009 would have been $3.4 million or 13% of revenue.
The increase in EBITDAS as a percentage of revenue came primarily from the increased activity in the fourth quarter of 2010 as compared to the same period of 2009, mainly from Camp Rental and Catering operations. The cost structure in these operations is such that fixed costs are a significant component of total direct costs. As a result, costs are not linear with revenue and with increased utilization economies of scale become more pronounced.
The camp and space sales and service operations had higher EBITDAS as a percentage of revenue in the three months ended December 31, 2010 as compared to the same period of 2009. The increase indicates a return to more historic margins in both operations as the work executed in the fourth quarter of 2009 was bid at significantly lower margins, reflecting the slower economic conditions at that time.
Matting
Matting revenue is comprised of mat rental revenue, mat sales revenue, installation, transportation, service, and other revenue as follows:
|
Three months ended December 31 |
Year ended December 31 |
|||||||
| (000's except mat rental days, mats in fleet and mat sold) | 2010 | 2009 | 2010 | 2009 | ||||
| Mat rental revenue | $ 1,530 | $ 1,817 | $ 6,391 | $ 5,535 | ||||
| Mat sales revenue | 7,241 | 875 | 13,877 | 4,215 | ||||
| Installation, transportation, service and other revenue | 5,120 | 2,822 | 17,097 | 10,048 | ||||
| Total revenue | $ 13,891 | $ 5,514 | $ 37,365 | $ 19,798 | ||||
| EBITDAS | $ 3,799 | $ 1,781 | $ 10,810 | $ 5,854 | ||||
| Operating earnings (loss) | $ 2,350 | $ 409 | $ 5,139 | $ (57) | ||||
| Mat rental days | 520,090 | 856,236 | 2,887,624 | 2,349,833 | ||||
| Average mats in rental fleet | 11,735 | 13,826 | 12,771 | 13,289 | ||||
| Mats sold | ||||||||
| New mats | 6,874 | 1,150 | 11,851 | 3,294 | ||||
| Used mats | 5,256 | 305 | 11,680 | 4,133 | ||||
| Total mats sold | 12,130 | 1,455 | 23,531 | 7,427 | ||||
REVENUE
Revenue from the Matting segment for the three months ended December 31, 2010 was $13.9 million as compared to $5.5 million for the same period of 2009, an increase of $8.4 million or 153%. EBITDAS from operations for the three months ended December 31, 2010 was $3.8 million or 27% of revenue compared to $1.8 million or 33% of revenue in the same period in 2009.
Mat rental revenue for the three months ended December 31, 2010 was $1.5 million as compared to $1.8 million in the same period of 2009, a decrease of $0.3 million or 17%. Mat rental days were 520,090 for the three months ended December 31, 2010 as compared to 856,236 in the same period 2009, a decrease of 39%. The fourth quarter 2010 rental days were impacted by the conversion of a long-term mat rental of 3,100 mats into a sale by a customer who decided to purchase the mats at the beginning of quarter. Revenue per mat rental day was $2.94 in the three months ended December 31, 2010 as compared to $2.12 in the same period in the prior year. This increase was driven by stronger traditional oak mat rental rates as a result of increased drilling and infrastructure activity in the oil sands sector.
Mat sales revenue for the three months ended December 31, 2010 was $7.2 million as compared to $0.9 million for the same period in 2009, an increase of $6.3 million or 700%. The total number of mats sold increased by 10,675 as compared to the same period in 2009, as overall customer demand increased throughout 2010. Sales volumes were driven by increased activity in the Fort McMurray, Alberta oil sands region as work on SAGD drilling pads and facilities construction gained momentum. The longer-term and static nature of SAGD drilling pad programs requires continuous mat usage. As a result, customers' economics of buying mats are more compelling than renting for these types of projects. Revenue per mat sold during the fourth quarter of 2010 was $597, relatively unchanged from $601 in the fourth quarter of 2009.
Installation, transportation, service and other revenues for the three months ended December 31, 2010 were $5.1 million as compared to $2.8 million for the same period in 2009, an increase of $2.3 million or 82%. Service revenue is driven primarily from the mat rental and mat sale businesses, however the fourth quarter of 2010 saw a significant mat rental converted into a used mat sale. The mats were already on the customers site and placed therefore the sale did not have the associated service revenue.
EBITDAS
EBITDAS for the three months ended December 31, 2010 was $3.8 million or 27% of revenue as compared to $1.8 million or 33% of revenue for the same period in 2009. The decrease in EBITDAS as a percentage of revenue is mainly attributable to the revenue mix, with mat sales revenue being a significantly higher portion of revenues in the three months ended December 31, 2010 as compared to the same period of 2009. Generally, the mat sales operations contribute a lower EBITDAS as compared to mat rental operations due to the nature of the revenue streams.
Marine Services
Marine Services revenue is comprised of tug and barge revenue, barge camp revenue, and rental and other revenue as follows:
|
Three months ended December 31 |
Year ended December 31 |
||||||
| (000's) | 2010 | 2009 | 2010 | 2009 | |||
| Tug revenue | $ 39 | $ 1 | $ 2,514 | $ 547 | |||
| Barge revenue | 2 | - | 153 | 191 | |||
| Barge camp revenue | 839 | 1 | 2,532 | 3,034 | |||
| Rental and other revenue | 255 | 244 | 1,519 | 1,330 | |||
| Total revenue | $ 1,135 | $ 246 | $ 6,718 | $ 5,102 | |||
| EBITDAS | $ 447 | $ (182) | $ 2,435 | $ 1,463 | |||
| Operating earnings (loss) | $ 147 | $ (479) | $ 1,238 | $ 289 | |||
REVENUE
Revenue from the Marine Services segment for the three months ended December 31, 2010 was $1.1 million as compared to $0.2 million in the same period in 2009, an increase of $0.9 million or 450%. The increase was due to barge camp revenues related to the ongoing provision of two barge camps and associated service and support personnel at a customer's mining project in Nunavut.
EBITDAS
EBITDAS for the three months ended December 31, 2010 was $0.4 million or 36% of revenue as compared to a loss of $0.2 million for the same period in 2009 due to minimal revenue.
Corporate
Corporate costs are the general and administrative 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 December 31, 2010 were $2.1 million as compared to $1.6 million in the same period in 2009. This increase of $0.5 million is related to additional staff and higher incentive compensation estimates based on the increased level of activity in 2010.
Consolidated Balance Sheets
December 31, 2010 and 2009 (Unaudited)
| (000's) | December 2010 | December 2009 | |||
| Assets | |||||
| Current assets: | |||||
| Cash & cash equivalents | $ | - | $ | 3,724 | |
| Accounts receivable | 52,003 | 23,218 | |||
| Inventory | 13,726 | 11,834 | |||
| Prepaid expenses | 8,953 | 1,830 | |||
| Income taxes receivable | - | 990 | |||
| 74,682 | 41,596 | ||||
| Other assets | 2,934 | 3,061 | |||
| Property, plant and equipment, net | 172,151 | 156,426 | |||
| Intangible assets, net | 26,892 | 35,320 | |||
| Goodwill | 2,136 | 2,136 | |||
| Long-term investments | 2,251 | 2,463 | |||
| $ | 281,046 | $ | 241,002 | ||
| Liabilities and Shareholders' Equity | |||||
| Current liabilities: | |||||
| Bank indebtedness | $ | 834 | $ | - | |
| Operating lines of credit | 10,200 | 6,900 | |||
| Accounts payable and accrued liabilities | 25,377 | 12,391 | |||
| Deferred revenue | 7,206 | 2,068 | |||
| Income taxes payable | 1,344 | - | |||
| Current portion of long-term debt | 1,573 | 1,939 | |||
| 46,534 | 23,298 | ||||
| Long-term debt | 30,363 | 35,863 | |||
| Future income tax liability | 17,282 | 12,687 | |||
| 94,179 | 71,848 | ||||
| Shareholders' equity: | |||||
| Share capital | 245,353 | 245,353 | |||
| Contributed surplus | 12,983 | 11,812 | |||
| Deficit | (71,469) | (88,011) | |||
| 186,867 | 169,154 | ||||
| $ | 281,046 | $ | 241,002 | ||
Consolidated Statements of Operations and Deficit
For the year ended December 31, 2010 and 2009 (Unaudited)
| (000's except per share amounts) | 2010 | 2009 | |||
| Revenue | $ | 242,654 | $ | 149,839 | |
| Expenses: | |||||
| Cost of goods sold | 54,361 | 25,634 | |||
| Operating | 123,730 | 80,316 | |||
| General and administrative | 11,253 | 9,299 | |||
| Stock based compensation | 1,171 | 521 | |||
| Depreciation of property, plant and equipment | 17,356 | 17,048 | |||
| Amortization of intangible assets | 8,533 | 8,869 | |||
| Loss (gain) on disposal of property, plant and equipment | 343 | (1,407) | |||
| Foreign exchange (gain) loss | (33) | 63 | |||
| 216,714 | 140,343 | ||||
| Operating earnings | 25,940 | 9,496 | |||
| Interest income | (39) | (85) | |||
| Interest expense on operating lines of credit | 331 | 270 | |||
| Interest expense on long-term debt | 1,250 | 1,350 | |||
| Accretion expense | 314 | - | |||
| Loss on equity investments | 212 | 171 | |||
| Earnings before income taxes | 23,872 | 7,790 | |||
| Income taxes: | |||||
| Current income tax | 2,735 | 924 | |||
| Future income tax | 4,595 | 1,303 | |||
| 7,330 | 2,227 | ||||
| Net earnings and comprehensive income | 16,542 | 5,563 | |||
| Deficit, beginning of year | (88,011) | (93,574) | |||
| Deficit, end of year | $ | (71,469) | $ | (88,011) | |
| Earnings per share: | |||||
| Basic | $ | 0.16 | $ | 0.05 | |
| Diluted | $ | 0.16 | $ | 0.05 | |
Consolidated Statements of Cash Flows
For the year ended December 31, 2010 and 2009 (Unaudited)
| (000's) | December 2010 | December 2009 | |||
| Cash provided by (used in): | |||||
| Operating activities: | |||||
| Net earnings | $ | 16,542 | $ | 5,563 | |
| Items not involving cash: | |||||
| Depreciation of property, plant and equipment | 17,356 | 17,048 | |||
| Amortization of intangible assets | 8,533 | 8,869 | |||
| Future income tax | 4,595 | 1,303 | |||
| Stock based compensation | 1,171 | 521 | |||
| Amortization of other assets | 127 | - | |||
| Accretion expense | 314 | - | |||
| Loss on equity investments | 212 | 171 | |||
| Gain on sale of property, plant and equipment | (2,635) | (3,087) | |||
| 46,215 | 30,388 | ||||
| Changes in non-cash working capital items | (2,372) | 10,731 | |||
| 43,843 | 41,119 | ||||
| Investing activities: | |||||
| Purchase of other assets | - | (3,061) | |||
| Purchase of property, plant and equipment | (41,561) | (24,521) | |||
| Purchase of intangibles | (105) | (864) | |||
| Proceeds on sale of property, plant and equipment | 11,115 | 10,574 | |||
| Business acquisition | - | (818) | |||
| (30,551) | (18,690) | ||||
| Changes in non-cash working capital items | (15,227) | 1,900 | |||
| (45,778) | (16,790) | ||||
| Financing activities: | |||||
| Proceeds from (repayment of) bank indebtedness | 834 | (1,776) | |||
| Share purchase costs | - | (57) | |||
| Repurchase of shares | - | (6,368) | |||
| Proceeds from (repayment of) operating lines of credit | 3,300 | (1,934) | |||
| Proceeds from long-term debt | 58,543 | 23,101 | |||
| Repayment of long-term debt | (64,723) | (32,916) | |||
| (2,046) | (19,950) | ||||
| Changes in non-cash working capital items | 257 | (655) | |||
| (1,789) | (20,605) | ||||
| Increase (decrease) in cash position | (3,724) | 3,724 | |||
| Cash, beginning of year | 3,724 | - | |||
| Cash, end of year | $ | - | $ | 3,724 | |
| Supplementary information: | |||||
| Income taxes paid | $ | 401 | $ | 958 | |
| Interest received | 39 | 85 | |||
| Interest paid | 1,578 | 1,784 | |||
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 Dividend Payment the statements "The intention is to continue to declare dividends on a quarterly basis at the rate of $0.04 per share" and under the heading Outlook "Demand for our services is expected to grow in conjunction with the expansion of remote resource development projects" under the heading Conventional camp rental and catering "The mine project has completed its mobilization and ramp-up phase and the revenue is expected to continue at the current level well into 2011" and under the Camp and space sales revenue heading "This production level is expected to continue well into 2011".
All of these foregoing statements are based on the assumption that the high levels of activity and usage of Horizon's assets and services experienced in 2010 will continue into 2011. There is a risk that such activity could decrease back to levels experienced prior to 2010, and, as such Horizon's revenue and profit expectations could be negatively affected.
All of these foregoing statements are based on the assumption that the high levels of activity and usage of Horizon's assets and services experienced in 2010 will continue into 2011. There is a risk that such activity could decrease back to levels experienced prior to 2010, and, as such Horizon's revenue and profit expectations could be negatively affected.
Corporate Information
Additional 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 Canadian GAAP and the reporting currency is in Canadian dollars.
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