Pason Systems Inc.TSX: PSI

Pason Reports Fourth Quarter & Year End 2010 Results

· Issued by Pason Systems Inc. via CNW
Watch Pason Systems explain itPason Systems Inc. (PSI) Q2 2026 Earnings Call · Replay · Aug 12

Feb. 23, 2011 (Canada NewsWire Group) --

Stock Exchange: TSX
Symbol: PSI

CALGARY, Feb. 23 /CNW/ - Pason Systems Inc. ("Pason" or "the Company") today announced its 2010 fourth quarter and year end results.

PERFORMANCE DATA

                              Three Months Ended
December 31, 		Years Ended
December 31,
                              2010 2009 Change 2010 2009 Change
(000s, except per share data)                             ($) ($) (%) ($) ($) (%)
Revenue                             73,494 41,013 79 249,562 145,861 71
EBITDA (1)                             36,016 13,620 164 117,524 46,651 152
      As a % of revenue                             49.0 33.2 48 47.1 32.0 47
      Per share - basic                             0.44 0.17 158 1.44 0.57 152
      Per share - diluted                             0.44 0.17 158 1.44 0.57 152
Funds flow from operations (1)                             27,899 12,238 128 93,973 41,354 127
      Per share - basic                             0.34 0.15 127 1.15 0.51 125
      Per share - diluted                             0.34 0.15 127 1.15 0.51 125
Earnings (loss)                             8,233 2,480 232 35,532 (5,510) --
      Per share - basic                             0.10 0.03 232 0.44 (0.07) --
      Per share - diluted                             0.10 0.03 232 0.44 (0.07) --
Capital expenditures                             26,214 9,148 187 50,164 21,493 133
Working capital                             127,567 119,824 6 127,567 119,824 6
Total assets                             424,172 373,097 14 424,172 373,097 14
Total long-term debt                             -- -- -- -- -- --
Shareholders' equity                             312,367 308,335 1 312,367 308,335 1
Cash dividends declared                             0.17 0.14 21 0.33 0.26 27
Common shares outstanding (#)                                        
      Basic                             81,620 81,487 -- 81,525 81,476 --
      Diluted                             82,007 81,487 -- 81,525 81,476 --
Shares outstanding end of period (#)                             81,714 81,487 -- 81,714 81,487 --
(1)  EBITDA is defined as earnings before interest expense, income taxes, stock-based compensation expense and depreciation and amortization expense. Funds flow from operations is defined as earnings adjusted for depreciation and amortization expense, stock-based compensation expense, future income taxes and other non-cash items impacting operations as presented in the Consolidated Statements of Cash Flows. These definitions are not recognized measures under Canadian generally accepted accounting principles, and accordingly, may not be comparable to measures used by other companies.

SUMMARY DATA

  Three Months Ended
December 31, 		Years Ended
December 31,
  2010 2009 Change 2010 2009 Change
(000s, except per share data) ($) ($) (%) ($) ($) (%)
Revenue            
     Drilling recorder rentals 30,024 14,519 107 99,857 56,716 76
     Pit volume totalizer rentals 13,532 7,151 89 45,610 27,632 65
     Communications rentals 9,547 5,260 82 31,201 15,954 96
     Automatic driller rentals 8,761 4,486 95 28,567 14,966 91
     Total gas rentals 4,846 2,784 74 16,601 10,110 64
     Hazardous gas alarm rentals 789 578 37 2,945 2,044 44
     Mobilization income 1,956 1,589 23 8,270 4,660 77
     Other income 4,039 4,646 (13) 16,511 13,779 20
     Total revenue 73,494 41,013 79 249,562 145,861 71
Expenses            
     Rental services 26,059 20,154 29 96,684 73,143 32
     Manufacturing and distribution 534 59 805 1,450 431 236
     Research and development 3,561 3,736 (5) 16,472 13,140 25
     Corporate services 2,945 2,190 34 9,309 6,722 38
     Local administration 942 1,442 (35) 6,076 4,889 24
     Stock-based compensation 6,685 494 1,253 12,175 5,684 114
     Depreciation and amortization 18,424 13,713 34 55,764 55,842 --
     Total expenses 59,150 41,788 42 197,930 159,851 24
Foreign exchange (loss) gain (3,437) 188 -- (2,047) (886) 131
Earnings (loss) 8,233 2,480 232 35,532 (5,510) --
     Per share - basic 0.10 0.03 232 0.44 (0.07) --
Funds flow from operations (1) 27,899 12,238 128 93,973 41,354 127
     Per share - basic 0.34 0.15 127 1.15 0.51 125
(1) For the purposes of funds flow per share calculations, funds flow from operations is defined as earnings adjusted for depreciation and amortization expense, stock-based compensation expense, future income taxes and other non-cash items impacting operations as presented in the Consolidated Statements of Cash Flows.  This definition is not a recognized measure under Canadian generally accepted accounting principles, and accordingly, may not be comparable to measures used by other companies.

QUARTERLY REVIEW

Current Quarter versus Q4 2009

The Company's fourth quarter revenue rose 79% to $73.5 million, funds flow from operations was up 128% to $27.9 million and earnings increased 232% compared to the last quarter of 2009.  Earnings per share was $0.10 versus $0.03 in 2009.  This improvement was primarily driven by a turnaround in the U.S., where segment revenue jumped 125% (up 173% when measured in USD) and earnings reversed from a loss of $2.6 million in the prior year to a profit of $18.3 million in 2010.  The Company was aided by greater industry drilling days, that were up 56% over the prior year's fourth quarter. Pricing and increased product deployment gains also increased U.S. revenue per industry drilling day for the quarter to $277 compared to $184 in the prior year.

Canadian segment profit and revenue was up in line with the year over year improvement in industry drilling days. Revenue increased 58% to $27.5 million and segment profit rose by 63% to $12.4 million.  Revenue per industry day for the quarter was $748 and up from the $695 recorded last year due to product price increases in the fourth quarter.  Overall fourth quarter results were weighed down by disappointing International results.  The International segment turned in a $2.7 million loss compared to a profit of $0.7 million in the prior year.

  • Historically, Mexico has been our most profitable International market but drilling activity collapsed in that country during the second half reducing our results for the quarter to a loss of $0.5 million versus a profit of $0.3 million in 2009.
  • Australia was hit by record flooding, which restricted drilling activity and movement. This resulted in a loss of $0.3 million compared to a profit of $0.2 million in 2009.
  • Our International segment includes the offshore portion of the business acquired from Petron which was significantly affected by the reduction in Gulf of Mexico drilling activity caused by the BP oil spill. Additionally, the refurbishments and interest in sold systems on offshore and eastern hemisphere land rigs declined markedly.  This contributed to a $2.3 million loss in the business unit we have been calling Pason Offshore.

Current Quarter versus Q3 2010

Pason continued its sequential improvement in activity over the prior quarter with small fourth quarter gains in revenue (+7%), EBITDA (+4%) and funds flow from operations (+4%).  This was achieved from industry drilling days that were up 20% sequentially in Canada and up 4% in the U.S.

However, net earnings declined to $8.2 million and $0.10 per share compared to $12.5 million and $0.16 per share in the third quarter. This decline resulted from the following factors:

  • Assets related to the 2009 purchase of Petron Industries were written down causing a $3.3 million non-cash after-tax charge, which negatively impacted earnings per share by $0.04.  Over half of this write-down consisted of a reversal of the asset value increase that was booked at the time of purchase to partially account for the difference between the purchase consideration and the net book value of Petron assets.  While Pason has clearly achieved value with the retained Petron customers and employees, the decision to use Pason equipment on all U.S. rigs required a reduction of the asset value.
  • Stock-based compensation expense increased by $3.7 million compared to the third quarter of 2010 as a result of an increase in our share price.
  • As required by Canadian generally accepted accounting principles, gains and losses from foreign exchange changes relating to monetary assets and liabilities must be taken into earnings in the period in which they occurred.  The strengthening Canadian dollar against the U.S dollar resulted in an after-tax foreign exchange loss of $2.1 million, impacting earnings by $0.03 a share.  The equivalent amount in the third quarter of 2010 was effectively nil.

FOURTH QUARTER CONFERENCE CALL

A conference call to review the 2010 fourth quarter and year-end results has been scheduled for 9:00 a.m. (Calgary time) on Thursday, February 24, 2011.  The dial-in # is 1-888-231-8191, Conference ID 37324043 (replay # 1-800-642-1687 Password 37324043).

Shareholders are also invited to attend the Company's Annual General Meeting on Monday, May 9, 2011 at 3.30 p.m. (Calgary time) in the offices of Pason Systems Inc., 6120 Third Street S.E., Calgary, Alberta.

For additional information, the Company's 2010 Management Discussion and Analysis ("MD&A") and Audited Consolidated Financial Statements have been posted on SEDAR.

Pason is a leading international provider of specialized rental and sold oilfield instrumentation systems for use on land and offshore rigs. Our tightly integrated package of products and services, including data acquisition, wellsite reporting software, remote communications and Internet information management tools, maximizes rig uptime and minimizes operating costs.

Pason's common shares trade on the Toronto Stock Exchange under the symbol PSI. Visit us at www.pason.com to learn about what's new at Pason.

Certain information regarding the Company contained herein may constitute forward-looking statements under applicable securities laws.  Such statements are subject to known or unknown risks and uncertainties that may cause actual results to differ materially from those anticipated or implied in the forward-looking statements.

 

CONSOLIDATED BALANCE SHEETS

                                                                         
December 31,                                                         2010             2009
(000s)                                                         ($)             ($)
ASSETS                                                                        
Current                                                                        
    Cash                                                         110,400             109,849
    Accounts receivable                                                         79,880             39,102
    Prepaid expenses                                                         1,489             1,416
    Income taxes recoverable                                                         --             2,928
    Future income tax assets                                                         15,551             9,037
                                                          207,320             162,332
Capital assets                                                         162,797             170,678
Intangible assets                                                         29,397             19,557
Future income tax asset                                                         16,382             14,558
Goodwill                                                         8,276             5,972
                                                          424,172             373,097
LIABILITIES                                                                        
Current                                                                        
     Accounts payable and accrued liabilities                                                         51,398             29,780
     Income taxes payable                                                         9,021             --
     Current portion of stock-based compensation liability                                                         5,444             1,320
     Dividend payable                                                         13,890             11,408
                                                          79,753             42,508
Stock-based compensation liability                                                         4,878             906
Future income tax liabilities                                                         27,174             21,348
                                                          111,805             64,762
SHAREHOLDERS' EQUITY                                                                        
Share capital                                                         75,040             71,864
Contributed surplus                                                         12,331             14,029
Accumulated other comprehensive loss                                                         (28,699)             (22,651)
Retained earnings                                                         253,695             245,093
                                                          312,367             308,335
                                                          424,172             373,097
                                                                         

CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS

                   
                                    Three Months Ended
                    December 31, 		                 Years Ended
                  December 31,
                2010 2009 2010 2009
(000's,  except per share data)               ($) ($) ($) ($)
Revenue                      
      Equipment rentals and other               73,494 41,013 249,562 145,861
                       
Expenses                      
      Rental services               26,059 20,154 96,684 73,143
      Manufacturing and distribution               534 59 1,450 431
      Research and development               3,561 3,736 16,472 13,140
      Corporate services               2,945 2,190 9,309 6,722
      Local administration               942 1,442 6,076 4,889
      Stock-based compensation               6,685 494 12,175 5,684
      Depreciation and amortization               18,424 13,713 55,764 55,842
                59,150 41,788 197,930 159,851
Earnings (loss) before the undernoted items               14,344 (775) 51,632 (13,990)
Foreign exchange (loss) gain               (3,437) 188 (2,047) (886)
Earnings (loss) before income taxes               10,907 (587) 49,585 (14,876)
Income taxes                      
      Current               8,457 448 19,824 1,796
      Future               (5,783) (3,515) (5,771) (11,162)
                2,674 (3,067) 14,053 (9,366)
Earnings (loss)               8,233 2,480 35,532 (5,510)
Retained earnings, beginning of period               259,352 254,021 245,093 271,788
Dividends               (13,890) (11,408) (26,930) (21,185)
Retained earnings, end of period                253,695 245,093 253,695 245,093
Earnings (loss) per share                      
      Basic               0.10 0.03 0.44 (0.07)
      Diluted                     0.10 0.03 0.44 (0.07)
                       

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

                                                       
                                                          Three Months Ended       Years Ended
                                                          December 31,       December 31,
                                                    2010 2009 2010 2009
(000s)                                                   ($) ($) ($) ($)
Earnings (loss)                                                   8,233 2,480 35,532 (5,510)
Other comprehensive loss, net of tax                                                          
   Foreign currency translation adjustment                                                   (3,148) (4,414) (6,048) (25,101)
Total comprehensive income (loss)                                                   5,085 (1,934) 29,484 (30,611)
                                                           

CONSOLIDATED STATEMENTS OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

       
          Three Months Ended       Years Ended
          December 31,       December 31,
    2010 2009 2010 2009
(000s)   ($) ($) ($) ($)
Accumulated other comprehensive (loss) income, beginning of period   (25,551) (18,237) (22,651) 2,450
Other comprehensive loss, net of tax          
    Foreign currency translation adjustment   (3,148) (4,414) (6,048) (25,101)
Accumulated other comprehensive loss, end of period   (28,699) (22,651) (28,699) (22,651)
           

CONSOLIDATED STATEMENTS OF CASH FLOWS

                   
                Three Months Ended
December 31, 		Years Ended
December 31,
                      2010       2009 2010 2009
(000s)                     ($)       ($) ($) ($)
Cash flows related to the following activities:                    
Operating                      
    Earnings (loss)               8,233 2,480 35,532 (5,510)
    Adjustments for non-cash items:                      
    Depreciation and amortization               18,424 13,713 55,764 55,842
    Stock-based compensation               5,131 (96) 8,051 1,894
    Future income taxes               (5,783) (3,515) (5,771) (11,162)
    Unrealized foreign exchange               1,894 (344) 397 290
                       27,899 12,238 93,973 41,354
    Changes in non-cash working capital               (4,375) (6,369) (14,618) 43,868
    Cash flow from operating activities               23,524 5,869 79,355 85,222
Financing                      
     Issue of common shares under the stock option plan               2,538 8 2,736 274
     Purchase of stock options               (1,849) -- (1,854) (240)
     Payment of dividends               -- -- (24,448) (19,554)
     Repayment of debt               -- (4,684) -- (4,684)
                689 (4,676) (23,566) (24,204)
Investing                      
      Additions to capital assets               (23,924) (8,619) (45,777) (18,318)
      Deferred development costs, net of investment tax credits received               (2,290) (529) (4,387) (3,175)
      Proceeds on disposal of capital assets               (22) (6) 72 528
      Business acquisitions, net of cash acquired                         (6,115) (20,934) (8,944) (20,934)
      Changes in non-cash working capital                       7,266 1,179 5,973 (5,116)
                (25,085) (28,909) (53,063) (47,015)
Effect of exchange rate changes on cash               (1,540) 2,050 (2,175) (4,764)
Net (decrease) increase in cash               (2,412) (25,666) 551 9,239
Cash, beginning of period               112,812 135,515 109,849 100,610
Cash, end of period               110,400 109,849 110,400 109,849
Represented by:                      
      Cash               96,510 98,441 96,510 98,441
      Cash held in trust               13,890 11,408 13,890 11,408
                110,400 109,849 110,400 109,849

SEGMENTED INFORMATION 		                                                           
                                                      Canada United  States International Total
(000s)                                                     ($) ($) ($) ($)
Year ended December 31, 2010                                                            
Revenue                                                     86,045 144,917 18,600 249,562
Operating costs                                                     28,870 60,979 12,911 102,760
Depreciation and amortization                                                     21,965 25,148 8,651 55,764
Segment operating profit (loss)                                                     35,210 58,790 (2,962) 91,038
Research and development                                                           16,472
Stock-based compensation                                                            12,175
Corporate services                                                           9,309
Manufacturing and distribution                                                           1,450
Foreign exchange                                                           2,047
Income taxes                                                                      14,053
Earnings                                                                      35,532
Goodwill                                                       5,676 2,600 8,276
Total assets                                                     171,082 183,800 69,290 424,172
Capital expenditures                                                     18,192 22,545 9,427 50,164
                                                             
Year ended December 31, 2009                                                            
Revenue                                                     57,127 76,173 12,561 145,861
Operating costs                                                     21,251 51,828 4,953 78,032
Depreciation and amortization                                                     22,093 29,511 4,238 55,842
Segment operating profit (loss)                                                     13,783 (5,166) 3,370 11,987
Research and development                                                           13,140
Stock-based compensation                                                            5,684
Corporate services                                                           6,722
Manufacturing and distribution                                                           431
Foreign exchange                                                           886
Income tax recovery                                                                      (9,366)
Loss                                                           (5,510)
Goodwill                                                                  5,972   5,972
Total assets                                                     182,392 167,419 23,286 373,097
Capital expenditures                                                     11,838 3,687 5,968 21,493
                                                             
                                                                       
                                                          Canada   United States        International     Total
(000s)                                                         ($)   ($) ($)     ($)
Three Months Ended                                                                      
December 31, 2010                                                                      
Revenue                                                         27,543   42,550 3,401     73,494
Operating costs                                                         9,462   14,108 3,431     27,001
Depreciation and amortization                                                         5,677   10,100 2,647     18,424
Segment operating profit (loss)                                                         12,404   18,342 (2,677)     28,069
Research and development                                                                     3,561
Stock-based compensation                                                                     6,685
Corporate services                                                                     2,945
Manufacturing and distribution                                                                     534
Foreign exchange                                                                     3,437
Income taxes                                                                     2,674
Earnings                                                                     8,233
Capital expenditures                                                         12,022   10,859 3,333     26,214
                                                                       
Three Months Ended                                                                      
December 31, 2009                                                                      
Revenue                                                         17,378   18,948 4,687     41,013
Operating costs                                                         5,075   14,406 2,115     21,596
Depreciation and amortization                                                         4,700   7,168 1,845     13,713
Segment operating profit (loss)                                                         7,603   (2,626) 727     5,704
Research and development                                                                     3,736
Stock-based compensation                                                                     494
Corporate services                                                                     2,190
Manufacturing and distribution                                                                     59
Foreign exchange                                                                     (188)
Income tax recovery                                                                     (3,067)
Earnings                                                                     2,480
Capital expenditures                                                         8,066   (150) 1,232     9,148

<table border="0" valign="top"><tr><td><b>Jim Hill </b><br/> Chairman, President and CEO <br/> Phone: (403) 301-3401 <br/> Fax: (403) 301-3499<br/> E-mail: <a href="mailto:jim.hill@pason.com">jim.hill@pason.com</a> </td> <td><br/> <br/> <br/> <br/></td> <td><br/> <br/> <br/> <br/></td> <td><b>David Elliott</b><br/> Chief Financial Officer<br/> Phone: (403) 301-3441<br/> Fax: (403) 301-3499<br/> E-Mail: <a cr="true" href="mailto:david.elliott@pason.com">david.elliott@pason.com</a></td></tr></table><br />