Horizon North Logistics Inc. Announces Fourth Consecutive Quarter of Increasing Revenues and EBITDAS
TSX Symbol: HNL
CALGARY, Aug. 1, 2012 /CNW/ - Horizon North Logistics Inc. ("Horizon" or the "Corporation") reported its financial and operating results for the three and six months ended June 30, 2012 and 2011.
Second Quarter Highlights
- Fourth consecutive quarter of increasing consolidated revenues and EBITDAS;
- Second quarter revenues and EBITDAS included a payment of $5.1 million representing an end of contract billing for minimum utilization over the term of a particular contract in excess of actual utilization;
- Growth was led by the Camps & Catering segment, excluding the $5.1 million payment, revenues increased by $37.1 million, and
- Continued investment and focus on the Alberta oil sands region with 64% of second quarter revenues generated from oil sands related projects.
Second Quarter Financial Summary
| Three months ended June 30 | Six months ended June 30 | |||||||||||||||||||||||||||||
| (000's except per share amounts) | 2012 | 2011 | % Change | 2012 | 2011 | % Change | ||||||||||||||||||||||||
| Revenue | $ | 139,551 | $ | 86,607 | 61% | $ | 268,148 | $ | 189,766 | 41% | ||||||||||||||||||||
| EBITDAS(1) | 40,463 | 22,019 | 84% | 74,908 | 44,824 | 67% | ||||||||||||||||||||||||
| EBITDAS as a % of revenue | 29% | 25% | 28% | 24% | ||||||||||||||||||||||||||
| Operating earnings(1) | 30,056 | 14,652 | 105% | 56,136 | 30,193 | 86% | ||||||||||||||||||||||||
| Total profit | 21,769 | 10,233 | 113% | 40,630 | 21,145 | 92% | ||||||||||||||||||||||||
| Total comprehensive income | 21,854 | 10,233 | 114% | 40,646 | 21,145 | 92% | ||||||||||||||||||||||||
| Earnings per share | |
|||||||||||||||||||||||||||||
| - basic | $ | 0.20 | $ | 0.10 | 100% | $ | 0.38 | $ | 0.20 | 90% | ||||||||||||||||||||
| - diluted | $ | 0.20 | $ | 0.10 | 100% | $ | 0.37 | $ | 0.20 | 85% | ||||||||||||||||||||
| Total assets | 428,494 | 315,251 | 36% | 428,494 | 315,251 | 36% | ||||||||||||||||||||||||
| Long-term loans and borrowings | 86,161 | 42,773 | 101% | 86,161 | 42,773 | 101% | ||||||||||||||||||||||||
| Funds from operations(2) | 30,422 | 17,232 | 77% | 57,845 | 34,399 | 68% | ||||||||||||||||||||||||
| Capital spending | 35,346 | 30,423 | 69,523 | 56,247 | ||||||||||||||||||||||||||
| Debt to total capitalization ratio(3) | 0.26 | 0.19 | 0.26 | 0.19 | ||||||||||||||||||||||||||
| (1) | See financial measures definitions on the last page of the press release for details. |
Overview and Outlook
Horizon reported its fourth consecutive quarter of increasing revenue and EBITDAS, with results for the three months ended June 30, 2012 establishing new records for both revenue and EBITDAS. Revenue and EBITDAS are expected to maintain at or near current levels for the remaining two quarters of 2012 with increases coming early in 2013 as new assets are deployed and with winter projects getting underway.
Oil sands development and related activities continue to be the main driver of Horizon's growth with 64% of consolidated second quarter revenues driven from these activities. With robust oil sands development expected to continue, Horizon will focus the majority of its capital deployment in support of oil sands development. As a result of the focus on oil sands development seasonality in Horizon's revenue has been significantly reduced.
Horizon's manufacturing facilities continue to be highly utilized, with capacity allocated between external sales projects and investment in the camp rental fleet. During the first six months of the year, 77% of capacity was allocated to third party sales projects with the remaining 23% dedicated to internal fleet build projects. Considering the current manufacturing backlog, allocation of production for the remainder of 2012 will continue to be heavily weighted to third party sales, consistent with the first half of 2012.
Horizon's matting division had its strongest second quarter on record. Wet conditions along with the mix of oil sands related projects drove very strong utilization in the access mat rental fleet and significant mat sales. The remainder of 2012 will see rentals and sales continue to be driven by; oil sand, natural gas, and pipeline development projects.
Dividend Payment
Horizon North Logistic Inc. announced today that its Board of Directors has declared a dividend for the third quarter of 2012 at $0.05 per share. The dividend is payable to shareholders of record at the close of business on September 28, 2012 to be paid on October 12, 2012. The dividends are eligible dividends for Canadian tax purposes.
Second Quarter Financial Results
| Three months ended June 30, 2012 | |||||||||||||||||||||||||||||
| (000's) | Camps & Catering |
Matting | Marine Services |
Corporate | Inter-segment Eliminations |
Total | |||||||||||||||||||||||
| Revenue | $ | 116,937 | $ | 25,232 | $ | 679 | $ | - | $ | (3,297) | $ | 139,551 | |||||||||||||||||
| Expenses | |||||||||||||||||||||||||||||
| Direct costs | 78,349 | 18,918 | 500 | (1) | (3,174) | 94,592 | |||||||||||||||||||||||
| Selling & administrative | 1,635 | 153 | 4 | 2,704 | - | 4,496 | |||||||||||||||||||||||
| EBITDAS | 36,953 | 6,161 | 175 | (2,703) | (123) | 40,463 | |||||||||||||||||||||||
| EBITDAS as a % of revenue | 32% | 24% | 26% | - | - | 29% | |||||||||||||||||||||||
| Share based payments | 339 | 52 | - | 262 | - | 653 | |||||||||||||||||||||||
| Depreciation & amortization | 7,290 | 2,152 | 106 | 130 | (38) | 9,640 | |||||||||||||||||||||||
| Loss (gain) on disposal of property, plant and equipment |
142 | (28) | - | - | - | 114 | |||||||||||||||||||||||
| Operating earnings (loss) | $ | 29,182 | $ | 3,985 | $ | 69 | $ | (3,095) | $ | (85) | $ | 30,056 | |||||||||||||||||
| Finance costs | 849 | ||||||||||||||||||||||||||||
| Loss on equity investments | 19 | ||||||||||||||||||||||||||||
| Income tax expense | 7,419 | ||||||||||||||||||||||||||||
| Other comprehensive income | (85) | ||||||||||||||||||||||||||||
| Total comprehensive income | $ | 21,854 | |||||||||||||||||||||||||||
| Earnings per share - basic & diluted | $ | 0.20 | |||||||||||||||||||||||||||
| Three months ended June 30, 2011 | |||||||||||||||||||||||||||||
| (000's) | Camps & Catering |
Matting | Marine Services |
Corporate | Inter-segment Eliminations |
Total | |||||||||||||||||||||||
| Revenue | $ | 74,695 | $ | 12,255 | $975 | $ | - | $ | (1,318) | $ | 86,607 | ||||||||||||||||||
| Expenses | |||||||||||||||||||||||||||||
| Direct costs | 53,313 | 8,711 | 746 | 2 | (1,280) | 61,492 | |||||||||||||||||||||||
| Selling & administrative | 853 | 95 | 7 | 2,141 | - | 3,096 | |||||||||||||||||||||||
| EBITDAS | $ | 20,529 | $ | 3,449 | $222 | $ | (2,143) | $ | (38) | $ | 22,019 | ||||||||||||||||||
| EBITDAS as a % of revenue | 27% | 28% | 23% | - | - | 25% | |||||||||||||||||||||||
| Share based payments | 90 | 9 | 1 | 53 | - | 153 | |||||||||||||||||||||||
| Depreciation & amortization | 5,557 | 1,507 | 115 | 88 | (22) | 7,245 | |||||||||||||||||||||||
| Gain on disposal of property, plant and equipment |
(1) | (30) | - | - | - | (31) | |||||||||||||||||||||||
| Operating earnings (loss) | $ | 14,883 | $ | 1,963 | $106 | $ | (2,284) | $ | (16) | $ | 14,652 | ||||||||||||||||||
| Finance costs | 576 | ||||||||||||||||||||||||||||
| Loss on equity investments | 20 | ||||||||||||||||||||||||||||
| Income tax expense | 3,823 | ||||||||||||||||||||||||||||
| Other comprehensive income | - | ||||||||||||||||||||||||||||
| Total comprehensive income | $ | 10,233 | |||||||||||||||||||||||||||
| Earnings per share - basic & diluted | $ | 0.10 | |||||||||||||||||||||||||||
| Six months ended June 30, 2012 | |||||||||||||||||||||||||||||
| (000's) | Camps & Catering |
Matting | Marine Services |
Corporate | Inter-segment Eliminations |
Total | |||||||||||||||||||||||
| Revenue | $ | 229,123 | $ | 43,570 | $ | 1,420 | $ | - | $ | (5,965) | $ | 268,148 | |||||||||||||||||
| Expenses | |||||||||||||||||||||||||||||
| Direct costs | 156,509 | 32,773 | 894 | - | (5,574) | 184,602 | |||||||||||||||||||||||
| Selling & administrative | 2,648 | 264 | 4 | 5,722 | - | 8,638 | |||||||||||||||||||||||
| EBITDAS | 69,966 | 10,533 | 522 | (5,722) | (391) | 74,908 | |||||||||||||||||||||||
| EBITDAS as a % of revenue | 31% | 24% | 37% | - | - | 28% | |||||||||||||||||||||||
| Share based payments | 372 | 63 | 1 | 307 | - | 743 | |||||||||||||||||||||||
| Depreciation & amortization | 13,611 | 3,909 | 217 | 244 | (61) | 17,920 | |||||||||||||||||||||||
| Loss (gain) on disposal of property, plant and equipment |
137 | (28) | - | - | - | 109 | |||||||||||||||||||||||
| Operating earnings (loss) | $ | 55,846 | $ | 6,589 | $ | 304 | $ | (6,273) | $ | (330) | $ | 56,136 | |||||||||||||||||
| Finance costs | 1,543 | ||||||||||||||||||||||||||||
| Gain on equity investments | (27) | ||||||||||||||||||||||||||||
| Income tax expense | 13,990 | ||||||||||||||||||||||||||||
| Other comprehensive income | (16) | ||||||||||||||||||||||||||||
| Total comprehensive income | $ | 40,646 | |||||||||||||||||||||||||||
| Earnings per share | |||||||||||||||||||||||||||||
| - basic | $ | 0.38 | |||||||||||||||||||||||||||
| - diluted | $ | 0.37 | |||||||||||||||||||||||||||
| Six months ended June 30, 2011 | |||||||||||||||||||||||||||||
| (000's) | Camps & Catering |
Matting | Marine Services |
Corporate | Inter-segment Eliminations |
Total | |||||||||||||||||||||||
| Revenue | $ | 160,818 | $ | 30,096 | $1,807 | $ | - | $ | (2,955) | $ | 189,766 | ||||||||||||||||||
| Expenses | |||||||||||||||||||||||||||||
| Direct costs | 118,031 | 22,179 | 1,205 | 2 | (2,864) | 138,553 | |||||||||||||||||||||||
| Selling & administrative | 1,727 | 194 | 7 | 4,461 | - | 6,389 | |||||||||||||||||||||||
| EBITDAS | $ | 41,060 | $ | 7,723 | $595 | $ | (4,463) | $ | (91) | $ | 44,824 | ||||||||||||||||||
| EBITDAS as a % of revenue | 26% | 26% | 33% | - | - | 24% | |||||||||||||||||||||||
| Share based payments | 174 | 19 | 2 | 114 | - | 309 | |||||||||||||||||||||||
| Depreciation & amortization | 10,968 | 2,817 | 222 | 172 | (38) | 14,141 | |||||||||||||||||||||||
| Loss on disposal of property, plant and equipment |
83 | 98 | - | - | - | 181 | |||||||||||||||||||||||
| Operating earnings (loss) | $ | 29,835 | $ | 4,789 | $371 | $ | (4,749) | $ | (53) | $ | 30,193 | ||||||||||||||||||
| Finance costs | 1,189 | ||||||||||||||||||||||||||||
| Loss on equity investments | 41 | ||||||||||||||||||||||||||||
| Income tax expense | 7,818 | ||||||||||||||||||||||||||||
| Other comprehensive income | - | ||||||||||||||||||||||||||||
| Total comprehensive income | $ | 21,145 | |||||||||||||||||||||||||||
| Earnings per share - basic & diluted | $ | 0.20 | |||||||||||||||||||||||||||
Camps & Catering
| Three months ended June 30 | Six months ended June 30 | ||||||||||||||||||||||||||||
| (000's except bed rental days and catering only days) |
2012 | 2011 | % change |
2012 | 2011 | % change |
|||||||||||||||||||||||
| Camp rental and catering operations revenue | $ | 60,109 | $ | 43,978 | 37% | $ | 135,111 | $ | 90,461 | 49% | |||||||||||||||||||
| Manufacturing sales and service revenue | 54,036 | 28,541 | 89% | 87,350 | 66,784 | 31% | |||||||||||||||||||||||
| Space rental and service revenue | 2,792 | 2,176 | 28% | 6,662 | 3,573 | 86% | |||||||||||||||||||||||
| Total revenue | $ | 116,937 | $ | 74,695 | 57% | $ | 229,123 | $ | 160,818 | 42% | |||||||||||||||||||
| EBITDAS | $ | 36,953 | $ | 20,529 | 80% | $ | 69,966 | $ | 41,060 | 70% | |||||||||||||||||||
| EBITDAS as % of revenue | 32% | 27% | 19% | 31% | 26% | 19% | |||||||||||||||||||||||
| Operating earnings | $ | 29,182 | $ | 14,883 | 96% | $ | 55,846 | $ | 29,835 | 87% | |||||||||||||||||||
| Bed rental days(1) | 250,403 | 206,491 | 21% | 587,577 | 416,046 | 41% | |||||||||||||||||||||||
| Catering only days(2) | 53,697 | 45,618 | 18% | 126,216 | 104,563 | 21% | |||||||||||||||||||||||
| (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. |
Revenues from the Camps & Catering segment were $116.9 million for the three months ended June 30, 2012 compared to $74.7 million for the three months ended June 30, 2011, an increase of $42.2 million or 56%. EBITDAS for the three months ended June 30, 2012 were $37.0 million or 32% of revenue compared to $20.5 million or 27% of revenue for the three months ended June 30, 2011, an increase of $16.5 million or 80%.
Included in revenue and EBITDAS for the quarter was a payment of $5.1M representing an end of contract billing for minimum utilization over the term of a particular contract in excess of the actual utilization. Excluding this payment, revenues were $111.8 million and EBITDAS were $31.9 million or 29% of revenues, significantly above the same period of 2011.
Horizon's Camps & Catering segment continued its trend of strong revenue and EBITDAS growth driven mainly by significant oil sands development activity and investment by oil sands operators. 66% of segment revenue, for the six months ended June 30, 2012 were derived from oil sands related activity compared to 64% for the same period of 2011.
Camp rental and catering operations revenue
Revenues are derived from the following main business areas: large camp operations, drill camp operations, catering only operations, and the associated service work with each operation. Service work includes the transportation, setup and de-mobilization of the camp and catering operations. Revenues from camp and catering operations were $60.1 million for the three months ended June 30, 2012 compared to $44.0 million for the three months ended June 30, 2011, an increase of $16.1 million or 37%.
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 June 30 | ||||||||||||||||||||||||||
| (000's for revenue only) | 2012 | 2011 | ||||||||||||||||||||||||
| Large camp |
Drill camp |
Total | Large camp |
Drill camp |
Total | |||||||||||||||||||||
| Revenue | $49,363 | $808 | $50,171 | $34,917 | $867 | $35,784 | ||||||||||||||||||||
| Bed rental days | 246,237 | 4,166 | 250,403 | 201,201 | 5,290 | 206,491 | ||||||||||||||||||||
| Revenue per bed rental day | $180(1) | $194 | $180(1) | $174 | $164 | $173 | ||||||||||||||||||||
| Rentable beds at period end | 5,116 | 950 | 6,066 | 3,861 | 1,018 | 4,879 | ||||||||||||||||||||
| Available beds(2) | 5,108 | 950 | 6,058 | 3,657 | 1,018 | 4,675 | ||||||||||||||||||||
| Utilization(3) | 53% | 5% | 45% | 60% | 6% | 49% | ||||||||||||||||||||
| Six months ended June 30 | ||||||||||||||||||||||||||
| (000's for revenue only) | 2012 | 2011 | ||||||||||||||||||||||||
| Large camp |
Drill camp |
Total | Large camp |
Drill camp |
Total | |||||||||||||||||||||
| Revenue | $102,143 | $8,963 | $111,106 | $68,227 | $4,059 | $72,286 | ||||||||||||||||||||
| Bed rental days | 539,975 | 47,602 | 587,577 | 391,496 | 24,550 | 416,046 | ||||||||||||||||||||
| Revenue per bed rental day | $180(1) | $188 | $180(1) | $174 | $165 | $174 | ||||||||||||||||||||
| Rentable beds at period end | 5,116 | 950 | 5,961 | 3,861 | 1,018 | 4,879 | ||||||||||||||||||||
| Average rentable beds available(2) | 4,894 | 950 | 5,844 | 3,488 | 1,018 | 4,506 | ||||||||||||||||||||
| Utilization(3) | 61% | 26% | 55% | 62% | 13% | 51% | ||||||||||||||||||||
| (1) | Revenue per bed rental day for the three months ended June 30, 2012 and the six months ended June 30, 2012 excludes the $5.1 million payment. | |
| (2) | Available rentable beds available 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 average rentable beds available times days in the quarter. |
Revenues from large camp operations for the three months ended June 30, 2012, excluding the $5.1 million payment, increased by $9.3 million or 27% as compared to the same period in 2011. The revenue growth was driven by Horizon's ability to leverage the continued strong demand from Alberta oil sands operators for turnkey camp solutions. The majority of Horizon's 2011 and 2012 capital plan is focused on growing the rental fleet in the oil sands region. As at June 30, 2012, total rentable beds in the Alberta oil sands region were 5,116 as compared to 3,861 in the same period of 2011.
Utilization of the expanded large camp fleet dipped slightly in the second quarter as compared to the same period in the prior year, primarily due to timing of completed contracts. There is typically several months between contracts as equipment is de-mobilized from completed contracts and redeployed onto new projects. The quarter ended June 30, 2012, saw a higher number of beds in transition as compared to the same period of 2011.
Revenue per bed rental day, excluding the payment of $5.1 million, increased over the comparative quarters to $180, as compared to $174 in the same period of 2011. The increase of $6 is more reflective of revenue mix and the nature of current contracts, rather than increasing rates.
Revenues from drill camp operations for the three months ended June 30, 2012 decreased slightly as compared to the same period of 2011. The decrease was driven by lower industry activity with The Canadian Association of Oilwell Drilling Contractors (CAODC) reporting rig utilization down by 2% in the comparative periods. Offsetting the lower volumes, revenue per bed rental day increased by $30 per day due to a combination of 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 June 30 | Six months ended June 30 | |||||||||||||||||||
| (000's for revenue only) | 2012 | 2011 | 2012 | 2011 | ||||||||||||||||
| Catering only revenue | $ | 5,577 | $ | 4,035 | $ | 13,121 | $ | 9,796 | ||||||||||||
| Catering only days(1) | 53,697 | 45,618 | 126,216 | 104,563 | ||||||||||||||||
| Revenue per catering only day | $ | 104 | $ | 88 | $ | 104 | $ | 94 | ||||||||||||
| (1) | One catering only day equals the provision of catering and housekeeping services with no related bed rental for one day. |
Revenues from the provision of catering and housekeeping only services, with no associated bed rentals, increased $1.5 million or 38% for the three months ended June 30, 2012 as compared to same period of 2011. The increased volumes came from an expanded customer base as compared to the same period of 2011. The remainder of the revenue increase came from a higher revenue per catering day, a result of additional services requested by the customer and the mix of contracts as compared to the same period of 2011.
The table below outlines the service revenue generated from the camp and catering operation.
| Three months ended June 30 | Six months ended June 30 | |||||||||||||||||||
| (000's) | 2012 | 2011 | 2012 | 2011 | ||||||||||||||||
| Camp and catering operations service related revenue | $ | 4,361 | $ | 4,161 | $ | 10,884 | $ | 8,379 | ||||||||||||
Service revenues in the camp & catering operations is related to the transportation, setup and de-mobilization of camps. Revenue was relatively consistent in the comparative quarters mainly due to similar levels of activity in the set up and demobilization of both large camps and drill camps.
Manufacturing sales and service revenue
Manufacturing sales and service revenue includes new manufacturing operations and the transportation and installation associated with new manufacturing. Revenues for the three months ended June 30, 2012 were $54.0 million as compared to $28.5 million for the same period in 2011, an increase of $25.5 million or 89%. The increase was a result of higher levels of activity in both manufacturing and installation operations.
Manufacturing capacity increased by 10% through the addition of production staff for the three months ended June 30, 2012 as compared to the same period of 2011. Total production capacity is constantly reviewed by management and allocated as required to meet external third party contracts and internal fleet requirements. In the second quarter of 2012 a significantly higher proportion of production was allocated to meet external orders as compared to the same period of 2011. For the six months ended June 30, 2012, 77% of total production was allocated to external third party contacts as compared to 57% in the same period of 2011. The service revenue, which includes the transportation and installation components of the sale, typically follows the manufacturing activity and for the three months ended June 30, 2012 service was focused primarily on two significant oil sands related camp projects, compared to one significant project in the same period of 2011.
Space rental and service revenue
Space rental and service revenue for the three months ended June 30, 2012 was $2.8 million as compared to $2.2 million for the same period in 2011. The rental fleet performance was consistent in the comparative periods with utilization at 88% and rental rates up slightly due to the location and mix of rental contracts.
Direct costs
Direct costs for the three months ended June 30, 2012 were $78.3 million or 70% of the revenue normalized for the payment of $5.1M, compared to $53.3 million or 71% of revenue for the same period of 2011. Direct costs are closely related to business volumes and the increase in overall direct costs was primarily a result of the higher activity levels in the comparative periods. As a percentage of revenue, direct costs remained relatively static in the comparative periods indicating cost escalation has not been a significant factor.
Matting
Matting revenue is comprised of mat and equipment rental revenue, mat sales revenue, installation, transportation, service, and other revenue as follows:
| Three months ended June 30 | Six months ended June 30 | |||||||||||||||||||||||
| (000's except mat rental days and numbers of mats) | 2012 | 2011 | % change |
2012 | 2011 | % change |
||||||||||||||||||
| Access mat rental revenue(1) | $ | 6,311 | $ | 1,904 | 231% | $ | 8,439 | $ | 2,109 | 300% | ||||||||||||||
| Other mat and rental equipment revenue(2) | $ | 422 | $ | 163 | 159% | $ | 1,103 | $ | 589 | 87% | ||||||||||||||
| Total mat and equipment rental revenue | $ | 6,733 | $ | 2,067 | 226% | $ | 9,542 | $ | 2,698 | 254% | ||||||||||||||
| Mat sales revenue | 8,440 | 4,993 | 69% | 15,009 | 15,580 | (4%) | ||||||||||||||||||
| Installation, transportation, service, and other revenue | 10,059 | 5,195 | 94% | 19,019 | 11,818 | 61% | ||||||||||||||||||
| Total revenue | $ | 25,232 | $ | 12,255 | 106% | $ | 43,570 | $ | 30,096 | 45% | ||||||||||||||
| EBITDAS | $ | 6,161 | $ | 3,449 | 79% | $ | 10,533 | $ | 7,723 | 36% | ||||||||||||||
| EBITDAS as a % of revenue | 24% | 28% | (14%) | 24% | 26% | (8%) | ||||||||||||||||||
| Operating earnings | $ | 3,985 | $ | 1,963 | 103% | $ | 6,589 | $ | 4,789 | 38% | ||||||||||||||
| Access mat rental days(3) | 2,164,495 | 787,029 | 175% | 2,908,839 | 1,057,616 | 175% | ||||||||||||||||||
| Average owned access mats in rental fleet(4) | 15,377 | 9,109 | 69% | 13,172 | 8,181 | 61% | ||||||||||||||||||
| Average sub rental access mats in rental fleet(5) | 11,375 | - | 100% | 5,688 | - | 100% | ||||||||||||||||||
| Access mats in rental fleet at quarter end(4) | 15,287 | 10,302 | 48% | 15,287 | 10,302 | 48% | ||||||||||||||||||
| Mat sold: | ||||||||||||||||||||||||
| New mats | 10,135 | 6,219 | 63% | 17,542 | 18,604 | (6%) | ||||||||||||||||||
| Used Mats | 1,647 | 111 | 1384% | 3,546 | 2,493 | 42% | ||||||||||||||||||
| Total mats sold | 11,782 | 6,330 | 86% | 21,088 | 21,097 | 0% | ||||||||||||||||||
| (1) | Access mat rental revenue includes revenues generated from the rental of traditional oak and oak edged mats. |
| (2) | Other mat rental equipment revenue includes the rental of rig mats, quad mats, other ancillary equipment such as well site accommodation units and light towers. |
| (3) | One mat rental day equals the rental of one access mat for one day. |
| (4) | Average access mat rental fleet numbers reflect only owned access mats. |
| (5) | Average sub rental access mats is the average number of non-owned access mats in the rental fleet. These mats are rented from third parties on a short term basis. |
Revenues from the Matting segment were $25.2 million for the three months ended June 30, 2012 compared to $12.3 million in the same period of 2011, an increase of $12.9 million or 105%. EBITDAS for the three months ended June 30, 2012 were $6.2 million or 24% of revenue as compared to $3.4 million or 28% of revenue for the same period of 2011, an increase of $2.8 million or 82%.
The revenue and EBITDAS growth was driven by an unusually wet spring and by continued strong demand to purchase mats for oil sands and pipeline construction projects.
Mat and equipment rental revenue
Total mat and equipment rental revenues increased by $4.7 million or 226% in the comparative periods, driven by both increased volume of mat rental days and higher revenues per mat rental day. The increased level of rental activity in the comparative quarters was a combination of a wet spring and the mix of projects and customers. Higher rental day volumes were achieved by a larger owned rental fleet for the three months ended June 30, 2012 as compared to the same period of 2011, and by sub renting mats from a third party. Sub renting mats was an effective method to temporarily increase the fleet size to meet peak customer demand. Sub renting was not done in the comparative period of 2011. Stronger market conditions also helped boost access mat rental rates with revenue per rental day of $2.92 in the three months ended June 30, 2012 as compared to $2.42 in the same period of 2011.
Mat sales revenue
Revenues from mat sales for the three months ended June 30, 2012 increased by $3.4 million or 69% as compared to the same period of 2011. The higher revenue was a result of 3,916 more new mats sold in the three months ended June 30, 2012 as compared to the same period of 2011. The higher sales volume was partially offset by lower revenue per mat with revenue per mat sold for three months ended June 30, 2012 of $716, down from $789 in the same period of 2011. The decrease is a result of the mix of mats sold with fewer new mats and more used mats sold in the three months ended June 30, 2012 as compared to the same period of 2011. Used mat sales have a significantly lower selling price than new mats.
Installation, transportation, service, and other revenue
Installation, transportation, service, and other revenues are driven primarily from the level of activity in the mat rental and mat sale businesses and are charged for separately from rentals and sales. Revenues for the three months ended March 31, 2012 were higher by $4.9 million or 94% as compared to the same period in 2011. The increase is mainly due to the higher volume of both rentals and mat sales throughout the quarter.
Direct costs
Direct costs for the three months ended June 30, 2012 were $18.9 million or 75% of revenue as compared to $8.7 million or 71% of revenue for the same period of 2011. Direct costs are driven by the level of business activity, with the significant increase in activity for the comparative quarters, directs costs have increased accordingly. Costs in the rental operations increased in the three months ended June 30, 2012 as a result of costs related to the sub rental of access mats. Direct costs, as a percentage of revenue, increased by 4% due to the increased rental costs.
Marine Services
Marine Services revenue is comprised of barge camp revenue and rental and other revenue as follows:
| Three months ended June 30 | Six months ended June 30 | |||||||||||||||||||||||||||||||||||
| (000's) | 2012 | 2011 | % Change | 2012 | 2011 | % Change | ||||||||||||||||||||||||||||||
| Barge camp revenue | $ | 664 | $ | 642 | 3% | $ | 1,391 | $ | 1,308 | 6% | ||||||||||||||||||||||||||
| Rental and other revenue | 15 | 333 | (95%) | 29 | 499 | (94%) | ||||||||||||||||||||||||||||||
| Total revenue | $ | 679 | $ | 975 | (30%) | $ | 1,420 | $ | 1,807 | (21%) | ||||||||||||||||||||||||||
| EBITDAS | $ | 175 | $ | 222 | (21%) | $ | 522 | $ | 595 | (12%) | ||||||||||||||||||||||||||
| Operating earnings | $ | 69 | $ | 106 | (35%) | $ | 304 | $ | 371 | (18%) | ||||||||||||||||||||||||||
Revenues from the Marine Services segment for the three months ended June 30, 2012 were $0.7 million as compared to $1.0 million in the same period of 2011, a decrease of $0.3 million or 30%. The decrease was primarily due to lower levels of activity in the three months ended June 30, 2012 as compared to the same period of 2011.
EBITDAS remained relatively consistent in the comparative quarters. EBITDAS as a percentage of revenue was 26% in the three months ended June 30, 2012 as compared to 23% in the same period of 2011.
Corporate
Corporate 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. Corporate costs for the three months ended June 30, 2012 were $2.7 million as compared to $2.1 million in the same period in 2011. This increase of $0.6 million is driven by the increased cost to support the higher level of business activity. Corporate costs, as a percentage of total revenue, were 2.0% for the three months ended June 30, 2012 compared to 2.5% in same period of 2011.
Other Items
Depreciation and amortization
Depreciation and amortization costs for the three months ended June 30, 2012 were $9.6 million as compared to $7.2 million in the same period of 2011. The increase was mainly from depreciation which increased from $5.2 million to $7.6 million or 47%, as a result of net capital additions of $101.3 million in depreciable assets from June 30, 2011 to June 30, 2012 primarily in camp facilities. Amortization of intangibles remained relatively unchanged in the comparative periods at $2.0 million.
Financing costs
Financing costs on loans and borrowings for the three months ended June 30, 2012 were $0.8 million as compared to $0.6 million in the same period of 2011. The increase of $0.2 million was a result of a higher weighted average level of debt held. For the three months ended June 30, 2012 the weighted average debt was $69.9 million compared to $31.8 million in the same period of 2011.
Income taxes
Income tax expense was $7.4 million, an effective tax rate of 25.4%, for the three months ended June 30, 2012 as compared to a tax expense of $3.8 million, an effective rate of 27.2%, for the same period of 2011. The effective tax rate decreased due to a 1.0% decrease in federal tax rates from 2011 to 2012 as well as the change in estimated timing of realization of temporary differences.
Selling and administrative
Selling and administrative expense was $4.5 million for the three months ended June 30, 2012 as compared to $3.1 million in the same period of 2011. The increase is reflective of the higher levels of business activity in 2012 as compared to 2011. However, as a percentage of revenue, selling and administrative expense declined to 3.2% of revenue in 2012 as compared to 3.6% in 2011.
| Condensed consolidated statement of financial position (Unaudited) | |||||||
| (000's) | June 30, 2012 |
December 31, 2011 |
|||||
| Assets | |||||||
| Current assets: | |||||||
| Trade and other receivables | $ | 105,030 | $ | 83,484 | |||
| Inventories | 15,025 | 15,334 | |||||
| Prepayments | 5,126 | 3,981 | |||||
| Income taxes receivable | 345 | - | |||||
| 125,526 | 102,799 | ||||||
| Non-current assets: | |||||||
| Property, plant and equipment | 281,615 | 228,793 | |||||
| Intangible assets | 14,130 | 18,232 | |||||
| Goodwill | 2,136 | 2,136 | |||||
| Investments in equity accounted investees | 556 | 529 | |||||
| Deferred tax assets | 1,784 | 1,837 | |||||
| Other assets | 2,747 | 2,811 | |||||
| 302,968 | 254,338 | ||||||
| $ | 428,494 | $ | 357,137 | ||||
| Liabilities and Shareholders' Equity | |||||||
| Current liabilities: | |||||||
| Trade and other payables | $ | 52,848 | $ | 41,833 | |||
| Deferred revenue | 2,256 | 13,601 | |||||
| Income taxes payable | 8,279 | 4,380 | |||||
| Current portion of loans and borrowings | 1,149 | 1,281 | |||||
| 64,532 | 61,095 | ||||||
| Non-current liabilities: | |||||||
| Asset retirement provisions | 1,334 | 1,283 | |||||
| Loans and borrowings | 86,161 | 55,234 | |||||
| Deferred tax liabilities | 26,329 | 23,456 | |||||
| 178,356 | 141,068 | ||||||
| Shareholders' equity: | |||||||
| Share capital | 178,211 | 173,438 | |||||
| Contributed surplus | 9,870 | 10,421 | |||||
| Accumulated other comprehensive income | 174 | 158 | |||||
| Retained earnings | 61,883 | 32,052 | |||||
| 250,138 | 216,069 | ||||||
| $ | 428,494 | $ | 357,137 | ||||
| Condensed consolidated statement of comprehensive income (Unaudited) Three and Six months ended June 30, 2012 and 2011 |
||||||||||||||||||
| Three months ended June 30 |
Six months ended June 30 |
|||||||||||||||||
| (000's) | 2012 | 2011 | 2012 | 2011 | ||||||||||||||
| Revenue | $ | 139,551 | $ | 86,607 | $ | 268,148 | $ | 189,766 | ||||||||||
| Operating expenses: | ||||||||||||||||||
| Direct costs | 94,592 | 61,492 | 184,602 | 138,553 | ||||||||||||||
| Depreciation | 7,589 | 5,164 | 13,818 | 10,000 | ||||||||||||||
| Amortization of intangible assets | 44 | 41 | 88 | 82 | ||||||||||||||
| Share based compensation | 391 | 99 | 436 | 194 | ||||||||||||||
| Loss (gain) on disposal of property, plant and equipment | 114 | (31) | 109 | 181 | ||||||||||||||
| Direct operating expenses | 102,730 | 66,765 | 199,053 | 149,010 | ||||||||||||||
| Gross profit | 36,821 | 19,842 | 69,095 | 40,756 | ||||||||||||||
| Selling & administrative expenses: | ||||||||||||||||||
| Selling & administrative expenses | 4,496 | 3,096 | 8,638 | 6,389 | ||||||||||||||
| Amortization of intangible assets | 2,007 | 2,040 | 4,014 | 4,059 | ||||||||||||||
| Share based compensation | 262 | 54 | 307 | 115 | ||||||||||||||
| Selling & administrative expenses | 6,765 | 5,190 | 12,959 | 10,563 | ||||||||||||||
| Operating earnings | 30,056 | 14,652 | 56,136 | 30,193 | ||||||||||||||
| Finance costs | 849 | 576 | 1,543 | 1,189 | ||||||||||||||
| Share of loss (gain) of equity accounted investees | 19 | 20 | (27) | 41 | ||||||||||||||
| Profit before tax | 29,188 | 14,056 | 54,620 | 28,963 | ||||||||||||||
| Current tax expense | 6,304 | 2,731 | 11,064 | 7,419 | ||||||||||||||
| Deferred tax expense | 1,115 | 1,092 | 2,926 | 399 | ||||||||||||||
| Income tax expense | 7,419 | 3,823 | 13,990 | 7,818 | ||||||||||||||
| Total profit | 21,769 | 10,233 | 40,630 | 21,145 | ||||||||||||||
| Other comprehensive income: | ||||||||||||||||||
| Translation of foreign operations | (85) | - | (16) | - | ||||||||||||||
| Other comprehensive income, net of income tax | (85) | - | (16) | - | ||||||||||||||
| Total comprehensive income | $ | 21,854 | $ | 10,233 | $ | 40,646 | $ | 21,145 | ||||||||||
| Earnings per share: | ||||||||||||||||||
| Basic | $ | 0.20 | $ | 0.10 | $ | 0.38 | $ | 0.20 | ||||||||||
| Diluted | $ | 0.20 | $ | 0.10 | $ | 0.37 | $ | 0.20 | ||||||||||
| Condensed consolidated statement of changes in equity (Unaudited) | |||||||||||||||||||||||||
| (000's) | Share Capital |
Contributed Surplus |
Accumulated Other Comprehensive Income |
Retained Earnings (Deficit) |
Total | ||||||||||||||||||||
| Balance at December 31, 2010 | $ | 245,353 | $ | 11,446 | $ | - | $ | (78,000) | $ | 178,799 | |||||||||||||||
| Reduction of capital | (78,000) | - | - | 78,000 | - | ||||||||||||||||||||
| Total profit | - | - | - | 21,145 | 21,145 | ||||||||||||||||||||
| Share based compensation | - | 309 | - | - | 309 | ||||||||||||||||||||
| Share options exercised | 2,674 | (736) | - | - | 1,938 | ||||||||||||||||||||
| Dividends declared ($0.04 per share) | - | - | - | (4,215) | (4,215) | ||||||||||||||||||||
| Balance at June 30, 2011 | 170,027 | 11,019 | - | 16,930 | 197,976 | ||||||||||||||||||||
| Total profit | - | - | - | 23,677 | 23,677 | ||||||||||||||||||||
| Share based compensation | - | 289 | - | - | 289 | ||||||||||||||||||||
| Share options exercised | 3,411 | (887) | - | - | 2,524 | ||||||||||||||||||||
| Translation of foreign operations | - | - | 158 | - | 158 | ||||||||||||||||||||
| Dividends paid ($0.04 per share) | - | - | - | (4,285) | (4,285) | ||||||||||||||||||||
| Dividends declared ($0.04 per share) | - | - | - | (4,270) | (4,270) | ||||||||||||||||||||
| Balance at December 31, 2011 | 173,438 | 10,421 | 158 | 32,052 | 216,069 | ||||||||||||||||||||
| Total profit | - | - | - | 40,630 | 40,630 | ||||||||||||||||||||
| Share based compensation | - | 743 | - | - | 743 | ||||||||||||||||||||
| Share options exercised | 4,773 | (1,294) | - | - | 3,479 | ||||||||||||||||||||
| Translation of foreign operations | - | - | 16 | - | 16 | ||||||||||||||||||||
| Dividends paid ($0.05 per share) | - | - | - | (5,392) | (5,392) | ||||||||||||||||||||
| Dividends declared ($0.05 per share) | - | - | - | (5,407) | (5,407) | ||||||||||||||||||||
| Balance at June 30, 2012 | $ | 178,211 | $ | 9,870 | $ | 174 | $ | 61,883 | $ | 250,138 | |||||||||||||||
| Condensed consolidated statement of cash flows (Unaudited) Six months ended June 30, 2012 and 2011 |
||||||
| June 30, | June 30, | |||||
| (000's) | 2012 | 2011 | ||||
| Cash provided by (used in): | ||||||
| Operating activities: | ||||||
| Profit for the period | $ | 40,630 | $ | 21,145 | ||
| Adjustments for: | ||||||
| Depreciation | 13,818 | 10,000 | ||||
| Amortization of intangible assets | 4,102 | 4,141 | ||||
| Share based compensation | 743 | 309 | ||||
| Amortization of other assets | 64 | 60 | ||||
| Loss on equity investments | (27) | 41 | ||||
| Gain on sale of property, plant and equipment | (1,508) | (1,297) | ||||
| Unrealized foreign exchange | 23 | - | ||||
| Finance costs | 1,543 | 1,189 | ||||
| Income tax expense | 13,990 | 7,818 | ||||
| 73,378 | 43,406 | |||||
| Income taxes paid | (7,510) | (3,515) | ||||
| Interest paid | (1,140) | (811) | ||||
| Changes in non-cash working capital items | (22,793) | 15,584 | ||||
| 41,935 | 54,664 | |||||
| Investing activities: | ||||||
| Purchase of property, plant and equipment | (69,523) | (56,247) | ||||
| Proceeds on sale of property, plant and equipment | 4,400 | 2,955 | ||||
| (65,123) | (53,292) | |||||
| Financing activities: | ||||||
| Proceeds from loans and borrowings | 30,508 | 905 | ||||
| Shares issued | 3,479 | 1,938 | ||||
| Payment of dividends | (9,662) | - | ||||
| 24,325 | 2,843 | |||||
| Changes in non-cash working capital items | (1,137) | (4,215) | ||||
| 23,188 | (1,372) | |||||
| Increase in cash position | - | - | ||||
| Cash, beginning of period | - | - | ||||
| Cash, end of period | $ | - | $ | - | ||
Financial Measures Definitions
EBITDAS
EBITDAS (Earnings before interest, taxes, depreciation, amortization, gain/loss on equity investments, gain/loss on disposal of property, plant and equipment, share of income/loss from equity accounted investees and share based compensation) is not a recognized measure 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 may differ from other entities and accordingly, may not be comparable to measures used by other entities. EBITDAS 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.
Funds from operations
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.
Debt to total capitalization
Debt to total capitalization is calculated as the ratio of debt to total capitalization. Debt is defined as the sum of current and long-term portions of loans and borrowings. Total capitalization is calculated as the sum of debt and shareholders' equity.
Caution Regarding Forward-Looking Information and Statements
Certain statements contained in this Management Discussion and Analysis ("MD&A") constitutes forward-looking statements or information. These statements relate to future events or future performance of Horizon. All statements other than statements of historical fact are forward-looking statements. The use of any of the words "anticipate", "plan" "continue", "estimate", "expect", "may", "will", "project", "predict", "potential", "should", "believe" and similar expressions are intended to identify forward-looking statements.
In particular, such forward looking statements include: under the heading "Overview and Outlook" the statements that "Revenue and EBITDAS are expected to maintain at or near current levels for the remaining two quarters of 2012 with increases coming early in 2013 as new assets are deployed and with winter projects getting underway", "With robust oil sands development expected to continue, Horizon will focus the majority of its capital deployment in support of oil sands development", "allocation of production for the remainder of 2012 will continue to be heavily weighted to third party sales" and "The remainder of 2012 will see rentals and sales continue to be driven by; oil sand, natural gas, and pipeline development projects." and Under the heading "Quarterly Summary of Results" the statements that "Horizon's strong performance is expected to continue in 2012 based on increasing customer demand driven by levels of project investment and Horizon's continuing capital investment in expanding its fleet. With the high levels of investment being made by the energy sector and continued robust activity in the oil sands, strengthening demand and improving utilization is significantly reducing the seasonal nature of Horizon's business."
The foregoing statements are based on the assumption that the demand for Horizon's products and services will remain strong through 2012 and that Horizon will continue to experience significant year round revenues from its oil sands and other energy customers.
There are a number of risks which could impact these generally high levels of activity which could negatively impact the Corporation's business. As such, many factors could cause the performance or achievements of the Corporation to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements.
Corporate 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.ca. Unless otherwise indicated, the consolidated financial statements have been prepared in accordance with IFRS and the reporting currency is in Canadian dollars.
SOURCE: Horizon North Logistics Inc.
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
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