Horizon North Logistics Inc. Announces Results For The Period Ended September
30, 2009
Highlights
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Three Three Nine Nine
months months months months
ended ended ended ended
(000's except per September September September September
share amounts) 30, 2009 30, 2008 30, 2009 30, 2008
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Revenue $ 32,048 $ 53,692 $112,812 $124,044
EBITDAS (1) 5,035 14,273 32,434 31,252
Operating (loss)
earnings (1) (571) 7,453 13,696 13,160
Net (loss) earnings (105) 5,004 9,480 8,389
Net earnings per share
- diluted $ 0.00 $ 0.05 $ 0.09 $ 0.08
Total assets 222,285 368,934 222,285 368,934
Total long-term financial
liabilities (2) 21,717 54,542 21,717 54,542
Funds from operations (3) 4,383 9,770 29,281 22,929
Capital spending 1,605 10,161 9,675 48,796
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(1) EBITDAS (Earnings before interest, taxes, depreciation, amortization,
gain/loss on disposal of property, plant and equipment and stock
based compensation) and operating earnings (loss) are not recognized
measures under Canadian generally accepted accounting principles
(GAAP). Management believes that in addition to net earnings, EBITDAS
is a useful supplemental measure as it provides an indication of the
Corporation's ability to generate cash flow in order to fund working
capital, service debt, pay current income taxes and fund capital
programs. Management believes that in addition to net earnings,
operating earnings (loss) 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 (loss) should not be
construed as alternatives to net earnings determined in accordance
with GAAP as an indicator of the Corporation's performance. Horizon's
method of calculating EBITDAS and operating earnings (loss) may
differ from other entities and accordingly, EBITDAS and operating
earnings (loss) may not be comparable to measures used by other
entities.
(2) Long-term financial liabilities include operating lines of credit,
the current and long-term portions of long-term debt, the current and
long-term portions of capital lease obligations.
(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.
Key Points
- Strong financial position with continued debt reduction in the
quarter; available borrowing capacity of $58.8 million under credit
facilities of $80.5 million;
- 4.8 million shares repurchased and cancelled under Normal Course
Issuer Bid for $5.8 million.
- Substantial reduction in revenues, EBITDAS and earnings as a result
of reduced activity and margin contraction;
- Results include remediation costs at the BlackSand Executive Lodge
of $539,000 and costs of starting the blast resistant structures
business of $179,000;
Overview
Revenues for the three months ended
Camp & Catering revenues decreased
Matting revenues decreased
EBITDAS and operating earnings decreased by
Outlook
Horizon's businesses are continuing to experience the impact of the global recession through reduced activity levels and margin contraction as competitors vie for fewer jobs. Horizon's customers in the conventional oil and gas exploration and production business have seen their cash flows reduced dramatically by lower commodity prices, which has led to 2009 drilling activity declining to levels not seen in over a decade. Relief from this situation is unlikely to occur until general economic activity improvements spur increased industrial demand for commodities, in particular for natural gas.
Crude oil prices have improved from their recent low in the
The mining industry has seen an improvement in commodity prices and access to capital markets. Horizon has done substantial business with mining industry participants in the past and anticipates that a number of delayed projects will be coming back on-stream in the near future. Development of shale gas resources in remote regions of north-eastern British Columbia are in their early stages and the Corporation is exploring opportunities to enter this market.
Horizon's strong and improving financial position should ensure that the Corporation sees its way through these difficult economic times and allow it to take advantage of opportunities that might be available near the bottom of the economic cycle.
During the third quarter of 2009, the Corporation repaid
Financial Results
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Three months ended September 30, 2009
Inter-
segment
Camps & Marine Elimi-
(000's) Catering Matting Services Corporate nations Total
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Revenue $ 26,103 $ 5,118 $ 1,109 $ - $ (282) $ 32,048
Expenses
Cost of
goods sold 4,846 743 - - (4) 5,585
Operating 15,629 2,504 1,285 - (278) 19,140
General &
administrative 825 83 2 1,345 - 2,255
Foreign
exchange
loss (gain) 18 (3) (3) 21 - 33
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EBITDAS $ 4,785 $ 1,791 $ (175) $ (1,366) $ - $ 5,035
Stock based
compensation 101 22 1 (50) - 74
Depreciation &
amortization 4,155 1,397 292 65 (10) 5,899
Gain on
disposal of
property,
plant &
equipment (367) - - - - (367)
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Operating
earnings
(loss) $ 896 $ 372 $ (468) $ (1,381) $ 10 $ (571)
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Interest
income (8)
Interest
expense on
operating
lines of
credit 42
Interest
expense on
long-term debt 127
Earnings on
equity
investments (260)
Income tax
recovery (367)
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Net loss $ (105)
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Three months ended September 30, 2008
Inter-
segment
Camps & Marine Elimi-
(000's) Catering Matting Services Corporate nations Total
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Revenue $ 37,722 $ 12,877 $ 3,979 $ - $ (886) $ 53,692
Expenses
Cost of
goods sold 5,821 6,142 - - (187) 11,776
Operating 18,800 3,633 3,551 - (590) 25,394
General &
administrative 574 146 - 1,495 - 2,215
Foreign
exchange
loss - 30 - 4 - 34
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EBITDAS $ 12,527 $ 2,926 $ 428 $ (1,499) $ (109) $ 14,273
Stock based
compensation 220 53 4 169 - 446
Depreciation &
amortization 4,495 1,566 273 44 (22) 6,356
Loss (gain)
on disposal
of property,
plant &
equipment 33 (15) - - - 18
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Operating
earnings
(loss) $ 7,779 $ 1,322 $ 151 $ (1,712) $ (87) $ 7,453
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Interest
income (6)
Interest
expense on
operating
lines of
credit 129
Interest
expense on
long-term debt 593
Loss on
equity
investments 28
Income tax
expense 1,705
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Net earnings $ 5,004
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Camps & Catering
Camps & Catering revenue is comprised of camp, catering and service revenue, camp and space sales, and space rental revenue as follows:
Three months ended Nine months ended
(000's except September 30 September 30
rental days ------------------------- -------------------------
and mandays) 2009 2008 2009 2008
----------- ----------- ----------- -----------
Revenue from
operations
Camps, catering &
service revenue $ 17,535 $ 27,288 $ 59,563 $ 64,044
Camp sales revenue 6,184 6,563 21,424 16,190
Space sales
revenue 1,321 2,787 2,616 7,190
Space rental
revenue 1,063 1,084 3,154 3,657
----------- ----------- ----------- -----------
Revenue from
operations $ 26,103 $ 37,722 $ 86,757 $ 91,081
Contract
cancellation fee - - 8,000 -
----------- ----------- ----------- -----------
Total Revenue $ 26,103 $ 37,722 $ 94,757 $ 91,081
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
EBITDAS
Operations $ 4,785 $ 12,527 $ 23,217 $ 27,444
Contract
cancellation fee - - 8,000 -
----------- ----------- ----------- -----------
Total EBITDAS $ 4,785 $ 12,527 $ 31,217 $ 27,444
----------- ----------- ----------- -----------
Operating earnings
Operations $ 896 $ 7,779 $ 9,885 $ 15,549
Contract
cancellation fee - - 8,000 -
----------- ----------- ----------- -----------
Total Operating
earnings $ 896 $ 7,779 $ 17,885 $ 15,549
----------- ----------- ----------- -----------
Bed rental days(1) 109,417 154,682 242,116 419,611
Catering mandays(2) 87,439 117,959 203,910 326,056
(1) One bed rental day equals the rental of one bed for one day.
(2) One catering manday equals 3 meals for one person for one day.
Revenue from the Camps & Catering segment decreased by
Camps, catering and service revenues decreased
Revenues from the BlackSand facilities decreased by
Revenues from conventional equipment decreased by
Revenues from service work remained consistent at
Combined camp and space sales revenues decreased
EBITDAS and operating earnings were negatively affected by a number of factors compared to the same period in the prior year. Margins at the BlackSand facilities declined from 47% in Q3 2008 to 27% in Q3 2009 as overall rates charged decreased as part of the amended contract terms discussed above. Additionally, in Q3 2008 there were a significant number of beds billed on a take-or-pay basis for which full revenues were earned that did not have associated catering and housekeeping costs. Included in Q3 2009 were costs incurred to correct moisture accumulation problems at BlackSand of
Matting
Matting revenue is comprised of mat rental revenue, mat sales, installation, transportation, service, and other revenue as follows:
Three months ended Nine months ended
(000's except September 30 September 30
rental days ------------------------- -------------------------
and mats) 2009 2008 2009 2008
----------- ----------- ----------- -----------
Mat rental revenue $ 1,504 $ 1,303 $ 3,717 $ 4,069
Mat sales revenue 1,220 7,387 3,340 10,337
Installation,
transportation,
service and other
revenue 2,394 4,187 7,227 12,264
----------- ----------- ----------- -----------
Total revenue $ 5,118 $ 12,877 $ 14,284 $ 26,670
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
EBITDAS $ 1,791 $ 2,926 $ 4,073 $ 6,511
Operating earnings
(loss) $ 372 $ 1,322 $ (466) $ 1,833
Mat rental days 649,750 434,441 1,493,597 1,314,375
Average mats in
rental fleet 13,421 18,398 13,125 18,054
Mats sold
New mats 870 9,119 2,144 11,423
Used mats 1,738 330 3,828 1,719
----------- ----------- ----------- -----------
Total mats sold 2,608 9,449 5,972 13,142
Revenue from the Matting segment decreased
Mat rental revenues for the three months ended
Mat sales revenues for the three months ended
Installation, transportation, service and other revenue for the three months ended
EBITDAS and operating earnings decreased by
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 Nine months ended
September 30 September 30
------------------------- -------------------------
(000's) 2009 2008 2009 2008
----------- ----------- ----------- -----------
Tug revenue $ 517 $ 3,281 $ 547 $ 3,632
Barge revenue 191 178 191 586
Barge camp revenue 75 185 3,033 3,299
Rental and other
revenue 326 335 1,085 1,212
----------- ----------- ----------- -----------
Total revenue $ 1,109 $ 3,979 $ 4,856 $ 8,729
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----------- ----------- ----------- -----------
EBITDAS $ (175) $ 428 $ 1,645 $ 2,674
Operating (loss)
earnings $ (468) $ 151 $ 768 $ 1,871
Revenues from the Marine Services segment for the three months ended
Tug and barge revenues were significantly lower in the three months ended
Rental and other revenues were generated mainly from storage of equipment and supplies for customers and were consistent with the same period in 2008.
EBITDAS and operating earnings for the three months ended
Corporate
Corporate costs are the costs of the head office which include the Chief Executive Officer, President, Chief Financial Officer, Vice President of Safety, Corporate Secretary, Corporate Accounting staff, and associated costs of supporting a public company. Overall cash costs were
Other Items
Interest on operating lines of credit and long-term debt
Interest on operating lines of credit and long-term debt decreased to
Earnings on equity investments
Earnings on equity investments in the three months ended
Liquidity and Capital Resources
The Corporation has a strong working capital position and borrowing capacity as set out below:
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Increase/
(000's) September 2009 December 2008 (Decrease) $
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Current assets $ 40,511 $ 50,465 $ (9,954)
Operating lines of credit 8,206 8,834 (628)
Current liabilities
excluding borrowings(1) 13,730 18,177 (4,447)
Current portion of
long-term debt 255 488 (233)
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Current liabilities 22,191 27,499 (5,308)
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Working capital(2) 18,320 22,966 (4,646)
Bank borrowings
Operating lines
of credit $ 8,206 $ 8,834 $ (628)
Senior secured revolving
term facility 13,511 39,112 (25,601)
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Total bank borrowings 21,717 47,946 (26,229)
Available bank lines(3) 80,500 80,500 -
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Borrowing capacity(4) $ 58,783 $ 32,554 $ 26,229
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(1) Calculated as the sum of bank indebtedness, accounts payable and
accrued liabilities and deferred revenue.
(2) Calculated as current assets less current liabilities.
(3) Includes $80,000,000 available to Horizon and $1,000,000 (Horizon's
50% portion - $500,000) available to Horizon's joint venture, Arctic
Oil & Gas Services Inc.
(4) Calculated as available bank lines less total bank borrowing.
In the nine months ended
During the three and nine months ended
The Corporation was granted approval from the
The Corporation does not anticipate having any issues with respect to credit facility covenant violations. The Corporation is in compliance with its four debt covenants on its bank borrowings as set out below:
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Debt Covenant September 30, 2009
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Current ratio(1) - must be greater than 1.2:1 1.83:1
Debt(2) to EBITDAS(3)(4) - must be less than 2:1 0.5:1
Debt service coverage(5) - must be greater than 1.5:1 23.8:1
Debt(2) to total capitalization(6) - must be less than 0.5:1 0.11:1
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(1) Current ratio is calculated as ratio of current assets to current
liabilities.
(2) Calculated as the sum of operating lines of credit and long-term
debt.
(3) EBITDAS (Earnings before interest, taxes, depreciation, amortization,
gain/loss on disposal of property, plant and equipment and stock
based compensation) is not a recognized measure under Canadian
generally accepted accounting principles (GAAP). Management believes
that in addition to net earnings, EBITDAS is a useful supplemental
measure as it provides an indication of the Corporation's ability to
generate cash flow in order to fund working capital, service debt,
pay current income taxes and fund capital programs. Investors should
be cautioned, however, that EBITDAS should not be construed as an
alternative to net earnings determined in accordance with GAAP as an
indicator of the Corporation's performance. Horizon's method of
calculating EBITDAS may differ from other entities and accordingly,
EBITDAS may not be comparable to measures used by other entities.
(4) Debt to EBITDAS is calculated as the ratio of debt to trailing
12 months EBITDAS.
(5) Debt service coverage is calculated as the ratio of trailing
12 months EBITDAS less cash taxes to debt service. EBITDAS less cash
taxes is calculated as the trailing 12 months EBITDAS less trailing
12 months current tax expense. Debt service is calculated as the sum
of trailing 12 months interest expense on operating lines of credit,
trailing 12 months interest expense on long-term debt and current
portion of long-term debt.
(6) Debt to total capitalization is calculated as the ratio of debt to
total capitalization. Total capitalization is calculated as the sum
of debt and shareholder's equity.
Consolidated Balance Sheets (Unaudited)
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(000's) September 2009 December 2008
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Assets
Current assets:
Cash $ 122 $ -
Accounts receivable 25,170 37,873
Inventory 12,458 9,960
Prepaid expenses 2,146 1,682
Income tax receivable 615 950
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40,511 50,465
Property, plant and equipment, net 138,655 147,924
Goodwill 441 -
Intangible assets, net 37,255 43,032
Long-term investments 6,023 5,760
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$222,885 $247,181
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Liabilities and Shareholders' Equity
Current liabilities:
Bank indebtedness $ - $ 1,776
Operating lines of credit 8,206 8,834
Accounts payable and accrued liabilities 10,718 14,234
Deferred revenue 3,012 2,167
Current portion of long-term debt 255 488
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22,191 27,499
Long-term debt 13,256 38,624
Future income tax liability 14,021 11,456
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49,468 77,579
Shareholders' equity:
Share capital 246,334 257,505
Contributed surplus 11,070 5,564
Deficit (83,987) (93,467)
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173,417 169,602
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$222,885 $247,181
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Consolidated Statements of Operations and (Deficit) Retained Earnings
Three and nine months ended September 30, 2009 and 2008 (Unaudited)
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Three months ended Nine months ended
(000's except per September 30 September 30
share amounts) 2009 2008 2009 2008
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Revenue $ 32,048 $ 53,692 $112,812 $124,044
Expenses:
Cost of goods sold 5,585 11,776 18,305 22,854
Operating 19,140 25,394 55,252 62,622
General and administrative 2,255 2,215 6,776 7,234
Stock based compensation 74 446 182 1,448
Depreciation of property,
plant and equipment 3,655 4,114 13,205 9,857
Amortization of intangible
assets 2,244 2,242 6,728 6,726
(Gain) loss on disposal of
property, plant and equipment (367) 18 (1,377) 61
Foreign exchange loss 33 34 45 82
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32,619 46,239 99,116 110,884
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Operating (loss) earnings (517) 7,453 13,696 13,160
Interest income (8) (6) (27) (14)
Interest expense on operating
lines of credit 42 129 194 476
Interest expense on long-term debt 127 593 981 1,234
(Earnings) loss on equity
investments (260) 28 (503) (409)
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(Loss) earnings before
income taxes (472) 6,709 13,051 11,873
Income taxes
Current tax expense 74 2,807 935 4,845
Future tax (recovery) expense (441) (1,102) 2,636 (1,361)
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(367) 1,705 3,571 3,484
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Net (loss) earnings and other
comprehensive (loss) income (105) 5,004 9,480 8,389
(Deficit) retained earnings,
beginning of period (83,882) 7,867 (93,467) 4,482
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(Deficit) retained earnings,
end of period $(83,987) $ 12,871 $(83,987) $ 12,871
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Earnings per share:
Basic $ 0.00 $ 0.05 $ 0.09 $ 0.08
Diluted $ 0.00 $ 0.05 $ 0.09 $ 0.08
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Consolidated Statements of Cash Flows
Three and nine months ended September 30, 2009 and 2008 (Unaudited)
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Three months ended Nine months ended
September 30 September 30
(000's) 2009 2008 2009 2008
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Cash provided by (used in):
Operating activities:
Net (loss) earnings $ (105) $ 5,004 $ 9,480 $ 8,389
Items not involving cash:
Depreciation of property,
plant and equipment 3,655 4,114 13,205 9,857
Amortization of intangible
assets 2,244 2,242 6,728 6,726
Future income tax (recovery)
expense (441) (1,102) 2,636 (1,361)
Stock based compensation 74 446 182 1,448
(Earnings) loss on equity
investments (260) 28 (503) (409)
Gain on sale of property,
plant and equipment (784) (962) (2,447) (1,721)
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4,383 9,770 29,281 22,929
Changes in non-cash working
capital items 3,350 (9,960) 6,868 (13,101)
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7,733 (190) 36,149 9,828
Investing activities:
Purchase of property, plant
and equipment (1,605) (10,161) (9,675) (48,796)
Purchase of intangibles (626) - (626) -
Proceeds on sale of property,
plant and equipment 2,924 1,208 8,196 4,456
Return of capital from
equity investments (349) 334 240 334
Business acquisitions (818) - (818) (580)
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(474) (8,619) (2,683) (44,586)
Changes in non-cash working
capital items 1,394 346 1,394 914
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920 (8,273) (1,289) (43,672)
Financing activities:
(Repayment of) proceeds from
bank indebtedness (251) 666 (1,776) 1,694
Share purchase costs (53) - (53) -
Share issue costs - - - (15)
Repurchase of shares (5,793) - (5,793) -
(Repayment of) proceeds from
operating lines of credit (1,132) 258 (628) (6,352)
Proceeds from long-term debt 7,200 8,200 7,200 39,000
Repayment of long-term debt (7,615) (207) (32,801) (986)
Repayment of capital leases - (454) - (507)
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(7,644) 8,463 (33,851) 32,834
Changes in non-cash working
capital items (887) - (887) (210)
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(8,531) 8,463 (34,738) 32,624
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Increase (decrease) in
cash position 122 - 122 (1,220)
Cash, beginning of period - - - 1,220
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Cash, end of period $ 122 $ - $ 122 $ -
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Supplementary information:
Income taxes paid $ 701 $ 817 $ 549 $ 4,800
Interest income received 8 4 27 12
Interest paid 192 524 1,360 1,551
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This press release may contain forward-looking statements that are subject to risk factors associated with the oil and gas and mining businesses and the overall economy. The Corporation believes that the expectations reflected in this press release are reasonable, but results may be affected by a variety of variables. The Corporation relies on litigation protection for "forward-looking" statements.
For further information: Ric Peterson, Chairman, President and Chief Executive Officer, or Bob German, 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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