Horizon North Logistics Inc. Announces Results For the Quarter and Year Ended December 31, 2012
TSX Symbol: HNL
CALGARY, Feb. 20, 2013 /CNW/ - Horizon North Logistics Inc. ("Horizon" or the "Corporation") reported its financial and operating results for the quarter and years ended December 31, 2012 and 2011.
Highlights
- Horizon continues to be significantly levered to oil sands activity with 63% of consolidated revenues derived from oil sands in 2012 as compared to 55% in 2011.
- Consolidated revenues increased 31% year over year:
- Revenues from the Camps & Catering segment increased by 30% as compared to the prior year with increases in camp rental and catering operations as well as strong camp sales and associated installation and transportation revenues;
- Revenues from the Matting segment increased by 34% as compared to the prior year driven by significant demand for mat sales throughout the year.
- Consolidated EBITDAS for the year improved significantly to $145.0 million or 28% of revenues as compared to $102.6 million or 25% of revenues in the prior year, an increase of 41% year over year:
- EBITDAS from the Camps and Catering segment was $134.2 million or 30% of revenues as compared to $93.5 million or 27% of revenues in the prior year, a year over year increase of 44%;
- EBITDAS from the Matting segment increased to $22.6 million or 25% of revenues as compared to $17.9 million or 26% of revenues in the prior year, a year over year increase of 26%.
Annual Financial Summary
| Years ended December 31 | |||||||||
| (000's except per share amounts) | 2012 | % change | 2011 | % change | 2010 | ||||
| Revenue | $ | 526,616 | 31% | $ | 402,993 | 68% | $ | 239,258 | |
| EBITDAS(1) | 145,027 | 41% | 102,636 | 96% | 52,483 | ||||
| EBITDAS as a % of revenue | 28% | 25% | 22% | ||||||
| Operating earnings before impairment loss(1) | 102,758 | 45% | 70,794 | 174% | 25,855 | ||||
| Operating earnings before impairment loss as a % of revenue | 20% | 18% | 11% | ||||||
| Impairment loss | - | - | 8,071 | - | - | ||||
| Operating earnings after impairment loss | 102,758 | 64% | 62,723 | 143% | 25,855 | ||||
| Total profit before impairment loss | $ | 72,883 | 38% | $ | 52,893 | 222% | $ | 16,430 | |
| Total profit after impairment loss | 72,883 | 63% | 44,822 | 173% | 16,430 | ||||
| Total comprehensive income | 72,933 | 62% | 44,980 | 174% | 16,430 | ||||
| Earnings per share before impairment loss | - basic | $ | 0.67 | 31% | $ | 0.51 | 213% | $ | 0.16 |
| - diluted | 0.66 | 33% | 0.49 | 206% | 0.16 | ||||
| Earnings per share after impairment loss | - basic | $ | 0.67 | 60% | $ | 0.42 | 163% | $ | 0.16 |
| - diluted | 0.66 | 61% | 0.41 | 156% | 0.16 | ||||
| Total assets | $ | 495,993 | 39% | $ | 357,137 | 29% | $ | 277,837 | |
| Long-term loans and borrowings | 116,872 | 112% | 55,234 | 82% | 30,363 | ||||
| Funds from operations(1) | 113,062 | 38% | 82,124 | 103% | 40,419 | ||||
| Capital spending | 139,346 | 38% | 101,034 | 143% | 41,561 | ||||
| Debt to total capitalization ratio(1) | 0.30 | 43% | 0.21 | 11% | 0.19 | ||||
| Dividends declared | $ | 21,662 | $ | 12,770 | $ | - | |||
| Dividends declared per share | $ | 0.20 | $ | 0.12 | $ | - | |||
(1) See financial measures definitions on the last page of the press release for details.
Overview
2012 proved to be another successful year for Horizon on virtually all fronts. Revenue, EBITDAS and Earnings per Share increased by 31%, 41% and 33%, respectively, over the results achieved in 2011. At the same time, the Company executed the most ambitious capital spending program in its 6 year history, deploying $139 million to increase and maintain its operating asset base. Most notably, our rentable bed count increased by 2,000 to exit 2012 at 8,500. Horizon's continued growth also resulted in improved bottom line performance as measured by return on invested capital which was 20.4% for the 2012 fiscal year compared to 19.6% in 2011.
Outlook
Horizon's customer base expanded in 2012 with new customers engaged in SAGD oil sands projects, natural gas development in northeast British Columbia and northwestern Alberta, as well as infrastructure projects throughout western Canada. Oil sands development activities, driven primarily by SAGD projects, continue to be the main driver of Horizon's growth and are expected to remain robust over the next few years. Oil sands activity accounted for 63% of Horizon's consolidated revenues for 2012.
Coming into 2013, Horizon saw a reduction in bed requirements for a specific project from a major customer. While reduced utilization and visibility on the revenue from these assets is likely in the near term, activity in the region from other operators remains robust and Horizon continues to see opportunities to remarket or reposition these beds as we move through the second half of 2013.
Capital spending for 2013 is expected to be $80 million, focused primarily on adding 1,000 beds to the camp and catering operations throughout the year. Of the expected 1,000 beds, 36% are under contract to be deployed in the second quarter, primarily in the oil sands region of Alberta on a SAGD project. Capital spending in 2013 is expected to be less than the $140 million 2012 program so as to match the continued growth of our operating and service delivery capabilities and maintaining a conservative balance sheet.
Dividend payment
Horizon North Logistic Inc. announced today that its Board of Directors has declared a dividend for the first quarter of 2013 at $0.0625 per share, an increase of 25% from the previous quarterly dividend of $0.05 per share in 2012. The dividend is payable to shareholders of record at the close of business on March 31, 2013 to be paid on April 12, 2013. The dividends are eligible dividends for Canadian tax purposes.
Segment realignment
During the quarter ended December 31, 2012, the Corporation realigned the business segments to include the Marine services operations within the Camps & Catering segment. This was done to better represent the nature of Horizon's northern operations where revenue is generated mainly from accommodation barge rental and equipment rental. All comparatives have been revised to reflect the change.
| Fourth Quarter Financial Summary | |||||||
| Three months ended December 31 | |||||||
| (000's except per share amounts) | 2012 | 2011 | % Change | ||||
| Revenue | $ | 138,558 | $ | 110,929 | 25% | ||
| EBITDAS(1) | 36,039 | 29,369 | 23% | ||||
| EBITDAS as a % of revenue | 26% | 26% | |||||
| Operating earnings before impairment loss(1) | 23,390 | 19,936 | 17% | ||||
| Operating earnings before impairment loss as a % of revenue | 17% | 18% | (6%) | ||||
| Impairment loss | - | 8,071 | - | ||||
| Operating earnings | 23,390 | 11,865 | 97% | ||||
| Total profit before impairment loss | $ | 15,991 | $ | 16,680 | (4%) | ||
| Total profit after impairment loss | 15,991 | 8,609 | 86% | ||||
| Total comprehensive income | 15,959 | 8,537 | 87% | ||||
| Earnings per share before impairment loss | - basic | $ | 0.15 | $ | 0.16 | (6%) | |
| - diluted | 0.15 | 0.15 | -% | ||||
| Earnings per share after impairment loss | - basic | 0.15 | 0.08 | 88% | |||
| - diluted | 0.15 | 0.08 | 88% | ||||
| Total assets | $ | 495,993 | $ | 357,137 | 39% | ||
| Long-term loans and borrowings | 116,872 | 55,234 | 112% | ||||
| Funds from operations(2) | 28,323 | 17,202 | 65% | ||||
| Capital spending | 23,378 | 21,926 | 7% | ||||
| Debt to total capitalization ratio(3) | 0.30 | 0.21 | 43% | ||||
| Dividends declared | $ | 5,439 | $ | 4,270 | 27% | ||
| Dividends declared per share | $ | 0.05 | $ | 0.04 | 25% | ||
| (1) | See financial measures definitions on the last page of the press release for details. |
| Fourth Quarter Financial Results | ||||||||||||
| Three months ended December 31, 2012 | ||||||||||||
| (000's) | Camps & Catering |
Matting | Corporate | Inter-segment Eliminations |
Total | |||||||
| Revenue | $ | 117,214 | $ | 24,151 | $ | - | $ | (2,807) | $ | 138,558 | ||
| Expenses | ||||||||||||
| Direct costs | 81,691 | 18,752 | 34 | (2,688) | 97,789 | |||||||
| Selling & administrative | 1,728 | 196 | 2,806 | - | 4,730 | |||||||
| EBITDAS | 33,795 | 5,203 | (2,840) | (119) | 36,039 | |||||||
| EBITDAS as a % of revenue | 29% | 22% | 26% | |||||||||
| Share based payments | 379 | 55 | 291 | - | 725 | |||||||
| Depreciation & amortization | 9,867 | 2,122 | 122 | (56) | 12,055 | |||||||
| Gain on disposal of property, plant and equipment | (38) | (80) | (13) | - | (131) | |||||||
| Operating earnings (loss) | $ | 23,587 | $ | 3,106 | $ | (3,240) | $ | (63) | $ | 23,390 | ||
| Finance costs | 971 | |||||||||||
| Share of equity accounted investees | 504 | |||||||||||
| Income tax expense | 5,924 | |||||||||||
| Other comprehensive loss | 32 | |||||||||||
| Total comprehensive income | $ | 15,959 | ||||||||||
| Earnings per share | - basic | $ | 0.15 | |||||||||
| - diluted | $ | 0.15 | ||||||||||
| Three months ended December 31, 2011 | ||||||||||||
| (000's) | Camps & Catering |
Matting | Corporate | Inter-segment Eliminations |
Total | |||||||
| Revenue | $ | 94,674 | $ | 20,797 | $ | - | $ | (4,542) | $ | 110,929 | ||
| Expenses | ||||||||||||
| Direct costs | 66,750 | 15,970 | 1 | (4,597) | 78,124 | |||||||
| Selling & administrative | 960 | 146 | 2,330 | - | 3,436 | |||||||
| EBITDAS | 26,964 | 4,681 | (2,331) | 55 | 29,369 | |||||||
| EBITDAS as a % of revenue | 28% | 23% | - | - | 26% | |||||||
| Share based payments | 79 | 16 | 51 | - | 146 | |||||||
| Depreciation & amortization | 5,999 | 1,863 | 85 | (24) | 7,923 | |||||||
| Loss on disposal of property, plant and equipment | 1,364 | - | - | - | 1,364 | |||||||
| Operating earnings before impairment loss | $ | 19,522 | $ | 2,802 | $ | (2,467) | $ | 79 | $ | 19,936 | ||
| Impairment loss | 8,071 | - | - | - | 8,071 | |||||||
| Operating earnings (loss) | $ | 11,451 | $ | 2,802 | $ | (2,467) | $ | 79 | $ | 11,865 | ||
| Finance costs | 637 | |||||||||||
| Share of equity accounted investees | (12) | |||||||||||
| Income tax expense | 2,631 | |||||||||||
| Other comprehensive loss | 72 | |||||||||||
| Total comprehensive income | $ | 8,537 | ||||||||||
| Earnings per share before impairment loss | - basic | $ | 0.16 | |||||||||
| - diluted | $ | 0.15 | ||||||||||
| Earnings per share after impairment loss | - basic | $ | 0.08 | |||||||||
| - diluted | $ | 0.08 | ||||||||||
Camps & Catering
Camps & Catering revenue is comprised of camp rental and catering operations revenue, manufacturing and space unit sales revenue and space rental and service revenue.
Effective October 1, 2012, presentation of Camps & Catering segment has been realigned to include Marine services to better represent the businesses within the Camps & Catering segment. Marine services revenue is now reported as Camp rental and catering operations revenue and includes the following components: barge camp rental, equipment rental and other ancillary revenue. 2011 comparatives have been similarly revised to ensure meaningful comparatives.
| Three months ended December 31 | ||||||
| (000's except bed rental days and catering only days) | 2012 | 2011 | % change | |||
| Camp rental and catering operations revenue | $ | 76,668 | $ | 55,383 | 38% | |
| Manufacturing sales | 38,019 | 37,029 | 3% | |||
| Space rental and service revenue | 2,527 | 2,262 | 12% | |||
| Total revenue | $ | 117,214 | $ | 94,674 | 24% | |
| EBITDAS | $ | 33,795 | $ | 26,964 | 25% | |
| EBITDAS as % of revenue | 29% | 28% | ||||
| Operating earnings | $ | 23,587 | $ | 11,451 | 106% | |
| Bed rental days(1) | 433,832 | 220,678 | 97% | |||
| Catering only days(2) | 58,794 | 78,958 | (26%) | |||
| (1) | One bed rental day represents;the provision of one bed for one day under a combined rental and catering manday rate; or the provision of one bed for one day under an equipment rental rate for dedicated camp equipment. |
| (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 $117.2 million for the three months ended December 31, 2012 as compared to $94.7 million for the three months ended December 31, 2011, an increase of $22.5 million or 24%. EBITDAS for the three months ended December 31, 2012 were $33.8 million or 29% of revenue compared to $27.0 million or 28% of revenue for the three months ended December 31, 2011, an increase of $6.8 million or 25%.
Horizon's growth in the Camps & Catering segment for the comparative quarters was led by camp rental and catering operations with revenue growth of $21.3 million or 38%. These operations are highly levered to activity levels in the Alberta oil sands area and Horizon operated an additional 2,277 beds for the three months ended December 31, 2012 as compared to the same period of 2011 with the majority of the additional beds being deployed in the Alberta oil sands area to take advantage of the high levels of activity.
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 projects. Revenues from camp and catering operations were $76.7 million for the three months ended December 31, 2012 compared to $55.4 million for the three months ended December 31, 2011, an increase of $21.3 million or 38%.
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 December 31 | |||||||||||||
| (000's for revenue only) | 2012 | 2011 | |||||||||||
| Large camp |
Drill camp |
Total | Large camp |
Drill camp |
Total | ||||||||
| Revenue | $ | 59,718 | $ | 3,925 | $ | 63,643 | $ | 37,525 | $ | 3,389 | $ | 40,914 | |
| Bed rental days(1) | 410,456 | 23,376 | 433,832 | 200,421 | 20,257 | 220,678 | |||||||
| Revenue per bed rental day | $ | 145 | $ | 168 | $ | 147 | $ | 187 | $ | 167 | $ | 185 | |
| Rentable beds at period end | 6,905 | 871 | 7,776 | 4,850 | 950 | 5,800 | |||||||
| Average rentable beds available(2) | 6,897 | 836 | 7,733 | 4,506 | 950 | 5,456 | |||||||
| Utilization(3) | 65% | 30% | 61% | 48% | 23% | 44% | |||||||
| (1) | One bed rental day represents; the provision of one bed for one day under a combined rental and catering manday rate; or the provision of one bed for one day under an equipment rental rate for dedicated camp equipment. |
| (2) | Average 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 December 31, 2012 increased by $22.2 million or 59% compared to the same period in 2011, primarily as a result of a larger fleet mainly deployed in the oil sands area.
Within the large camp operations revenue is derived from two styles of camp offerings, open camps and dedicated single customer camps. In 2012 an increased focus on securing longer term contracts for dedicated single customers camps resulted in a higher proportion of large camp revenue being generated from these dedicated camps as compared to 2011. Generally the contracted revenue for open camps has a short contract duration typically priced with a single rate on bed rental day basis. The dedicated single customer camps usually are longer term contracts and priced using an equipment rental charge and a room occupancy charge. The contracts with the two charge structure have a significant impact on both utilization and on the revenue per bed rental day. With the two charge pricing structure the beds are considered to be 100% utilized since the customer is paying an equipment rental charge, in comparison, the single rate bed rental day pricing is based on occupancy. The changing mix of the two contract types was a contributing factor to the 35% increase in utilization for fourth quarter of 2012 as compared to the fourth quarter of 2011. An additional effect of the contract mix is to decrease in the revenue per bed rental day as a result of the increased number of beds considered rented, the bed rental day rate in 2012 was $145, a decrease of $42, or 22%.
Of note, a large portion of the dedicated camps have been contracted with customers new to Horizon, particularly on SAGD oil sands projects, resulting in a more diverse customer base in 2012 as compared to 2011.
Revenues from drill camp operations for the three months ended December 31, 2012 increased by $0.5 million or 16% compared to the same period of 2011. The increase was a result of higher volumes as compared to the comparative quarter in 2011.
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 December 31 | ||||
| (000's for revenue only) | 2012 | 2011 | ||
| Catering only revenue | $ | 6,119 | $ | 7,400 |
| Catering only days(1) | 58,794 | 78,958 | ||
| Revenue per catering only day | $ | 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, decreased $1.3 million or 17% for the three months ended December 31, 2012 as compared to same period of 2011. The lower volumes were mainly a result of the close out of a significant catering only job at a mining operation in the Northwest Territories. The higher rate was mainly the result of change in customer mix due to close out of the large catering job.
The table below outlines the service revenue generated from the camp and catering operations:
| Three months ended December 31 | ||||
| (000's) | 2012 | 2011 | ||
| Camp and catering operations service related revenue | $ | 6,906 | $ | 7,069 |
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 the nature of the specific service projects undertaken in the comparative quarters.
Manufacturing sales
Manufacturing sales revenues include the manufacture of camps sold to third parties and the transportation and installation associated with those sales. Revenues for the three months ended December 31, 2012 were $38.0 million as compared to $37.0 million for the same period in 2011, an increase of $1.0 million or 3%. Manufacturing production capacity is regularly reviewed by management to determine the allocation of production required to meet external third party sales contracts and internal fleet requirements. The increase in revenue was a result of the allocation of production capacity between sales and fleet build in the comparative quarters. Actual direct manufacturing hours were 188,234 hours for the three months ended December 31, 2012 as compared to 138,507 in the comparative period, an increase of 49,727 hours or 36%. The increase was a result of additional production staff for the three months ended December 31, 2012 compared to the same period of 2011. In the fourth quarter of 2012 57% of direct hours were allocated to external sales contracts compared to 64% in the same period of 2011. Service revenue, which includes the transportation and installation components of the sale, for the three months ended December 31, 2012, was focused primarily on close out of a significant oil sands related camp project and ramping up for the next significant project which is currently in the manufacturing phase.
Space rental revenues
Space rental revenues for the three months ended December 31, 2012 were $2.5 million as compared to $2.3 million for the same period in 2011, an increase of $0.2 million or 12%. The increase came from slightly higher volumes with fleet utilization of 87% for the three months ended December 31, 2012 compared to 85% for the same period in 2011.
Direct costs
Direct costs for the three months ended December 31, 2012 were $81.7 million or 70% of revenue as compared to $66.8 million or 71% of revenue for the same period of 2011. Direct costs are closely related to business volumes and the increased direct costs are primarily a result of the higher activity levels in the comparative periods. As a percentage of revenue, direct costs decreased by 1% in the comparative periods, the decrease is reflecting fixed costs in relation to the levels of activity, as activity levels increase fixed costs become a smaller proportion of revenue.
Matting
Matting revenue is comprised of mat rental revenue, mat sales revenue, installation, transportation, service, and other revenue as follows:
| Three months ended December 31 | |||||||
| (000's except mat rental days and numbers of mats) | 2012 | 2011 | % change | ||||
| Access mat rental revenue(1) | $ | 2,919 | $ | 1,842 | 58% | ||
| Other mat and rental equipment revenue(2) | 888 | 465 | 91% | ||||
| Mat sales revenue | 10,893 | 10,694 | 2% | ||||
| Installation, transportation, service, and other revenue | 9,451 | 7,796 | 21% | ||||
| Total revenue | $ | 24,151 | $ | 20,797 | 16% | ||
| EBITDAS | $ | 5,203 | $ | 4,681 | 11% | ||
| EBITDAS as a % of revenue | 22% | 23% | (4%) | ||||
| Operating earnings | $ | 3,106 | $ | 2,802 | 11% | ||
| Access mat rental days - owned mats(3) | 777,350 | 619,727 | 25% | ||||
| Access mat rental days - third party mats(4) | 263,808 | - | 100% | ||||
| Total access mat rental days | 1,041,158 | 619,727 | 68% | ||||
| Average owned access mats in rental fleet(5) | 14,190 | 9,863 | 44% | ||||
| Average sub rental access mats in rental fleet(6) | 2,866 | - | 100% | ||||
| Access mats in rental fleet at quarter end(7) | 13,714 | 9,739 | 41% | ||||
| Mats sold: | |||||||
| New mats | 13,910 | 13,557 | 3% | ||||
| Used Mats | 992 | 437 | 127% | ||||
| Total mats sold | 14,902 | 13,994 | 6% | ||||
| (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 owned access mat for one day. |
| (4) | One mat rental day equals the rental of one third party sub rented access mat for one day. |
| (5) | Average access mat rental fleet numbers reflect only owned access mats. |
| (6) | 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. |
| (7) | Access mats in rental fleet at quarter end represents the number of owned access mats in the Matting fleet on December 31, 2012. |
Revenues from the Matting segment for the three months ended December 31, 2012 were $24.2 million as compared to $20.8 million for the same period of 2011, an increase of $3.4 million or 16%. EBITDAS for the three months ended December 31, 2012 were $5.2 million or 22% of revenue as compared to $4.7 million or 23% of revenue for the same period of 2011, an increase of $0.5 million or 11%.
Mat and equipment rental revenue
Total mat and equipment rental revenues for the three months ended December 31, 2012 were $3.8 million as compared to $2.3 million for the same period of 2011, an increase of $1.5 million or 65%. The growth in rental revenue was mainly driven by the increase in mat rental days partially offset by slightly lower revenues per mat rental day. Volumes increased in the fourth quarter of 2012 as compared to the same period in 2011 by 421,431 days. The owned access mat fleet was 60% utilized compared to 68% in the comparative quarter of 2011. The revenue per mat rental day decreased slightly to $2.80 per day in the fourth quarter of 2012 from $2.97 in the same period of 2011, this decrease was mainly due to the duration of contracts in the comparative periods.
Mat sales revenue
Revenues from mat sales for the three months ended December 31, 2012 were relatively consistent in the comparative quarters with 2012, higher by $0.2 million. The mix of new and used access mat sales changed with used mats sales being a higher proportion of total mat sales in the three months ended December 31, 2012 as compared to the same period of 2011. As a result of the sales mix, revenue per mat decreased by $33 per mat as used mats have a lower selling price.
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 December 31, 2012 were $9.5 million as compared to $ 7.8 million the same period in 2011, an increase of $1.7 million or 21%. The increase is mainly reflective of the higher volume of rentals in the three months ended December 31, 2012, as compared to the same period of 2011.
Direct costs
Direct costs for the three months ended December 31, 2012 were $18.8 million or 78% of revenue as compared to $16.0 million or 77% of revenue for the same period of 2011. Direct costs are driven by the level of business activity, with the increase in revenue, as compared to the same period of 2011, direct costs have increased accordingly. Direct costs as a percentage of revenue increased by 1% for the three months ended December 31, 2012 as compared the same period of 2011. The increase is primarily a result of costs in the rental operation as a result of sub renting mats as compared to 2011 when there was no mat sub rental.
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 December 31, 2012 were $2.8 million as compared to $2.3 million in the same period in 2011. This increase of $0.5 million reflects the increased cost to support the higher level of business activity. Corporate costs, as a percentage of total revenue, remained consistent for the comparative periods at 2.0%.
Other Items
| Depreciation and amortization | ||||||
| Three months ended December 31, | ||||||
| (000's) | 2012 | 2011 | % change | |||
| Depreciation | $ | 10,004 | $ | 5,842 | 71% | |
| Amortization | 2,051 | 2,081 | (1%) | |||
| Total depreciation and amortization | $ | 12,055 | $ | 7,923 | 52% | |
Depreciation and amortization costs for the three months ended December 31, 2012 were $12.1 million as compared to $7.9 million in the same period of 2011. The increase was a result of depreciation which increased by $4.2 million or 71%. The increased depreciation was a result of camp asset additions which include camp setup and installation costs that are depreciated over the term of the contract. Depreciation for the camp setup and installation was $2.0 million higher in the fourth quarter of 2012 as compared to the same period of 2011.
Financing costs
Financing costs include interest on loans and borrowings and accretion on notes payable. For the three months ended December 31, 2012 financing costs were $1.0 million as compared to $0.6 million in the same period of 2011, an increase of $0.4 million as a result of a higher interest expense on loans and borrowings. The increased interest expense was due to higher weighted average debt of $105.1 million for the three months ended December 31, 2012 compared to $49.6 million in the same period of 2011.The interest rate decreased in the comparative quarters as a result of lower rates in the renewed credit facility and a higher proportion of debt being converted to bankers acceptance in the fourth quarter of 2012 as compared to the same period of 2011.
Income taxes
Income tax expense was $5.9 million, an effective tax rate of 27%, for the three months ended December 31, 2012 as compared to a tax expense of $2.6 million, an effective rate of 24% for the same period of 2011. The effective tax rate in the fourth quarter of 2011 was low due to the timing of the realization of tax losses in the four quarter of 2011.
Selling and administrative
Selling and administrative expense was $4.7 million for the three months ended December 31, 2012 as compared to $3.4 million in the same period of 2011. The increase is reflective of the higher levels of business activity in 2012 as compared to 2011. As a percentage of revenue, selling and administrative expense increased to 3.4% in 2012 as compared to 3.1% in 2011.
| Consolidated statement of financial position | |||||
| (000's) | December 31, 2012 |
December 31, 2011 |
|||
| Assets | |||||
| Current assets: | |||||
| Trade and other receivables | 133,195 | 83,484 | |||
| Inventories | 13,321 | 15,334 | |||
| Prepayments | 2,506 | 3,981 | |||
| Income taxes receivable | 146 | - | |||
| 149,168 | 102,799 | ||||
| Non-current assets: | |||||
| Property, plant and equipment | 330,205 | 228,793 | |||
| Intangible assets | 10,028 | 18,232 | |||
| Goodwill | 2,136 | 2,136 | |||
| Investments in equity accounted investees | - | 529 | |||
| Deferred tax assets | 1,772 | 1,837 | |||
| Other assets | 2,684 | 2,811 | |||
| 346,825 | 254,338 | ||||
| $ | 495,993 | $ | 357,137 | ||
| Liabilities and Shareholders' Equity | |||||
| Current liabilities: | |||||
| Trade and other payables | 59,511 | 41,833 | |||
| Deferred revenue | 588 | 13,601 | |||
| Income taxes payable | 12,661 | 4,380 | |||
| Current portion of loans and borrowings | 1,416 | 1,281 | |||
| 74,176 | 61,095 | ||||
| Non-current liabilities: | |||||
| Asset retirement obligations | 1,364 | 1,283 | |||
| Loans and borrowings | 116,872 | 55,234 | |||
| Deferred tax liabilities | 29,318 | 23,456 | |||
| 221,730 | 141,068 | ||||
| Shareholders' equity: | |||||
| Share capital | 179,999 | 173,438 | |||
| Contributed surplus | 10,783 | 10,421 | |||
| Accumulated other comprehensive income | 208 | 158 | |||
| Retained earnings | 83,273 | 32,052 | |||
| 274,263 | 216,069 | ||||
| $ | 495,993 | $ | 357,137 | ||
| Consolidated statement of comprehensive income | |||||
| Twelve months ended December 31, 2012 and 2011 | |||||
| (000's except per share amounts) | December 31, 2012 |
December 31, 2011 |
|||
| Revenue | $ | 526,616 | $ | 402,993 | |
| Operating expenses: | |||||
| Direct costs | 364,361 | 285,837 | |||
| Depreciation | 32,007 | 21,420 | |||
| Amortization of intangible assets | 44 | 163 | |||
| Share based compensation | 1,268 | 377 | |||
| Impairment loss | - | 8,071 | |||
| (Gain) loss on disposal of property, plant and equipment | (93) | 1,521 | |||
| Direct operating expenses | 397,587 | 317,389 | |||
| Gross profit | 129,029 | 85,604 | |||
| Selling & administrative expenses: | |||||
| Selling & administrative expenses | 17,228 | 14,520 | |||
| Amortization of intangible assets | 8,160 | 8,140 | |||
| Share based compensation | 883 | 221 | |||
| Selling & administrative expenses | 26,271 | 22,881 | |||
| Operating earnings | 102,758 | 62,723 | |||
| Finance costs | 3,557 | 2,467 | |||
| Share of equity accounted investees | 529 | 27 | |||
| Profit before tax | 98,672 | 60,229 | |||
| Current tax expense | 19,862 | 8,248 | |||
| Deferred tax expense | 5,927 | 7,159 | |||
| Income tax expense | 25,789 | 15,407 | |||
| Total profit | 72,883 | 44,822 | |||
| Other comprehensive income: | |||||
| Translation of foreign operations | (50) | (158) | |||
| Other comprehensive income, net of income tax | (50) | (158) | |||
| Total comprehensive income | $ | 72,933 | $ | 44,980 | |
| Earnings per share: | |||||
| Basic | $ | 0.67 | $ | 0.42 | |
| Diluted | $ | 0.66 | $ | 0.41 | |
| Consolidated statement of changes in equity | ||||||||||
| (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 | - | - | - | 44,822 | 44,822 | |||||
| Share based compensation | - | 598 | - | - | 598 | |||||
| Share options exercised | 6,085 | (1,623) | - | - | 4,462 | |||||
| Translation of foreign operations | - | - | 158 | - | 158 | |||||
| Dividends declared and paid ($0.08 per share) | (8,500) | (8,500) | ||||||||
| 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 | - | - | - | 72,883 | 72,883 | |||||
| Share based compensation | - | 2,151 | - | - | 2,151 | |||||
| Share options exercised | 6,561 | (1,789) | - | - | 4,772 | |||||
| Translation of foreign operations | - | - | 50 | - | 50 | |||||
| Dividends declared and paid ($0.15 per share) | - | - | - | (16,223) | (16,223) | |||||
| Dividends declared ($0.05 per share) | - | - | - | (5,439) | (5,439) | |||||
| Balance at December 31, 2012 | $ | 179,999 | $ | 10,783 | $ | 208 | $ | 83,273 | $ | 274,263 |
| Consolidated statement of cash flows | |||||
| Twelve months ended December 31, 2012 and 2011 | |||||
| December 31, | December 31, | ||||
| (000's) | 2012 | 2011 | |||
| Cash provided by (used in): | |||||
| Operating activities: | |||||
| Profit for the period | $ | 72,883 | $ | 44,822 | |
| Adjustments for: | |||||
| Depreciation | 32,007 | 21,420 | |||
| Amortization of intangible assets | 8,204 | 8,303 | |||
| Impairment loss | - | 8,071 | |||
| Share based compensation | 2,151 | 598 | |||
| Amortization of other assets | 127 | 123 | |||
| Share of equity accounted investees | 529 | 27 | |||
| Gain on sale of property, plant and equipment | (2,924) | (1,267) | |||
| Unrealized foreign exchange | 85 | 27 | |||
| Finance costs | 3,557 | 2,467 | |||
| Income tax expense | 25,789 | 15,407 | |||
| 142,408 | 99,998 | ||||
| Income taxes paid | (11,727) | (5,211) | |||
| Interest paid | (2,904) | (1,708) | |||
| Changes in non-cash working capital items | (41,572) | (5,368) | |||
| 86,205 | 87,711 | ||||
| Investing activities: | |||||
| Purchase of property, plant and equipment | (139,346) | (101,034) | |||
| Proceeds on sale of property, plant and equipment | 8,831 | 8,683 | |||
| (130,515) | (92,351) | ||||
| Financing activities: | |||||
| Shares issued on exercise of options | 4,772 | 4,462 | |||
| Net proceeds from loans and borrowings | 61,200 | 12,893 | |||
| Payment of dividends | (20,493) | (8,500) | |||
| 45,479 | 8,855 | ||||
| Change in non-cash working capital items | (1,169) | (4,215) | |||
| 44,310 | 4,640 | ||||
| Change in cash position | - | - | |||
| Cash, beginning of period | - | - | |||
| Cash, end of period | $ | - | $ | - | |
Financial Measures Definitions
EBITDAS
EBITDAS (Earnings before interest, taxes, depreciation, amortization, impairment, gain/loss on equity investments, gain/loss on disposal of property, plant and equipment, 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") constitute forward-looking statements or information. These statements relate to future events or future performance of Horizon. All statements other than statements of historical fact are forward-looking statements. The use of any of the words "anticipate", "plan" "continue", "estimate", "expect", "may", "will", "project", "predict", "potential", "should", "believe" and similar expressions are intended to identify forward-looking statements.
In particular, such forward looking statements include: under the heading "Outlook" the statements that "Oil sands development activities, driven primarily by SAGD projects, continue to be the main driver of Horizon's growth and are expected to remain robust over the next few years.", "While reduced utilization and visibility on the revenue from these assets is likely in the near term, activity in the region from other operators remains strong and Horizon continues to see opportunities to remarket or reposition these beds as we move through the second half of 2013", "Capital spending for 2013 is expected to be $80 million, focused primarily on adding 1,000 beds to the camp and catering operations throughout the year. Of the expected 1,000 beds, 36% are under contract to be deployed in the second quarter, primarily in the oil sands region of Alberta on a SAGD project. Capital spending in 2013 is expected to be less than the $140 million 2012 program so as to match the continued growth of our operating and service delivery capabilities and maintaining a conservative balance sheet."
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.com. 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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