Horizon North Logistics Inc. Announces Results for the Quarter and Year Ended December 31, 2014
TSX Symbol: HNL
CALGARY, Feb. 18, 2015 /CNW/ - Horizon North Logistics Inc. ("Horizon" or the "Corporation") reported its financial and operating results for the quarter and years ended December 31, 2014 and 2013.
Fourth Quarter Highlights
- Camp rental and catering operations revenue grew by 41% in Q4 2014 compared to the same period of 2013 driven primarily by higher activity levels and stronger utilization of a larger fleet;
- Relocatable structures revenue grew by 45% in Q4 2014 compared to the same period of 2013 as a result of the fleet expansion undertaken in the first half of 2014;
- Matting revenues in Q4 2014 grew by 27% compared to the same period of 2013 as a result of stronger service activity.
Financial Summary
| Three months ended December 31 |
Twelve months ended December 31 |
||||||||||||
| (000's except per share amounts) |
2014 |
2013 |
% Change |
2014 |
2013 |
% Change |
|||||||
| Revenue |
$ |
135,860 |
$ |
108,641 |
25% |
$ |
476,060 |
$ |
554,387 |
(14%) |
|||
| EBITDAS(1) |
27,774 |
15,687 |
77% |
92,866 |
126,334 |
(26%) |
|||||||
| EBITDAS as a % of revenue |
20% |
14% |
20% |
23% |
|||||||||
| Operating earnings |
11,510 |
(1,607) |
816% |
37,502 |
63,291 |
(41%) |
|||||||
| Operating earnings as a % of revenue |
8% |
(1%) |
8% |
11% |
|||||||||
| Total profit |
7,183 |
(2,520) |
385% |
23,646 |
42,451 |
(44%) |
|||||||
| Total comprehensive income |
7,329 |
(2,376) |
408% |
24,026 |
42,637 |
(44%) |
|||||||
| Earnings per share |
|||||||||||||
| – basic |
$ |
0.06 |
(0.02) |
400% |
0.21 |
0.39 |
(46%) |
||||||
| – diluted |
0.06 |
(0.02) |
400% |
0.21 |
0.38 |
(45%) |
|||||||
| Total assets |
$ |
539,978 |
$ |
471,115 |
15% |
$ |
539,978 |
$ |
471,115 |
15% |
|||
| Long-term loans and borrowings |
146,370 |
78,256 |
87% |
146,370 |
78,256 |
87% |
|||||||
| Cash from operations |
18,056 |
28,726 |
(37%) |
57,571 |
125,369 |
(54%) |
|||||||
| Capital spending |
|||||||||||||
| Purchase of property, plant & equipment |
17,540 |
34,883 |
(50%) |
114,581 |
90,146 |
27% |
|||||||
| Proceeds from disposals of property, plant & equipment |
(1,967) |
(3,493) |
(44%) |
(14,946) |
(26,925) |
(44%) |
|||||||
| Net Capital spending |
15,573 |
31,390 |
(50%) |
99,635 |
63,221 |
58% |
|||||||
| Debt to EBITDAS(1) |
1.63:1 |
0.46:1 |
1.63:1 |
0.60:1 |
|||||||||
| Debt to total capitalization ratio |
0.35:1 |
0.21:1 |
66% |
0.35:1 |
0.21:1 |
67% |
|||||||
| Dividends declared |
$ |
8,840 |
$ |
6,880 |
28% |
$ |
35,307 |
$ |
27,378 |
29% |
|||
| Dividends declared per share |
$ |
0.08 |
$ |
0.06 |
33% |
$ |
0.32 |
$ |
0.25 |
28% |
|||
| (1) |
See financial measures definitions on the last page of the press release for details. |
Fourth Quarter Overview
Horizon North's results for the three months ended December 31, 2014 ("Q4 2014") were significantly stronger than the same period of 2013 ("Q4 2013") with revenue, EBITDAS, net operating earnings and earnings per share all above Q4 2013. Q4 2014 experienced higher activity levels in the camp rental and catering operations, relocatable structures and matting operations with manufacturing sales essentially unchanged in the comparative quarters.
Consolidated revenues for Q4 2014 were $135.9 million, an increase of $27.2 million or 25% compared to Q4 2013. The majority of the increase was a result of higher camp and catering activity levels which were driven by a larger fleet size in combination with higher utilization and stronger seasonal activity compared to Q4 2013. The fourth quarter of 2014 had several additional large camp projects, announced in late 2013 and early 2014, which were in full operation in Q4 2014. Utilization of the large camp fleet was 69% with an average of 8,285 rentable beds compared to Q4 2013 with utilization of 57% with an average of 7,613 rentable beds. Bed rental days were 524,565, an increase of 197,579 bed days or 60% resulting in RevPAAB of $79 compared to $63 in Q4 of 2013.
In addition to the strong camp and catering activity, the matting operations had higher revenues in Q4 2014 compared to Q4 2013. The increase in revenue is primarily a result of higher mat management services in Q4 2014 compared to the same period of 2013. The fourth quarter of 2014 saw several customers with large mat fleets gather up and consolidate their fleets to their inventory locations in preparation for deployment in 2015.
Manufacturing sales revenues were consistent quarter over quarter however total direct hours were 274,694, a decrease of 40,417 hours or 13% compared to Q4 2013 with 76% of total direct hours allocated to external sales projects in Q4 compared to 44% in Q4 2013. The consistent revenue but higher external hours quarter over quarter reflects the difference between execution phases of projects with the project in Q4 2014 focused on manufacturing, which is labour intensive, compared to the project in Q4 2013 which was primarily focused on site installation which typically consumes less direct labour but has a higher component of subcontractors.
Q4 2014 EBITDAS were $27.8 million, an increase of $12.1 or 77% compared to Q4 2013 as a result of the higher activity levels discussed above. As a percentage of revenues, EBITDAS were 20%, an increase from 14% in Q4 2013 compared to Q4 2013 primarily due to the strong utilization in the camp and catering operations with matting relatively consistent in the comparative quarters.
Net income and earnings per share increased in Q4 2014 compared to Q4 2013 as a result of the stronger revenue and EBITDAS in Q4 2014 and due to the disposal in Q4 2013 of property plant and equipment related to the Corporation's blast resistant structures business.
Annual Overview
Horizon North's results for the year ended December 31, 2014 ("2014") reflect the challenges faced by the Corporation throughout the year; customer driven project delays, escalation of project costs and downward pressure on pricing which all led to the year over year decreases in revenues, EBITDAS, operating earnings and earnings per share compared to the year ended December 31, 2013 ("2013").
Consolidated revenues for the year ended December 31, 2014 decreased by $78.3 million or 14% compared to 2013 with the decrease attributable to the manufacturing sales operations. The significant decrease in manufacturing sales revenues was a result of the timing between external sales projects and the internal fleet requirements for camp rentals and relocatable structures. As a result of customer delays there was a gap between external sales projects with a project completed in Q1 2014 and the next project delayed until late Q3 2014. The total direct hours decreased year over year with fewer hours dedicated to external revenue generating projects compared to 2013. The total direct hours in 2014 were 1,101,526, a decrease of 162,900 hours or 13% compared to 2013 with 57% of total direct hours allocated to external sales compared to 68% in 2013. In contrast to manufacturing, all other operations experienced year over year revenue growth which partially offset the manufacturing decrease. The revenue growth in camps and catering came from additional camp projects related to previous contract announcements and a stronger seasonal lift compared 2013. Higher activity at several open camps in Q1 2014 and Q4 2014 was a result of increased number of seasonal projects compared to 2013. Large camp fleet utilization was 63% with an average of 7,613 rentable beds in 2014 compared to 61% utilization and an average of 7,078 rentable beds in 2013. The higher utilization and revenue led to RevPAAB (revenue per average available bed) of $78 in 2014 compared to $76 in 2013. The revenue strength in the matting operations was mainly from mat sales with a year over year increase in sales of 57%.
2014 EBITDAS were $92.9 million, a decrease of $33.5 million or 26% compared to 2013. The decreased EBITDAS were mainly a result of the lower activity levels in manufacturing as described above. As a percentage of revenues, EBITDAS were 20%, a decrease from 23% in 2013. The decreased EBITDAS as a percentage of revenues were mainly due to higher costs experienced in the manufacturing operations as a result of the mix and the execution phase of projects between the comparative years. In addition, matting experienced decreased margins in 2014 compared to 2013 as a result of a more competitive environment and higher costs in manufacturing and mat rentals. Revenue per mat rental day decreased by $0.20 or 8% to $2.18 per day compared to $2.38 per day in 2013 while costs in the rental operation increased as a result of higher usage of third party access mats compared to 2013. Costs also increased year over year for new mat manufacturing as a result of increased lumber costs due to a weaker Canadian dollar.
Net income and earnings per share decreased in 2014 compared to 2013. The decrease was primarily due to the lower revenues and EBITDAS as discussed above and higher depreciation year over year. The majority of the increased depreciation was related to expansion of the camp rental fleet as discussed above. The remainder of the depreciation increase was related to growth of the relocatable structures fleet in the first half of 2014 and growth of the access mat fleet mainly in the second half of 2014.
Outlook
Horizon North is presently at an inflection point. Commodity prices in early 2015 are under considerable pressure with oil pricing currently in the $40-$55 per barrel range, a six year low. A number of our larger customers have delayed or deferred their capital spending and a tone of extreme caution has pervaded our sector which has significant implications for our business. While we have seen these swings in the past, there is no clear consensus on how long this trough will last.
With this challenging macro environment, Horizon North is undertaking structural changes in its business that will realign the development and direction of the Company, stabilize our base, and prepare us for the next up-cycle. These changes, included taking steps in January 2015 to reduce our manufacturing headcount to match our current order book, outlining a reduced maintenance capital spending program of $25 million, moving towards a more integrated business model which will reduce costs and improve efficiencies and changing our business development strategy to facilitate additional cross selling capabilities for all of our products and services.
We will be expanding our product and service offerings to balance our exposure between the OPEX and CAPEX budgets of our major customers. CAPEX is typically cyclical as compared to OPEX spending which tends to be smoother and more consistent over time. We will broaden our products/service offerings to a variety of end-markets to lessen our exposure to energy market fluctuations. We are continuing to develop new end-markets for our manufacturing platform, for example moving into the construction of permanent modular buildings in commercial and institutional markets. Finally we are preparing our land infrastructure for significant potential mega projects in electricity and LNG.
Our new mission statement at Horizon North is "To provide superior, safe, fully integrated turn-key accommodations and related ancillary infrastructure in Canada and Alaska". This will be our focus in 2015.
Dividend payment
Horizon North Logistics Inc. announced today that its Board of Directors has declared a dividend for the fourth quarter of 2014 at $0.08 per share. The dividend is payable to shareholders of record at the close of business on March 31, 2015 to be paid on April 15, 2015. The dividends are eligible dividends for Canadian tax purposes.
Fourth Quarter Financial Results
| Three months ended December 31, 2014 |
||||||||||||||||||||
| (000's) |
Camps & |
Matting |
Corporate |
Inter-segment |
Total |
|||||||||||||||
| Revenue |
$ |
121,778 |
$ |
14,518 |
$ |
- |
$ |
(436) |
$ |
135,860 |
||||||||||
| Expenses |
||||||||||||||||||||
| Direct costs |
90,989 |
10,241 |
3 |
(436) |
100,797 |
|||||||||||||||
| Selling & administrative |
2,851 |
215 |
4,223 |
- |
7,289 |
|||||||||||||||
| EBITDAS |
27,938 |
4,062 |
(4,226) |
- |
27,774 |
|||||||||||||||
| EBITDAS as a % of revenue |
23% |
28% |
- |
- |
20% |
|||||||||||||||
| Share based compensation |
223 |
62 |
200 |
- |
485 |
|||||||||||||||
| Depreciation & amortization |
12,460 |
2,872 |
315 |
(49) |
15,598 |
|||||||||||||||
| Loss (gain) on disposal of property, plant and equipment |
190 |
- |
(9) |
- |
181 |
|||||||||||||||
| Operating earnings (loss) |
$ |
15,065 |
$ |
1,128 |
$ |
(4,732) |
$ |
49 |
$ |
11,510 |
||||||||||
| Finance costs |
1,383 |
|||||||||||||||||||
| Income tax expense |
2,944 |
|||||||||||||||||||
| Other comprehensive income (loss) |
(146) |
|||||||||||||||||||
| Total comprehensive income |
$ |
7,329 |
||||||||||||||||||
| Earnings per share |
||||||||||||||||||||
| – basic |
$ |
0.06 |
||||||||||||||||||
| – diluted |
$ |
0.06 |
||||||||||||||||||
| Three months ended December 31, 2013 |
||||||||||||
| (000's) |
Camps & |
Matting |
Corporate |
Inter-segment |
Total |
|||||||
| Revenue |
$ |
97,827 |
$ |
11,431 |
$ |
- |
$ |
(617) |
$ |
108,641 |
||
| Expenses |
||||||||||||
| Direct costs |
80,496 |
8,213 |
(617) |
88,092 |
||||||||
| Selling & administrative |
1,426 |
182 |
3,254 |
- |
4,862 |
|||||||
| EBITDAS |
15,905 |
3,036 |
(3,254) |
- |
15,687 |
|||||||
| EBITDAS as a % of revenue |
16% |
27% |
- |
- |
14% |
|||||||
| Share based compensation |
310 |
40 |
222 |
- |
572 |
|||||||
| Depreciation & amortization |
11,841 |
1,644 |
163 |
(53) |
13,595 |
|||||||
| Loss on disposal of property, plant and equipment |
3,127 |
- |
- |
- |
3,127 |
|||||||
| Operating earnings (loss) |
$ |
627 |
$ |
1,352 |
$ |
(3,639) |
$ |
53 |
$ |
(1,607) |
||
| Finance costs |
786 |
|||||||||||
| Income tax expense |
127 |
|||||||||||
| Other comprehensive income (loss) |
(144) |
|||||||||||
| Total comprehensive income (loss) |
$ |
(2,376) |
||||||||||
| Loss per share |
||||||||||||
| – basic |
$ |
(0.02) |
||||||||||
| – diluted |
$ |
(0.02) |
||||||||||
Annual Financial Results
| Year ended December 31, 2014 |
|||||||||||
| (000's) |
Camps & |
Matting |
Corporate |
Inter-segment |
Total |
||||||
| Revenue |
$ |
410,499 |
$ |
67,172 |
$ |
- |
$ |
(1,611) |
$ |
476,060 |
|
| Expenses |
|||||||||||
| Direct costs |
311,316 |
50,596 |
3 |
(1,611) |
360,304 |
||||||
| Selling & administrative |
8,002 |
1,071 |
13,817 |
- |
22,890 |
||||||
| EBITDAS |
91,181 |
15,505 |
(13,820) |
- |
92,866 |
||||||
| EBITDAS as a % of revenue |
22% |
23% |
- |
- |
20% |
||||||
| Share based compensation |
1,014 |
208 |
913 |
- |
2,135 |
||||||
| Depreciation & amortization |
48,102 |
7,972 |
1,015 |
(194) |
56,895 |
||||||
| (Gain) loss on disposal of property, plant and equipment |
(3,682) |
25 |
(9) |
- |
(3,666) |
||||||
| Operating earnings (loss) |
$ |
45,747 |
$ |
7,300 |
$ |
(15,739) |
$ |
194 |
$ |
37,502 |
|
| Finance costs |
4,551 |
||||||||||
| Income tax expense |
9,305 |
||||||||||
| Other comprehensive income |
(380) |
||||||||||
| Total comprehensive income |
$ |
24,026 |
|||||||||
| Earnings per share |
|||||||||||
| – basic |
$ |
0.21 |
|||||||||
| – diluted |
$ |
0.21 |
|||||||||
| Year ended December 31, 2013 |
|||||||||||
| (000's) |
Camps & |
Matting |
Corporate |
Inter-segment |
Total |
||||||
| Revenue |
$ |
496,594 |
$ |
62,419 |
$ |
- |
$ |
(4,626) |
$ |
554,387 |
|
| Expenses |
|||||||||||
| Direct costs |
369,940 |
43,657 |
- |
(4,595) |
409,002 |
||||||
| Selling & administrative |
5,677 |
1,002 |
12,372 |
- |
19,051 |
||||||
| EBITDAS |
120,977 |
17,760 |
(12,372) |
(31) |
126,334 |
||||||
| EBITDAS as a % of revenue |
24% |
28% |
- |
1% |
23% |
||||||
| Share based payments |
1,143 |
168 |
897 |
- |
2,208 |
||||||
| Depreciation & amortization |
46,197 |
8,112 |
583 |
(209) |
54,683 |
||||||
| Loss (gain) on disposal of property, plant and equipment |
6,173 |
(21) |
- |
- |
6,152 |
||||||
| Operating earnings |
$ |
67,464 |
$ |
9,501 |
$ |
(13,852) |
$ |
178 |
$ |
63,291 |
|
| Finance costs |
3,822 |
||||||||||
| Income tax expense |
17,018 |
||||||||||
| Other comprehensive income |
(186) |
||||||||||
| Total comprehensive income |
$ |
42,637 |
|||||||||
| Earnings per share |
|||||||||||
| – basic |
$ |
0.39 |
|||||||||
| – diluted |
$ |
0.38 |
|||||||||
Camps & Catering
Camps & Catering revenues are comprised of camp rental and catering operations revenue, manufacturing sales revenue, relocatable structures rental revenue and the associated service revenue within each operation.
| Three months ended December 31 |
Years ended December 31 |
|||||||||
| Revenues (000's) |
2014 |
2013 |
% change |
2014 |
2013 |
% change |
||||
| Large Camp revenue |
$ |
60,425 |
$ |
40,396 |
50% |
$ |
215,727 |
$ |
197,079 |
9% |
| Drill Camp revenue |
4,308 |
3,570 |
21% |
15,322 |
20,105 |
(24%) |
||||
| Catering only revenue |
4,473 |
3,364 |
33% |
15,271 |
17,692 |
(14%) |
||||
| Camp and catering service revenue |
8,513 |
7,808 |
9% |
32,580 |
22,944 |
42% |
||||
| Total camp rental and catering revenues |
$ |
77,719 |
$ |
55,138 |
41% |
$ |
278,900 |
$ |
257,820 |
8% |
| Manufacturing sales revenue |
40,085 |
39,942 |
- |
118,667 |
227,650 |
(48%) |
||||
| Relocatable structures revenue |
3,974 |
2,747 |
45% |
12,932 |
11,124 |
16% |
||||
| Total revenue |
$ |
121,778 |
$ |
97,827 |
24% |
$ |
410,499 |
$ |
496,594 |
(17%) |
| EBITDAS |
$ |
27,938 |
$ |
15,905 |
76% |
$ |
91,181 |
$ |
120,977 |
(25%) |
| EBITDAS as a % of revenue |
23% |
16% |
22% |
24% |
||||||
| Operating earnings |
$ |
15,065 |
$ |
627 |
2,299% |
$ |
45,747 |
$ |
67,464 |
(32%) |
Revenues from the Camps & Catering segment for the three months ended December 31, 2014 ("Q4 2014") were $121.8 million, an increase of $24.0 million or 24% compared to the three months ended December 31, 2013 ("Q4 2013"). EBITDAS for the three months ended December 31, 2014 were $27.9 million, an increase of $12.0 million or 76% compared to the same period of 2013. The increased revenues were a result of higher activity levels across all operations in the segment with large camps being the greatest contributor. In Q4 2014, large camps experienced stronger utilization as a result of more seasonal projects compared to Q4 2013, as well, several camp projects announced in late 2013 and early 2014 became fully operational in the third quarter of 2014 increasing activity levels and the comparative quarters.
Revenues from the Camps & Catering segment for the year ended December 31, 2014 were $410.5 million, a decrease of $86.1 million or 17% compared to 2013. EBITDAS for the year ended December 31, 2014 were $91.2 million, a decrease of $29.8 million or 25% compared to 2013. The year over year decrease in revenues was primarily a result of lower activity levels in manufacturing sales mainly due to the timing of projects with a large project completing in Q1 2014 and the next project not online until late Q3 2014 as a result of customer delays. In addition, more of the direct manufacturing hours were allocated to internal fleet requirements in 2014 compared to 2013. The decrease in manufacturing sales was partially offset by strong revenue growth in the large camp operations, service related operations and in relocatable structures compared to 2013. Large camp operations and the camp related service operations had strong revenue growth year over year as a result of the additional camp projects becoming fully operational in Q3 of 2014, as well, stronger utilization in Q1 and Q4 of 2014 from increased number of seasonal projects boosted activity levels. Relocatable structures had considerable revenue growth in 2014 as a result of its expanded fleet in the first half of 2014 which experienced strong utilization in the second half of 2014. The softer EBITDAS and EBITDAS as a percentage of revenue in 2014, compared to 2013, was mainly related to the lower manufacturing sales volumes and the higher costs related to a project close out and lower manufacturing efficiencies experienced during the initiation phase of a major project.
Horizon North's revenues in the Camps & Catering segment continue to be driven by Alberta oil sands activity with 48% of revenues for the year ended December 31, 2014 generated from oil sands related projects compared to 61% in the same period of 2013. The change was driven primarily by the timing of manufacturing sales projects and the opportunities undertaken through the last quarter of 2013 and the year ended 2014.
Large Camps
The table below outlines the key performance metrics used by management to measure performance in the large camp operations:
| Three months ended December 31 |
Years ended December 31 |
|||||||||
| Revenues (000's) |
2014 |
2013 |
% change |
2014 |
2013 |
% change |
||||
| Large Camp revenue |
$ |
60,425 |
$ |
40,396 |
50% |
$ |
215,727 |
$ |
197,079 |
9% |
| Bed rental days (1) |
524,565 |
326,986 |
60% |
1,755,383 |
1,574,231 |
12% |
||||
| Revenue per bed rental day |
$ |
115 |
$ |
111 |
4% |
$ |
123 |
$ |
125 |
(2%) |
| RevPAAB (2) |
$ |
79 |
$ |
63 |
25% |
$ |
78 |
$ |
76 |
3% |
| Rentable beds |
8,673 |
7,059 |
23% |
8,673 |
7,059 |
23% |
||||
| Average rentable beds (3) |
8,285 |
6,977 |
19% |
7,613 |
7,078 |
8% |
||||
| Utilization (4) |
69% |
57% |
63% |
61% |
||||||
| 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) |
RevPAAB equals revenue per average available rentable bed calculated as Large Camp revenue divided by average rentable beds available in the period. |
| 3) |
Average rentable beds available is equal to total average beds in the fleet over the period less beds required for staff. |
| 4) |
Utilization equals the total number of bed rental days divided by average rentable beds available in the period. |
Revenues from large camp operations, for the three months ended December 31, 2014 increased by $20.0 million, or 50% compared to the same period of 2013. The increase was a result of the addition of several large camps which were fully operational in the fourth quarter of 2014 along with higher activity levels and utilization primarily a result of pipeline construction activity which boosted occupancy at certain open camps.
Revenue per bed rental day for the three months ended December 31, 2014 increased by $4 or 4% as a result of the different mix of contracts between the comparative periods. RevPAAB (revenue per available bed) increased by $16 compared to Q4 2013, consistent with the higher revenue and 21% increase in utilization between the comparative quarters.
Revenues from the large camp operations, for the year ended December 31, 2014 increased by $18.6 million, or 9% compared to 2013. The increased revenues were primarily a result of additional large camps added throughout 2014 as a result of contract commitments announced in the fourth quarter of 2013 and the first quarter of 2014. In addition to the growth in large camps, Q1 and Q4 of 2014 experienced stronger seasonal uplift compared to the same periods of 2013. Bed rental days increased by 12% and fleet utilization improved by 3% year over year, a result of the additional large camps and seasonal projects which employed a combination of existing and new equipment.
Revenue per bed rental day decreased by $2 or 2%, reflective of the nature and mix of contracts in place in the comparative years. RevPAAB (revenue per available bed) increased $2 or 3% year over year, consistent with higher revenues and stronger utilization.
Drill Camps
The table below outlines the key performance metrics used by management to measure performance in the drill camp operations:
| Three months ended December 31 |
Years ended December 31 |
||||||||||
| Revenues (000's) |
2014 |
2013 |
% change |
2014 |
2013 |
% change |
|||||
| Drill Camp revenue |
$ |
4,308 |
$ |
3,570 |
21% |
$ |
15,322 |
$ |
20,105 |
(24%) |
|
| Bed rental days (1) |
26,421 |
21,510 |
23% |
90,834 |
115,968 |
(22%) |
|||||
| Revenue per bed rental day |
$ |
163 |
$ |
166 |
(2%) |
$ |
169 |
$ |
173 |
(2%) |
|
| RevPAAB (2) |
$ |
55 |
$ |
45 |
22% |
$ |
49 |
$ |
63 |
(22%) |
|
| Number of rentable beds at period end |
855 |
882 |
(3%) |
855 |
882 |
(3%) |
|||||
| Average rentable beds available (3) |
855 |
871 |
(2%) |
855 |
873 |
(2%) |
|||||
| Utilization (4) |
34% |
27% |
26% |
29% |
36% |
(19%) |
|||||
| 1) |
One bed rental day represents the provision of one bed for one day under a combined rental and catering manday rate. |
| 2) |
RevPAAB equals revenue per average available rentable bed calculated as Drill Camp revenue divided by average rentable beds available in the period. |
| 3) |
Average rentable beds available is equal to total average beds in the fleet over the period less beds required for staff. |
| 4) |
Utilization equals the total number of bed rental days divided by average rentable beds available in the period. |
Revenues from drill camp operations for the three months ended December 31, 2014 increased by $0.7 million or 21% compared to the same period of 2013. The increase was due to a higher volume of bed rental days which was partially offset by softer pricing resulting in revenue per bed rental day of $163 for Q4 2014, a decrease of 2% compared to the same period of 2013. RevPAAB (revenue per average available rentable bed) was $55, $10 or 22% higher than the same period of 2013, a result of the stronger revenues and utilization.
Revenues from drill camp operations for the year ended December 31, 2014 decreased by $4.8 million or 24% compared to 2013. The decrease was primarily related to the first half of 2014 where Horizon North experienced lower activity levels compared to the same period of 2013. Revenue per bed rental day decreased by $4 or 2% mainly due to the competitive environment, particularly in the second half of 2014. RevPAAB (revenue per available rentable bed) was significantly lower reflecting both lower revenues and lower utilization.
Catering Only
The table below outlines the key performance metrics used by management to measure performance in the catering only operations:
| Three months ended December 31 |
Years ended December 31 |
|||||||||
| (000's for revenue only) |
2014 |
2013 |
% change |
2014 |
2013 |
% change |
||||
| Catering only revenue |
$ |
4,473 |
$ |
3,364 |
33% |
$ |
15,271 |
$ |
17,692 |
(14%) |
| Catering only days(1) |
36,658 |
27,128 |
35% |
120,606 |
165,006 |
(27%) |
||||
| Revenue per catering only day |
$ |
122 |
$ |
124 |
(2%) |
$ |
127 |
$ |
107 |
19% |
| (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 services, with no associated bed rentals, for the three months ended December 31, 2014 increased $1.1 million or 33% compared to same period of 2013. This increase was mainly a result of a 100 bed catering only camp which began operation in the third quarter of 2014 along with higher activity levels for customer own drill camps in the fourth quarter of 2014 compared to the same period of 2013.
Revenues from the provision of catering and housekeeping services, with no associated bed rentals, for the year ended December 31, 2014 decreased $2.4 million or 14% compared to 2013. The lower revenues were primarily a result of softer activity levels in the first quarter of 2014 related to customer owned drill camps.
Service
The table below outlines the service revenue generated from the camp and catering operations:
| Three months ended December 31 |
Years ended December 31 |
|||||||||
| (000's) |
2014 |
2013 |
% change |
2014 |
2013 |
% change |
||||
| Camp and catering service revenue |
$ |
8,513 |
$ |
7,808 |
9% |
$ |
32,580 |
$ |
22,944 |
42% |
Service revenues are related to the transportation, set-up and de-mobilization of camps for customers. Revenues for the three months ended December 31, 2014 increased $0.7 million or 9% compared to the same period in 2013. The increase was mainly due to the timing of specific projects undertaken in the comparative periods, with several larger camp mobilizations occurring in the fourth quarter of 2014 compared to smaller scale projects in the same period of 2013.
Revenues for the year ended December 31, 2014 increased $9.6 million or 42% compared to the same period in 2013. The increase was mainly due to the timing of specific projects undertaken in the comparative year, with several large camp mobilizations occurring throughout 2014 related to large camps additions and the stronger uplift in seasonal activity in Q1 and Q4 2014 compared to 2013.
Manufacturing Sales
Manufacturing sales revenues include the in-plant construction, transportation and installation of camps sold to third parties. The table below outlines the key performance metrics used by management to measure performance in the manufacturing sales operations:
| Three months ended December 31 |
Years ended December 31 |
|||||||||
| (000's) |
2014 |
2013 |
% change |
2014 |
2013 |
% change |
||||
| Manufacturing sales revenue |
$ |
40,085 |
$ |
39,942 |
- |
$ |
118,667 |
$ |
227,650 |
(48%) |
| Three months ended December 31 |
Years ended December 31 |
|||||||
| 2014 |
2013 |
2014 |
2013 |
|||||
| Direct Hours |
% of total hours |
Direct Hours |
% of total hours |
Direct Hours |
% of total hours |
Direct Hours |
% of total hours |
|
| External hours |
209,285 |
76% |
140,023 |
44% |
633,374 |
57% |
858,333 |
68% |
| Internal hours |
65,409 |
24% |
175,088 |
56% |
468,152 |
43% |
406,093 |
32% |
| Total direct hours (1) |
274,694 |
100% |
315,111 |
100% |
1,101,526 |
100% |
1,264,426 |
100% |
| (1) |
Total direct hours incudes; direct hours worked in the manufacturing plants and on-site installation hours. |
Revenues for the three months ended December 31, 2014 remained relatively unchanged compared to the same period in 2013. Although revenue was consistent, the direct external hours increased by 69,262 hours or 49% compared to Q4 2013. The increase is reflective of the difference between project execution phases in the comparative periods with the significant project in Q4 2014 being mainly focused on manufacturing, which is labour intensive, compared to the project in Q4 2013 which was primarily focused on site installation. Site installation typically consumes less direct labour but has a higher component of subcontractors.
Total direct hours, which include direct hours worked in the manufacturing plants and installation hours undertaken on project sites, for the three months ended December 31, 2014 were 274,694 hours, a decrease of 40,417 hours or 13% compared to the same period of 2013. The decrease in direct hours was a result of Horizon North managing production capacity through reduced overtime and headcount to align with manufacturing visibility. 76% of total direct hours were directed to external sales projects in Q4 2014 compared to 44% in the same period of 2013, a reflection of the timing of external sales projects in the comparative quarters.
Revenues for the year ended December 31, 2014 were $118.7 million, a decrease of $109.0 million or 48% compared to 2013. The decreased revenues were a result of several factors but primarily related to the timing between external sales projects. 2013 had a large project run continuously through the year and complete in Q1 2014, however, the next large project did not go online until late Q3 2014 due to customer delays. 2014 had reduced total direct hours compared to 2013 and fewer direct hours allocated to external revenue generating projects. In addition, 2014 allocated more direct manufacturing hours to internal fleet requirements compared to 2013 with the focus on expanding the relocatable structures fleet in the first half of 2014 and additional camp rental fleet to meet contract commitments announced late 2013 and early 2014. As well, 2013 revenue included a $13.5 million used equipment sale with no associated direct hours, there was no similar sale in 2014.
Total direct hours, which include direct hours worked in the manufacturing plants and installation hours undertaken on project sites, for the year ended December 31, 2014 were 1,101,526 hours, a decrease of 162,900 hours or 13% compared to the same period of 2013. The decrease in direct hours was a result of Horizon North managing production capacity through reduced overtime and headcount to align with manufacturing visability. 57% of total direct hours were directed to external sales projects for the year ended December 31, 2014 compared to 68% in 2013. The decrease is reflective of the project delay and the focus on internal fleet requirements to expand relocatable structures in the first half of 2014 and the camp rentals fleet to meet contract commitments.
Relocatable Structures
Relocatable structures (formerly Space Rentals) revenues include the rental of relocatable structures and the associated transportation and service. Relocatable Structures include office units, lavatory units, mine dry units and associated equipment.
Revenues for the three months ended December 31, 2014 were $4.0 million, an increase of $1.2 million or 45% compared to the same period of 2013. The increase in revenue is primarily a result of continued robust utilization on a larger fleet with 367 more units in Q4 2014 compared to the same period of 2013. Utilization in the fourth quarter of 2014 was 77% of 1,203 units compared to 80% of 836 units in the comparative quarter of 2013.
Revenues for the year ended December 31, 2014 were $12.9 million, an increase of $1.8 million or 16% compared to 2013. The increase is primarily a result of the additions to the fleet in the first half of 2014. Utilization for the year ended 2014 was 69% of 1,203 units compared to 81% of 836 units in 2013. The decreased utilization is a result of the fleet growth in the first half of 2014. The second half of 2014 saw most of the new units working and utilization increase to be relatively comparable to the second half of 2013.
Direct costs
Direct costs for the three months ended December 31, 2014 were $91.0 million or 75% of revenues compared to $80.5 million or 82% of revenue for the same period of 2013. Direct costs are closely related to business volumes and revenue mix. The decrease was primarily as a result of lower volumes in the manufacturing sales operations.As a percentage of revenue, direct costs decreased primarily a result of the nature and timing of projects flowing through the manufacturing sales operations.
Direct costs for the year ended December 31, 2014 were $311.3 million or 76% of revenue compared to $369.9 million or 74% of revenue for 2013. Direct costs decreased primarily due to lower volumes in the manufacturing sales operations.As a percentage of revenue, direct costs increased as a result of the nature and timing of projects described above. In addition, manufacturing sales operations experienced higher costs to close out several large projects, similar costs were not incurred in the same period of 2013.
Matting
Matting revenues are comprised of access mat rental revenue, other mat and rental equipment revenue, mat sales revenue, installation, transportation, service, and other revenue as follows:
| Three months ended December 31 |
Years ended December 31 |
||||||||||
| (000's except mat rental days and numbers of mats) |
2014 |
2013 |
% change |
2014 |
2013 |
% change |
|||||
| Access mat rental revenue(1) |
$ |
3,093 |
$ |
3,027 |
2% |
$ |
13,611 |
$ |
13,828 |
(2%) |
|
| Other mat and rental equipment revenue(2) |
$ |
831 |
$ |
868 |
(4%) |
$ |
2,924 |
$ |
2,969 |
(2%) |
|
| Total mat and rental equipment revenue |
$ |
3,924 |
$ |
3,895 |
1% |
$ |
16,535 |
$ |
16,797 |
(2%) |
|
| Mat sales revenue |
2,495 |
2,124 |
17% |
20,601 |
13,081 |
57% |
|||||
| Installation, transportation, service and other revenue |
8,099 |
5,412 |
50% |
30,036 |
32,541 |
(8%) |
|||||
| Total revenue |
$ |
14,518 |
$ |
11,431 |
27% |
$ |
67,172 |
$ |
62,419 |
8% |
|
| EBITDAS |
$ |
4,062 |
$ |
3,036 |
34% |
$ |
15,505 |
$ |
17,760 |
(13%) |
|
| EBITDAS as a % of revenue |
28% |
27% |
23% |
28% |
|||||||
| Operating earnings |
$ |
1,128 |
$ |
1,352 |
(17%) |
$ |
7,300 |
$ |
9,501 |
(23%) |
|
| Access mat rental days – owned mats(3) |
1,273,117 |
877,053 |
45% |
4,413,357 |
4,157,699 |
6% |
|||||
| Access mat rental days – third party mats(4) |
197,959 |
361,377 |
(45%) |
1,837,077 |
1,653,828 |
11% |
|||||
| Total access mat rental days |
1,471,076 |
1,238,430 |
19% |
6,250,434 |
5,811,527 |
8% |
|||||
| Average owned access mats in rental fleet(5) |
23,411 |
16,845 |
39% |
19,438 |
17,057 |
14% |
|||||
| Average sub rental access mats in rental fleet(6) |
2,151 |
3,930 |
(45%) |
5,000 |
4,521 |
11% |
|||||
| Owned access mats in rental fleet at period end(7) |
23,325 |
16,392 |
42% |
23,325 |
16,392 |
42% |
|||||
| Mats sold: |
|||||||||||
| New mats |
1,755 |
494 |
255% |
24,215 |
12,849 |
88% |
|||||
| Used Mats |
1,516 |
3,464 |
(56%) |
6,498 |
6,818 |
(5%) |
|||||
| Total mats sold |
3,271 |
3,958 |
(17%) |
30,713 |
19,667 |
56% |
|||||
| (1 |
Access mat rental revenue includes revenues generated from the rental of traditional oak and oak edged mats. |
| (2) |
Other mat and rental equipment revenue includes the rental of rig mats, quad mats and 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 period end represents the number of owned access mats in the Matting fleet. |
Revenues from the Matting segment for the three months ended December 31, 2014 were $14.5 million an increase of $3.1 million or 27% compared to the same period of 2013. EBITDAS for the three months ended December 31, 2014 were $4.1 million, an increase of $1.0 million or 34% compared to the same period of 2013. The increased revenues came primarily from the management of customer owned access mats as several customers gathered up and consolidated their mat fleets to their inventory locations.
Revenues from the Matting segment for the year ended December 31, 2014 were $67.2 million, an increase of $4.8 million or 8% compared to 2013. The increased revenues were driven primarily by higher new mat sales year over year. EBITDAS for the year ended December 31, 2014 was $15.5 million, a decrease of $2.3 million or 13% compared to 2013. The year over year decrease in EBITDAS was a result of the effects of downward pressure on access mat rental rates and increased cost for mat manufacturing due to higher lumber costs as a result of the weaker Canadian dollar compared to 2013.
Mat and rental equipment revenue
Mat and equipment rental revenues for the three months ended December 31, 2014 remained consistent compared to the same period of 2013 as a result of offsetting movements in activity levels and pricing. Activity increased in Q4 2014 compared to Q4 2013 with a higher number of access mat rental days and stronger utilization on a larger fleet size. Compared to Q4 2013, access mat rental days increased by 232,646 days or 19% with utilization of the owned access mat fleet at 59%, up from 57% in Q4 2013. The access mat fleet grew by 6,566 mats to an average of 23,411 mats in the comparative quarters. The higher activity levels were offset by the lower revenue per mat rental day which was $2.10, a decrease of $0.34 or 14% compared to the same period of 2013 as a result of a more competitive environment.
For the year ended December 31, 2014 mat and equipment rental revenues were consistent year over year as a result of higher rental activity being offset by softer pricing. 2014 access mat rental days were 6,250,434, an increase of 438,907 or 8% compared to 2013. Utilization in 2014 decreased to 62% from 67% in 2013 mainly as a result of the larger fleet which grew by an average of 2,381 mats compared to 2013. A competitive pricing environment throughout 2014 put downward pressure on access mat rental rates resulting in revenue per access mat rental day of $2.18, a decrease of $0.20 or 8% compared to the same period of 2013. This softer pricing offset the higher rental activity in 2014.
Mat sales revenue
Revenues from mat sales for the three months ended December 31, 2014 were $2.5 million, an increase of $0.4 million or 17% compared to the same period of 2013. The volume of mats sold is highly dependent on the timing of customers projects and on project economics with 3,271 mats sold in the three months ended December 31, 2014, a decrease of 687 mats or 17% compared to the same period of 2013. Revenues per mat sold were $763 for the fourth quarter of 2014, an increase of $226 or 42% compared to the same period of 2013. This increase is reflective of the mix of new and used mats sold, as new mats typically have higher selling price than used mats.
Revenues from mat sales for the year ended December 31, 2014 were $20.6 million, an increase of $7.5 million or 57% compared to 2013. The increase was due mainly to several significant new and used mat sales in 2014 resulting in mat sales for the year ended December 31, 2014 of 30,713 mats, an increase of 11,046 mats or 56% compared to 2013. Revenues per mat sold were $671 for the year ended December 31, 2014, an increase of $6 or 1% compared to 2013 mainly due to the higher number of new mats sold in 2014, new mats typically have a higher selling price than used mats.
Installation, transportation, service, and other revenue
Installation, transportation, service, and other revenues are driven mainly from the level of activity in the mat rental, mat sale and mat management businesses and are charged for separately from rentals and sales.
Revenues for the three months ended December 31, 2014 were $8.1 million, an increase of $2.7 million or 50% compared to the same period in 2013. The increase in revenue was is primarily a result of increased demand for mat management services in Q4 2014 compared to the same period of 2013. The fourth quarter of 2014 saw several customers with large mat fleets gather up and consolidate their fleets to their inventory locations in preparation for 2015. The majority of this work is transportation services.
Revenues for the year ended December 31, 2014 were $30.0 million, a decrease of $2.5 million or 8% compared to 2013. The decrease in revenues was primarily a result of the revenue mix, as mat sales typically do not generate significant installation and service revenues.
Direct costs
Direct costs for the three months ended December 31, 2014 were $10.2 million or 71% of revenue compared to $8.2 million or 72% of revenue for the same period of 2013. Direct costs are driven by both the level and mix of business activity with the increase in overall direct costs in Q4 2014 compared to Q4 2013 a result of the higher activity levels mainly in transportation. As a percentage of revenue, direct costs decreased slightly in the three months ended December 31, 2014 compared to the same period of 2013 mainly due to the lower use of third party mats and the associated rental costs.
Direct costs for the year ended December 31, 2014 were $50.6 million or 75% of revenue compared to $43.7 million or 70% of revenue for 2013. Direct costs are driven by both the level and mix of business activity. The increase in direct costs year over year was mainly due to costs associated with higher volume of new mat sales in 2014. As a percentage of revenue, direct costs increased in the year ended December 31, 2014 compared to the same period of 2013. This increase is primarily due to the higher costs of lumber used in mat manufacturing due to the weaker Canadian dollar.
Corporate
Corporate costs are the costs of the head office which include the President and Chief Executive Officer, Chief Financial Officer, Senior Vice President of Business Development, Vice President of Quality, Health, Safety, and Environment, Vice President of Aboriginal Relations, Vice President of Legal, Corporate Secretary, corporate accounting staff, information technology, and associated costs of supporting a public company. Corporate costs for the three months ended December 31, 2014 were $4.2 million, an increase of $1.0 million or 30% compared to the same period in 2013. The increased costs primarily relate to the retirement allowance of the previous chief executive officer in November 2014. Corporate costs, as a percentage of total revenue were 3.1% compared to 3.0% for the three months and year ended December 31, 2013.
Corporate costs for the year ended December 31, 2014 were $13.8 million, an increase of $1.4 million or 12% compared to 2013. The increased costs primarily relate to the retirement allowance of the previous chief executive officer in November 2014 with the balance related to higher IT costs and HSE education programs. Corporate costs, as a percentage of total revenue were 2.9% compared to 2.2% for the year ended December 31, 2013 as a result of the increased cost described above and lower 2014 revenues.
Other Items
Selling and administrative
Selling and administrative expenses for the three months and year ended December 31, 2014 were $3.1 million, an increase of $1.5 million or 91% compared to the same period in 2013. As a percentage of revenue, selling and administrative expenses for the three months and year ended December 31, 2014 were 2% compared to 1.5% thecomparative period of 2013.
Selling and administrative expenses for the year ended December 31, 2014 were $9.1 million, an increase of $2.4 million or 36% compared to the same period in 2013. As a percentage of revenue, selling and administrative expenses for the year ended December 31, 2014 were 2% compared to 1% for 2013.
Depreciation and amortization
| Three months ended December 31 |
Years ended December 31 |
|||||||||
| (000's) |
2014 |
2013 |
% change |
2014 |
2013 |
% change |
||||
| Depreciation of property, plant and equipment |
$ |
15,067 |
$ |
12,688 |
19% |
$ |
53,927 |
$ |
47,623 |
13% |
| Amortization of intangibles |
531 |
907 |
(41%) |
2,968 |
7,060 |
(58%) |
||||
| Total depreciation and amortization |
$ |
15,598 |
$ |
13,595 |
15% |
$ |
56,895 |
$ |
54,683 |
4% |
Depreciation of property, plant and equipment increased $2.4 million or 19% in the three months ended December 31, 2014 compared to the same period of 2013. The increase was mainly related to camp fleet additions and camp setup costs added between the comparative quarters.
Depreciation of property, plant and equipment increased by $6.3 million or 13% in 2014 compared to 2013. The majority of the increase was expansion of the camp rental fleet and camp setup costs associated with contract commitments late in 2013 and throughout 2014. The remainder of the increase was related to growth of the relocatable structures fleet in the first half of 2014 and growth of the access mat fleet mainly in the second half of 2014.
Amortization costs related to customer relationships decreased $0.4 million or 41% for the three months ended December 31, 2014 compared to the same period of 2013 as they were fully amortized in Q4 2014.
Amortization costs related to customer relationships decreased $4.1 million or 58% in 2014 compared to 2013. The decrease is a result of these costs being fully amortized in 2014.
Financing costs
Financing costs include interest on loans and borrowings and accretion of notes payable. For the three months ended December 31, 2014 financing costs were $1.4 million, an increase of $0.6 million or 76% compared to 2013. The increase in financing costs was mainly a result of higher average debt levels in the fourth quarter of 2014 which averaged $150.0 million compared to $59.2 million in the same period of 2013.
For the year ended December 31, 2014 financing costs were $4.6 million, an increase of $0.7 million or 19% compared to 2013. The increase in financing costs was mainly a result of higher average debt levels throughout the year which averaged $126.6 million compared to $93.2 million in 2013. The effective interest rate on loans and borrowings for 2014 was 3.3% compared to 3.6% in 2013. The lower effective interest rate was a result of carrying a higher proportion of the 2014 debt balance in bankers acceptances, compared to 2013 which generally have a lower interest rate than prime rate debt.
Income taxes
For the year ended December 31, 2014 income tax expense was $9.3 million and effective tax rate of 28.2% compared to $17.0 million and an effective tax rate of 28.6% in 2013. The decrease in the expense was related to the lower profit before tax compared to 2013. The higher tax rate in prior year was a result of the effect of prior period adjustments made in the respective periods.
Gain/Loss on disposal
For the three months ended December 31, 2014, Horizon North recognized losses on disposal of $0.2 million compared to losses of $3.1 million in the Q4 of 2013. The majority of these losses in 2013came from disposal of the remaining camp assets and property related to the Northern based ancillary assets.
For the year ended December 31, 2014 Horizon North recognized gains on disposal of $3.7 million which were primarily related to the disposal of camp assets and property related to the Northern based ancillary assets in Q3 of 2014. This compares to a loss on disposal of $6.2 million in 2013, composed of undepreciated setup costs related to a large camp which was dismantled and sold in Q2 2013 and the disposal of the Corporation's blast resistant structures business in Q4 2013.
Consolidated statement of financial position
| (000's) |
December 31, 2014 |
December 31, 2013 |
|||
| Assets |
|||||
| Current assets: |
|||||
| Trade and other receivables |
$ |
116,074 |
$ |
90,856 |
|
| Inventories |
14,656 |
15,638 |
|||
| Prepayments |
3,612 |
3,000 |
|||
| Income taxes receivable |
- |
4,114 |
|||
| 134,342 |
113,608 |
||||
| Non-current assets: |
|||||
| Property, plant and equipment |
401,130 |
349,252 |
|||
| Intangible assets |
- |
2,968 |
|||
| Goodwill |
1,664 |
1,664 |
|||
| Deferred tax assets |
414 |
1,067 |
|||
| Other assets |
2,428 |
2,556 |
|||
| 405,636 |
357,507 |
||||
| $ |
539,978 |
$ |
471,115 |
||
| Liabilities and Shareholders' Equity |
|||||
| Current liabilities: |
|||||
| Trade and other payables |
$ |
55,577 |
$ |
56,677 |
|
| Deferred revenue |
2,268 |
3,447 |
|||
| Income taxes payable |
2,492 |
284 |
|||
| Current portion of loans and borrowings |
7,668 |
1,496 |
|||
| 68,005 |
61,904 |
||||
| Non-current liabilities: |
|||||
| Asset retirement obligations |
5,890 |
5,656 |
|||
| Loans and borrowings |
146,370 |
78,256 |
|||
| Deferred tax liabilities |
33,139 |
30,872 |
|||
| 253,404 |
176,688 |
||||
| Shareholders' equity: |
|||||
| Share capital |
185,592 |
183,851 |
|||
| Contributed surplus |
13,523 |
11,836 |
|||
| Accumulated other comprehensive income |
774 |
394 |
|||
| Retained earnings |
86,685 |
98,346 |
|||
| 286,574 |
294,427 |
||||
| $ |
539,978 |
$ |
471,115 |
||
Consolidated statement of comprehensive income
Twelve months ended December 31, 2014 and 2013
| (000's except per share amounts) |
December 31, 2014 |
December 31, 2013 |
|||
| Revenue |
$ |
476,060 |
$ |
554,387 |
|
| Operating expenses: |
|||||
| Direct costs |
360,304 |
409,007 |
|||
| Depreciation |
53,927 |
47,623 |
|||
| Share based compensation |
1,222 |
1,311 |
|||
| (Gain) loss on disposal of property, plant and equipment |
(3,666) |
6,152 |
|||
| Direct operating expenses |
411,787 |
464,093 |
|||
| Gross profit |
64,273 |
90,294 |
|||
| Selling & administrative expenses: |
|||||
| Selling & administrative expenses |
22,890 |
19,046 |
|||
| Amortization of intangible assets |
2,968 |
7,060 |
|||
| Share based compensation |
913 |
897 |
|||
| Selling & administrative expenses |
26,771 |
27,003 |
|||
| Operating earnings |
37,502 |
63,291 |
|||
| Finance costs |
4,551 |
3,822 |
|||
| Profit before tax |
32,951 |
59,469 |
|||
| Current tax expense |
6,385 |
14,759 |
|||
| Deferred tax expense |
2,920 |
2,259 |
|||
| Income tax expense |
9,305 |
17,018 |
|||
| Total profit |
23,646 |
42,451 |
|||
| Other comprehensive income: |
|||||
| Translation of foreign operations |
380 |
186 |
|||
| Other comprehensive income, net of income tax |
380 |
186 |
|||
| Total comprehensive income |
$ |
24,026 |
$ |
42,637 |
|
| Earnings per share: |
|||||
| Basic |
$ |
0.21 |
$ |
0.39 |
|
| Diluted |
$ |
0.21 |
$ |
0.38 |
|
Consolidated statement of changes in equity
| (000's) |
Share Capital |
Contributed Surplus |
Accumulated Other Comprehensive Income |
Retained Earnings |
Total |
|||||
| Balance at December 31, 2012 |
$ |
179,999 |
$ |
10,783 |
$ |
208 |
$ |
83,273 |
$ |
274,263 |
| Total profit |
- |
- |
- |
42,451 |
42,451 |
|||||
| Share based compensation |
- |
2,208 |
- |
- |
2,208 |
|||||
| Share options exercised |
3,852 |
(1,155) |
- |
- |
2,697 |
|||||
| Translation of foreign operations |
- |
- |
186 |
- |
186 |
|||||
| Dividends declared |
- |
- |
- |
(27,378) |
(27,378) |
|||||
| Balance at December 31, 2013 |
$ |
183,851 |
$ |
11,836 |
$ |
394 |
$ |
98,346 |
$ |
294,427 |
| Total profit |
- |
- |
- |
23,646 |
23,646 |
|||||
| Share based compensation |
- |
2,135 |
- |
- |
2,135 |
|||||
| Share options exercised |
1,741 |
(448) |
- |
- |
1,293 |
|||||
| Translation of foreign operations |
- |
- |
380 |
- |
380 |
|||||
| Dividends declared |
- |
- |
- |
(35,307) |
(35,307) |
|||||
| Balance at December 31, 2014 |
$ |
185,592 |
$ |
13,523 |
$ |
774 |
$ |
86,685 |
$ |
286,574 |
Consolidated statement of cash flows
Twelve months ended December 31, 2014 and 2013
| December 31, |
December 31, |
||||
| (000's) |
2014 |
2013 |
|||
| Cash provided by (used in): |
|||||
| Operating activities: |
|||||
| Profit for the period |
$ |
23,646 |
$ |
42,451 |
|
| Adjustments for: |
|||||
| Depreciation |
53,927 |
47,623 |
|||
| Amortization of intangible assets |
2,968 |
7,060 |
|||
| Share based compensation |
2,135 |
2,208 |
|||
| Amortization of other assets |
128 |
128 |
|||
| (Gain) loss on sale of property, plant and equipment |
(6,101) |
1,384 |
|||
| Unrealized foreign exchange |
311 |
55 |
|||
| Finance costs |
4,551 |
3,822 |
|||
| Income tax expense |
9,305 |
17,018 |
|||
| 90,870 |
121,749 |
||||
| Income taxes paid |
(63) |
(31,104) |
|||
| Interest paid |
(4,232) |
(3,412) |
|||
| Changes in non-cash working capital items |
(29,004) |
38,136 |
|||
| 57,571 |
125,369 |
||||
| Investing activities: |
|||||
| Purchase of property, plant and equipment |
(114,581) |
(90,146) |
|||
| Proceeds on sale of property, plant and equipment |
14,946 |
26,925 |
|||
| (99,635) |
(63,221) |
||||
| Financing activities: |
|||||
| Proceeds from shares issued on exercise of options |
1,293 |
2,697 |
|||
| Net proceeds from (repayment of) loans and borrowings |
74,118 |
(38,907) |
|||
| Payment of dividends |
(33,347) |
(25,938) |
|||
| 42,064 |
(62,148) |
||||
| Change in cash position |
- |
- |
|||
| Cash, beginning of year |
- |
- |
|||
| Cash, end of year |
$ |
- |
$ |
- |
|
Non-GAAP and additional GAAP measures
Certain measures in this MD&A do not have any standardized meaning as prescribed by generally accepted accounting principles ("GAAP") and, therefore, are considered non-GAAP measures. These measures are regularly reviewed by the Chief Operating Decision Maker and provide investors with an alternative method for assessing the Corporation's operating results in a manner that is focused on the performance of the Corporation's ongoing operations and to provide a more consistent basis for comparison between periods. These measures should not be construed as alternatives to total profit and total comprehensive income determined in accordance with GAAP as an indicator of the Corporation's performance. The method of calculating these measures may differ from other entities and accordingly, may not be comparable to measures used by other entities. The following non-GAAP and additional GAAP measures are used to monitor the Corporation's performance:
EBITDAS: Earnings before finance costs, taxes, depreciation, amortization, gain/loss on disposal of property, plant and equipment and share based compensation ("EBITDAS"). 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.
Debt to total capitalization: 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.
Reconciliation of non-GAAP and additional GAAP measures
The following provides a reconciliation of non-GAAP and additional GAAP measures to the nearest measure under GAAP for items presented throughout the MD&A.
EBITDAS
| Three months ended December 31 |
Years ended December 31 |
||||||||
| (000's) |
2014 |
2013 |
2014 |
2013 |
|||||
| Total profit |
$ |
7,183 |
$ |
(2,520) |
$ |
23,646 |
$ |
42,451 |
|
| Add: |
|||||||||
| Finance costs |
1,383 |
786 |
4,551 |
3,822 |
|||||
| Income tax expense |
2,944 |
127 |
9,305 |
17,018 |
|||||
| Depreciation |
15,067 |
12,688 |
53,927 |
47,623 |
|||||
| Amortization of intangible assets |
531 |
907 |
2,968 |
7,060 |
|||||
| (Gain) loss on disposal of property, plant and equipment |
181 |
3,127 |
(3,666) |
6,152 |
|||||
| Share based compensation |
485 |
572 |
2,135 |
2,208 |
|||||
| EBITDAS |
$ |
27,774 |
$ |
15,687 |
$ |
92,866 |
$ |
126,334 |
|
Caution Regarding Forward-Looking Information and Statements
Certain statements contained in the Management Discussion and Analysis ("MD&A") constitute forward-looking statements or information. These statements relate to future events or future performance of Horizon North. 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:
"Horizon North is presently at an inflection point. Commodity prices in early 2015 are under considerable pressure with oil pricing currently in the $40-$55 per barrel range, a six year low. A number of our larger customers have delayed or deferred their capital spending and a tone of extreme caution has pervaded our sector which has significant implications for our business. While we have seen these swings in the past, there is no clear consensus on how long this trough will last.
With this challenging macro environment, Horizon North is undertaking structural changes in its business that will realign the development and direction of the Company, stabilize our base, and prepare us for the next up-cycle. These changes, included taking steps in January 2015 to reduce our manufacturing headcount to match our current order book, outlining a reduced maintenance capital spending program of $25 million, moving towards a more integrated business model which will reduce costs and improve efficiencies and changing our business development strategy to facilitate additional cross selling capabilities for all of our products and services.
We will be expanding our product and service offerings to balance our exposure between the OPEX and CAPEX budgets of our major customers. CAPEX is typically cyclical as compared to OPEX spending which tends to be smoother and more consistent over time. We will broaden our products/service offerings to a variety of end-markets to lessen our exposure to energy market fluctuations. We are continuing to develop new end-markets for our manufacturing platform, for example moving into the construction of permanent modular buildings in commercial and institutional markets. Finally we are preparing our land infrastructure for significant potential mega projects in electricity and LNG.
Our new mission statement at Horizon North is "To provide superior, safe, fully integrated turn-key accommodations and related ancillary infrastructure in Canada and Alaska". This will be our focus in 2015."
Many factors could cause the performance or achievements of Horizon North to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements. These include, but are not limited to general economic, market and business conditions.
Readers are cautioned that the foregoing list of risks and uncertainties is not exhaustive. Additional information on these and other risk factors that could affect Horizon North's operations and financial results are included in Horizon North's annual information form which may be accessed through the SEDAR website at www.sedar.com. The forward-looking statements and information contained in this MD&A are made as of the date hereof and Horizon
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.
Rod Graham, 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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