Horizon North Logistics Inc. Announces Results for the Quarter Ended September 30, 2014
TSX Symbol: HNL
CALGARY, Oct. 28, 2014 /CNW/ - Horizon North Logistics Inc. ("Horizon" or the "Corporation") reported its financial and operating results for the three and nine months ended September 30, 2014 and 2013.
Third Quarter Highlights
- Camp rental and catering operations revenue grew by 6% in Q3 2014 compared to the same period of 2013 driven by stronger utilization with improved margins;
- Manufacturing sales revenues and margins in Q3 2014 were significantly lower compared to the same period of 2013, reflecting lower activity levels in the comparative periods;
- Matting revenues in Q3 2014 were similar to the same period of 2013 but with margins decreasing as a result of downward pressure on rental rates and upward cost pressure in mat manufacturing.
Third Quarter Financial Summary
| Three months ended September 30 |
Nine months ended September 30 |
||||||||||||||
| (000's except per share amounts) |
2014 |
2013 |
% Change |
2014 |
2013 |
% Change |
|||||||||
| Revenue |
$ |
121,895 |
$ |
157,361 |
(23%) |
$ |
340,200 |
$ |
445,746 |
(24%) |
|||||
| EBITDAS(1) |
26,046 |
41,306 |
(37%) |
65,092 |
110,647 |
(41%) |
|||||||||
| EBITDAS as a % of revenue |
21% |
26% |
19% |
25% |
|||||||||||
| Operating earnings |
12,691 |
27,423 |
(54%) |
25,992 |
64,898 |
(60%) |
|||||||||
| Operating earnings as a % of revenue |
10% |
17% |
8% |
15% |
|||||||||||
| Total profit |
8,065 |
18,339 |
(56%) |
16,463 |
44,971 |
(63%) |
|||||||||
| Total comprehensive income |
8,178 |
18,643 |
(56%) |
16,697 |
45,013 |
(63%) |
|||||||||
| Earnings per share |
|||||||||||||||
| Basic |
$ |
0.07 |
$ |
0.17 |
(59%) |
$ |
0.15 |
$ |
0.41 |
(63%) |
|||||
| Diluted |
$ |
0.07 |
$ |
0.17 |
(59%) |
$ |
0.15 |
$ |
0.41 |
(63%) |
|||||
| Total assets |
534,776 |
470,049 |
14% |
534,776 |
470,049 |
14% |
|||||||||
| Long-term loans and borrowings |
146,433 |
69,770 |
110% |
146,433 |
69,770 |
110% |
|||||||||
| Cash from operations |
6,117 |
67,316 |
(91%) |
39,515 |
96,643 |
(60%) |
|||||||||
| Capital spending |
|||||||||||||||
| Purchase of property, plant & equipment |
20,817 |
15,679 |
33% |
97,041 |
55,263 |
76% |
|||||||||
| Proceeds from disposals of property, plant & equipment |
(3,619) |
(6,667) |
(46%) |
(12,979) |
(23,432) |
(45%) |
|||||||||
| Net Capital spending |
17,198 |
9,012 |
91% |
84,062 |
31,831 |
164% |
|||||||||
| Debt to EBITDAS(1) |
1.79:1 |
0.46:1 |
289% |
1.79:1 |
0.46:1 |
289% |
|||||||||
| Debt to total capitalization ratio |
0.34 |
0.19 |
79% |
0.34 |
0.19 |
79% |
|||||||||
| Dividends declared |
$ |
8,825 |
$ |
6,852 |
29% |
$ |
26,467 |
$ |
20,498 |
29% |
|||||
| Dividends declared per share |
$ |
0.08 |
$ |
0.06 |
33% |
$ |
0.08 |
$ |
0.06 |
33% |
|||||
| (1) |
See Non-GAAP and additional GAAP measures definitions within the press release for details. |
Overview
Horizon's results for the three months ended September 30, 2014 (Q3 2014) were significantly lower than previous expectations, mainly a result of customer driven delays in initiating a large manufacturing project and lower than expected utilization of the drill camp fleet as activity levels did not ramp up as expected. Results for the nine months ended September 30, 2014 were lower compared to the same period of 2013 with lower manufacturing sales and matting results offsetting consistent year over year performance in the camp rental and catering operations.
Revenues from manufacturing sales were significantly lower in Q3 2014 compared to the same period of 2013 due to the timing of specific projects undertaken and a significant used camp sale that occurred in Q3 2013, with no similar sale in Q3 2014. A large oil sands project was initiated in the middle of Q3 2014 compared to a similar project in Q3 2013 which was in full execution mode throughout the entire quarter. Total direct hours (which include all direct hours in the manufacturing plants and installation hours on project sites) in Q3 2014 were 288,492 hours as compared to 335,000 hours in Q3 2013, a decrease of 46,508 hours or 14%. 63% of total direct hours in Q3 2014 were allocated to third party contracts as compared to 79% in the same period of 2013. The decrease in overall direct hours was a result of Horizon managing production capacity through reduced overtime and headcount to align with manufacturing visibility, while the allocation of hours between external and internal projects was a result of the specific opportunities available during the period. EBITDAS from manufacturing sales decreased significantly in Q3 2014 as compared to the same period of 2013 due to lower external sales volumes, the margins associated with the specific projects flowing through the manufacturing operations and lower efficiencies typically experienced during the initiation phase of a major project.
Revenues from camp rental and catering operations for Q3 2014 increased compared to the same period of 2013 as a result of stronger utilization of an expanded fleet. The number of rentable beds in the large camp fleet at the end of Q3 2014 was 8,030 as compared to 6,771 beds at the end of Q3 2013 with utilization for Q3 2014 of 62% as compared to 54% in the same period of 2013. EBITDAS in Q3 2014 increased compared to the same period of 2013 as a result of higher volumes combined with improved margins, with EBITDAS as a percentage of revenue of 26% in Q3 2014 as compared to 23% in the same period of 2013.
Matting revenues remained consistent in Q3 2014 compared to the same period of 2013 as activity levels were relatively similar. EBITDAS decreased in Q3 2014 compared to the same period of 2013 as a result of a more competitive pricing environment for access mat rentals and a higher proportion of third party access mats on rent which generate lower margins. In addition, mat sales margins have decreased due to higher costs of oak lumber used in the manufacturing process.
Operating earnings and earnings per share decreased in Q3 2014 as compared to the same period in 2013 driven primarily by lower EBITDAS.
Revenues from manufacturing sales were significantly lower in the nine months ended September 30, 2014 compared to the same period of 2013 due to the nature and timing of specific projects undertaken during the periods. Total direct hours (which include all direct hours in the manufacturing plants and installation hours on project sites) in the nine months ended September 30, 2014 were 826,833 hours as compared to 949,314 hours in the same period of 2013, a decrease of 122,481 hours or 13%. 51% of total direct hours in the nine months ended September 30, 2014 were allocated to third party contracts as compared to 76% in the same period of 2013. The decrease in overall direct hours was a result of Horizon managing production capacity through reduced overtime and headcount to align with manufacturing visibility, while the allocation of hours between external and internal projects was a result of the specific opportunities available during the period. EBITDAS from manufacturing sales decreased in the nine months ended September 30, 2014 as compared to the same period of 2013 due to lower external sales volumes and the margins associated with the specific projects flowing through the manufacturing operations including higher than anticipated costs in closing out a major oil sands project in the first half of 2014.
Revenues from camp rental and catering operations for the nine months ended September 30, 2014 were down slightly from the same period of 2013. Utilization and pricing related to the large camp fleet for the nine months ended September 30, 2014 was consistent with the same period of 2013, while the drill camp fleet experienced a combination of lower utilization and pricing. EBITDAS was lower for the nine months ended September 30, 2014 compared to the same period of 2013 as a result of lower revenues and margins during the first half of 2014, with EBITDAS as a percentage of revenue of 25% in the nine months ended September 30, 2014 as compared to 27% in the same period of 2013.
Matting revenues for the nine months ended September 30, 2014 increased slightly as compared to the same period of 2013, mainly related to increased mat sales year over year. EBITDAS decreased in the comparative periods as a result of a more competitive pricing environment for access mat rentals and a higher proportion of third party access mats on rent which generates lower margins. In addition, mat sales margins have decreased due to higher costs of oak lumber used in the manufacturing process.
Operating earnings and earnings per share decreased in the nine months ended September 30, 2014 as compared to the same period in 2013 driven primarily by lower EBITDAS.
Outlook
Q3 2014 was Horizon's strongest quarter of 2014 with improvements shown in the camp rental and catering operations and manufacturing sales operations. Consolidated revenues and EBITDAS improved significantly as compared to Q2 2014, with EBITDAS for Q4 2014 expected to be similar to Q3 2014 levels.
Manufacturing activities in Q4 2014 will focus mainly on executing the previously announced 1,250 bed oil sands project which will be in full production and installation mode through the end of 2014 and into the first half of 2015. Visibility of the manufacturing sales backlog for the latter half of 2015 remains unclear, however bidding activity continues to be reasonably strong. Horizon continues to focus on development of the market for modular construction of permanent facilities to solidify the demand for its manufacturing capacity from areas other than camp facility construction.
Camp rental and catering operations are expected to continue to improve in Q4 2014, lifted by the installation of a 400 bed oil sands operations camp for a new customer that began operating late in Q3 2014 and as the normal seasonal lift from winter based work is experienced.
Matting activities are expected to moderate somewhat in Q4 2014 as demand typically declines in the winter season. Focus continues on increasing the size of the mat rental fleet and displacing the use of third party matting over time.
Horizon's geographic base has expanded with 1,132 beds deployed on natural gas related projects as of September 30, 2014 as compared to 876 beds at this time last year. Horizon has acquired land positions in key development areas near proposed LNG project sites in British Columbia in order to be positioned to take advantage of opportunities in these areas.
Despite some recent turbulence, the underlying parts of Horizon's business remain stable with future revenues currently under contract of $272.0 million. Horizon continues to pursue bidding opportunities in the Alberta oil sands for both construction and operations project phases, natural gas and LNG related activities and infrastructure projects which will serve to expand this amount. Horizon's balance sheet position is expected to improve through the end of 2014 as the 2014 capital spending program is nearly complete. Cash flows for 2015 are anticipated to be sufficient to fund a lower capital spending program and stable dividend.
Dividend payment
Horizon North Logistics Inc. announced today that its Board of Directors has declared a dividend for the third quarter of 2014 at $0.08 per share. The dividend is payable to shareholders of record at the close of business on December 31, 2014 to be paid on January 9, 2015. The dividends are eligible dividends for Canadian tax purposes.
Third Quarter Financial Results
| Three months ended September 30, 2014 |
|||||||||||
| (000's) |
Camps & |
Matting |
Corporate |
Inter-segment |
Total |
||||||
| Revenue |
$ |
102,278 |
$ |
19,924 |
$ |
- |
$ |
(307) |
$ |
121,895 |
|
| Expenses |
|||||||||||
| Direct costs |
76,681 |
14,479 |
(2) |
(307) |
90,851 |
||||||
| Selling & administrative |
1,806 |
454 |
2,738 |
- |
4,998 |
||||||
| EBITDAS |
23,791 |
4,991 |
(2,736) |
- |
26,046 |
||||||
| EBITDAS as a % of revenue |
23% |
25% |
- |
- |
21% |
||||||
| Share based compensation |
330 |
66 |
298 |
- |
694 |
||||||
| Depreciation & amortization |
12,078 |
2,021 |
342 |
(48) |
14,393 |
||||||
| (Gain) on disposal of property, plant and equipment |
(1,732) |
- |
- |
- |
(1,732) |
||||||
| Operating earnings (loss) |
$ |
13,115 |
$ |
2,904 |
$ |
(3,376) |
$ |
48 |
$ |
12,691 |
|
| Finance costs |
1,231 |
||||||||||
| Income tax expense |
3,395 |
||||||||||
| Other comprehensive income |
(113) |
||||||||||
| Total comprehensive income |
$ |
8,178 |
|||||||||
| Earnings per share – basic |
$ |
0.07 |
|||||||||
| – diluted |
$ |
0.07 |
|||||||||
| Three months ended September 30, 2013 |
|||||||||||
| (000's) |
Camps & |
Matting |
Corporate |
Inter-segment |
Total |
||||||
| Revenue |
$ |
137,908 |
$ |
19,800 |
$ |
- |
$ |
(347) |
$ |
157,361 |
|
| Expenses |
|||||||||||
| Direct costs |
99,118 |
12,706 |
(347) |
111,477 |
|||||||
| Selling & administrative |
1,291 |
504 |
2,783 |
- |
4,578 |
||||||
| EBITDAS |
37,499 |
6,590 |
(2,783) |
- |
41,306 |
||||||
| EBITDAS as a % of revenue |
27% |
33% |
- |
- |
26% |
||||||
| Share based compensation |
297 |
39 |
219 |
- |
555 |
||||||
| Depreciation & amortization |
12,003 |
2,283 |
147 |
(53) |
14,380 |
||||||
| (Gain) loss on disposal of property, plant and equipment |
(2,647) |
- |
1,586 |
- |
(1,061) |
||||||
| Operating earnings (loss) |
$ |
27,846 |
$ |
4,268 |
$ |
(4,735) |
$ |
53 |
$ |
27,432 |
|
| Finance costs |
840 |
||||||||||
| Income tax expense |
8,253 |
||||||||||
| Other comprehensive income |
(304) |
||||||||||
| Total comprehensive income |
$ |
18,643 |
|||||||||
| Earnings per share – basic |
$ |
0.17 |
|||||||||
| – diluted |
$ |
0.17 |
|||||||||
| Nine months ended September 30, 2014 |
|||||||||||
| (000's) |
Camps & |
Matting |
Corporate |
Inter-segment |
Total |
||||||
| Revenue |
$ |
288,721 |
$ |
52,654 |
$ |
- |
$ |
(1,175) |
$ |
340,200 |
|
| Expenses |
|||||||||||
| Direct costs |
220,327 |
40,355 |
- |
(1,175) |
259,507 |
||||||
| Selling & administrative |
5,151 |
856 |
9,594 |
- |
15,601 |
||||||
| EBITDAS |
63,243 |
11,443 |
(9,594) |
- |
65,092 |
||||||
| EBITDAS as a % of revenue |
22% |
22% |
- |
- |
19% |
||||||
| Share based compensation |
791 |
146 |
713 |
- |
1,650 |
||||||
| Depreciation & amortization |
35,642 |
5,100 |
700 |
(145) |
41,297 |
||||||
| (Gain) loss on disposal of property, plant and equipment |
(3,872) |
25 |
- |
- |
(3,847) |
||||||
| Operating earnings (loss) |
$ |
30,682 |
$ |
6,172 |
$ |
(11,007) |
$ |
145 |
$ |
25,992 |
|
| Finance costs |
3,168 |
||||||||||
| Income tax expense |
6,361 |
||||||||||
| Other comprehensive income |
(234) |
||||||||||
| Total comprehensive income |
$ |
16,697 |
|||||||||
| Earnings per share – basic |
$ |
0.15 |
|||||||||
| – diluted |
$ |
0.15 |
|||||||||
| Nine months ended September 30, 2013 |
|||||||||||
| (000's) |
Camps & |
Matting |
Corporate |
Inter-segment |
Total |
||||||
| Revenue |
$ |
398,767 |
$ |
50,988 |
$ |
- |
$ |
(4,009) |
$ |
445,746 |
|
| Expenses |
|||||||||||
| Direct costs |
289,444 |
35,444 |
- |
(3,978) |
320,910 |
||||||
| Selling & administrative |
4,251 |
820 |
9,118 |
- |
14,189 |
||||||
| EBITDAS |
105,072 |
14,724 |
(9,118) |
(31) |
110,647 |
||||||
| EBITDAS as a % of revenue |
26% |
29% |
- |
- |
25% |
||||||
| Share based payments |
833 |
128 |
675 |
- |
1,636 |
||||||
| Depreciation & amortization |
34,356 |
6,468 |
420 |
(156) |
41,088 |
||||||
| Loss (gain) on disposal of property, plant and equipment |
1,517 |
(21) |
1,529 |
- |
3,025 |
||||||
| Operating earnings (loss) |
$ |
68,366 |
$ |
8,149 |
$ |
(11,742) |
$ |
125 |
$ |
64,898 |
|
| Finance costs |
3,036 |
||||||||||
| Income tax expense |
16,891 |
||||||||||
| Other comprehensive income |
(42) |
||||||||||
| Total comprehensive income |
$ |
45,013 |
|||||||||
| Earnings per share – basic |
$ |
0.41 |
|||||||||
| – diluted |
$ |
0.41 |
|||||||||
Camps & Catering
Camps & Catering revenue is 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 September 30 |
Nine months ended September 30 |
|||||||||||||
| Revenues (000's) |
2014 |
2013 |
% |
2014 |
2013 |
% |
||||||||
| Large Camp revenue |
$ |
46,766 |
$ |
44,379 |
5% |
$ |
155,302 |
$ |
156,685 |
(1%) |
||||
| Drill Camp revenue |
$ |
3,831 |
$ |
4,234 |
(10%) |
$ |
11,014 |
$ |
16,535 |
(33%) |
||||
| Catering only revenue |
$ |
3,748 |
$ |
4,279 |
(12%) |
$ |
10,798 |
$ |
14,327 |
(25%) |
||||
| Camp rental and catering operations service related revenue |
$ |
7,426 |
$ |
5,337 |
39% |
$ |
24,067 |
$ |
15,135 |
59% |
||||
| Total Camp rental and catering operations revenue |
$ |
61,771 |
$ |
58,229 |
6% |
$ |
201,181 |
$ |
202,682 |
(1%) |
||||
| Manufacturing sales revenue |
$ |
36,846 |
$ |
76,699 |
(52%) |
$ |
78,582 |
$ |
187,708 |
(58%) |
||||
| Relocatable structures revenue |
$ |
3,661 |
$ |
2,980 |
23% |
$ |
8,958 |
$ |
8,377 |
7% |
||||
| Total revenue |
$ |
102,278 |
$ |
137,908 |
(26%) |
$ |
288,721 |
$ |
398,767 |
(28%) |
||||
| EBITDAS |
$ |
23,791 |
$ |
37,499 |
(37%) |
$ |
63,243 |
$ |
105,072 |
(40%) |
||||
| EBITDAS as a % of revenue |
23% |
27% |
22% |
26% |
||||||||||
| Operating earnings |
$ |
13,115 |
$ |
27,846 |
(53%) |
$ |
30,682 |
$ |
68,366 |
(55%) |
||||
Revenues from the Camps & Catering segment for the three months ended September 30, 2014 were $102.3 million, a decrease of $35.6 million or 26% compared to the same period of 2013. EBITDAS for the three months ended September 30, 2014 were $23.8 million, a decrease of $13.7 million or 37% compared to the same period of 2013. The decrease in revenues and EBITDAS compared to Q3 2013 was due to lower manufacturing sales volumes. Manufacturing sales revenues were lower as a result of the timing of external sales projects undertaken in the comparative periods and a significant used equipment sale which occurred in Q3 2013 with no similar sale in Q3 2014.
Revenues from the Camps & Catering segment for the nine months ended September 30, 2014 were $288.7 million, a decrease of $110.0 million or 28% compared to the same period of 2013. EBITDAS for the nine months ended September 30, 2014 were $63.2 million, a decrease of $41.8 million or 40% compared to the same period of 2013. The decrease in revenues and EBITDAS was mainly related to manufacturing sales. Manufacturing sales revenues were lower as a result of timing of external projects undertaken in the comparative periods and a significant used equipment sale which occurred in 2013 with no similar sale in 2014. EBITDAS from manufacturing sales was negatively impacted by higher costs related to a project close out Q2 of 2014 and lower efficiencies during the initiation phase of a major project in Q3 2014.
Horizon's revenues in the Camps & Catering segment continue to be driven by Alberta oil sands activity with 50% of revenues for the nine months ended September 30, 2014 generated from oil sands related projects compared to 61% in the same period of 2013. The change is driven by the timing of manufacturing sales projects and opportunities undertaken through the last quarter of 2013 and the first nine months of 2014. Horizon has expanded its profile outside of the Alberta oil sands ending Q3 2014 with 16% of deployed rentable beds on natural gas projects compared to 14% at the end of Q3 2013.
Large Camps
The table below outlines the key performance metrics used by management to measure performance in the large camp operations:
| Three months ended September 30 |
Nine months ended September 30 |
|||||||||||||
| Revenues (000's) |
2014 |
2013 |
% |
2014 |
2013 |
% |
||||||||
| Large Camp revenue |
$ |
46,766 |
$ |
44,379 |
5% |
$ |
155,302 |
$ |
156,685 |
(1%) |
||||
| Bed rental days (1) |
432,746 |
346,833 |
25% |
1,230,818 |
1,211,245 |
(2%) |
||||||||
| Revenue per bed rental day |
$ |
108 |
$ |
128 |
(16%) |
$ |
126 |
$ |
129 |
(3%) |
||||
| RevPAAB (2) |
$ |
67 |
$ |
69 |
(3%) |
$ |
78 |
$ |
81 |
(4%) |
||||
| Rentable beds |
8,030 |
6,771 |
19% |
8,030 |
6,771 |
19% |
||||||||
| Average rentable beds (3) |
7,636 |
6,981 |
9% |
7,322 |
7,051 |
4% |
||||||||
| Utilization (4) |
62% |
54% |
15% |
62% |
63% |
(2%) |
||||||||
| 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 September 30, 2014 increased by $2.4 million or 5% compared to the same period of 2013. Bed rental days increased by 25% compared to the same period of 2013, a result of more camps operating during the comparative periods and improved overall utilization on a larger fleet.
Revenue per bed rental day for the three months ended September 30, 2014 decreased by $20 or 16% as compared to the same period of 2013. This change reflects a shift in activity away from open camps towards dedicated camps experienced over the past few quarters. In a dedicated camp scenario, customers generally pay a flat rental rate for access to the entire camp and an additional charge for the catering and associated housekeeping services on an occupied room basis. In open camps, customers pay a single rate on an occupied bed basis which typically results in higher revenues per bed rental day.
On a revenue per average available rentable bed basis the comparative quarters were relatively consistent. This metric evaluates revenues over the number of average rentable beds available during the period, effectively normalizing for the inherent differences in utilization as calculated under a large camp versus an open camp scenario.
Revenues from large camp operations for the nine months ended September 30, 2014 were relatively consistent compared to the same period of 2013. Bed rental days increased by 2% compared to the same period of 2013, a result of more camps operating during the comparative periods with similar utilization on a slightly larger fleet.
Revenue per bed rental day for the nine months ended September 30, 2014 decreased by $3 or 2% as compared to the same period of 2013 as quarterly variations in utilization and the transition from open camps to dedicated camps essentially offset each other. Similarly, revenue per available rentable bed decreased slightly in the comparative periods.
Drill Camps
The table below outlines the key performance metrics used by management to measure performance in the drill camp operations:
| Three months ended September 30 |
Nine months ended September 30 |
|||||||||||||
| Revenues (000's) |
2014 |
2013 |
% |
2014 |
2013 |
% |
||||||||
| Drill Camp revenue |
$ |
3,831 |
$ |
4,234 |
(10%) |
$ |
11,014 |
$ |
16,535 |
(33%) |
||||
| Bed rental days (1) |
23,439 |
23,884 |
(2%) |
64,413 |
94,458 |
(32%) |
||||||||
| Revenue per bed rental day |
$ |
163 |
$ |
177 |
(8%) |
$ |
171 |
$ |
175 |
2% |
||||
| RevPAAB (2) |
$ |
51 |
$ |
58 |
(12%) |
$ |
46 |
$ |
69 |
(33%) |
||||
| Number of rentable beds at period end |
828 |
782 |
6% |
828 |
782 |
6% |
||||||||
| Average rentable beds available (3) |
813 |
788 |
3% |
831 |
881 |
(6%) |
||||||||
| Utilization (4) |
31% |
33% |
(6%) |
28% |
39% |
(28%) |
||||||||
| 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 September 30, 2014 decreased by $0.4 million or 10% compared to the same period of 2013. Although activity levels remained consistent in the comparative quarters, the lower revenue was driven by competitive market conditions with downward pressure on pricing resulting in revenue per bed rental day of $163 in Q3 2014, a decrease of 8% compared to the same period of 2013. Revenue per average available rentable bed was 12% lower reflecting both slightly lower utilization and competitive pricing pressures noted above. This metric evaluates revenues over the number of average rentable beds available during the period. Revenues from drill camp operations for the nine months ended September 30, 2014 decreased by $5.5 million or 33% compared to the same period of 2013. The decrease was primarily related to the first half of 2014 where Horizon experienced lower activity levels compared to the same period of 2013. Revenue per available rentable bed was significantly lower reflecting both slightly lower pricing and lower utilization as noted. This metric evaluates revenues over the number of average rentable beds available during the period.
Catering Only
The table below outlines the key performance metrics used by management to measure performance in the catering only operations:
| Three months ended September 30 |
Nine months ended September 30 |
|||||||||||||
| (000's for revenue only) |
2014 |
2013 |
% |
2014 |
2013 |
% |
||||||||
| Catering only revenue |
$ |
3,748 |
$ |
4,279 |
(12%) |
$ |
10,798 |
$ |
14,327 |
(25%) |
||||
| Catering only days(1) |
30,094 |
36,127 |
(17%) |
83,948 |
137,878 |
(39%) |
||||||||
| Revenue per catering only day |
$ |
125 |
$ |
118 |
6% |
$ |
129 |
$ |
104 |
(24%) |
||||
| (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 September 30, 2014 decreased $0.5 million or 12% compared to same period of 2013. This decrease was mainly a result of lower volumes as the third quarter of 2013 had a large contract which was not operating in Q3 2014.
Revenues from the provision of catering and housekeeping services, with no associated bed rentals, for the nine months ended September 30, 2014 decreased $3.5 million or 25% compared to same period of 2013. This decrease is the cumulative effect of lower volumes experienced in catering only for customer owned drill camps through the first half of 2014, the third quarter of 2013 had a large contract which was not operating in Q3 2014.
Service
The table below outlines the service revenue generated from the camp and catering operations:
| Three months ended September 30 |
Nine months ended September 30 |
|||||||||||||
| (000's) |
2014 |
2013 |
% |
2014 |
2013 |
% |
||||||||
| Camp and catering service revenue |
$ |
7,426 |
$ |
5,337 |
39% |
$ |
24,067 |
$ |
15,135 |
59% |
||||
Service revenues are related to the transportation, set-up and de-mobilization of camps for customers. Revenues for the three months ended September 30, 2014 increased $2.1 million or 39% compared to the same period in 2013. The increase was mainly due to the timing of specific service projects undertaken in the comparative periods, with a large camp mobilization occurring in the third quarter of 2014 and no similar sized projects in the same period of 2013.
Revenues for the nine months ended September 30, 2014 increased $8.9 million or 59% compared to the same period in 2013. The increase was mainly due to the timing of specific service projects undertaken in the comparative period, with several large camp mobilizations occurring throughout 2014 and fewer similar sized projects in the same period of 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 September 30 |
Nine months ended September 30 |
|||||||||||||
| (000's) |
2014 |
2013 |
% |
2014 |
2013 |
% |
||||||||
| Manufacturing sales revenue |
$ |
36,846 |
$ |
76,699 |
(52%) |
$ |
78,582 |
$ |
187,708 |
(58%) |
||||
| Three months ended September 30 |
Nine months ended September 30 |
|||||||||||||||
| 2014 |
2013 |
2014 |
2013 |
|||||||||||||
| Direct Hours |
Hours |
% of total |
Hours |
% of total |
Hours |
% of total |
Hours |
% of total |
||||||||
| External hours |
182,379 |
63% |
266,069 |
79% |
424,090 |
51% |
718,309 |
76% |
||||||||
| Internal hours |
106,113 |
37% |
68,931 |
21% |
402,743 |
49% |
231,005 |
24% |
||||||||
| Total direct hours (1) |
288,492 |
100% |
335,000 |
100% |
826,833 |
100% |
949,314 |
100% |
||||||||
| (1) |
Total direct hours incudes; direct hours worked in the manufacturing plants and on-site installation hours. |
Revenues for the three months ended September 30, 2014 were $36.8 million, a decrease of $39.9 million or 52% compared to the same period of 2013. The decrease was due to the timing of external sales projects in the comparative quarters. A large Alberta oil sands project was initiated in the middle of in Q3 2014 while a similar large project in the Alberta oil sands was in full execution for the entire third quarter of 2013. In addition, revenue in Q3 2013 included a $13.5 million used equipment sale with no associated direct hours, a similar sale did not occur in Q3 2014.
Total direct hours, which include direct hours worked in the manufacturing plants and installation hours undertaken on project sites, for the three months ended September 30, 2014 were 288,492 hours, a decrease of 46,508 hours or 14% compared to the same period of 2013. The decrease in direct hours was a result of Horizon managing production capacity through reduced overtime and headcount to align with manufacturing visibility. 63% of total direct hours were directed to external sales projects in Q3 2014 compared to 79% in the same period of 2013, a reflection of more hours dedicated to completing internal fleet requirements and installations to meet contracted requirements.
Revenues for the nine months ended September 30, 2014 were $78.6 million, a decrease of $109.1 million or 58% compared to the same period of 2013. The decrease was due to the timing of external sales projects in the comparative periods, and the focus on internal fleet production in the first half of 2014 to support expansion of the relocatable structures fleet and camp rental and catering projects announced earlier in 2014.
Total direct hours, which include direct hours worked in the manufacturing plants and installation hours undertaken on project sites, for the nine months ended September 30, 2014 were 826,833 hours, a decrease of 122,481 hours or 13% compared to the same period of 2013. The decrease in direct hours was a result of Horizon managing production capacity through reduced overtime and headcount to align with manufacturing visibility. 51% of total direct hours were directed to external party sales in the first nine months of 2014 compared to 76% in the same period of 2013. The decrease is reflective of the focus on internal fleet requirements to meet contract commitments in the first half of 2014.
Relocatable Structures
Relocatable structures (formerly Space Rentals) revenues include the rental of relocatable structures and the associated transportation. Relocatable Structures include office units, lavatory units, mine dry units and associated equipment.
Revenues for the three months ended September 30, 2014 were $3.7 million, an increase of $0.7 million or 23% compared to the same period of 2013. The increase is primarily a result of the additions to the fleet in the first half of 2014, with many of the new units deployed in the third quarter of 2014. Utilization at the end of the third quarter of 2014 was 75% of 1,203 units compared to 89% of 910 units in the comparative quarter of 2013.
Revenues for the nine months ended September 30, 2014 were $9.0 million, an increase of $0.6 million or 7% compared to the same period of 2013. The increase is primarily a result of the additions to the fleet in the first half of 2014. Utilization for the first nine months of 2014 was 71% of 1,178 units compared to 87% of 828 units in 2013.
Direct costs
Direct costs for the three months ended September 30, 2014 were $76.7 million or 75% of revenues compared to $99.1 million or 72% of revenue for the same period of 2013. Direct costs are closely related to business volumes and revenue mix with the decrease primarily due to lower volumes in the manufacturing sales operations.As a percentage of revenue, direct costs increased primarily as a result of the nature and timing of projects flowing through the manufacturing sales operations. Typically manufacturing experiences higher costs in the initial manufacturing ramp-up and mobilization to site phase.
Direct costs for the nine months ended September 30, 2014 were $220.3 million or 76% of revenue compared to $289.4 million or 73% of revenue for the same period of 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, during the first half of 2014 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 revenue is 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 September 30 |
Nine months ended September 30 |
||||||||||||||
| (000's except mat rental days and numbers of mats) |
2014 |
2013 |
%change |
2014 |
2013 |
% change |
|||||||||
| Access mat rental revenue(1) |
$ |
4,508 |
$ |
4,850 |
(7%) |
$ |
10,518 |
$ |
10,797 |
(3%) |
|||||
| Other mat and rental equipment revenue(2) |
$ |
678 |
$ |
476 |
42% |
$ |
2,092 |
$ |
2,105 |
(1%) |
|||||
| Total mat and rental equipment revenue |
$ |
5,186 |
$ |
5,326 |
(3%) |
$ |
12,610 |
$ |
12,902 |
(2%) |
|||||
| Mat sales revenue |
4,758 |
3,911 |
22% |
18,107 |
10,957 |
65% |
|||||||||
| Installation, transportation, service and other revenue |
9,980 |
10,563 |
(6%) |
21,937 |
27,129 |
(19%) |
|||||||||
| Total revenue |
$ |
19,924 |
$ |
19,800 |
1% |
$ |
52,654 |
$ |
50,988 |
3% |
|||||
| EBITDAS |
$ |
4,991 |
$ |
6,590 |
(24%) |
$ |
11,443 |
$ |
14,724 |
(22%) |
|||||
| EBITDAS as a % of revenue |
25% |
33% |
22% |
29% |
|||||||||||
| Operating earnings |
$ |
2,904 |
$ |
4,268 |
(32%) |
$ |
6,172 |
$ |
8,149 |
(24%) |
|||||
| Access mat rental days – owned mats(3) |
1,271,836 |
1,512,190 |
(16%) |
3,140,240 |
3,280,646 |
(4%) |
|||||||||
| Access mat rental days – third party mats(4) |
800,114 |
537,193 |
49% |
1,639,118 |
1,292,451 |
27% |
|||||||||
| Total access mat rental days |
2,071,950 |
2,049,383 |
1% |
4,779,358 |
4,573,097 |
5% |
|||||||||
| Average owned access mats in rental fleet(5) |
20,257 |
19,845 |
2% |
18,103 |
17,126 |
6% |
|||||||||
| Average sub rental access mats in rental fleet(6) |
8,663 |
5,848 |
48% |
5,949 |
4,718 |
26% |
|||||||||
| Owned access mats in rental fleet at quarter end(7) |
20,497 |
19,630 |
4% |
20,497 |
19,630 |
4% |
|||||||||
| Mats sold: |
|||||||||||||||
| New mats |
5,789 |
4,401 |
32% |
22,460 |
12,355 |
82% |
|||||||||
| Used Mats |
596 |
1,510 |
(61%) |
4,982 |
3,354 |
49% |
|||||||||
| Total mats sold |
6,385 |
5,911 |
8% |
27,442 |
15,709 |
75% |
|||||||||
| (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 September 30, 2014 were $19.9 million, consistent with the same period of 2013. EBITDAS for the three months ended September 30, 2014 were $5.0 million, a decrease of $1.6 million or 24% compared to the same period of 2013. Although total revenues were very similar in the comparative quarters the revenue mix was not the same and was the primary driver of the decrease in EBTIDAS.
Revenues from the Matting segment for the nine months ended September 30, 2014 were $52.7 million, an increase of $1.7 million or 3% compared to the same period of 2013. EBITDAS for the nine months ended September 30, 2014 were $11.4 million, a decrease of $3.3 million or 22% compared to the same period of 2013. The main drivers in 2014 for the decreased EBITDAS was the difference in the revenue mix, downward pressure on access mat rental rates and increases in lumber costs for mat manufacturing.
Mat and rental equipment revenue
Mat and equipment rental revenues for the three months ended September 30, 2014 decreased by $0.1 million or 3% compared to the same period of 2013, driven by lower access mat rental revenues. Revenue per mat rental day for the three months ended September 30, 2014 was $2.18, a decrease of $0.19 or 8% compared to the same period of 2013 as a result of a more competitive pricing environment in 2014 compared to the same period of 2013. Access mat rental days were slightly higher in the three months ended September 30, 2014 compared to the same period of 2013. Owned access mat utilization was 68% in the three months ended September 30, 2014 compared to 83% in the comparative quarter of 2013. The decrease in utilization was due to the mix of owned and third party access mats on rent in the comparative periods.
For the nine months ended September 30, 2014 mat and equipment rental revenues decreased by $0.3 million or 2% as compared to the same period of 2013, driven by lower access mat rental revenues. Revenue per access mat rental day was $2.20, a decrease of $0.16 or 7% compared to the same period of 2013 as a result of a more competitive pricing environment. Although total access mat rental days increased by 206,261 or 5% compared to the same period of 2013 utilization of the owned mat rental fleet decreased to 64% from 70% in the comparative periods. The lower utilization was a combination of the mix of owned and third party access mats on rent and the average fleet size in the comparative periods.
Mat sales revenue
Revenues from mat sales for the three months ended September 30, 2014 were $4.8 million, an increase of $0.8 million or 22% 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 6,385 mats sold in the three months ended September 30, 2014, an increase of 474 mats or 8% compared to the same period of 2013. Revenues per mat sold were $745 for the third quarter of 2014, an increase of $83 or 13% compared to the same period of 2013. This increase is reflective of both the mix of new and used mats sold, as new mats typically have higher selling price than used mats, and increased pricing to offset increased input costs related to building mats.
Revenues from mat sales for the nine months ended September 30, 2014 were $18.1 million, an increase of $7.2 million or 65% compared to the same period of 2013. The increase was due mainly to several significant new and used mat sales in 2014 resulting in mat sales for the nine months ended September 30, 2014 of 27,442 mats, an increase of 11,733 mats or 75% compared to the same period of 2013. Revenues per mat sold were $660 for the nine months ended September 30, 2014, a decrease of $37 or 5% compared to the same period of 2013. The decrease in the revenue per mat sold was mainly a result of a more competitive pricing environment.
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 September 30, 2014 were $10.0 million, a decrease of $0.6 million or 6% compared to the same period in 2013. The decrease in revenue is primarily a result of a more competitive environment in the matting business, which has resulted in pricing pressure with respect to these services.
Revenues for the nine months ended September 30, 2014 were $21.9 million, a decrease of $5.2 million or 19% compared to the same period in 2013. The decrease in revenue is primarily a result of a more competitive environment in the matting business, which has resulted in pricing pressure with respect to these services.
Direct costs
Direct costs for the three months ended September 30, 2014 were $14.5 million or 73% of revenue compared to $12.7 million or 64% of revenue for the same period of 2013. Direct costs are driven by both the level and mix of business activity. The increase in overall direct costs was driven by both higher mat sales, which reflect the associated direct costs of mat manufacturing, and the increased number of third party mats on rent which have the associated rental costs.
Direct costs for the nine months ended September 30, 2014 were $40.4 million or 77% of revenue compared to $35.4 million or 70% of revenue for the same period of 2013. This increase in direct costs reflects the nine month effect of the factors discussed above.
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 Corporate Development and Planning, Vice President of Health, Safety, and Environment, Vice President of Aboriginal Relations, Corporate Secretary, corporate accounting staff, information technology, and associated costs of supporting a public company. Corporate costs for the three and nine months ended September 30, 2014 were $2.7 million, consistent with Q3 2013 and $9.6 million, an increase of $0.5 million or 5%, respectively compared to the same periods in 2013. Corporate costs as a percentage of total revenue for the three and nine months ended September 30, 2014 were 2% and 3% respectively compared to 2% in each of the comparative periods of 2013.
Other Items
Selling and administrative
Selling and administrative expenses for the three and nine months ended September 30, 2014 were $4.8 million, an increase of $0.2 million or 5%, and $15.4 million, an increase of $1.2 million or 9% compared to the same periods in 2013. As a percentage of revenue, selling and administrative expenses for the three and nine months ended September 30, 2014 were 4% and 5% compared to 3% in each of the comparative periods of 2013.
Depreciation and amortization
| Three months ended September 30 |
Nine months ended September 30 |
|||||||||||||
| (000's) |
2014 |
2013 |
% change |
2014 |
2013 |
% change |
||||||||
| Depreciation of property, plant and equipment |
$ |
13,595 |
$ |
12,329 |
10% |
$ |
38,860 |
$ |
34,935 |
11% |
||||
| Amortization of intangibles |
798 |
2,051 |
(61%) |
2,437 |
6,153 |
(60%) |
||||||||
| Total depreciation and amortization |
$ |
14,393 |
$ |
14,380 |
- |
$ |
41,297 |
$ |
41,088 |
1% |
||||
Depreciation of property, plant and equipment increased $1.3 million in the three months ended September 30, 2014 as compared to the same period of 2013. The increase was mainly related to newly constructed camp assets and the associated camp setup costs added between September 30, 2013 and September 30, 2014. Amortization costs related to customer relationships decreased $1.3 million or 61% and $3.7 million or 60% as compared to the same periods of 2013. A portion of these assets have now been fully amortized with the remainder to be fully amortized by December 2014.
For the nine months ended September 30, 2014 depreciation increased $3.9 million compared to the same period of 2013. The increase was primarily related to the increase in camp assets discussed above.
Financing costs
Financing costs include interest on loans and borrowings and accretion of notes payable. For the three and nine months ended September 30, 2014 financing costs were $1.2 million, an increase of $0.4 million or 47% and $3.2 million, an increase of $0.1 million or 4% respectively compared to 2013. The increase in financing costs was mainly a result of higher average debt levels in the third quarter and first nine months of 2014 compared to the same periods of 2013. The effective interest rate on loans and borrowings for the three and nine months ended September 30, 2014 was 3.3%, slightly lower than the comparative period at 3.5%.
Income taxes
For the three and nine months ended September 30, 2014 income tax expense was $3.4 million, an effective tax rate of 30% and $6.4 million, an effective tax rate of 28% compared to $8.3 million, an effective tax rate of 31% and $16.9 million, an effective tax rate of 27% in the same periods of 2013. The increased tax rate in the current period is greater than the statutory rate as a result of the effect of prior period adjustments made in the respective periods.
Gain/Loss on disposal
For the three months ended September 30, 2014 Horizon recognized gains on disposal of $1.7 million compared to gains of $1.1 million in the third quarter of 2013. The majority of these gains came from disposal of the remaining camp assets and property related to the northern assets.
For the nine months ended September 30, 2014 gains on disposal of $3.8 million were primarily related to the disposal of camp assets and property related to the northern assets throughout the year. This compares to a loss on disposal of $3.0 million in the same period of 2013 which was the result of the disposal of undepreciated setup costs related to a large camp which was dismantled and sold.
| Condensed consolidated statement of financial position (Unaudited) |
|||||||
|
(000's) |
September 30, 2014 |
December 31, 2013 |
|||||
| Assets |
|||||||
| Current assets: |
|||||||
| Trade and other receivables |
$ |
108,280 |
$ |
90,856 |
|||
| Inventories |
13,807 |
15,638 |
|||||
| Prepayments |
3,605 |
3,000 |
|||||
| Income taxes receivable |
3,306 |
4,114 |
|||||
| 128,998 |
113,608 |
||||||
| Non-current assets: |
|||||||
| Property, plant and equipment |
400,151 |
349,252 |
|||||
| Intangible assets |
531 |
2,968 |
|||||
| Goodwill |
1,664 |
1,664 |
|||||
| Deferred tax assets |
972 |
1,067 |
|||||
| Other assets |
2,460 |
2,556 |
|||||
| 405,778 |
357,507 |
||||||
| $ |
534,776 |
$ |
471,115 |
||||
| Liabilities and Shareholders' Equity |
|||||||
| Current liabilities: |
|||||||
| Trade and other payables |
$ |
54,728 |
$ |
56,677 |
|||
| Deferred revenue |
2,287 |
3,447 |
|||||
| Income taxes payable |
762 |
284 |
|||||
| Current portion of loans and borrowings |
1,479 |
1,496 |
|||||
| 59,256 |
61,904 |
||||||
| Non-current liabilities: |
|||||||
| Asset retirement provisions |
5,830 |
5,656 |
|||||
| Loans and borrowings |
146,433 |
78,256 |
|||||
| Deferred tax liabilities |
35,915 |
30,872 |
|||||
| 247,434 |
176,688 |
||||||
| Shareholders' equity: |
|||||||
| Share capital |
185,199 |
183,851 |
|||||
| Contributed surplus |
13,173 |
11,836 |
|||||
| Accumulated other comprehensive income |
628 |
394 |
|||||
| Retained earnings |
88,342 |
98,346 |
|||||
| 287,342 |
294,427 |
||||||
| $ |
534,776 |
$ |
471,115 |
||||
| Condensed consolidated statement of comprehensive income (Unaudited) |
|||||||||||||
| Three and nine months ended September 30, 2014 and 2013 |
|||||||||||||
| Three months ended September 30 |
Nine months ended |
||||||||||||
| (000's) |
2014 |
2013 |
2014 |
2013 |
|||||||||
| Revenue |
$ |
121,895 |
$ |
157,361 |
$ |
340,200 |
$ |
445,746 |
|||||
| Operating expenses: |
|||||||||||||
| Direct costs |
90,851 |
111,477 |
259,507 |
320,910 |
|||||||||
| Depreciation |
13,595 |
12,329 |
38,860 |
34,935 |
|||||||||
| Share based compensation |
396 |
336 |
937 |
961 |
|||||||||
| (Gain) loss on disposal of property, plant and equipment |
(1,732) |
(1,061) |
(3,847) |
3,025 |
|||||||||
| Direct operating expenses |
103,110 |
123,081 |
295,457 |
359,831 |
|||||||||
| Gross profit |
18,785 |
34,280 |
44,743 |
85,915 |
|||||||||
| Selling & administrative expenses: |
|||||||||||||
| Selling & administrative expenses |
4,998 |
4,578 |
15,601 |
14,189 |
|||||||||
| Amortization of intangible assets |
798 |
2,051 |
2,437 |
6,153 |
|||||||||
| Share based compensation |
298 |
219 |
713 |
675 |
|||||||||
| Selling & administrative expenses |
6,094 |
6,848 |
18,751 |
21,017 |
|||||||||
| Operating earnings |
12,691 |
27,432 |
25,992 |
64,898 |
|||||||||
| Finance costs |
1,231 |
840 |
3,168 |
3,036 |
|||||||||
| Profit before tax |
11,460 |
26,592 |
22,824 |
61,862 |
|||||||||
| Current tax (recovery) expense |
(598) |
6,764 |
1,223 |
16,319 |
|||||||||
| Deferred tax expense |
3,993 |
1,489 |
5,138 |
572 |
|||||||||
| Income tax expense |
3,395 |
8,253 |
6,361 |
16,891 |
|||||||||
| Total profit |
8,065 |
18,339 |
16,463 |
44,971 |
|||||||||
| Other comprehensive income: |
|||||||||||||
| Translation of foreign operations |
(113) |
(304) |
(234) |
(42) |
|||||||||
| Other comprehensive income, net of income tax |
(113) |
(304) |
(234) |
(42) |
|||||||||
| Total comprehensive income |
$ |
8,178 |
$ |
18,643 |
$ |
16,697 |
$ |
45,013 |
|||||
| Earnings per share: |
|||||||||||||
| Basic |
$ |
0.07 |
$ |
0.17 |
$ |
0.15 |
$ |
0.41 |
|||||
| Diluted |
$ |
0.07 |
$ |
0.17 |
$ |
0.15 |
$ |
0.41 |
|||||
| Condensed consolidated statement of changes in equity (Unaudited) |
|||||||||||||||
| (000's) |
Share |
Contributed |
Accumulated |
Retained |
Total |
||||||||||
| Balance at December 31, 2012 |
$ |
179,999 |
$ |
10,783 |
$ |
208 |
$ |
83,273 |
$ |
274,263 |
|||||
| Total profit |
- |
- |
- |
44,971 |
44,971 |
||||||||||
| Share based compensation |
- |
1,636 |
- |
- |
1,636 |
||||||||||
| Share options exercised |
2,357 |
(759) |
- |
- |
1,598 |
||||||||||
| Translation of foreign operations |
- |
- |
42 |
- |
42 |
||||||||||
| Dividends declared |
- |
- |
- |
(20,498) |
(20,498) |
||||||||||
| Balance at September 30, 2013 |
$ |
182,356 |
$ |
11,660 |
$ |
250 |
$ |
107,746 |
$ |
302,012 |
|||||
| Total loss |
- |
- |
- |
(2,520) |
(2,520) |
||||||||||
| Share based compensation |
- |
572 |
- |
- |
572 |
||||||||||
| Share options exercised |
1,495 |
(396) |
- |
- |
1,099 |
||||||||||
| Translation of foreign operations |
- |
- |
144 |
- |
144 |
||||||||||
| Dividends declared |
- |
- |
- |
(6,880) |
(6,880) |
||||||||||
| Balance at December 31, 2013 |
$ |
183,851 |
$ |
11,836 |
$ |
394 |
$ |
98,346 |
$ |
294,427 |
|||||
| Total profit |
- |
- |
- |
16,463 |
16,463 |
||||||||||
| Share based compensation |
- |
1,650 |
- |
- |
1,650 |
||||||||||
| Share options exercised |
1,348 |
(313) |
- |
- |
1,035 |
||||||||||
| Translation of foreign operations |
- |
- |
234 |
- |
234 |
||||||||||
| Dividends declared |
- |
- |
- |
(26,467) |
(26,467) |
||||||||||
| Balance at September 30, 2014 |
$ |
185,199 |
$ |
13,173 |
$ |
628 |
$ |
88,342 |
$ |
287,342 |
|||||
| Condensed consolidated statement of cash flows (Unaudited) |
||||||||
| Nine months ended September 30, 2014 and 2013 |
||||||||
| September 30, |
September 30, |
|||||||
| (000's) |
2014 |
2013 |
||||||
| Cash provided by (used in): |
||||||||
| Operating activities: |
||||||||
| Profit for the period |
$ |
16,463 |
$ |
44,971 |
||||
| Adjustments for: |
||||||||
| Depreciation |
38,860 |
34,935 |
||||||
| Amortization of intangible assets |
2,437 |
6,153 |
||||||
| Share based compensation |
1,650 |
1,636 |
||||||
| Amortization of other assets |
96 |
96 |
||||||
| (Gain) loss on sale of property, plant and equipment |
(5,628) |
42 |
||||||
| Unrealized foreign exchange loss (gain) |
165 |
(14) |
||||||
| Finance costs |
3,168 |
3,036 |
||||||
| Income tax expense |
6,361 |
16,891 |
||||||
| 63,572 |
107,746 |
|||||||
| Income taxes paid |
63 |
(26,282) |
||||||
| Interest paid |
(2,907) |
(2,800) |
||||||
| Changes in non-cash working capital items |
(21,213) |
17,979 |
||||||
| 39,515 |
96,643 |
|||||||
| Investing activities: |
||||||||
| Purchase of property, plant and equipment |
(97,041) |
(55,263) |
||||||
| Proceeds on sale of property, plant and equipment |
12,979 |
23,432 |
||||||
| (84,062) |
(31,831) |
|||||||
| Financing activities: |
||||||||
| Proceeds from (repayment of) loans and borrowings |
68,034 |
(47,328) |
||||||
| Share purchase options exercised |
1,035 |
1,598 |
||||||
| Payment of dividends |
(24,522) |
(19,082) |
||||||
| 44,547 |
(64,812) |
|||||||
| Change in cash position |
- |
- |
||||||
| Cash, beginning of period |
- |
- |
||||||
| Cash, end of period |
$ |
- |
$ |
- |
||||
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.
a) EBITDAS
| Three months ended September 30 |
Nine months ended September 30 |
||||||||||||
| (000's) |
2014 |
2013 |
2014 |
2013 |
|||||||||
| Total profit |
$ |
8,065 |
$ |
18,339 |
$ |
16,463 |
$ |
44,971 |
|||||
| Add: |
|||||||||||||
| Finance costs |
1,231 |
840 |
3,168 |
3,036 |
|||||||||
| Income tax expense |
3,395 |
8,253 |
6,361 |
16,891 |
|||||||||
| Depreciation |
13,595 |
12,329 |
38,860 |
34,935 |
|||||||||
| Amortization of intangible assets |
798 |
2,051 |
2,437 |
6,153 |
|||||||||
| (Gain) loss on disposal of property, plant and equipment |
(1,732) |
(1,061) |
(3,847) |
3,025 |
|||||||||
| Share based compensation |
694 |
555 |
1,650 |
1,636 |
|||||||||
| EBITDAS |
$ |
26,046 |
$ |
41,306 |
$ |
65,092 |
$ |
110,647 |
|||||
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. 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:
"Consolidated revenues and EBITDAS improved significantly as compared to Q2 2014, with EBITDAS for Q4 2014 expected to be similar to Q3 2014 levels."
"Manufacturing activities in Q4 2014 will focus mainly on executing the previously announced 1,250 bed oil sands project which will be in full production and installation mode through the end of 2014 and into the first half of 2014. Visibility of the manufacturing sales backlog for the latter half of 2014 remains unclear, however, bidding activity continues to be reasonably strong. Horizon continues to focus on development of the market for modular construction of permanent facilities to solidify the demand for its manufacturing capacity from areas other than camp facility construction." and
Camp rental and catering operations are expected to continue to improve in Q4 2014, lifted by the installation of a 400 bed oil sands operations camp for a new customer that began operating late in Q3 2014 and improved utilization of several open camp facilities that experienced low utilization through the first half of 2014. Horizon anticipates activity levels will continue to build through the end of the year and into the first quarter of 2015 as the normal seasonal lift from winter based work is experienced in Q1 2015."
The foregoing statements are based on the assumption that the contracts entered into at this time with respect to such activities will not be amended or terminated and that oil sands development in Alberta and other resource development in western Canada will strengthen.
Another forward-looking statement in the "Outlook" sections was "Matting activities are expected to moderate somewhat in Q4 2014 as demand typically declines in the winter season. Focus continues on increasing the size of the mat rental fleet and displacing the use of third party matting over time." That statement is based on the assumption that matting revenues will decline based on weather related seasonal demand for this product and services.
Many factors could cause the performance or achievements of Horizon 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's operations and financial results are included in Horizon'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 does not undertake any obligation to update publicly or revise any forward-looking statements and information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.
SOURCE: Horizon North Logistics Inc.
Scott Matson, 403-517-4654
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