Horizon North Logistics Inc. Announces Third Quarter Results
TSX Symbol: HNL
CALGARY, Oct. 31, 2012 /CNW/ - Horizon North Logistics Inc. ("Horizon" or the "Corporation") reported its financial and operating results for the three and nine months ended September 30, 2012 and 2011.
Third Quarter Highlights
- Revenue and EBITDAS growth was led by the camp rental and catering operations which were highly focused on the Alberta oil sands region;
- The matting segment had a record quarter with continued strong mat rentals and service offsetting slightly lower mat sales;
- Executing the 2012 capital plan remains a top priority and the cornerstone to achieving growth; manufacturing operations in the third quarter were focused on camps & catering rental fleet;
- 63% of third quarter revenues were generated from oil sands related projects.
Third Quarter Financial Summary
| Three months ended September 30 | Nine months ended September 30 | |||||||||||||||||||||||||||
| (000's except per share amounts) | 2012 | 2011 | % Change | 2012 | 2011 | % Change | ||||||||||||||||||||||
| Revenue | $ | 119,910 | $ | 102,298 | 17% | $ | 388,058 | $ | 292,064 | 33% | ||||||||||||||||||
| EBITDAS(1) | 34,080 | 28,443 | 20% | 108,988 | 73,267 | 49% | ||||||||||||||||||||||
| EBITDAS as a % of revenue | 28% | 28% | 28% | 25% | ||||||||||||||||||||||||
| Operating earnings(1) | 23,232 | 20,665 | 12% | 79,368 | 50,858 | 56% | ||||||||||||||||||||||
| Total profit | 16,262 | 15,068 | 8% | 56,892 | 36,213 | 57% | ||||||||||||||||||||||
| Total comprehensive income | 16,328 | 15,298 | 7% | 56,974 | 36,443 | 56% | ||||||||||||||||||||||
| Earnings per share | - basic | $ | 0.15 | |
$ | 0.14 |
7% | |
$ | 0.53 |
$ | 0.34 |
56% |
|||||||||||||||
| - diluted | $ | 0.15 | $ | 0.14 | 7% | $ | 0.52 | $ | 0.34 | 53% | ||||||||||||||||||
| Total assets | 480,322 | 328,928 | 46% | 480,322 | 328,928 | 46% | ||||||||||||||||||||||
| Long-term loans and borrowings | 117,830 | 43,356 | 172% | 117,830 | 43,356 | 172% | ||||||||||||||||||||||
| Funds from operations(1) | 26,894 | 22,452 | 20% | 84,739 | 56,851 | 49% | ||||||||||||||||||||||
| Capital spending | 46,445 | 22,861 | 103% | 115,968 | 79,108 | 47% | ||||||||||||||||||||||
| Debt to total capitalization ratio(1) | 0.31 | 0.17 | 0.31 | 0.17 | ||||||||||||||||||||||||
(1) See financial measures definitions on the last page of the press release for details.
Overview and Outlook
Horizon's third quarter results came in largely as expected, generating strong revenue and EBITDAS as compared to the same period of 2011. The increase was primarily driven by higher camp rental and catering operations revenues as a result of continued investment in the large camp rental fleet which occurred throughout 2011 and 2012. As a result, the average number of rentable beds available in the large camp rental fleet increased by 68% compared to the same period in 2011. Higher camp rental and catering operations revenue was partially offset by decreased revenue from camp sales as production capacity during the current quarter was heavily focused on executing internal fleet build projects.
Oil sands development and related activities continue to be the main driver of Horizon's business lines, with 63% of third quarter revenues generated from oil sands related projects. However, Horizon's customer base is expanding with the addition of new projects related to natural gas exploration and development, light oil development and pipeline projects.
Continued oil sands development activity is expected despite concerns regarding short term commodity price fluctuations. Oil sands projects are generally viewed in the context of long term planning horizons, with project spending allocated over a number of years. Individual companies may curtail or accelerate spending plans, but Horizon expects that continued strong bidding activity associated with the oil sands market will continue.
Horizon's manufacturing facilities continue to operate at high levels of utilization. Planned growth of production capacity through the addition of direct manufacturing labour in the facilities is ongoing. Staff levels are expected to continue to grow through the first half of 2013. The allocation of total production capacity between external camp sales and internal camp rental fleet requirements is reviewed regularly by management. Considering the current manufacturing backlog, the total production capacity for 2013 is likely to remain at 60% allocated to external camp sales with the remaining 40% allocated to internal fleet build projects.
Horizon's Matting division continues to turn in strong quarterly performances, and generated record revenue and EBITDAS during the quarter. Robust mat rental demand and continued strong demand for Horizon's full service oriented model helped offset slightly lower mat sales volumes during the quarter. With the current sales backlog and high activity levels driven by natural gas exploration and development, light oil development and pipeline projects performance of the Matting division is expected to remain strong through 2013.
Capital Spending
Executing the 2012 capital plan remains a high priority, with the majority of the 2012 capital program focused on adding beds to the Camps & Catering rental fleet. In the nine months ended September 30, 2012, Horizon added 1,594 beds to the rental fleet and expects to exit 2012 with a total of 8,500 rentable beds. With oil sands development activity remaining strong, the 2013 capital program is anticipated to add an additional 1,500 rentable beds to the Camp & Catering rental fleet.
Dividend Payment
Horizon North Logistics Inc. announced today that its Board of Directors has declared a dividend for the fourth quarter of 2012 at $0.05 per share. The dividend is payable to shareholders of record at the close of business on December 31, 2012 and is to be paid on January 11, 2013. The dividends are eligible dividends for Canadian tax purposes.
Liquidity and Capital Resources
On October 26, 2012, the Corporation increased its existing committed credit facility from $120 million to $150 million. The renewed committed credit facility was also renewed for a term of 3 years, extendable annually at the Corporation's request. In addition, a $35 million accordion feature is available upon request by the Corporation, subject to review and approval by the lenders. The committed credit facility is secured by a $300 million first fixed and floating charge debenture over all assets of the Corporation and its wholly owned subsidiaries. Interest is payable at the bank prime rate plus 0.625%. Amounts borrowed under the facility become due on October 26, 2015, the renewal date of the facility.
Third Quarter Financial Results
| Three months ended September 30, 2012 | |||||||||||||||||||||||||
| (000's) | Camps & Catering |
Matting | Marine Services |
Corporate | Inter-segment Eliminations |
Total | |||||||||||||||||||
| Revenue | $ | 97,414 | $ | 23,745 | $ | 2,019 | $ | - | $ | (3,268) | $ | 119,910 | |||||||||||||
| Expenses | |||||||||||||||||||||||||
| Direct costs | 66,908 | 16,727 | 1,441 | 1 | (3,107) | 81,970 | |||||||||||||||||||
| Selling & administrative | 1,138 | 128 | - | 2,594 | - | 3,860 | |||||||||||||||||||
| EBITDAS | 29,368 | 6,890 | 578 | (2,595) | (161) | 34,080 | |||||||||||||||||||
| EBITDAS as a % of revenue | 30% | 29% | 29% | - | - | 28% | |||||||||||||||||||
| Share based payments | 343 | 54 | 1 | 285 | - | 683 | |||||||||||||||||||
| Depreciation & amortization | 7,913 | 2,148 | 105 | 116 | (46) | 10,236 | |||||||||||||||||||
| Gain on disposal of property, plant and equipment |
(71) | - | - | - | - | (71) | |||||||||||||||||||
| Operating earnings (loss) | $ | 21,183 | $ | 4,688 | $ | 472 | $ | (2,996) | $ | (115) | $ | 23,232 | |||||||||||||
| Finance costs | 1,043 | ||||||||||||||||||||||||
| Loss on equity investments | 52 | ||||||||||||||||||||||||
| Income tax expense | 5,875 | ||||||||||||||||||||||||
| Other comprehensive income | (66) | ||||||||||||||||||||||||
| Total comprehensive income | $ | 16,328 | |||||||||||||||||||||||
| Earnings per share - basic & diluted | $ | 0.15 | |||||||||||||||||||||||
| Three months ended September 30, 2011 | |||||||||||||||||||||||||
| (000's) | Camps & Catering |
Matting | Marine Services |
Corporate | Inter-segment Eliminations |
Total | |||||||||||||||||||
| Revenue | $ | 85,273 | $ | 17,492 | $ | 1,554 | $ | - | $ | (2,021) | $ | 102,298 | |||||||||||||
| Expenses | |||||||||||||||||||||||||
| Direct costs | 58,257 | 11,853 | 1,036 | (3) | (1,983) | 69,160 | |||||||||||||||||||
| Selling & administrative | 2,390 | 125 | - | 2,180 | - | 4,695 | |||||||||||||||||||
| EBITDAS | $ | 24,626 | $ | 5,514 | $ | 518 | $ | (2,177) | $ | (38) | $ | 28,443 | |||||||||||||
| EBITDAS as a % of revenue | 29% | 32% | 33% | - | - | 28% | |||||||||||||||||||
| Share based payments | 71 | 14 | 2 | 56 | - | 143 | |||||||||||||||||||
| Depreciation & amortization | 5,652 | 1,828 | 113 | 88 | (22) | 7,659 | |||||||||||||||||||
| Gain on disposal of property, plant and equipment |
(21) | (3) | - | - | - | (24) | |||||||||||||||||||
| Operating earnings (loss) | $ | 18,924 | $ | 3,675 | $ | 403 | $ | (2,321) | $ | (16) | $ | 20,665 | |||||||||||||
| Finance costs | 641 | ||||||||||||||||||||||||
| Gain on equity investments | (2) | ||||||||||||||||||||||||
| Income tax expense | 4,958 | ||||||||||||||||||||||||
| Other comprehensive income | (230) | ||||||||||||||||||||||||
| Total comprehensive income | $ | 15,298 | |||||||||||||||||||||||
| Earnings per share - basic & diluted | $ | 0.14 | |||||||||||||||||||||||
| Nine months ended September 30, 2012 | ||||||||||||||||||||||||||
| (000's) | Camps & Catering |
Matting | Marine Services |
Corporate | Inter-segment Eliminations |
Total | ||||||||||||||||||||
| Revenue | $ | 326,537 | $ | 67,315 | $ | 3,439 | $ | - | $ | (9,233) | $ | 388,058 | ||||||||||||||
| Expenses | ||||||||||||||||||||||||||
| Direct costs | 223,417 | 49,500 | 2,335 | 1 | (8,681) | 266,572 | ||||||||||||||||||||
| Selling & administrative | 3,786 | 392 | 4 | 8,316 | - | 12,498 | ||||||||||||||||||||
| EBITDAS | 99,334 | 17,423 | 1,100 | (8,317) | (552) | 108,988 | ||||||||||||||||||||
| EBITDAS as a % of revenue | 30% | 26% | 32% | - | - | 28% | ||||||||||||||||||||
| Share based payments | 715 | 117 | 2 | 592 | - | 1,426 | ||||||||||||||||||||
| Depreciation & amortization | 21,524 | 6,057 | 322 | 360 | (107) | 28,156 | ||||||||||||||||||||
| Loss (gain) on disposal of property, plant and equipment |
66 | (28) | - | - | - | 38 | ||||||||||||||||||||
| Operating earnings (loss) | $ | 77,029 | $ | 11,277 | $ | 776 | $ | (9,269) | $ | (445) | $ | 79,368 | ||||||||||||||
| Finance costs | 2,586 | |||||||||||||||||||||||||
| Loss on equity investments | 25 | |||||||||||||||||||||||||
| Income tax expense | 19,865 | |||||||||||||||||||||||||
| Other comprehensive income | (82) | |||||||||||||||||||||||||
| Total comprehensive income | $ | 56,974 | ||||||||||||||||||||||||
| Earnings per share | - basic | $ | 0.53 |
|||||||||||||||||||||||
| - diluted | $ | 0.52 | ||||||||||||||||||||||||
| Nine months ended September 30, 2011 | |||||||||||||||||||||||||
| (000's) | Camps & Catering |
Matting | Marine Services |
Corporate | Inter-segment Eliminations |
Total | |||||||||||||||||||
| Revenue | $ | 246,091 | $ | 47,588 | $ | 3,361 | $ | - | $ | (4,976) | $ | 292,064 | |||||||||||||
| Expenses | |||||||||||||||||||||||||
| Direct costs | 176,288 | 34,032 | 2,241 | (1) | (4,847) | 207,713 | |||||||||||||||||||
| Selling & administrative | 4,117 | 319 | 7 | 6,641 | - | 11,084 | |||||||||||||||||||
| EBITDAS | $ | 65,686 | $ | 13,237 | $ | 1,113 | $ | (6,640) | $ | (129) | $ | 73,267 | |||||||||||||
| EBITDAS as a % of revenue | 27% | 28% | 33% | - | - | 25% | |||||||||||||||||||
| Share based payments | 245 | 33 | 4 | 170 | - | 452 | |||||||||||||||||||
| Depreciation & amortization | 16,620 | 4,645 | 335 | 260 | (60) | 21,800 | |||||||||||||||||||
| Loss on disposal of property, plant and equipment |
62 | 95 | - | - | - | 157 | |||||||||||||||||||
| Operating earnings (loss) | $ | 48,759 | $ | 8,464 | $ | 774 | $ | (7,070) | $ | (69) | $ | 50,858 | |||||||||||||
| Finance costs | 1,830 | ||||||||||||||||||||||||
| Loss on equity investments | 39 | ||||||||||||||||||||||||
| Income tax expense | 12,776 | ||||||||||||||||||||||||
| Other comprehensive income | (230) | ||||||||||||||||||||||||
| Total comprehensive income | $ | 36,443 | |||||||||||||||||||||||
| Earnings per share - basic & diluted | $ | 0.34 | |||||||||||||||||||||||
Camps & Catering
| Three months ended September 30 | Nine months ended September 30 | |||||||||||||||||||||||||
| (000's except bed rental days and catering only days) |
2012 | 2011 | % change |
2012 | 2011 | % change |
||||||||||||||||||||
| Camp rental and catering operations revenue | $ | 65,129 | $ | 48,597 | 34% | $ | 200,240 | $ | 139,058 | 44% | ||||||||||||||||
| Manufacturing sales | 28,961 | 34,831 | (17%) | 118,494 | 101,615 | 17% | ||||||||||||||||||||
| Space rental and service revenue | 3,324 | 1,845 | 80% | 7,803 | 5,418 | 44% | ||||||||||||||||||||
| Total revenue | $ | 97,414 | $ | 85,273 | 14% | $ | 326,537 | $ | 246,091 | 33% | ||||||||||||||||
| EBITDAS | $ | 29,368 | $ | 24,626 | 19% | $ | 99,334 | $ | 65,686 | 51% | ||||||||||||||||
| EBITDAS as % of revenue | 30% | 29% | 4% | 30% | 27% | 11% | ||||||||||||||||||||
| Operating earnings | $ | 21,183 | $ | 18,924 | 12% | $ | 77,029 | $ | 48,759 | 58% | ||||||||||||||||
| Bed rental days(1) | 333,186 | 206,626 | 61% | 1,007,465 | 622,672 | 62% | ||||||||||||||||||||
| Catering only days(2) | 61,184 | 65,772 | (7%) | 187,400 | 170,335 | 10% | ||||||||||||||||||||
| (1) | One bed rental day represents; the provision of one bed for one day under a combined rental and catering manday rate; or the provision of one bed for one day under an equipment rental rate for dedicated camp equipment. |
| (2) | One catering only day equals the provision of catering and housekeeping services with no related bed rental for one day. |
Revenues from the Camps & Catering segment were $97.4 million for the three months ended September 30, 2012 as compared to $85.3 million for the three months ended September 30, 2011, an increase of $12.1 million or 14%. EBITDAS for the three months ended September 30, 2012 were $29.4 million or 30% of revenue compared to $24.6 million or 29% of revenue for the three months ended September 30, 2011, an increase of $4.8 million or 19%.
Horizon's continued growth in the Camps & Catering segment was led by the camp rental and catering operations with revenue growth of $16.5 million or 34%. These operations are highly levered to the ongoing significant levels of investment in the Alberta oil sands. A growing number of oil sands projects require producers and developers to supply additional housing to an expanding workforce. Horizon's Camps & Catering segment is well positioned, as a vertically integrated supplier of workforce housing, to offer turnkey solutions to meet the producers housing requirements.
The Camps & Catering segment derived 68% of its revenue from development and production activity in the Alberta oil sands region compared to 64% in the same period of 2011.
Camp rental and catering operations revenue
Revenues are derived from the following main business areas: large camp operations, drill camp operations, catering only operations, and the associated service work with each operation. Service work includes the transportation, setup and de-mobilization of the camp and catering projects. Revenues from camp and catering operations were $65.1 million for the three months ended September 30, 2012 compared to $48.6 million for the three months ended September 30, 2011, an increase of $16.5 million or 34%.
The table below outlines the key performance metrics used by management to measure performance in the large camp and drill camp operations.
| Three months ended September 30 | |||||||||||||||||||||||||
| (000's for revenue only) | 2012 | 2011 | |||||||||||||||||||||||
| Large camp |
Drill camp |
Total | Large camp |
Drill camp |
Total | ||||||||||||||||||||
| Revenue | $ | 49,992 | $ | 2,080 | $ | 52,072 | $ | 33,557 | $ | 2,598 | $ | 36,155 | |||||||||||||
| Bed rental days(1) | 320,910 | 12,276 | 333,186 | 190,983 | 15,643 | 206,626 | |||||||||||||||||||
| Revenue per bed rental day | $ | 156 | $ | 169 | $ | 156 | $ | 176 | $ | 166 | $ | 175 | |||||||||||||
| Rentable beds at period end | 6,656 | 738 | 7,394 | 3,932 | 1,000 | 4,932 | |||||||||||||||||||
| Average rentable beds available(2) | 6,575 | 663 | 7,238 | 3,861 | 1,000 | 4,861 | |||||||||||||||||||
| Bed utilization(3) | 53% | 21% | 50% | 54% | 17% | 46% | |||||||||||||||||||
| Nine months ended September 30 | |||||||||||||||||||||||||
| (000's for revenue only) | 2012 | 2011 | |||||||||||||||||||||||
| Large camp |
Drill camp |
Total | Large camp |
Drill camp |
Total | ||||||||||||||||||||
| Revenue | $ | 152,136 | $ | 11,043 | $ | 163,179 | $ | 101,785 | $ | 6,657 | $ | 108,442 | |||||||||||||
| Bed rental days(1) | 947,587 | 59,878 | 1,007,465 | 582,479 | 40,193 | 622,672 | |||||||||||||||||||
| Revenue per bed rental day | $ | 161 | $ | 184 | $ | 162 | $ | 175 | $ | 166 | $ | 174 | |||||||||||||
| Rentable beds at period end | 6,656 | 738 | 7,394 | 3,932 | 1,000 | 4,932 | |||||||||||||||||||
| Average rentable beds available(2) | 6,023 | 780 | 6,803 | 3,614 | 1,000 | 4,614 | |||||||||||||||||||
| Bed utilization(3) | 57% | 28% | 54% | 59% | 15% | 49% | |||||||||||||||||||
| (1) | One bed rental day represents; the provision of one bed for one day under a combined rental and catering manday rate; or the provision of one bed for one day under an equipment rental rate for dedicated camp equipment. |
| (2) | Average rentable beds available is equal to total average beds in the fleet over the period less beds required for staff. |
| (3) | Utilization equals the total number of bed rental days divided by average rentable beds available times days in the quarter. |
Revenues from large camp operations for the three months ended September 30, 2012 increased by $16.4 million or 49% compared to the same period in 2011. Revenue growth was driven mainly by Horizon's ability to increase fleet size year over year, primarily in the Alberta oil sands region, and to capitalize on the increased demand from oil sands operators and developers for their workforce housing requirements.
Utilization of rentable beds for the three months ended September 30, 2012 was 53%, essentially unchanged from the comparable period of 2011 as activity levels remain strong. The increased beds at the end of the period include several new camps that were deployed or began operations in the quarter and typically new operations have a ramp up phase where utilization builds as the customer takes occupancy. Utilization is expected to strengthen throughout the next two quarters as the new camps become fully occupied.
Revenues per bed rental day decreased over the comparative quarters to $156 as compared to $176 in the same period of 2011. The decrease is more reflective of the nature of contracts in place through the current quarter compared to those in place the same period of 2011. A significant number of contracts in the current quarter incorporated a split rate with a charge related to the equipment deployed and a separate charge related to the catering and camp management services provided. For these contracts beds are considered 100% utilized and included in the bed rental day count. The inclusion of this style of contract can lead to an increase in bed rental days and a lower blended revenue per bed rental day statistics.
Revenues from drill camp operations for the three months ended September 30, 2012 decreased by $0.5 million or 20% compared to the same period of 2011. The decrease was mainly a result of lower volumes driven by lower industry activity as outlined by The Canadian Association of Oilwell Drilling Contractors (CAODC) who reported rig utilization down by 15% in the comparative periods. The lower volumes were partially offset by higher revenue per manday of $3 as a result of additional services requested by customers. Higher drill camp utilization in the three and nine months ended September 30, 2012 was due to the movement of drill camp beds between drill camp operations and large camp operations. Depending on the nature of the large camp, drill camp beds can comprise a portion of the large camp equipment deployed. The revenue associated with these drill camp beds is reflected in the large camp revenue.
The tables below outline the key performance metrics used by management to measure performance in the catering only and equipment rental operations.
| Three months ended September 30 | Nine months ended September 30 | ||||||||||||||||
| (000's for revenue only) | 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Catering only revenue | $ | 6,613 | $ | 5,975 | $ | 19,733 | $ | 15,770 | |||||||||
| Catering only days(1) | 61,184 | 65,772 | 187,400 | 170,335 | |||||||||||||
| Revenue per catering only day | $ | 108 | $ | 91 | $ | 105 | $ | 93 | |||||||||
| (1) | One catering only day equals the provision of catering and housekeeping services with no related bed rental for one day. |
Revenues from the provision of catering and housekeeping only services, with no associated bed rentals, increased $0.6 million or 11% for the three months ended September 30, 2012 as compared to same period of 2011. Increased revenue per catering day of $17 offset the decrease in volumes. The lower volumes were a result of the close out of a significant catering only job at a mining operation in the Northwest Territories. The higher rate was mainly the result of additional services requested by customers as compared to the same period of 2011.
The table below outlines the service revenue generated from the camp and catering operation.
| Three months ended September 30 | Nine months ended September 30 | ||||||||||||||||
| (000's) | 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Camp and catering operations service related revenue | $ | 6,444 | $ | 6,467 | $ | 17,328 | $ | 14,846 | |||||||||
Service revenues in the camp & catering operations is related to the transportation, setup and de-mobilization of camps. Revenue was relatively consistent in the comparative quarters mainly due to the nature of the specific service projects undertaken in the comparative quarters.
Manufacturing sales
Manufacturing sales revenues include the manufacture of camps sold to third parties and the transportation and installation associated with those sales. Revenues for the three months ended September 30, 2012 were $29.0 million as compared to $34.8 million for the same period in 2011, a decrease of $5.8 million or 17%. Manufacturing production capacity is regularly reviewed by management to determine the allocation of production required to meet external third party sales contracts and internal fleet requirements. The decrease in revenue was a result of the allocation of production capacity between sales and fleet build in the comparative quarters. Manufacturing capacity increased 23,200 direct hours, or 17%, to 161,654 direct hours in the comparative periods. The increase was a result of additional production staff for the three months ended September 30, 2012 compared to the same period of 2011. The third quarter of 2012 was mainly focused on producing internal fleet to be deployed on particular contracts resulting in a significantly lower proportion of production allocated to meet external orders compared to the same period of 2011. For the three months ended September 30, 2012, 45,691 direct hours, or 28% of total production was allocated to external third party contacts as compared to 87,774, or 63% in the same period of 2011. Service revenue, which includes the transportation and installation components of the sale, for the three months ended September 30, 2012, was focused primarily on completing two significant oil sands related camp projects, compared to one significant project in the same period of 2011.
Space rental and service revenue
Space rental and service revenue for the three months ended September 30, 2012 was $3.3 million as compared to $1.8 million for the same period in 2011. The increased revenue is a result of an increased fleet size and slightly higher utilization of 92% as compared to 89% in the same period of 2011. The three months ended September 30, 2012 also had higher service revenue as a result of the specific rental contracts compared to the same period of 2011.
Direct costs
Direct costs for the three months ended September 30, 2012 were $66.9 million or 68.7% of the revenue compared to $58.3 million or 68.3% of revenue for the same period of 2011. Direct costs are closely related to business volumes and the increase in overall direct costs was primarily a result of the higher activity levels in the comparative periods. As a percentage of revenue, direct costs remained relatively unchanged in the comparative periods indicating cost escalation has not been a significant factor.
Matting
Matting revenue is comprised of mat and equipment rental revenue, mat sales revenue, installation, transportation, service, and other revenue as follows:
| Three months ended September 30 | Nine months ended September 30 | ||||||||||||||||||||||
| (000's except mat rental days and numbers of mats) | 2012 | 2011 | % change |
2012 | 2011 | % change |
|||||||||||||||||
| Access mat rental revenue(1) | $ | 6,212 | $ | 2,502 | 148% | $ | 14,607 | $ | 4,902 | 198% | |||||||||||||
| Other mat and rental equipment revenue(2) | $ | 1,701 | $ | 1,044 | 63% | $ | 2,849 | $ | 1,944 | 47% | |||||||||||||
| Total mat and equipment rental revenue | $ | 7,913 | $ | 3,546 | 123% | $ | 17,456 | $ | 6,846 | 155% | |||||||||||||
| Mat sales revenue | 5,603 | 7,128 | (21%) | 20,612 | 22,709 | (9%) | |||||||||||||||||
| Installation, transportation, service, and other revenue | 10,229 | 6,818 | 50% | 29,247 | 18,033 | 62% | |||||||||||||||||
| Total revenue | $ | 23,745 | $ | 17,492 | 36% | $ | 67,315 | $ | 47,588 | 41% | |||||||||||||
| EBITDAS | $ | 6,890 | $ | 5,514 | 25% | $ | 17,423 | $ | 13,237 | 32% | |||||||||||||
| EBITDAS as a % of revenue | 29% | 32% | (9%) | 26% | 28% | (7%) | |||||||||||||||||
| Operating earnings | $ | 4,688 | $ | 3,675 | 28% | $ | 11,277 | $ | 8,464 | 33% | |||||||||||||
| Access mat rental days - owned mats(3) | 1,017,863 | 936,092 | 9% | 2,891,546 | 1,973,708 | 47% | |||||||||||||||||
| Access mat rental days - third party mats(4) | 1,238,779 | - | 100% | 2,273,935 | - | 100% | |||||||||||||||||
| Total access mat rental days | 2,256,642 | 936,092 | 141% | 5,165,481 | 1,973,708 | 162% | |||||||||||||||||
| Average owned access mats in rental fleet(5) | 14,711 | 10,383 | 42% | 13,685 | 8,915 | 54% | |||||||||||||||||
| Average sub rental access mats in rental fleet(6) | 13,407 | - | 100% | 8,260 | - | 100% | |||||||||||||||||
| Access mats in rental fleet at quarter end(7) | 14,665 | 10,082 | 45% | 14,665 | 10,082 | 45% | |||||||||||||||||
| Mat sold: | |||||||||||||||||||||||
| New mats | 6,200 | 8,861 | (30%) | 23,742 | 27,465 | (14%) | |||||||||||||||||
| Used Mats | 1,651 | 660 | 150% | 5,197 | 3,153 | 65% | |||||||||||||||||
| Total mats sold | 7,851 | 9,521 | (18%) | 28,939 | 30,618 | (5%) | |||||||||||||||||
| (1) | Access mat rental revenue includes revenues generated from the rental of traditional oak and oak edged mats. |
| (2) | Other mat rental equipment revenue includes the rental of rig mats, quad mats, other ancillary equipment such as well site accommodation units and light towers. |
| (3) | One mat rental day equals the rental of one owned access mat for one day. |
| (4) | One mat rental day equals the rental of one third party sub rented access mat for one day. |
| (5) | Average access mat rental fleet numbers reflect only owned access mats. |
| (6) | Average sub rental access mats is the average number of non-owned access mats in the rental fleet. These mats are rented from third parties on a short term basis. |
| (7) | Access mats in rental fleet at quarter end represents the number of owned access mats in the Matting fleet on September 30, 2012. |
Revenues from the Matting segment were $23.7 million for the three months ended September 30, 2012 compared to $17.5 million in the same period of 2011, an increase of $6.2 million or 36%. EBITDAS for the three months ended September 30, 2012 were $6.9 million or 29% of revenue as compared to $5.5 million or 32% of revenue for the same period of 2011, an increase of $1.4 million or 25%.
The revenue and EBITDAS growth was driven by continued strong mat rentals, a result of high activity levels in oil sands and pipeline construction projects.
Mat and equipment rental revenue
Total mat and equipment rental revenues increased by $4.4 million, or 123% in the comparative periods. The increased revenues were driven primarily by higher access mat rental volumes, a result of the ongoing high demand from oil sands and pipeline construction projects. The significantly higher rental day volumes were achieved by an increased owned rental fleet as compared to the same period of 2011, and by sub renting mats from third parties. Sub renting mats was an effective method to meet peak customer demand and increase revenues, this approach was not used in the comparative period of 2011. Supplementing the access mat rental fleet with sub rented third party mats has the effect of decreasing EBITDAS, as a percentage of revenue, due to the higher cost associated with sub renting.
Revenue per mat rental day for the three months ended September 30, 2012 was $2.75 as compared to $2.67 for the same period of 2011. The increased rate was a result of the mix and nature of contracts as well as some and inflationary pressures in the comparative quarters.
Mat sales revenue
Revenues from mat sales for the three months ended September 30, 2012 decreased by $1.5 million or 21% as compared to the same period of 2011. The decrease was a result of 2,661 fewer new mats sold in the three months ended September 30, 2012 as compared to the same period of 2011. Mat sales are typically dependent on the timing and frequency of customer projects, the decrease in mat sale relates to a large mat sale that occurred in the same period of 2011. In addition to lower sales volumes, revenue per mat sold for three months ended September 30, 2012 was $714, down from $749 in the same period of 2011. The decrease is a result of the mix of mats sold with fewer new mats and more used mats sold in the three months ended September 30, 2012 as compared to the same period of 2011. Used mat sales have a significantly lower selling price than new mats.
Installation, transportation, service, and other revenue
Installation, transportation, service, and other revenues are driven primarily from the level of activity in the mat rental and mat sale businesses and are charged for separately from rentals and sales. Revenues for the three months ended September 30, 2012 were higher by $3.4 million or 50% as compared to the same period in 2011. The increase is mainly due to the significantly higher volume of mat rentals and higher number of mats managed throughout the quarter.
Direct costs
Direct costs for the three months ended September 30, 2012 were $16.7 million or 70.4% of revenue as compared to $11.9 million or 67.8% of revenue for the same period of 2011. Direct costs are driven by the level of business activity, with the significant increase in activity for the comparative quarters, directs costs have increased accordingly. The direct costs as a percentage of revenue increased by 2.6% in the three months ended September 30, 2012 primarily as a result of costs related to the sub rental of access mats, these costs were not incurred in the same period of 2011.
Marine Services
Marine Services revenue is comprised of barge camp revenue and rental and other revenue as follows:
| Three months ended September 30 | Nine months ended September 30 | ||||||||||||||||||||||||||
| (000's) | 2012 | 2011 | % Change | 2012 | 2011 | % Change | |||||||||||||||||||||
| Barge camp revenue | $ | 1,401 | $ | 885 | 58% | $ | 2,793 | $ | 2,206 | 27% | |||||||||||||||||
| Rental and other revenue | 618 | 669 | (8%) | 647 | 1,155 | (44%) | |||||||||||||||||||||
| Total revenue | $ | 2,019 | $ | 1,554 | 30% | $ | 3,439 | $ | 3,361 | 2% | |||||||||||||||||
| EBITDAS | $ | 578 | $ | 518 | 12% | $ | 1,100 | $ | 1,113 | (1%) | |||||||||||||||||
| Operating earnings | $ | 472 | $ | 403 | 17% | $ | 776 | $ | 774 | -% | |||||||||||||||||
Revenues from the Marine Services segment for the three months ended September 30, 2012 were $2.0 million as compared to $1.6 million in the same period of 2011, an increase of $0.5 million or 30%. The increase was primarily related to the demobilization of two barge camps in the three months ended September 30, 2012 as compared to the same period of 2011.
EBITDAS remained relatively consistent in the comparative quarters. EBITDAS as a percentage of revenue was 29% in the three months ended September 30, 2012 as compared to 33% in the same period of 2011.
Corporate
Corporate costs are the costs of the head office which include the President and Chief Executive Officer, Chief Financial Officer, Vice President of Health, Safety, and Environment, Vice President of Aboriginal Relations, Corporate Secretary, corporate accounting staff, and associated costs of supporting a public company. Corporate costs for the three months ended September 30, 2012 were $2.6 million as compared to $2.2 million in the same period in 2011. This increase of $0.4 million is a result of the higher level of business activity. As a percentage of total revenue, costs were unchanged at 2.0% in the comparative periods.
Other Items
Depreciation and amortization
Depreciation and amortization costs for the three months ended September 30, 2012 were $10.2 million as compared to $7.6 million in the same period of 2011. Amortization remained relatively unchanged at $2.1 million while depreciation increased $2.6 million in the comparative quarters. The increase in depreciation is mainly attributable to $130.1 million of additional camp fleet assets in the comparative quarters.
Financing costs
Financing costs on loans and borrowings for the three months ended September 30, 2012 were $1.0 million as compared to $0.6 million in the same period of 2011. The increase of $0.4 million was a result of a higher weighted average level of debt held for the three months ended September 30, 2012. The weighted average debt was $99.9 million compared to $34.5 million in the same period of 2011 which was offset by a lower interest rate under the revised credit facility and from converting the prime rate borrowing into Bankers Acceptance.
Income taxes
Income tax expense was $5.9 million, an effective tax rate of 26.5%, for the three months ended September 30, 2012 as compared to a tax expense of $5.0 million, an effective rate of 24.8%, for the same period of 2011. The effective tax rate was slightly higher as the third quarter 2011 included the effects of a change in the estimated timing of the realization of temporary differences, lowering the effective tax rate.
Selling and administrative
Selling and administrative expense was $3.9 million for the three months ended September 30, 2012 as compared to $4.7 million in the same period of 2011. The 2011 amount included a $1.8 million bad debt expense; normalizing for this charge, selling and administrative costs increased by $1.0 million in the comparative quarters. As a percentage of revenue, selling and administrative expense was 3.2% of revenue in the third quarter of 2012 as compared to 2.8% in 2011 after normalizing for the bad debt charge.
Condensed consolidated statement of financial position (Unaudited)
| (000's) | September 30, 2012 |
December 31, 2011 |
|||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Trade and other receivables | $ | 121,584 | $ | 83,484 | |||||||
| Inventories | 15,982 | 15,334 | |||||||||
| Prepayments | 4,168 | 3,981 | |||||||||
| Income taxes receivable | 145 | - | |||||||||
| 141,879 | 102,799 | ||||||||||
| Non-current assets: | |||||||||||
| Property, plant and equipment | 319,292 | 228,793 | |||||||||
| Intangible assets | 12,079 | 18,232 | |||||||||
| Goodwill | 2,136 | 2,136 | |||||||||
| Investments in equity accounted investees | 504 | 529 | |||||||||
| Deferred tax assets | 1,717 | 1,837 | |||||||||
| Other assets | 2,715 | 2,811 | |||||||||
| 338,443 | 254,338 | ||||||||||
| $ | 480,322 | $ | 357,137 | ||||||||
| Liabilities and Shareholders' Equity | |||||||||||
| Current liabilities: | |||||||||||
| Trade and other payables | $ | 57,603 | $ | 41,833 | |||||||
| Deferred revenue | 521 | 13,601 | |||||||||
| Income taxes payable | 11,071 | 4,380 | |||||||||
| Current portion of loans and borrowings | 1,459 | 1,281 | |||||||||
| 70,654 | 61,095 | ||||||||||
| Non-current liabilities: | |||||||||||
| Asset retirement provisions | 1,349 | 1,283 | |||||||||
| Loans and borrowings | 117,830 | 55,234 | |||||||||
| Deferred tax liabilities | 27,662 | 23,456 | |||||||||
| 217,495 | 141,068 | ||||||||||
| Shareholders' equity: | |||||||||||
| Share capital | 179,726 | 173,438 | |||||||||
| Contributed surplus | 10,143 | 10,421 | |||||||||
| Accumulated other comprehensive income | 240 | 158 | |||||||||
| Retained earnings | 72,718 | 32,052 | |||||||||
| 262,827 | 216,069 | ||||||||||
| $ | 480,322 | $ | 357,137 | ||||||||
Condensed consolidated statement of comprehensive income (Unaudited)
Three and nine months ended September 30, 2012 and 2011
| Three months ended September 30 |
Six months ended September 30 |
||||||||||||||||
| (000's) | 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Revenue | $ | 119,910 | $ | 102,298 | $ | 388,058 | $ | 292,064 | |||||||||
| Operating expenses: | |||||||||||||||||
| Direct costs | 81,970 | 69,160 | 266,572 | 207,713 | |||||||||||||
| Depreciation | 8,185 | 5,578 | 22,003 | 15,578 | |||||||||||||
| Amortization of intangible assets | 44 | 41 | 132 | 123 | |||||||||||||
| Share based compensation | 398 | 88 | 834 | 282 | |||||||||||||
| (Gain) loss on disposal of property, plant and equipment | (71) | (24) | 38 | 157 | |||||||||||||
| Direct operating expenses | 90,526 | 74,843 | 289,579 | 223,853 | |||||||||||||
| Gross profit | 29,384 | 27,455 | 98,479 | 68,211 | |||||||||||||
| Selling & administrative expenses: | |||||||||||||||||
| Selling & administrative expenses | 3,860 | 4,695 | 12,498 | 11,084 | |||||||||||||
| Amortization of intangible assets | 2,007 | 2,040 | 6,021 | 6,099 | |||||||||||||
| Share based compensation | 285 | 55 | 592 | 170 | |||||||||||||
| Selling & administrative expenses | 6,152 | 6,790 | 19,111 | 17,353 | |||||||||||||
| Operating earnings | 23,232 | 20,665 | 79,368 | 50,858 | |||||||||||||
| Finance costs | 1,043 | 641 | 2,586 | 1,830 | |||||||||||||
| Share of loss (gain) of equity accounted investees | 52 | (2) | 25 | 39 | |||||||||||||
| Profit before tax | 22,137 | 20,026 | 76,757 | 48,989 | |||||||||||||
| Current tax expense | 4,475 | 1,340 | 15,539 | 8,759 | |||||||||||||
| Deferred tax expense | 1,400 | 3,618 | 4,326 | 4,017 | |||||||||||||
| Income tax expense | 5,875 | 4,958 | 19,865 | 12,776 | |||||||||||||
| Total profit | 16,262 | 15,068 | 56,892 | 36,213 | |||||||||||||
| Other comprehensive income: | |||||||||||||||||
| Translation of foreign operations | (66) | (230) | (82) | (230) | |||||||||||||
| Other comprehensive income, net of income tax | (66) | (230) | (82) | (230) | |||||||||||||
| Total comprehensive income | $ | 16,328 | $ | 15,298 | $ | 56,974 | $ | 36,443 | |||||||||
| Earnings per share: | |||||||||||||||||
| Basic | $ | 0.15 | $ | 0.14 | $ | 0.53 | $ | 0.34 | |||||||||
| Diluted | $ | 0.15 | $ | 0.14 | $ | 0.52 | $ | 0.34 | |||||||||
Condensed consolidated statement of changes in equity (Unaudited)
| (000's) | Share Capital |
Contributed Surplus |
Accumulated Other Comprehensive Income |
Retained Earnings (Deficit) |
Total | |||||||||||||||
| Balance at December 31, 2010 | $ | 245,353 | $ | 11,446 | $ | - | $ | (78,000) | $ | 178,799 | ||||||||||
| Reduction of capital | (78,000) | - | - | 78,000 | - | |||||||||||||||
| Total profit | - | - | - | 36,213 | 36,213 | |||||||||||||||
| Share options exercised | 1,476 | (1,024) | - | - | 452 | |||||||||||||||
| Cash from stock options exercised | 4,040 | 4,040 | ||||||||||||||||||
| Translation of foreign operations | - | - | 230 | - | 230 | |||||||||||||||
| Dividends paid ($0.04 per share) | - | - | - | (8,485) | (8,485) | |||||||||||||||
| Balance at September 30, 2011 | $ | 172,869 | $ | 10,422 | $ | 230 | $ | 27,728 | $ | 211,249 | ||||||||||
| Total profit | - | - | - | 8,609 | 8,609 | |||||||||||||||
| Share based compensation | - | 146 | - | - | 146 | |||||||||||||||
| Share options exercised | 569 | (147) | - | - | 422 | |||||||||||||||
| Translation of foreign operations | - | - | (72) | - | (72) | |||||||||||||||
| Dividends paid ($0.04 per share) | - | - | - | (4,285) | (4,285) | |||||||||||||||
| Balance at December 31, 2011 | 173,438 | 10,421 | 158 | 32,052 | 216,069 | |||||||||||||||
| Total profit | - | - | - | 56,892 | 56,892 | |||||||||||||||
| Share based compensation | - | 1,426 | - | - | 1,426 | |||||||||||||||
| Share options exercised | 6,288 | (1,704) | - | - | 4,584 | |||||||||||||||
| Translation of foreign operations | - | - | 82 | - | 82 | |||||||||||||||
| Dividends paid ($0.05 per share) | - | - | - | (10,796) | (10,796) | |||||||||||||||
| Dividends declared ($0.05 per share) | - | - | - | (5,430) | (5,430) | |||||||||||||||
| Balance at September 30, 2012 | $ | 179,726 | $ | 10,143 | $ | 240 | $ | 72,718 | $ | 262,827 | ||||||||||
Condensed consolidated statement of cash flows (Unaudited)
Nine months ended September 30, 2012 and 2011
| September 30, | September 30, | ||||||||||
| (000's) | 2012 | 2011 | |||||||||
| Cash provided by (used in): | |||||||||||
| Operating activities: | |||||||||||
| Profit for the period | $ | 56,892 | $ | 36,213 | |||||||
| Adjustments for: | |||||||||||
| Depreciation | 22,003 | 15,578 | |||||||||
| Amortization of intangible assets | 6,153 | 6,222 | |||||||||
| Share based compensation | 1,426 | 452 | |||||||||
| Amortization of other assets | 96 | 91 | |||||||||
| Loss on equity accounted investees | 25 | 39 | |||||||||
| Gain on sale of property, plant and equipment | (1,934) | (1,795) | |||||||||
| Unrealized foreign exchange | 78 | 51 | |||||||||
| Finance costs | 2,586 | 1,830 | |||||||||
| Income tax expense | 19,865 | 12,776 | |||||||||
| 107,190 | 71,457 | ||||||||||
| Income taxes paid | (8,993) | (4,356) | |||||||||
| Interest paid | (2,020) | (1,252) | |||||||||
| Changes in non-cash working capital items | (36,330) | 10,010 | |||||||||
| 59,847 | 75,859 | ||||||||||
| Investing activities: | |||||||||||
| Purchase of property, plant and equipment | (115,968) | (79,108) | |||||||||
| Proceeds on sale of property, plant and equipment | 5,403 | 6,412 | |||||||||
| (110,565) | (72,696) | ||||||||||
| Financing activities: | |||||||||||
| Proceeds from loans and borrowings | 62,343 | 1,248 | |||||||||
| Share purchase options exercised | 4,584 | 4,040 | |||||||||
| Payment of dividends | (15,064) | (4,236) | |||||||||
| 51,863 | 1,052 | ||||||||||
| Changes in non-cash working capital items | (1,145) | (4,215) | |||||||||
| 50,718 | (3,163) | ||||||||||
| Increase in cash position | - | - | |||||||||
| Cash, beginning of period | - | - | |||||||||
| Cash, end of period | $ | - | $ | - | |||||||
Financial Measures Definitions
EBITDAS
EBITDAS (Earnings before interest, taxes, depreciation, amortization, gain/loss on equity investments, gain/loss on disposal of property, plant and equipment, share of income/loss from equity accounted investees and share based compensation) is not a recognized measure under IFRS. Management believes that in addition to total profit and total comprehensive income, EBITDAS is a useful supplemental measure as it provides an indication of the Corporation's ability to generate cash flow in order to fund working capital, service debt, pay current income taxes and fund capital programs, and it is regularly provided to and reviewed by the Chief Operating Decision Maker and operating earnings provides an indication of the results generated by the Corporation's principal business activities prior to consideration of how those activities are financed or taxed. Horizon's method of calculating EBITDAS may differ from other entities and accordingly, may not be comparable to measures used by other entities. EBITDAS should not be construed as alternatives to total profit and comprehensive income determined in accordance with IFRS as an indicator of the Corporation's performance.
Funds from operations
Funds from operations is not a recognized measure under IFRS. Management believes that in addition to cash flow from operations, funds from operations is a useful supplemental measure as it provides an indication of the cash flow generated by the Corporation's principal business activities prior to consideration of changes in working capital. Investors should be cautioned, however, that funds from operations should not be construed as an alternative to cash flow from operations determined in accordance with IFRS as an indicator of the Corporation's performance. Horizon's method of calculating funds from operations may differ from other entities and accordingly, funds from operations may not be comparable to measures used by other entities. Funds from operations is equal to cash flow from operations before changes in non-cash working capital items related to operations, interest and income taxes paid, financing costs, and income tax expense.
Debt to total capitalization
Debt to total capitalization is calculated as the ratio of debt to total capitalization. Debt is defined as the sum of current and long-term portions of loans and borrowings. Total capitalization is calculated as the sum of debt and shareholders' equity.
Caution Regarding Forward-Looking Information and Statements
Certain statements contained in this press release 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 "Overview and Outlook" the statements "Oil sands development and related activities continue to be the main driver of Horizon's business lines, with 63% of third quarter revenues generated from oil sands related projects. However, Horizon's customer base is expanding with the addition of new projects related to natural gas exploration and development, light oil development and pipeline projects. Continued oil sands development activity is expected despite concerns regarding short term commodity price fluctuations. Oil sands projects are generally viewed in the context of long term planning horizons, with project spending allocated over a number of years. Individual companies may curtail or accelerate spending plans, but Horizon expects that continued strong bidding activity associated with the oil sands market will continue.." and "Staff levels are expected to continue to grow through the first half of 2013. The allocation of total production capacity between external camp sales and internal camp rental fleet requirements is reviewed regularly by management. Considering the current manufacturing backlog, the total production capacity for 2013 is likely to remain at 60% allocated to external camp sales with the remaining 40% allocated to internal fleet build projects" and "With the current sales backlog and high activity levels driven by natural gas exploration and development, light oil development and pipeline projects performance of the Matting division is expected to remain strong through 2013" and "In the nine months ended September 30, 2012, Horizon added 1,594 beds to the rental fleet and expects to exit 2012 with a total of 8,500 rentable beds. With oil sands development activity remaining strong, the 2013 capital program is anticipated to add an additional 1,500 rentable beds to the Camp & Catering rental fleet."
The foregoing statements are based on the assumption that the demand for Horizon's products and services will remain strong through 2012 and 2013 and that Horizon will continue to experience significant year round revenues from its oil sands and other energy customers.
There are a number of risks which could impact these generally high levels of activity which could negatively impact the Corporation's business. As such, many factors could cause the performance or achievements of the Corporation to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements.
Corporate Information
Additional information related to the Corporation, including the Corporation's annual information form, financial statements, and MD&A is available on SEDAR at www.sedar.ca. Unless otherwise indicated, the consolidated financial statements have been prepared in accordance with IFRS and the reporting currency is in Canadian dollars.
SOURCE: Horizon North Logistics Inc.
Bob German, President and Chief Executive Officer, or Scott Matson, Vice President Finance and Chief Financial Officer, 1600, 505 - 3rd Street S.W., Calgary, Alberta T2P 3E6, Telephone: (403) 517-4654, Fax: (403) 517- 4678; website: www.horizonnorth.ca
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