Pason Reports Fourth Quarter and Year End 2012 Results

News provided by

Feb 21, 2013, 22:37 ET

CALGARY, Feb. 21, 2013 /CNW/ - Pason Systems Inc. (PSI.TO) announced today its 2012 fourth quarter and year end results.

Performance Data

		Three Months Ended December 31,			Years Ended December 31,
		2012	2011 (reclassified)	Change	2012	2011 (reclassified)	Change
(CDN 000s, except per share data)		($)	($)	(%)	($)	($)	(%)
Revenue ⁽¹⁾		90,995	100,933	(10)	386,514	346,158	12
EBITDA ⁽²⁾		8,286	47,920	(83)	151,753	171,661	(12)
	As a % of revenue	9.1	47.5	(81)	39.3	49.6	(21)
	Per share - basic	0.10	0.59	(83)	1.85	2.10	(12)
	Per share - diluted	0.10	0.58	(83)	1.84	2.08	(12)
Funds flow from operations ⁽²⁾		36,278	42,089	(14)	158,948	145,358	9
	Per share - basic	0.44	0.51	(14)	1.94	1.78	9
	Per share - diluted	0.44	0.51	(14)	1.92	1.76	9
(Loss) earnings		(13,703)	31,702	N/A	39,884	86,223	(54)
	Per share - basic	(0.17)	0.39	N/A	0.49	1.05	(54)
	Per share - diluted	(0.17)	0.38	N/A	0.48	1.04	(54)
Capital expenditures		13,602	21,927	(38)	69,780	78,357	(11)
Working capital		163,371	126,605	29	163,371	126,605	29
Total assets		488,378	455,901	7	488,378	455,901	7
Total long-term debt		--	--	--	--	--	--
Total equity		368,696	367,269	--	368,696	367,269	--
Market capitalization		1,407,141	982,848	43	1,407,141	982,848	43
Cash dividends declared		0.24	0.20	20	0.46	0.38	21
Common shares outstanding (#)
	Basic	82,035	81,903	--	81,968	81,851	--
	Diluted	83,056	82,077	2	82,679	82,572	2
Shares outstanding end of period (#)		82,049	81,904	--	82,049	81,904	--

(1)

Data transmission expenses have been reclassified from revenue to rental service expense. All comparative figures have been restated accordingly. This change has no impact on reported EBITDA, funds flow from operations or earnings.

(2)

EBITDA is defined as earnings before interest expense, income taxes, stock-based compensation expense, and depreciation and amortization expense. Funds flow from operations is defined as earnings adjusted for depreciation and amortization expense, impairment losses, stock-based compensation expense, deferred income taxes and other non-cash items impacting operations as presented in the Consolidated Statements of Cash Flows. These definitions are not recognized measures under International Financial Reporting Standards, and accordingly, may not be comparable to measures used by other companies.

President's Message

Drilling days and active rig counts in North America were lower in the fourth quarter of 2012 than in the fourth quarter of the previous year, with the decline in Canadian activity being steeper than in the United States. International markets continued their steady activity increase. Strong revenue growth in the International markets was more than offset by a decline in revenue in both the United States and Canada. As a result, total revenue decreased 10% to $91.0 million in the fourth quarter of 2012. For the full year, however, revenue increased 12% to $386.5 million.

All product categories generated revenue growth above drilling industry activity during the quarter with the exception of the Pit Volume Totalizer and Communications. As in previous quarters, the Software segment demonstrated the highest year-over-year growth rate at 33%, followed by the Hazardous Gas Alarm at 30% and the Gas Analyzer at 8%. These three product categories also led growth for the full year, with 68% for Software, 40% for Hazardous Gas Alarm and 28% for Gas Analyzer.

Funds flow from operations decreased 14% to $36.3 million for the fourth quarter, however for the full year it grew 9% to $158.9 million.

EBITDA for the quarter dropped by 83% to $8.3 million. EBITDA, as a percentage of revenue, was 9% in the fourth quarter compared to 47% in the fourth quarter of the previous year, and 39% versus 50% for the full year. The Company generated a net loss for the quarter of $13.7 million, or $0.17 per share, compared to net earnings of $31.7 million, or $0.39 per share, in the fourth quarter of 2011. Fourth quarter net earnings were negatively impacted by a number of significant factors:

A non-cash accrual of an additional $32.5 million for the liability related to the ongoing patent litigation. Management continues to be confident in its defenses in the three cases, namely that the asserted claims of the 142 patent are not valid, and/or the Company does not infringe on any valid claims. Nevertheless, in light of the cumulative effect of the progress on these cases in 2012, including the appeal of the Colorado case, the fact that the Texas case has been filed, the reopening of the Canadian case, and a recent mediation that did not result in a voluntary resolution, the Company decided to accrue, in accordance with accounting guidelines, this additional amount;

A $9.8 million increase in stock-based compensation due to an increase in the Company's stock price;

A non-cash impairment loss of $4.7 million charged against our Torque and Tension Sub program. While interest in sold systems has been robust, progress on the rental side has been slow. The impairment relates primarily to certain peripheral equipment that is required for the rental fleet but not for sold systems;

A final non-cash impairment loss of $0.6 million charged against the US water treatment business as we sold our plant in Colorado;

A $1.7 million increase in R&D costs as we completed the hiring of staff to support our Electronic Drilling Recorder (EDR) evolution project.

Capital expenditures for the quarter were $13.6 million, down from $21.9 million the previous year, as the North American roll-out of the new Gas Analyzer was completed over the summer. For the full year, capital expenditures were $69.8 million compared to $78.4 million in 2011.

On December 31, our cash position stood at $157.9 million and our working capital stood at $163.4 million. We are increasing our quarterly dividend by 8% to $0.13 per share. The Pason Board of Directors previously made the decision to adopt a quarterly dividend policy starting in 2013.

United States
The US segment includes our US rental business, 3PS Inc., our Austin-based equipment manufacturer, and the water treatment business, which we shut down during 2012.

Drilling activity in the United States continued its downward trend. While industry days were down 11% in the fourth quarter 2012 compared to the fourth quarter of 2011, revenue in the US segment was down 10% to $49.0 million. For the full year, revenue was up 18% to $223.1 million. On average, 936 US land rigs were operating Pason equipment during the fourth quarter of 2012, compared to 1,089 in the same period of 2011. Our EDR market share for the fourth quarter of 2012 was 54%, compared to 55% in the third quarter.

Revenue growth above industry day growth was achieved through higher product penetration and a price increase at the beginning of 2012, resulting in a 13% increase in average daily revenue per rig from US$507 in the fourth quarter of 2011 to US$574 in 2012. The Software, Gas Analyzer, and Hazardous Gas Alarm products again achieved above-average revenue growth.

Operating costs decreased 18% and depreciation and amortization increased by 39%. As a result, our US business unit was able to generate an operating profit of $23.2 million in the fourth quarter, a decrease of 13% over 2011. For the full year, operating profit increased 18% to $104.9 million.

Canada
Drilling activity in Canada was significantly lower in the fourth quarter of 2012 than in the previous year, with industry days down 24%. Our Canadian business unit was able to partially offset this significant reduction in activity levels through new product adoption and more products on each rig.

Revenue for the fourth quarter was down 19% to $32.0 million. On average, 308 Canadian land rigs were operating Pason equipment compared to 443 the year before. EDR market share was 92% compared to 91% in the previous quarter. For the full year, revenue was down 2% to $125.7 million.

Average daily revenue generated on each rig with a Pason product installed grew 16% to $1,120 in the fourth quarter of 2012 from $963 in 2011. As in the United States, the Software, Gas Analyzer, and Hazardous Gas Alarm products showed above average growth rates during the period.

Operating costs decreased by 18% and depreciation and amortization decreased by 9%. As a result, our Canadian business unit was able to generate an operating profit of $16.9 million for the quarter, compared to $22.1 million for the same period in 2011, a decrease of 23%. For the full year, operating profit increased 5% to $62.5 million.

International
Our International business unit, which includes our businesses in Latin America, Australia, and offshore, had another excellent quarter. Revenue increased 45% to $9.9 million for the quarter. This represents 11% of Pason's total revenue. We realized gains in all major international markets with notable gains in Argentina, Brazil, Australia, and Mexico. For the full year, revenue was up 32% to a record $37.7 million.

Operating costs were down 11% and depreciation and amortization decreased by 35%. As a result, the International business unit was able to generate a quarterly operating profit of $1.3 million, up from a loss of $3.9 million the previous year. For the full year, an operating profit of $5.8 million was realized compared to a loss of $1.5 million in 2011.

Outlook
There is significant uncertainty regarding the outlook for North American drilling activity in 2013 at this point in time. Many operating companies have started reducing CAPEX budgets. The natural gas glut generated by unconventional plays does limit gas-directed drilling activity, challenging our ability to significantly grow revenue in the short term. As with every year, the timing of spring break-up in Canada will be a key driver of first quarter 2013 results. We expect the International business unit to continue to realize robust profitable growth this year.

Our capital expenditure budget for the next 12 months is $84.3 million, $57.5 million of which is directed towards equipment that can generate incremental revenue or save operating costs, $13.0 million for maintenance capital, and $13.8 million for capitalized R&D.

Our cash-generating capacity, a cash position at $157.9 million, and working capital of $163.4 million are strong enough to comfortably cover new business development, planned equipment upgrades, our dividend, and any probable adverse outcome in the patent litigation.

As the industry leader in field services, with outstanding technical support, a competitive product suite, and a promising R&D project pipeline, Pason is well positioned to weather a period of lower North American drilling activity and to capitalize on growth opportunities.

(Signed)

Marcel Kessler
President and Chief Executive Officer
February 21, 2013

Management's Discussion and Analysis

The following discussion and analysis has been prepared by management as of February 21, 2013 and is a review of the financial condition and results of operations of Pason Systems Inc. (Pason or the Company) based on International Financial Reporting Standards (IFRS) and should be read in conjunction with the consolidated financial statements and accompanying notes.

Certain information regarding the Company contained herein may constitute forward-looking statements under applicable securities laws. Such statements are subject to known or unknown risks and uncertainties that may cause actual results to differ materially from those anticipated or implied in the forward-looking statements.

All financial measures presented in this report are expressed in Canadian dollars unless otherwise indicated.

Overview of the 2012 Fourth Quarter


		Three Months Ended December 31,			Years Ended December 31,
		2012	2011 (reclassified)	2010 (reclassified)	2012	2011 (reclassified)	2010 (reclassified)
(000s, except per share data)		($)	($)	($)	($)	($)	($)
Revenue ⁽¹⁾		90,995	100,933	76,390	386,514	346,158	260,397
EBITDA ⁽²⁾		8,286	47,920	29,359	151,753	171,661	110,867
	As a % of revenue	9.1	47.5	38.4	39.3	49.6	42.6
	Per share - basic	0.10	0.59	0.36	1.85	2.10	1.36
	Per share - diluted	0.10	0.58	0.36	1.84	2.08	1.36
Funds flow from operations ⁽²⁾		36,278	42,089	27,899	158,948	145,358	93,973
	Per share - basic	0.44	0.51	0.34	1.94	1.78	1.15
	Per share - diluted	0.44	0.51	0.34	1.92	1.76	1.15
(Loss) earnings		(13,703)	31,702	10,525	39,884	86,223	36,474
	Per share - basic	(0.17)	0.39	0.13	0.49	1.05	0.45
	Per share - diluted	(0.17)	0.38	0.13	0.48	1.04	0.45
Total assets		488,378	455,901	402,082	488,378	455,901	402,082
Total long-term debt		--	--	--	--	--	--

(1)

(2)

Overall Performance

		Three Months Ended December 31,			Years Ended December 31,
		2012	2011 (reclassified)	Change	2012	2011 (reclassified)	Change
(000s)		($)	($)	(%)	($)	($)	(%)
Revenue
	Electronic Drilling Recorder ⁽¹⁾	38,448	42,905	(10)	159,607	145,771	9
	Pit Volume Totalizer	14,100	16,888	(17)	59,220	58,591	1
	Communications ⁽¹⁾⁽²⁾	7,533	9,196	(18)	32,227	32,209	--
	Software ⁽²⁾	6,188	4,662	33	24,916	14,798	68
	Automatic Driller	9,410	11,520	(18)	40,399	39,395	3
	Gas Analyzer/Total Gas System	6,898	6,413	8	27,304	21,306	28
	Hazardous Gas Alarm System	1,932	1,490	30	7,345	5,258	40
	Mobilization	3,098	2,481	25	12,265	9,523	29
	Other ⁽²⁾	3,388	5,378	(37)	23,231	19,307	20
Total revenue		90,995	100,933	(10)	386,514	346,158	12

(1)	Data transmission expenses have been reclassified from revenue to rental service expense. All comparative figures have been restated accordingly.
(2)	2011 revenue associated with the Company's software applications has been reclassified from Communications to Software.

Change in Accounting Classification
In the fourth quarter of 2012, the Company changed the way it records expenses associated with data transmission costs. Previously, the Company recorded these costs as a reduction in revenue. Effective for 2012, these costs have been reclassified to rental services expense. This change, which does not impact EBITDA or net income, was applied retroactively, with all comparative figures being restated accordingly. All revenue and operating cost figures, as well as key metrics based upon revenue, in the following Management and Discussion and Analysis, have been calculated based upon this new presentation.

The impact of this reclassification on the 2011 comparative figures presented above is as follows:

	Three Months Ended December 31, 2011			Year Ended December 31,2011
	Reported	Previously Disclosed	Change	Reported	Previously Disclosed	Change
(000s)	($)	($)	($)	($)	($)	($)
Revenue
Electronic Drilling Recorder ⁽¹⁾	42,905	40,079	2,826	145,771	134,935	10,836
Communications ⁽¹⁾⁽²⁾	9,196	8,711	485	32,209	30,407	1,802
Total revenue	100,933	97,622	3,311	346,158	333,520	12,638

Canada
	Three Months Ended December 31,			Years Ended December 31,
	2012	2011	Change	2012	2011	Change
			(%)			(%)
EDR rental days (#)	28,300	40,800	(31)	115,800	141,200	(18)
PVT rental days (#)	27,900	37,900	(26)	114,100	135,400	(16)

United States
	Three Months Ended December 31,			Years Ended December 31,
	2012	2011	Change	2012	2011	Change
			(%)			(%)
EDR rental days (#)	86,100	100,200	(14)	378,800	381,700	(1)
PVT rental days (#)	62,100	70,100	(11)	267,800	264,200	1

Electronic Drilling Recorder
The Pason Electronic Drilling Recorder (EDR) remains the Company's primary product. The EDR provides a complete system of drilling data acquisition, data networking, and drilling management tools and reports at both the wellsite and customer offices. The EDR is the base product from which all other wellsite instrumentation products are linked. By linking these products, a number of otherwise redundant elements such as data processing, display, storage, and networking are eliminated. This ensures greater reliability and a more robust system of instrumentation for the customer. Revenue generated from the EDR declined 10% for the fourth quarter of 2012 compared to the same period in 2011; however, for the year ended December 2012, EDR revenue increased 9% over 2011 levels. The decrease in the fourth quarter is attributable to a decrease in rig activity in both the United States (US) and Canadian markets, offset by an increase in the Company's International markets. The year to date increase in revenue is due to previous price increases, continued demand by customers for EDR peripheral devices in all of its markets, and a strong increase in International rentals, reduced by an 18% drop in EDR days in Canada.

During 2012, the Pason EDR was installed on 93% of all active land rigs in Canada and 56% of the land rigs in the US.

Pit Volume Totalizer
The Pit Volume Totalizer (PVT) is Pason's proprietary solution for the detection and early warning of "kicks" that are caused by hydrocarbons entering the wellbore under high-pressure and expanding as they migrate to the surface. PVT revenue for both the quarter and year to date were impacted by an increase in product penetration in all of the Company's markets as well as changes to rig activity and price increases previously described above. During the 2012 fiscal year, the PVT was installed on 99% of rigs with a Pason EDR in Canada and 71% in the US, compared to 96% and 69%, respectively, in 2011.

Communications
Pason's communications rental revenue is derived from the Company's automatic aiming satellite system. This system provides high-speed wellsite communications for email and web application management tools. Pason displays all data in standard forms on its DataHub web application, although if customers require greater analysis or desire to have the information transferred to another supplier's database, data is available for export from the Pason DataHub using WITSML (a specification for transferring data amongst oilfield service companies, drilling contractors, and operators). The Company continues to complement its satellite equipment with High Speed Packet Access (HSPA), a high-speed wireless ground system that requires lower capital cost, less service, and lower cost per Internet kilobyte, benefiting company margins. In Canada, HSPA has been installed on all rigs, and the majority of the rigs running will benefit from the investment in HSPA given the growth in cellular coverage. In the US, field coverage tests for HSPA are continuing with positive results.

Software
The Pason DataHub is the Company's data management system that collects, stores, and displays drilling data, reports, and real-time information from drilling operations. DataHub provides access to data through a number of innovative applications or services including:

Enhanced Live Rig View (eLRV), which provides advanced data viewing, directional drilling, and 3D visualization of drilling data in real-time via a web browser.
Mobile Viewer and Pason Mobile, which allow users to access their data on mobile devices including iPhone, iPad, and BlackBerry.
WITSML, which provides seamless data sharing with third-party applications enhancing the value of data hosted by Pason.
Additional specialized software.

During the 2012 year, 98% of the Company's Canadian customers and 87% of customers in the US were using all or a portion of the functionality of the DataHub, compared to 94% and 76%, respectively, in 2011. The 2012 revenue generated from customers using the applications included with the DataHub rose 68% over comparable 2011 levels, even though rig activity was relatively flat in the US and down significantly in Canada.

Gas Analyzer and Total Gas System
The Pason Gas Analyzer, which has replaced the Total Gas System (TGAS) in the Company's major markets, measures the total hydrocarbon gases (C1 through C4¹) exiting the wellbore, and then calculates the lag time to show the formation depth where the gases were produced. The new Gas Analyzer increases the functionality that was found in the TGAS product to include the actual composition of the gas, much like a gas chromatograph, and further calculates geologic ratios from the gas composition to assist in indicating the type of gas, natural gas liquid, or oil in the formation. For the twelve months ended December 2012, the Gas Analyzer generated $21.3 million of revenue compared to $6.0 million for TGAS. The Company has now completed the deployment of the Gas Analyzer in both Canada and the US and is realizing increased product penetration as compared to TGAS in both markets. For 2012, both of these systems combined were installed on 52% of Canadian and 19% of US land rigs operating with a Pason EDR system. The combined market penetration of both products in Canada is an increase of approximately 9% over 2011 levels while the US has seen an increase of 2%. The roll out of the Gas Analyzer in the International markets started in 2012, and will accelerate in 2013.

Automatic Driller
Pason's Automatic Driller (AutoDriller) is used to maintain constant weight on the drill bit while a well is being drilled. During 2012, Pason's AutoDriller was installed on 78% of Canadian and 49% of US land rigs operating with a Pason EDR system, compared to 78% and 47%, respectively, in 2011.

Hazardous Gas Alarm System
The Pason Hazardous Gas Alarm System (HGAS) monitors lower explosive limit (LEL) gases and displays the readings on the EDR. If a hazardous rig atmosphere is detected, the system reacts immediately, sounding an alarm and flashing a strobe light. The Hazardous Gas Alarm System was installed on 21% of Canadian rigs in 2012, up from 18% for the same period in 2011, and 9% of US land rigs operating with a Pason EDR system, an increase from 6% in 2011. This increase in product penetration, along with price increases in particular markets, led to an increase in revenue of 30% for the fourth quarter of 2012 over 2011 levels, and an increase of 40% for the full year.

_______________________
¹C4 also includes nC5

Discussion of Operations

United States Operations

		Three Months Ended December 31,			Years Ended December 31,
		2012	2011 (reclassified)	Change	2012	2011 (reclassified)	Change
(000s)		($)	($)	(%)	($)	($)	(%)
Revenue
	Electronic Drilling Recorder ⁽¹⁾	22,552	25,154	(10)	97,816	89,634	9
	Pit Volume Totalizer	7,685	8,959	(14)	33,459	32,623	3
	Communications ⁽¹⁾⁽²⁾	3,112	3,931	(21)	14,367	13,916	3
	Software ⁽²⁾	4,075	2,266	80	16,741	7,761	116
	Automatic Driller	5,073	6,230	(19)	23,222	21,900	6
	Gas Analyzer/Total Gas System	2,667	2,134	25	11,312	7,906	43
	Hazardous Gas Alarm System	800	565	42	3,169	1,620	96
	Mobilization	2,299	1,924	19	9,233	6,939	33
	Other ⁽²⁾	746	3,147	(76)	13,735	6,992	96
Total revenue		49,009	54,310	(10)	223,054	189,291	18
Operating costs		18,073	21,988	(18)	85,811	78,105	10
Depreciation and amortization		7,713	5,538	39	32,381	22,535	44
Segment operating profit		23,223	26,784	(13)	104,862	88,651	18

(1)	Data transmission expenses have been reclassified from revenue to rental service expense. All comparative figures have been restated accordingly.
(2)	2011 revenue associated with the Company's software applications has been reclassified from Communications to Software.

The impact of the accounting reclassification of data transmission costs from revenue to operating costs previously discussed had the following impact on the 2011 comparative figures presented above:

	Three Months Ended December 31, 2011			Year Ended December 31,2011
	Reported	Previously Disclosed	Change	Reported	Previously Disclosed	Change
(000s)	($)	($)	($)	($)	($)	($)
Revenue
Electronic Drilling Recorder ⁽¹⁾	25,154	23,685	1,469	89,634	84,040	5,594
Communications ⁽¹⁾⁽²⁾	3,931	3,834	97	13,916	13,609	307
Total revenue	54,310	52,744	1,566	189,291	183,390	5,901
Operating costs	21,988	20,422	1,566	78,105	72,204	5,901
Revenue per EDR day	517	495	22	484	473	11
Revenue per Industry day	289	280	9	278	266	12

US segment revenue decreased by 10% in the fourth quarter of 2012 over the 2011 comparable period (7% decrease when measured in US dollars). Rental service revenue decreased 6% for the quarter (USD 3%) while the remaining difference is a result of a drop in sales at 3PS, Inc. and a drop in revenue from Auxsol.

For the full year 2012, US segment revenue increased by 18% (USD 17%), which includes $7.8 million of sales by 3PS, Inc., included in Other revenue.

As expected, the number of US drilling days were down approximately 11% in the fourth quarter of 2012 versus the fourth quarter of 2011 due to a pullback in drilling for both natural gas and oil. However, revenue from the rental of instrumentation compared very favourably to the drop in activity, with a decrease of only 6% (USD 3%) over 2011 levels. On a year to date basis, rental instrumentation revenue increased 15% (USD 14%) over 2011 levels, compared to only a very modest increase in industry days of 2%.

Revenue was impacted by the following factors:

More products on each rig, new product adoption, and better pricing. Revenue was increased by additional product penetration on each rig, primarily with gains in EDR peripheral devices, AutoDriller rentals, customer acceptance of the Company's Enhanced Live Rig View (eLRV) real-time data software, and increased adoption of the Gas Analyzer compared to the previous TGAS system. Mobilization income, which represents the cost recovery of the labour incurred by the Company for a field technician visit to a rig, was up 33% for the full year due to an increased number of "rig ups" and "rig downs" as a result of higher rig turnover compared to 2011. In addition, prices on specific products increased at the beginning of 2012. These factors combined resulted in an increase in revenue per EDR day in the fourth quarter of 2012 over 2011 levels of $51 (USD $67). On a year to date basis revenue per EDR day increased 16% or $77 (USD $73).

A decrease in EDR rental days of 14% for the three months ended December 2012, over the same time period in 2011, and a small drop of 1% on a year to date basis over 2011 levels. This compares to a drop in industry days of 11% and an increase in industry days of 1% for the similar time period.

The factors explained above resulted in the US segment being able to realize revenue per EDR day during the fourth quarter of 2012 of $568 (USD $574) compared to $517 (USD $507) during the same time period in 2011. For the full year of 2012, revenue per EDR day was $561 (USD $562) compared to $484 (USD $489) in 2011.

Revenue per industry day for the fourth quarter of the year was $305 (USD $308) compared to $289 (USD $283) in 2011. Year to date figures were $314 (USD $314) compared to 2011 amounts of $278 (USD $281).

The majority of the increase in "Other" revenue relates to the Company realizing an entire year of sales of 3PS,Inc. compared to only approximately five months in 2011. Segment profit, as a percentage of revenue, was 47% for the fourth quarter of 2012 and 47% year to date, compared to 49% and 47% for the respective periods in 2011.

The US business unit was able to maintain its operating margin year over year, even with a significant increase in depreciation and amortization costs, by leveraging its fixed cost structure while at the same time continuing to control variable costs and implementing changes to operations to adapt to changing market conditions. The 2012 segment profit percentage was impacted by the following factors (all amounts in $CDN):

Field technician-related costs and repair costs in the fourth quarter of 2012 compared to 2011 increased approximately $0.3 million. On a year to date basis, these costs increased by approximately $2.7 million. This increased consists of a 7% increase in field costs (attributed to an increase in health care-related costs and other field technician-related costs), offset by a reduction in repair costs of $1.0 million (associated with the phased out TGAS system).
As disclosed in prior quarters, the US business unit made a concerted effort in 2012 to strengthen its sales presence. This led to an increase in sales and marketing costs of $1.5 million for the twelve months ended December, 2012 over 2011 amounts.
Fourth quarter 2012 depreciation and amortization expense was up $2.2 million compared to the same period in 2011. On a year to date basis, these costs were up $9.8 million, due in large part to

The accelerated depreciation on the Company's original EDR system as a result of the EDR evolution project, which will make obsolete a portion of the Company's base EDR system,
A full twelve months depreciation on 3PS, Inc. assets,
Depreciation on the new Gas Analyzer system, and
Depreciation costs relating to the vehicle fleet as vehicles are now purchased rather than leased.

Legal fees associated with the Automatic Driller lawsuit decreased $0.3 million in the fourth quarter of 2012 and $0.9 million for the year compared to the respective 2011 periods.
Year-to-date 2012 figures include a full year's results of 3PS, Inc., which generates a lower margin than the US rental business.

Canadian Operations

		Three Months Ended December 31,			Years Ended December 31,
		2012	2011 (reclassified)	Change	2012	2011 (reclassified)	Change
(000s)		($)	($)	(%)	($)	($)	(%)
Revenue
	Electronic Drilling Recorder ⁽¹⁾	11,864	14,715	(19)	46,632	46,163	1
	Pit Volume Totalizer	4,929	6,445	(24)	19,921	21,649	(8)
	Communications ⁽¹⁾⁽²⁾	4,308	5,443	(21)	17,323	18,193	(5)
	Software ⁽²⁾	1,938	2,303	(16)	7,662	6,721	14
	Automatic Driller	3,368	4,678	(28)	13,500	15,175	(11)
	Gas Analyzer/Total Gas System	3,357	3,405	(1)	12,303	11,252	9
	Hazardous Gas Alarm System	609	682	(11)	2,443	2,603	(6)
	Mobilization	178	198	(10)	638	781	(18)
	Other ⁽²⁾	1,488	1,893	(21)	5,316	5,795	(8)
Total revenue		32,039	39,762	(19)	125,738	128,332	(2)
Operating costs		8,858	10,788	(18)	36,291	42,616	(15)
Depreciation and amortization		6,246	6,897	(9)	26,964	25,934	4
Segment operating profit		16,935	22,077	(23)	62,483	59,782	5

(1)	Data transmission expenses have been reclassified from revenue to rental service expense. All comparative figures have been restated accordingly.
(2)	2011 revenue associated with the Company's software applications has been reclassified from Communications to Software.

The impact of the accounting reclassification of data transmission costs from revenue to operating costs previously discussed had the following impact on the 2011 comparative figures presented above:

	Three Months Ended December 31, 2011			Year Ended December 31,2011
	Reported	Previously Disclosed	Change	Reported	Previously Disclosed	Change
(000s)	($)	($)	($)	($)	($)	($)
Revenue
Electronic Drilling Recorder ⁽¹⁾	14,715	13,464	1,251	46,163	41,130	5,033
Communications ⁽¹⁾⁽²⁾	5,443	5,055	388	18,193	16,698	1,495
Total revenue	39,762	38,123	1,639	128,332	121,804	6,528
Operating costs	10,788	9,149	1,639	42,616	36,088	6,528
Revenue per EDR day	963	923	40	897	850	47
Revenue per Industry day	968	927	41	872	827	45

Canadian segment revenue decreased 19% for the three months ended December 2012, compared to the fourth quarter of 2011. This decrease is a result of a 24% decrease in the number of Canadian drilling industry days from 2011 levels. On a year to date basis, revenue decreased only 2% when compared to a decline in the number of Canadian drilling days of 14%.

EDR rental days declined 31% in the fourth quarter of 2012 over the fourth quarter of 2011. On a year to date basis, EDR rental days declined by 18% over 2011 levels.

The Canadian business unit was able to lessen the impact of the significant reduction in activity levels in Canada, due to current weak oil and natural gas prices and uncertainty around future pricing, through better pricing, new product adoption, and more products on each rig. The business unit increased pricing on most of its key products in the fourth quarter of 2011 and this combined with increased market penetration of the Gas Analyzer and Hazardous Gas Alarm System, customer acceptance of the Company's Enhanced Live Rig View (eLRV) real-time data software, and more products on each rig, primarily with gains in EDR peripheral devices, lessened the impact of the significant drop in the number of wells being drilled.

The factors above combined to result in:

An increase in revenue per EDR day during the fourth quarter of 2012 compared to 2011 of 16% ($157) to $1,120. For 2012, revenue per EDR day increased by $177 to $1,073.
Fourth quarter revenue per industry day of $1,025 in 2012 compared to $968 in 2011. For the entire year, revenue per industry day increased 14% to $997.

The segment profit for the fourth quarter of 2012 of $16.9 million is a decrease of $5.1 million over the 2011 amount. Factors impacting the fourth quarter results include:

The weak drilling activity in the Western Canadian Sedimentary Basin (WCSB), together with a slight decrease in the Company's market share, resulted in 12,500 fewer EDR days during the fourth quarter of 2012 compared to 2011, resulting in much lower revenue.
A decrease in the loss on the disposal of assets of $0.8 million, which is included in depreciation and amortization, offset by an increase in amortization costs relating to capitalized research and development costs, as a result of the deployment of new software applications to customers.
A decrease in most repair cost categories due to a drop in drilling activity, combined with a reduction in costs associated with the new Gas Analyzer as compared to the TGAS system.
In the fourth quarter of 2011, $1.3 million of legal fees were incurred, mostly relating to the Automatic Driller litigation. These costs were minimal in the fourth quarter of 2012.

The segment profit, as a percent of revenue, was 50% for the year ended December 2012, compared to 47% for 2011. Factors impacting the year results include:

An increase in depreciation and amortization charges relating to the accelerated depreciation on the Company's EDR systems, the depreciation on the new Gas Analyzer system and increased amortization of previously deferred research and development costs. These increases were offset by a reduction in depreciation relating to the previously disposed water treatment business and a decline in the loss relating to the scrapping of obsolete equipment.
An increase in field costs of $1.2 million, which is mostly attributable to the expansion of the work force. This was deemed necessary given the shift in drilling activity in the WCSB, anticipation of additional product opportunities, and an adjustment to the field technician shift schedule.
A decrease in repair costs of $2.8 million, mostly attributable to the roll out of the new Gas Analyzer, resulting in a decline in repair costs for this category, combined with a decline in other repair costs due to lower drilling activity.
In 2011, the Canadian business unit incurred $4.5 million in legal costs, mostly related with the Automatic Driller litigation. Total legal expense for 2012 was approximately $0.7 million.
$1.5 million of net expenses relating to the water treatment business were recorded in the 2011. This business unit was disposed of in the fourth quarter of 2011.

International Operations

		Three Months Ended December 31,			Years Ended December 31,
		2012	2011 (reclassified)	Change	2012	2011 (reclassified)	Change
(000s)		($)	($)	(%)	($)	($)	(%)
Revenue
	Electronic Drilling Recorder ⁽¹⁾	4,032	3,036	33	15,159	9,974	52
	Pit Volume Totalizer	1,486	1,484	--	5,840	4,319	35
	Communications ⁽¹⁾⁽²⁾	113	(178)	N/A	537	100	437
	Software ⁽²⁾	175	93	88	513	316	62
	Automatic Driller	969	612	58	3,677	2,320	58
	Gas Analyzer/Total Gas System	874	874	--	3,689	2,148	72
	Hazardous Gas Alarm System	523	243	115	1,733	1,035	67
	Mobilization	621	359	73	2,394	1,803	33
	Other ⁽²⁾	1,154	338	241	4,180	6,520	(36)
Total revenue		9,947	6,861	45	37,722	28,535	32
Operating costs		6,152	6,897	(11)	23,073	19,967	16
Depreciation and amortization		2,518	3,903	(35)	8,868	10,096	(12)
Segment operating profit (loss)		1,277	(3,939)	N/A	5,781	(1,528)	N/A

(1)	Data transmission expenses have been reclassified from revenue to rental service expense. All comparative figures have been restated accordingly.
(2)	2011 revenue associated with the Company's software applications has been reclassified from Communications to Software.

The impact of the accounting reclassification of data transmission costs from revenue to operating costs previously discussed had the following impact on the 2011 comparative figures presented above:

	Three Months Ended December 31, 2011			Year Ended December 31,2011
	Reported	Previously Disclosed	Change	Reported	Previously Disclosed	Change
(000s)	($)	($)	($)	($)	($)	($)
Revenue
Electronic Drilling Recorder ⁽¹⁾	3,036	2,930	106	9,974	9,765	209
Communications ⁽¹⁾⁽²⁾	(178)	(178)	--	100	100	--
Total revenue	6,861	6,755	106	28,535	28,326	209
Operating costs	6,897	6,791	106	19,967	19,758	209

Revenue in the International operations improved 45% in the fourth quarter of 2012 from the same period in 2011. On a year-over-year basis, revenue increased approximately $9.2 million or 32% over 2011 amounts. The Company realized gains in all of its major markets, with notable gains in both revenue and segment profit in Argentina, Brazil, Australia, and Mexico.

Operating profit increased by $5.2 million for the fourth quarter of 2012 and by $7.3 million for the twelve months ending December 31, over 2011 results.

A number of factors influenced these results:

Increased market share combined with price increases in Argentina contributed to significant gains in both revenue and operating profit. Year over year operating profit has increased $1.9 million.
Triple-digit revenue growth in Brazil as a result of an increase in the number of rigs deploying the Company's equipment, resulting in an increase in the year to date revenue of $2.1 million and an increase in operating profit of $2.0 million over 2011 levels.
An increase in drilling activity in both Mexico and Australia has led to these two business units realizing increases in operating profit from 2011 levels of $2.2 million and $2.1 million, respectively.
The Company's International segment includes our Offshore business unit which generated a triple digit increase in its rental revenue for the twelve months ended December, 2012 over the same period in 2011. These gains are as a result of the deployment of Pason hardware onto offshore drilling rigs in the Gulf of Mexico and internationally.
Depreciation expense is down in large part due to a decrease in capital expenditures as a result of a concerted effort to increase the utilization of equipment within this market.

Consolidated Results

		Three Months Ended December 31,			Years Ended December 31,
		2012	2011	Change	2012	2011	Change
(000s)		($)	($)	(%)	($)	($)	(%)
Other expenses
Research and development		7,033	5,371	31	22,467	17,366	29
Corporate services		4,326	3,816	13	15,723	12,975	21
Stock-based compensation		7,237	(2,561)	N/A	23,792	1,309	1,718
Other
	Litigation provision	32,500	--	N/A	37,913	--	N/A
	Foreign exchange loss (gain)	10	690	(99)	4,573	(2,713)	N/A
	Impairment loss	5,282	2,780	90	7,918	4,580	73
	Other	475	683	(30)	992	1,601	(38)
		56,863	10,779	527	113,378	35,118	223

Q4 2012 versus Q4 2011
The active rig count in both the US and Canadian markets declined from the fourth quarter of 2011, with the Canadian drop in activity much more severe than the US decline. The International market saw an increase in drilling days. The increased revenue and profitability in the International markets were not sufficient to offset the drop in operating results in both Canada and the US. Revenue decreased 10%, while EBITDA dropped by 83% and funds flow from operations was down 14%.

The company incurred a net loss of $13.7 million or $0.17 per share compared to net earnings of $31.7 million or $0.39 per share in the fourth quarter of 2011. The fourth quarter consolidated results, when compared to 2011 figures, were impacted by the following significant items:

A non-cash accrual of an additional $32.5 million for the liability related to the ongoing patent litigation. Management continues to be confident in its defenses in the three cases, namely that the asserted claims of the 142 patent are not valid, and/or the Company does not infringe on any valid claims. Nevertheless, in light of the cumulative effect of the progress on these cases in 2012, including the appeal of the Colorado case, the fact that the Texas case has been filed, the reopening of the Canadian case, and a recent mediation that did not result in a voluntary resolution, the Company decided to accrue, in accordance with accounting guidelines, this additional amount;
Increase in research and development costs in the fourth quarter of 2012 of $1.7 million as the Company completed the hiring of additional staff to support the EDR evolution project and other product developments.
Stock-based compensation increased by $9.8 million compared to the fourth quarter of 2011 due to an increase in the Company's stock price, which impacts the valuation under the Black-Scholes pricing model. The Company's stock price increased approximately 5% during the fourth quarter of 2012 compared to a decline in the corresponding period in 2011.
During the fourth quarter of 2012, the Company recorded a non-cash impairment loss of $4.7 million against its Torque and Tension Sub (TTS) program, and an additional $0.6 million against the US water treatment business. In 2012, the Company initiated the roll-out of the (TTS), and initial field trials were promising; the TTS was able to provide measurements that were more accurate than indirect readings. However, due to a number of complications, including deployment issues and sales and marketing challenges due to the fact that the TTS is different than the Company's traditional products, customer acceptance and the resulting revenue was lower than the Company initially anticipated. As a result, the Company made the decision in the fourth quarter of 2012 to alter its business model. Management made the decision to supplement the rental model by providing its customers the option of sold units and at the same time identified new markets within the oil and gas industry. The Canadian and US business units will continue to rent these assets while 3PS, Inc. will offer to sell the units to a wider range of customers. The Company believes that this change in strategy, which expands the customer base and allows for more options to the customer, will result in an increase in demand from current levels. As a result of this change the Company identified raw materials that are no longer required and that some of the TTS accessories are obsolete, which led the Company to record the non-cash impairment loss. In the fourth quarter of 2011, a non-cash impairment loss of $2.8 million was recorded against the US water treatment business.
Decrease in the foreign exchange loss recorded in the fourth quarter of 2012 of $0.5 million
An increase in corporate service costs of $0.9 million due in most part to staff restructuring costs.

Q4 2012 versus Q3 2012
Revenue was lower in the fourth quarter of 2012 versus the third quarter by $5.3 million. The Canadian business unit realized an increase in revenue of $1.7 million but this was offset by a drop of $4.5 million in the US rental market. The Canadian business unit realized a profit of $16.9 million for the three months ended December 2012 compared to a $14.6 million profit in the third quarter. The US business unit profit declined from a profit of $27.0 million in the previous quarter to a profit of $23.2 million in the current quarter, due to a drop in drilling days.

The following items also impacted the comparison to the 2012 third quarter results:

Increase in the litigation accrual described above of $32.5 million.
An increase in research and development costs of $1.7 million.
During the third quarter of 2012, the Company recorded a non-cash impairment loss of $2.6 million on its US water treatment assets. During the fourth quarter of 2012, the Company recorded a non-cash impairment loss of $4.7 million against its Torque and Tension Sub program and an additional $0.6 million on the US water treatment asset.
An increase in corporate service costs of $0.9 million due in most part to staff restructuring costs.
An increase in stock-based compensation expense of $1.8 million.
A decrease in foreign exchange loss of $1.5 million.

Summary of Quarterly Results

Three Months Ended		Mar 31, 2011	Jun 30, 2011	Sep 30, 2011	Dec 31, 2011	Mar 31, 2012	Jun 30, 2012	Sep 30, 2012	Dec 31, 2012
(000s, except per share data)		($)	($)	($)	($)	($)	($)	($)	($)
Revenue ⁽¹⁾		88,218	65,546	91,461	100,933	115,145	84,112	96,262	90,995
EBITDA ⁽²⁾		44,729	25,850	53,162	47,920	64,146	31,656	47,665	8,286
	Per share - basic	0.55	0.31	0.65	0.59	0.78	0.39	0.58	0.10
	Per share - diluted	0.55	0.30	0.64	0.58	0.78	0.38	0.58	0.10
Funds flow from operations ⁽²⁾		39,082	22,917	41,270	42,089	51,707	30,132	40,831	36,278
	Per share - basic	0.48	0.28	0.50	0.51	0.63	0.37	0.50	0.44
	Per share - diluted	0.48	0.27	0.50	0.51	0.63	0.37	0.50	0.44
Earnings (loss) ⁽³⁾		17,757	8,217	28,547	31,702	29,073	6,772	17,742	(13,703)
	Per share - basic	0.22	0.10	0.35	0.39	0.35	0.08	0.22	(0.17)
	Per share - diluted	0.22	0.09	0.35	0.39	0.35	0.08	0.21	(0.17)

(1)	Data transmission expenses have been reclassified from revenue to rental service expense. All comparative figures have been restated accordingly. This change has no impact on reported EBITDA, funds flow from operations or earnings.
(2)	EBITDA is defined as earnings before interest expense, income taxes, stock-based compensation expense, and depreciation and amortization expense. Funds flow from operations is defined as earnings adjusted for depreciation and amortization expense, impairment losses, stock-based compensation expense, deferred income taxes and other non-cash items impacting operations as presented in the Consolidated Statements of Cash Flows. These definitions are not recognized measures under International Financial Reporting Standards, and accordingly, may not be comparable to measures used by other companies.
(3)	Earnings for the quarters ended March 31, June 30, and September 30, 2012 have been reduced to correct a non-cash error in the statement of operations related to stock-based compensation of $400, $1,700, and $1,600 respectively. Per share amounts have been recalculated accordingly.

Three Months Ended	Mar 31, 2011	Jun 30, 2011	Sep 30, 2011	Dec 31, 2011	Mar 31, 2012	Jun 30, 2012	Sep 30, 2012	Dec 31, 2012
(000s)	($)	($)	($)	($)	($)	($)	($)	($)
Income (loss) before taxes ⁽³⁾	26,337	11,833	39,474	34,143	40,329	10,425	24,422	(15,428)
Depreciation and amortization	12,945	14,247	15,035	16,338	16,897	16,987	17,852	16,477
Stock-based compensation ⁽³⁾	5,447	(230)	(1,347)	(2,561)	6,920	4,244	5,391	7,237
EBITDA ⁽²⁾	44,729	25,850	53,162	47,920	64,146	31,656	47,665	8,286

Variations in Pason's quarterly financial results are due in part to the seasonality of the oil and gas service industry in Canada, which is somewhat offset by the less seasonal nature of US and International operations. The first quarter is generally the strongest quarter for the Company due to strong activity in Canada when location access is best during the winter. The second quarter is always the slowest due to spring break up in Canada when many areas are not accessible due to ground conditions, and therefore, do not permit the movement of heavy equipment. Activity generally increases in the third quarter, depending on the year, as ground conditions have often improved and location access becomes available; however, a rainy summer can have a significant adverse effect on drilling activity. By the fourth quarter, often the Company's second strongest quarter, access to most areas in Canada become available with ground freezing. Consequently, the performance of the Company may not be comparable quarter to consecutive quarter and should be considered on the basis of results for the whole year, or by comparing results in a quarter with results in the same quarter for the previous year.

Fourth Quarter & Year End Conference Call

Pason will be conducting a conference call for interested analysts, brokers, investors and media representatives to review its fourth quarter and year-end results at 9:00 a.m. (MST) on Friday, February 22, 2013. The conference call dial-in number is 1-888-231-8191 or 1-647-427-7450. You can access the seven-day replay by dialing 1-855-859-2056 or 1-416-849-0833, using password 85698063.

Pason Systems Inc. is a leading provider of instrumentation systems to land-based and offshore drilling rigs worldwide. The company's rental solutions, which include data acquisition, wellsite reporting, remote communications, and web-based information management, maximize rig uptime, improve work efficiency, and minimize operating costs. Pason's common shares trade on the Toronto Stock Exchange under the symbol PSI.TO.

Additional information, including the Company's Annual Report and Annual Information Form for the year ended December 31, 2012, is available on SEDAR at www.sedar.com or on the Company's website at www.pason.com.

Shareholders are also invited to attend the Company's Annual General Meeting on Thursday, May 2, 2013, at 3:30 pm at the offices of Pason Systems Inc., 6120 Third Street SE, Calgary, Alberta.

Consolidated Financial Statements

Consolidated Balance Sheets


As at		December 31, 2012	December 31,2011
(CDN 000s) (unaudited)		($)	($)
Assets
Current
	Cash and cash equivalents	157,944	104,993
	Trade and other receivables	84,506	102,321
	Prepaid expenses	2,920	1,970
	Total current assets	245,370	209,284
Non-current
	Property, plant and equipment	174,651	183,007
	Intangible assets	59,593	58,071
	Deferred tax assets	8,764	5,539
	Total non-current assets	243,008	246,617
Total assets		488,378	455,901
Liabilities and equity
Current
	Trade payables and accruals	25,674	40,668
	Litigation provision	19,533	14,543
	Income taxes payable	3,313	5,318
	Stock-based compensation liability	13,788	5,770
	Dividend payable	19,691	16,380
	Total current liabilities	81,999	82,679
Non-current
	Stock-based compensation liability	2,583	1,030
	Deferred tax liabilities	2,600	4,923
	Litigation provision	32,500	--
	Total non-current liabilities	37,683	5,953
Equity
	Share capital	79,393	77,613
	Employee benefits reserve	12,927	12,927
	Foreign currency translation reserve	(8,348)	(5,835)
	Retained earnings	284,724	282,564
	Total equity	368,696	367,269
Total liabilities and equity		488,378	455,901

Consolidated Statements of Operations


		Three Months Ended December 31,		Years Ended December 31,
		2012	2011 (reclassified)	2012	2011 (reclassified)
(CDN 000s, except per share data) (unaudited)		($)	($)	($)	($)
Revenue
	Equipment rentals and other	90,995	100,933	386,514	346,158
Operating expenses
	Rental services	28,652	33,503	125,269	119,342
	Local administration	4,431	6,170	19,906	21,346
	Depreciation and amortization	16,477	16,338	68,213	58,565
		49,560	56,011	213,388	199,253

Operating profit		41,435	44,922	173,126	146,905
Other expenses
	Research and development	7,033	5,371	22,467	17,366
	Corporate services	4,326	3,816	15,723	12,975
	Stock-based compensation (recovery)	7,237	(2,561)	23,792	1,309
	Other expenses	38,267	4,153	51,396	3,468
		56,863	10,779	113,378	35,118

(Loss) income before income taxes		(15,428)	34,143	59,748	111,787
	Income taxes	(1,725)	2,441	19,864	25,564
Net (loss) income		(13,703)	31,702	39,884	86,223
(Loss) earnings per share
	Basic	(0.17)	0.39	0.49	1.05
	Diluted	(0.17)	0.38	0.48	1.04

Change in Accounting Classification

In the fourth quarter of 2012, the Company changed the way in which it records expenses associated with data transmission costs. Previously, the Company recorded these costs as a reduction in revenue. Effective for 2012, these costs have been reclassified to rental services expense. This change, which does not impact EBITDA or net income, was applied retroactively, with all comparative figures being restated accordingly.

Consolidated Statements of Other Comprehensive Income

		Three Months Ended December 31,		Years Ended December 31,
		2012	2011	2012	2011
(CDN 000s) (unaudited)		($)	($)	($)	($)
Net (loss) income		(13,703)	31,702	39,884	86,223
Other comprehensive income (loss)
	Foreign currency translation adjustment	2,681	(6,049)	(2,513)	213
Total comprehensive income		(11,022)	25,653	37,371	86,436

Consolidated Statements of Changes in Equity


		Share Capital	Employee Benefits Reserve	Foreign Currency Translation Reserve	Retained Earnings	Total Equity
(CDN 000s) (unaudited)		($)	($)	($)	($)	($)
Balance at December 31, 2010		75,040	13,228	(6,048)	227,464	309,684
	Net income	--	--	--	86,223	86,223
	Dividends	--	--	--	(31,123)	(31,123)
	Other comprehensive income	--	--	213	--	213
	Exercise of stock options	2,265	--	--	--	2,265
	Options exercised that were previously expensed	308	(308)	--	--	--
	Stock-based compensation	--	7	--	--	7
Balance at December 31, 2011		77,613	12,927	(5,835)	282,564	367,269
	Net income	--	--	--	39,884	39,884
	Dividends	--	--	--	(37,724)	(37,724)
	Other comprehensive loss	--	--	(2,513)	--	(2,513)
	Exercise of stock options	1,780	--	--	--	1,780
Balance at December 31, 2012		79,393	12,927	(8,348)	284,724	368,696

Consolidated Statements of Cash Flows

		Three Months Ended December 31,		Years Ended December 31,
		2012	2011	2012	2011
(CDN 000s) (unaudited)		($)	($)	($)	($)
Cash flows from operating activities
	Net (loss) income	(13,703)	31,702	39,884	86,223
Adjustment for non-cash items:
	Depreciation and amortization	16,477	16,338	68,213	58,565
	Litigation provision	32,500	--	32,500	--
	Impairment loss	5,282	2,780	7,918	4,580
	Stock-based compensation (recovery)	5,541	(3,048)	16,067	(2,112)
	Deferred income taxes	(8,223)	(6,660)	(6,019)	1,329
	Unrealized foreign exchange (gain) loss	(1,596)	977	385	(3,227)
Funds flow from operations		36,278	42,089	158,948	145,358
Movements in non-cash working capital
	Decrease (increase) in trade and other receivables	7,391	(6,376)	16,376	(19,896)
	Decrease (increase) in prepaid expenses	1,853	2,481	(994)	(446)
	Increase in income taxes payable	3,513	3,448	18,072	13,819
	(Decrease) increase in trade payables, accruals and provisions	(10,076)	(221)	(7,101)	5,444
	(Decrease) increase in stock-based compensation liability	(3,564)	(3,524)	2,312	(732)
	Effects of exchange rate changes	2,808	(46)	1,778	832
	Changes in non-cash working capital	1,925	(4,238)	30,443	(979)
Cash generated from operating activities		38,203	37,851	189,391	144,379
	Income tax paid	(3,988)	(1,400)	(20,213)	(18,050)
Net cash from operating activities		34,215	36,451	169,178	126,329
Cash flows (used in) from financing activities
	Proceeds from issuance of common shares	558	33	1,780	2,265
	Purchase of stock options	(3,532)	(89)	(8,772)	(3,355)
	Payment of dividends	--	--	(34,413)	(28,631)
Net cash used in financing activities		(2,974)	(56)	(41,405)	(29,721)
Cash flows (used in) from investing activities
	Additions to property, plant and equipment	(10,173)	(20,647)	(58,640)	(71,382)
	Additions to intangibles	(414)	(184)	(1,644)	(184)
	Deferred development costs	(3,429)	(1,280)	(11,140)	(6,975)
	Proceeds on disposal of property, plant and equipment	586	505	586	505
	Acquisitions, net of cash acquired	--	(841)	--	(24,410)
	Changes in non-cash working capital	(35)	2,249	(2,646)	(520)
Net cash used in investing activities		(13,465)	(20,198)	(73,484)	(102,966)
Effect of exchange rate on cash and cash equivalents		356	(1,096)	(1,338)	951
Net increase (decrease) in cash and cash equivalents		18,132	15,101	52,951	(5,407)
Cash and cash equivalents, beginning of period		139,812	89,892	104,993	110,400
Cash and cash equivalents, end of period		157,944	104,993	157,944	104,993

The Company operates in three geographic segments: Canada, the United States, and Internationally (Latin America, Offshore, and the Eastern Hemisphere). The amounts related to each segment are as follows:

Three Months Ended December 31, 2012	Canada	United States	International	Total
(unaudited)	($)	($)	($)	($)
Revenue	32,039	49,009	9,947	90,995
Operating costs	8,858	18,073	6,152	33,083
Depreciation and amortization	6,246	7,713	2,518	16,477
Segment operating profit	16,935	23,223	1,277	41,435
Research and development				7,033
Corporate services				4,326
Stock-based compensation				7,237
Other expenses				38,267
Income taxes (recovery)				(1,725)
Net loss				(13,703)
Capital expenditures and acquisitions	5,006	5,926	2,670	13,602
Goodwill	--	18,414	2,600	21,014
Intangible assets	25,583	9,711	3,285	38,579
Segment assets	182,458	241,391	64,529	488,378
Segment liabilities	96,780	13,120	9,782	119,682


Three Months Ended December 31, 2011

Revenue	39,762	54,310	6,861	100,933
Operating costs	10,788	21,988	6,897	39,673
Depreciation and amortization	6,897	5,538	3,903	16,338
Segment operating profit (loss)	22,077	26,784	(3,939)	44,922
Research and development				5,371
Corporate services				3,816
Stock-based compensation (recovery)				(2,561)
Other expenses				4,153
Income taxes				2,441
Net income				31,702
Capital expenditures and acquisitions	9,245	11,844	838	21,927
Goodwill	--	18,823	2,600	21,423
Intangible assets	20,188	11,890	4,570	36,648
Segment assets	149,453	243,423	63,025	455,901
Segment liabilities	64,194	15,433	9,005	88,632

Year Ended December 31, 2012	Canada	United States	International	Total
(unaudited)	($)	($)	($)	($)
Revenue	125,738	223,054	37,722	386,514
Operating costs	36,291	85,811	23,073	145,175
Depreciation and amortization	26,964	32,381	8,868	68,213
Segment operating profit	62,483	104,862	5,781	173,126
Research and development				22,467
Corporate services				15,723
Stock-based compensation				23,792
Other expenses				51,396
Income taxes				19,864
Net income				39,884
Capital expenditures and acquisitions	25,682	37,850	7,892	71,424
Goodwill	--	18,414	2,600	21,014
Intangible assets	25,583	9,711	3,285	38,579
Segment assets	182,458	241,391	64,529	488,378
Segment liabilities	96,780	13,120	9,782	119,682


Year Ended December 31, 2011

Revenue	128,332	189,291	28,535	346,158
Operating costs	42,616	78,105	19,967	140,688
Depreciation and amortization	25,934	22,535	10,096	58,565
Segment operating profit (loss)	59,782	88,651	(1,528)	146,905
Research and development				17,366
Corporate services				12,975
Stock-based compensation				1,309
Other expenses				3,468
Income taxes				25,564
Net income				86,223
Capital expenditures and acquisitions	29,488	64,249	9,214	102,951
Goodwill	--	18,823	2,600	21,423
Intangible assets	20,188	11,890	4,570	36,648
Segment assets	149,453	243,423	63,025	455,901
Segment liabilities	64,194	15,433	9,005	88,632

Pason Systems Inc.

Certain information regarding the Company contained herein may constitute forward-looking information under applicable securities law. The words "anticipate", "expect", "believe", "may", "should", "will", "estimate", "project", "outlook", "forecast" or other similar words are used to identify such forward-looking information and statements. Forward-looking statements in this document may include statements, express or implied regarding the anticipated business prospects and financial performance of Pason; expectations or projections about future strategies and goals for growth and expansion; expected and future cash flows and revenues; and expected impact of future commitments. These forward-looking statements are based upon various underlying factors and assumptions, including the state of the economy and the oil and gas exploration and production business, in particular; the Company's business prospects and opportunities; and estimates of the financial and operational performance of Pason.

Forward-looking information and statements are subject to known or unknown risks and uncertainties that may cause actual results to differ materially from those anticipated or implied in the forward-looking information and statements. Risk factors that could cause actual results or events to differ materially from current expectations include, among others, the ability of Pason to successfully implement its strategic initiatives and whether such strategic initiatives will yield the expected benefits, the operating performance of Pason's assets and businesses, the price of energy commodities, competitive factors in the energy industry, changes in laws and regulations affecting Pason's businesses, technological developments, and general economic conditions.

Readers are cautioned not to place undue reliance on forward-looking statements as there can be no assurance that the plans, intentions or expectations upon which they are placed will occur. Such forward looking statements, although considered reasonable by management as of the date hereof, may prove to be incorrect and actual results may differ materially from those anticipated. Forward-looking statements contained in this press release are expressly qualified by this cautionary statement.

Additional information on risks and uncertainties and other factors that could affect Pason's operations or financial results are included in Pason's reports on file with the Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com or through Pason's website www.pason.com). Furthermore, any forward looking statements contained in this news release are made as of the date of this news release, and Pason does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by securities law.

SOURCE: Pason Systems Inc.

For more information about Pason Systems Inc., visit the company's website at www.pason.com or contact:

Marcel Kessler
President and CEO
403-301-3400
[email protected]

David Elliott
Chief Financial Officer
403-301-3441
[email protected]

Browse News Releases

News Releases Overview

Multimedia Gallery

Multimedia Gallery Overview

Trending Topics

Pason Reports Fourth Quarter and Year End 2012 Results

News provided by

Organization Profile

Pason Systems Inc.

Contact Cision

Products

About

My Services