Pason Reports Second Quarter 2017 Results

News provided by

Aug 09, 2017, 17:00 ET

CALGARY, Aug. 9, 2017 /CNW/ - Pason Systems Inc. (TSX:PSI) announced today its 2017 second quarter results.

Performance Data

		Three Months Ended June 30,			Six Months Ended June 30,
		2017	2016	Change	2017	2016	Change
(CDN 000s, except per share data)		($)	($)	(%)	($)	($)	(%)
Revenue		55,792	27,173	105	114,841	72,986	57
Income (loss)		6,895	(11,319)	—	14,048	(22,179)	—
	Per share – basic	0.08	(0.13)	—	0.17	(0.26)	—
	Per share – diluted	0.08	(0.13)	—	0.17	(0.26)	—
EBITDA ⁽¹⁾		21,050	(2,231)	—	44,519	(2,584)	—
	As a % of revenue	37.7	(8.2)	—	38.8	(3.5)	—
Adjusted EBITDA ⁽¹⁾		19,361	(1,470)	—	44,269	7,293	507
	As a % of revenue	34.7	(5.4)	—	38.5	10.0	29
Funds flow from operations		18,795	(974)	—	39,869	2,361	1,589
	Per share – basic	0.22	(0.01)	—	0.47	0.03	1,467
	Per share – diluted	0.22	(0.01)	—	0.47	0.03	1,467
Cash from operating activities		24,201	2,993	709	54,032	14,324	277
Free cash flow ⁽¹⁾		19,628	(2,461)	—	48,139	1,680	2,765
Capital expenditures		5,099	4,929	3	6,233	11,509	(46)
Working capital		197,191	197,843	—	197,191	197,843	—
Total assets		412,991	456,894	(10)	412,991	456,894	(10)
Total long-term debt		—	—	—	—	—	—
Cash dividends declared		0.17	0.17	—	0.34	0.34	—
Shares outstanding end of period (#000's)		84,814	84,280	1	84,814	84,280	1

(1) Non-IFRS financial measures are defined in the Management's Discussion and Analysis section.

Q2 2017 vs Q2 2016

The Company generated consolidated revenue of $55.8 million in the second quarter of 2017, an increase of 105% from the same period in 2016. Stable commodity prices and continued optimism has led to increased drilling activity in Canada and the US market. Revenue in the second quarter of 2017, when compared to 2016, also benefited by a lower Canadian dollar relative to the US dollar. Revenue from the International business unit increased modestly compared to the second quarter of 2016.

Consolidated adjusted EBITDA increased to $19.4 million in the second quarter, up from a negative $1.5 million in the second quarter of 2016. Strong operational performance in North America gross profit performance led to the rebound in these key measures.

The Company recorded net income of $6.9 million ($0.08 per share) in the second quarter of 2017, compared to a net loss of $11.3 million ($0.13 per share) recorded in the same period in 2016. The increase in Canadian and US revenue combined with cost reduction programs previously implemented and a significant decline in depreciation expense from prior year levels led to the increase in income from 2016 levels. In addition, the strengthening Canadian dollar toward the end of the second quarter of 2017 led to a lower effective tax rate for the second quarter of 2017.

President's Message

The second quarter of each year generally has the lowest drilling activity due to spring break-up in Canada, when many areas are not accessible because of ground conditions. As a result, financial performance in the second quarter is usually weaker than in the first. This was again the case this year. However, due to higher drilling activity in the United States, in Canada, and in certain International markets, as well as lower operating costs, Pason's financial performance improved significantly from the second quarter of 2016.

Revenue for the quarter was up 105% to $55.8 million from the previous year period. Income for the second quarter of 2017 was $6.9 million, or $0.08 per share, compared to a loss of $11.3 million in the previous year. Adjusted EBITDA was $19.4 million, resulting in an adjusted EBITDA margin of 35%. Free Cash Flow for the quarter was $19.6 million. At June 30, 2017, our working capital position stood at $197 million, including cash at $167 million. There is no debt on our balance sheet. We are maintaining our quarterly dividend at $0.17 per share.

The key drivers of improved financial performance were: 1) higher drilling activity in the United States - especially in the Permian region - as well as in Canada; 2) increased US market share; and 3) a significant reduction in operating costs and depreciation.

The impact of previously implemented cost reduction programs is highlighted by comparing this quarter's results with the second quarter of 2015. While revenue was essentially at the same level, EBITDA increased from $7.5 million the second quarter of 2015 to $21.1 million in the second quarter of 2017. Our recorded net income was also much improved. We expect to continue to reap the benefits of our lower fixed cost structure into the foreseeable future.

Since the beginning of this year, growth in land-based drilling activity in North America has exceeded our expectations. The US land rig count now stands at 930 and the average for Canada year-to-date is at 180.

While we don't expect to see immediate reductions in operator capital budgets - and thus drilling activity - we believe growth will be muted going forward. Operator capital budgets are likely to be significantly impacted by future commodity prices, and the potential to return to lower commodity prices, as well as continued pipeline and LNG uncertainty in Canada, may create headwinds to continued growth in industry activity.

Pason's two main objectives for 2017 remain unchanged: 1) to fully participate in the industry's upturn while containing growth of the cost base; and 2) to become a key enabler of drilling automation and big data strategies.

We continue to invest approximately $30 million annually in R&D and IT. In addition to continuously enhancing the functionality and performance of existing products, our development efforts are focused on products that directly improve the efficiency, effectiveness and safety of drilling operations and wellbore quality.

Examples of this include our ePVT Adaptive Alarms and Digital Trip Sheets, AC AutoDriller, abbl Directional Advisor and the deployment of the advanced Exxon Drilling Advisory System. We are building on our acquisition of Verdazo Analytics to provide customers with a holistic platform to analyze drilling, production, and operational data. The deployment of an enhanced Live Rig View (LRV) web service to our cloud-based offering benefits office-based users of Pason data.

Our capital expenditures will be relatively modest going forward with a larger portion of our current development efforts focused on software and analytics. Our very capable and flexible rigsite IT and communications platform can host new Pason and third party software. For 2017, we intend to spend up to $25 million in capital expenditures.

Pason's market position remains very strong and the outlook for our new products and services looks promising. We are the service provider of choice for many leading operators and drilling contractors with Pason equipment installed on over 65% of all active land drilling rigs in the Western Hemisphere and a growing presence in the Middle East.

(signed)
Marcel Kessler
President and Chief Executive Officer
August 9, 2017

Management's Discussion and Analysis

The following discussion and analysis has been prepared by management as of August 9, 2017, 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.

Additional IFRS Measures

In its interim condensed consolidated financial statements, the Corporation uses certain additional IFRS measures. Management believes these measures provide useful supplemental information to readers.

Funds flow from operations

Management believes that funds flow from operations, as reported in the Consolidated Statements of Cash Flows, is a useful additional measure as it represents the cash generated during the period, regardless of the timing of collection of receivables and payment of payables. Funds flow from operations represents the cash flow from continuing operations, excluding non-cash items. Funds flow from operations is defined as net income adjusted for depreciation and amortization expense, non-cash stock-based compensation expense, deferred taxes, and other non-cash items impacting operations.

Cash from operating activities

Cash from operating activities is defined as funds flow from operations adjusted for changes in working capital items.

Non-IFRS Financial Measures

These definitions are not recognized measures under IFRS, and accordingly, may not be comparable to measures used by other companies. These Non-IFRS measures provide readers with additional information regarding the Company's ability to generate funds to finance its operations, fund its research and development and capital expenditure program, and pay dividends.

Revenue per EDR Day

Revenue per EDR day is defined as the daily revenue generated from all products that the Company has on rent on a drilling rig that has the Company's base EDR installed. This metric provides a key measure on the Company's ability to increase production adoption and evaluate product pricing.

EBITDA

EBITDA is defined as net income before interest expense, income taxes, stock-based compensation expense, depreciation and amortization expense, and gains on disposal of investments.

Adjusted EBITDA

Adjusted EBITDA is defined as EBITDA, adjusted for foreign exchange, impairment of property, plant, and equipment, restructuring costs, and other items which the Company does not consider to be in the normal course of continuing operations.

Free cash flow

Free cash flow is defined as cash from operating activities plus proceeds on disposal of property, plant, and equipment, less capital expenditures, and deferred development costs.

Overall Performance

		Three Months Ended June 30,			Six Months Ended June 30,
		2017	2016	Change	2017	2016	Change
(000s)		($)	($)	(%)	($)	($)	(%)
Revenue
	Electronic Drilling Recorder	27,147	11,462	137	52,803	30,617	72
	Pit Volume Totalizer/ePVT	7,723	3,465	123	16,299	9,821	66
	Communications	4,926	2,258	118	11,849	6,589	80
	Software	4,887	1,791	173	9,903	4,922	101
	AutoDriller	3,021	1,517	99	6,850	4,283	60
	Gas Analyzer	3,679	1,853	99	8,291	5,477	51
	Other	4,409	4,827	(9)	8,846	11,277	(22)
Total revenue		55,792	27,173	105	114,841	72,986	57

Electronic Drilling Recorder (EDR) and Pit Volume Totalizer (PVT) rental day performance for Canada and the United States is reported below:

Canada
	Three Months Ended June 30,			Six Months Ended June 30,
	2017	2016	Change	2017	2016	Change
	#	#	(%)	#	#	(%)
EDR rental days	9,200	4,400	109	33,000	19,400	70
PVT rental days	8,800	4,000	120	30,600	18,000	70


United States
	Three Months Ended June 30,			Six Months Ended June 30,
	2017	2016	Change	2017	2016	Change
	#	#	(%)	#	#	(%)
EDR rental days	43,700	18,400	138	79,000	43,600	81
PVT rental days	34,900	14,400	142	62,600	33,400	87

The Pason 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.

Total revenue increased 105% and 57% for the three and six months ending June 2017, over the same period in 2016. This increase is attributable to an increase in drilling activity in the Company's North American markets. The second quarter 2017 results benefited from a weaker Canadian dollar relative to the US dollar.

Industry activity in the US market increased 118% in the second quarter of 2017 compared to the corresponding period in 2016 (68% on a year-to-date basis), while second quarter Canadian rig activity increased 141% (93% on a year-to-date basis). Canadian EDR days, which includes some non-oil and gas-related activity, increased 109% in the second quarter of 2017 from 2016 levels (70% on a year-to-date basis), while US EDR days increased by 138% from the second quarter of 2016 (81% on a year-to-date basis).

For the first half of 2017, the Pason EDR was installed on 55% of the land rigs in the US compared to 51% during the same time period in 2016.

The Canadian business unit continued to see increased competition from a number of competitors. For the first half of 2017, the Pason EDR was installed on 89% of the land rigs in the Canadian market; for the same period in 2016 the number of EDR days exceeded the number of reported industry days.

For the purposes of market share, the Company uses the number of EDR days billed and oil and gas drilling days as reported by accepted industry sources.

The Canadian market saw continued pricing pressure during the second quarter of 2017 relative to the same period in 2016.

The revenue generated from the Company's other wellsite instrumentation products tracked the percentage increase in drilling activity. The notable exceptions were:

increased product adoption of EDR peripherals, including workstations and Pason Rig Display
continued increase in customer adoption of the communication solutions previously rolled out in the Canadian and US markets
increased ePVT adoption rates in the US
increased AutoDriller rentals in both Canada and the US due to the significant increase in drilling activity which led to more mechanical rigs being deployed in 2017 compared to 2016
decreased revenue of service rig recorders in Latin America due to the drop in drilling activity which impacted other revenue

Included in the software category is revenue from the Company's data analytics subsidiary, Verdazo.

Other revenue is down due to the sale of the net operating assets of 3PS, Inc. (3PS) effective January 1, 2017.

For the second quarter of 2017, the Company saw an increase in rig count in its Australian and Andean operating areas, compared to the corresponding period in 2016. Rig count continues to be depressed in Argentina and Mexico. In the Middle East, the Company is realizing an increase in its share of net income from its Saudi Arabia joint venture as a result of a continuing increases in rig count and market penetration.

Discussion of Operations

United States Operations

		Three Months Ended June 30,			Six Months Ended June 30,
		2017	2016	Change	2017	2016	Change
(000s)		($)	($)	(%)	($)	($)	(%)
Revenue
	Electronic Drilling Recorder	20,400	7,383	176	35,524	18,070	97
	Pit Volume Totalizer/ePVT	5,594	2,174	157	10,197	5,350	91
	Communications	3,389	1,172	189	5,972	2,717	120
	Software	3,331	1,338	149	5,799	3,095	87
	AutoDriller	1,816	617	194	3,224	1,582	104
	Gas Analyzer	2,278	1,077	112	4,043	2,675	51
	Other	2,387	2,630	(9)	4,402	6,528	(33)
Total revenue		39,195	16,391	139	69,161	40,017	73
Operating costs		16,302	10,749	52	30,512	25,994	17
Depreciation and amortization		4,170	5,463	(24)	9,171	12,236	(25)
Segment operating profit		18,723	179	10,360	29,478	1,787	1,550

	Three Months Ended June 30,		Six Months Ended June 30,
	2017	2016	2017	2016
	$	$	$	$
Revenue per EDR day - USD	661	624	649	621
Revenue per EDR day - CAD	889	804	866	827

Momentum in the US land-based drilling count continued in the second quarter of 2017. Although the majority of the absolute rig count gains were seen in the Permian and certain plays in Oklahoma, the Eagle Ford and Bakken participated in the increase.

US segment revenue increased by 139% in the second quarter of 2017 over the 2016 comparable period. For the first six months, revenue increased 73% compared to the prior year. Included in the prior year results was revenue (included in other revenue) from 3PS, the net operating assets of which were sold effective January 1, 2017. Removing 3PS revenue from the comparative figures, revenue increased by 165% in the second quarter of 2017 compared to 2016 (151% increase when measured in USD). The value of the Canadian dollar relative to the US dollar had a positive impact on revenue when measured in Canadian dollars in the second quarter of 2017. For the first half of 2017, revenue increased by 90% (89% when measured in USD) when removing 3PS revenue.

Industry activity in the US market during the second quarter of 2017 increased 118% from the prior year, and 68% for the first six months. US market share was 55% for the second quarter of 2017 compared to 51% during the same period of 2016, primarily driven by market share growth in key US regions combined with changes in the mix of active customers.

EDR rental days increased by 138% for the quarter ended June 30, 2017, over the same time period in 2016, while revenue per EDR day in the second quarter of 2017 increased to US$661, an increase of US$37 over the same period in 2016. This increase is due to an uptick on adoption of certain key products, combined with continued customer acceptance of enhanced communication solutions. Pricing discounts were similar to 2016 levels.

Revenue per EDR day for the first half of 2017 was US$649, up US$28 from the same period in 2016.

Operating costs increased by 52% in the second quarter relative to the same period in the prior year. When measured in USD, and removing 3PS costs, operating costs increased by 68%, which is a direct result of the business unit investing in field costs to meet the significant increase in drilling activity with the largest increases in labour costs and repairs.

Depreciation expense for the second quarter of 2017 decreased 24% over 2016 amounts due to the reduction in the capital program.

Segment profit increased by $18.5 million in the second quarter of 2017 compared to the corresponding period in 2016.

Canadian Operations

		Three Months Ended June 30,			Six Months Ended June 30,
		2017	2016	Change	2017	2016	Change
(000s)		($)	($)	(%)	($)	($)	(%)
Revenue
	Electronic Drilling Recorder	3,769	1,853	103	12,205	7,687	59
	Pit Volume Totalizer/ePVT	1,502	827	82	4,979	3,359	48
	Communications	1,489	759	96	5,341	3,188	68
	Software	1,458	401	264	3,934	1,696	132
	AutoDriller	709	301	136	2,658	1,405	89
	Gas Analyzer	1,079	502	115	3,661	2,150	70
	Other	473	357	32	1,688	1,340	26
Total revenue		10,479	5,000	110	34,466	20,825	66
Operating costs		5,559	3,995	39	11,353	9,319	22
Depreciation and amortization		5,645	6,331	(11)	11,579	13,913	(17)
Segment operating (loss) profit		(725)	(5,326)	86	11,534	(2,407)	—

	Three Months Ended June 30,		Six Months Ended June 30,
	2017	2016	2017	2016
	$	$	$	$
Revenue per EDR day- CAD	1,044	1,103	994	1,053

The second quarter showed significant improvement in WCSB rig count, with virtually all operators increasing their activity.

Canadian segment revenue increased by 110% for the quarter ended June 30, 2017 compared to the same period in 2016. This increase is the result of a 141% increase in the number of drilling industry days in the second quarter compared to 2016 levels. Included in the software category is revenue earned by Verdazo.

EDR rental days increased 109% in the second quarter of 2017 compared to 2016 (70% for the first six months of 2017).

Revenue per EDR day decreased by $59 to $1,044 during the second quarter of 2017 compared to 2016, resulting from selective price discounts on certain products. Revenue per EDR day for the first half of 2017 was $994, down $59 from the same period in 2017. The Canadian business unit continues to see competitive pricing pressure relative to prior periods.

Operating costs increased by 39% in the second quarter of 2017 relative to the same period in 2016 (22% on a year-to-date basis), due to increased repair costs combined with the inclusion of Verdazo operating costs.

Depreciation and amortization expense decreased by approximately 11% for the three months ended June 30, 2017. The 2017 amounts include the amortization of investment tax credits received in the second quarter of 2017, offset by the amortization of intangibles that were recognized on the acquisition of Verdazo.

The second quarter 2017 operating loss of $0.7 million is an improvement of $6.1 million from the prior year. Segment operating profit for the first six months of 2017 is $11.5 million compared to a loss of $2.4 million in the prior year.

International Operations

		Three Months Ended June 30,			Six Months Ended June 30,
		2017	2016	Change	2017	2016	Change
(000s)		($)	($)	(%)	($)	($)	(%)
Revenue
	Electronic Drilling Recorder	2,703	2,226	21	5,074	4,860	4
	Pit Volume Totalizer/ePVT	627	464	35	1,123	1,112	1
	Communications	323	327	(1)	536	684	(22)
	Software	98	52	88	170	131	30
	AutoDriller	496	599	(17)	968	1,296	(25)
	Gas Analyzer	322	274	18	587	652	(10)
	Other	1,549	1,840	(16)	2,756	3,409	(19)
Total revenue		6,118	5,782	6	11,214	12,144	(8)
Operating costs		4,773	4,188	14	8,965	9,719	(8)
Depreciation and amortization		1,008	1,784	(43)	2,046	3,791	(46)
Segment operating profit (loss)		337	(190)	—	203	(1,366)	—

The international rig count was up in several of the Company's international markets, most notably Australia and portions of the Andean region in South America. As a result, revenue in the International operations segment increased 6% in the second quarter of 2017 compared to the same period in 2016. For the first half of 2017 revenue decreased by 8% from prior years levels as a result of lower activity in the Company's Argentina and Mexico markets.

Operating costs increased by 14% in the second quarter relative to the same period in the prior year as result of increased operating costs in certain key markets. The Company anticipates that future pricing arrangements will reflect these price increases.

Depreciation expense decreased by approximately 43% for the three months ended June 30, 2017.

The segment operating profit was $0.3 million for the second quarter of 2017, an improvement from the $0.1 million loss recorded in the corresponding period in 2016. The year-to-date profit was $0.2 million compared to a loss of $1.4 million in the prior year.

Corporate Expenses

		Three Months Ended June 30,			Six Months Ended June 30,
		2017	2016	Change	2017	2016	Change
(000s)		($)	($)	(%)	($)	($)	(%)
Other expenses
Research and development		6,261	5,629	11	12,138	12,257	(1)
Corporate services		3,536	4,082	(13)	7,604	8,404	(10)
Stock-based compensation		3,177	2,238	42	5,724	3,200	79
Other
	Restructuring costs	—	—	—	—	10,861	—
	Foreign exchange (gain) loss	(689)	396	—	(466)	(2,323)	80
	Other	(1,000)	365	—	216	1,339	(84)
Total corporate expenses		11,285	12,710	(11)	25,216	33,738	(25)

In the first quarter of 2016, the Company initiated additional cost reduction initiatives to address the prolonged downturn in oil and gas drilling activity. As a result, the Company recorded a restructuring charge of $10.9 million in the first quarter of 2016.

Q2 2017 vs Q1 2017

Consolidated revenue was $55.8 million in the second quarter of 2017 compared to $59.0 million in the first quarter of 2017, a decrease of $3.2 million, or 5%. The second quarter is usually the Company's weakest due to the spring break-up in Canada. US activity levels continued to increase from first quarter 2017 levels. The Canadian segment earned revenue of $10.5 million in the second quarter of 2017 compared to $24.0 million in the first quarter of 2017, a decrease of $13.5 million. Revenue in the US market increased by $9.2 million, from $30.0 million in the first quarter of 2017 to $39.2 million in the second quarter of 2017. The International segment experienced a revenue increase of $1.0 million.

The Company recorded a net profit in the second quarter of 2017 of $6.9 million ($0.08 per share) compared to a profit of $7.2 million ($0.08 per share) in the first quarter of 2017.

Sequentially, EBITDA decreased from $23.5 million in the first quarter of 2017 to $21.1 million in the second quarter of 2017. Adjusted EBITDA, which adjusts for foreign exchange and certain non-recurring charges, decreased from $24.9 million in the first quarter of 2017 to $19.4 million in the second quarter of 2017. Funds flow from operations decreased from $21.1 million in the first quarter of 2017 to $18.8 million in the second quarter of 2017.

Second Quarter Conference Call

Pason will be conducting a conference call for interested analysts, brokers, investors and media representatives to review its second quarter 2017 results at 9:00 am (Calgary time) on Thursday, August 10, 2017. 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 35710957.

Pason Systems Inc. is a leading global provider of specialized data management systems for drilling rigs. Our solutions, which include data acquisition, wellsite reporting, remote communications, web-based information management, and analytics, enable collaboration between the rig and the office. Pason's common shares trade on the Toronto Stock Exchange under the symbol PSI.

Additional information, including the Company's Annual Report and Annual Information Form for the year ended December 31, 2016, is available on SEDAR at www.sedar.com or on the Company's website at www.pason.com.

Condensed Consolidated Interim Balance Sheets

As at		June 30, 2017	December 31, 2016
(CDN 000s) (unaudited)		($)	($)
Assets
Current
	Cash and cash equivalents	166,520	146,479
	Trade and other receivables	47,414	50,721
	Prepaid expenses	3,473	3,826
	Income taxes recoverable	7,101	15,066
	Assets held for sale	—	8,413
	Total current assets	224,508	224,505
Non-current
	Property, plant and equipment	134,220	150,504
	Intangible assets and goodwill	39,655	43,698
	Deferred tax assets	14,608	16,544
	Total non-current assets	188,483	210,746
Total assets		412,991	435,251
Liabilities and equity
Current
	Trade payables and accruals	22,889	24,347
	Stock-based compensation liability	4,428	1,516
	Liabilities held for sale	—	223
	Total current liabilities	27,317	26,086
Non-current
	Stock-based compensation liability	3,829	2,941
	Onerous lease obligation	2,697	2,917
	Deferred tax liabilities	13,282	16,656
	Total non-current liabilities	19,808	22,514
Equity
	Share capital	143,795	139,730
	Share-based benefits reserve	23,679	23,026
	Foreign currency translation reserve	58,705	69,443
	Retained earnings	139,687	154,452
	Total equity	365,866	386,651
Total liabilities and equity		412,991	435,251

Condensed Consolidated Interim Statements of Operations

		Three Months Ended June 30,		Six Months Ended June 30,
		2017	2016	2017	2016
(CDN 000s, except per share data) (unaudited)		($)	($)	($)	($)

Revenue		55,792	27,173	114,841	72,986
Operating expenses
	Rental services	24,099	16,986	45,582	40,757
	Local administration	2,535	1,946	5,248	4,275
	Depreciation and amortization	10,823	13,578	22,796	29,940
		37,457	32,510	73,626	74,972

Operating profit (loss)		18,335	(5,337)	41,215	(1,986)
Other expenses
	Research and development	6,261	5,629	12,138	12,257
	Corporate services	3,536	4,082	7,604	8,404
	Stock-based compensation expense	3,177	2,238	5,724	3,200
	Other (income) expense	(1,689)	761	(250)	9,877
		11,285	12,710	25,216	33,738

Income (loss) before income taxes		7,050	(18,047)	15,999	(35,724)
	Income tax provision (recovery)	155	(6,728)	1,951	(13,545)
Net income (loss)		6,895	(11,319)	14,048	(22,179)
Income (loss) per share
	Basic	0.08	(0.13)	0.17	(0.26)
	Diluted	0.08	(0.13)	0.17	(0.26)

Condensed Consolidated Interim Statements of Other Comprehensive Income

		Three Months Ended June 30,		Six Months Ended June 30,
		2017	2016	2017	2016
(CDN 000s) (unaudited)		($)	($)	($)	($)
Net income (loss)		6,895	(11,319)	14,048	(22,179)
Items that may be reclassified subsequently to net income:
	Foreign currency translation adjustment	(9,733)	(262)	(11,328)	(24,865)
	Reclassification of foreign currency translation gain on disposition of 3PS assets	—	—	590	—
	Other comprehensive (loss) gain	(9,733)	(262)	(10,738)	(24,865)
Total comprehensive (loss) income		(2,838)	(11,057)	3,310	(47,044)

Condensed Consolidated Interim Statements of Changes in Equity

		Share Capital	Share-Based Benefits Reserve	Foreign Currency Translation Reserve	Retained Earnings	Total Equity
(CDN 000s) (unaudited)		($)	($)	($)	($)	($)
Balance at January 1, 2016		128,067	23,367	85,603	252,411	489,448
	Net loss	—	—	—	(22,179)	(22,179)
	Dividends	—	—	—	(28,621)	(28,621)
	Other comprehensive loss	—	—	(24,865)	—	(24,865)
	Exercise of stock options	4,546	(1,424)	—	—	3,122
	Expense related to vesting of options	—	1,417	—	—	1,417
Balance at June 30, 2016		132,613	23,360	60,738	201,611	418,322
	Net loss	—	—	—	(18,442)	(18,442)
	Dividends	—	—	—	(28,717)	(28,717)
	Other comprehensive income	—	—	8,705	—	8,705
	Exercise of stock options	5,867	(1,913)	—	—	3,954
	Expense related to vesting of options	—	1,579	—	—	1,579
	Shares issued pursuant to business acquisition	1,250	—	—	—	1,250
Balance at December 31, 2016		139,730	23,026	69,443	154,452	386,651
	Net income	—	—	—	14,048	14,048
	Dividends	—	—	—	(28,813)	(28,813)
	Other comprehensive loss	—	—	(10,738)	—	(10,738)
	Exercise of stock options	4,065	(985)	—	—	3,080
	Expense related to vesting of options	—	1,638	—	—	1,638
Balance at June 30, 2017		143,795	23,679	58,705	139,687	365,866

Condensed Consolidated Interim Statements of Cash Flows

		Three Months Ended June 30,		Six Months Ended June 30,
		2017	2016	2017	2016
(CDN 000s) (unaudited)		($)	($)	($)	($)
Cash from (used in) operating activities
	Net income (loss)	6,895	(11,319)	14,048	(22,179)
Adjustment for non-cash items:
	Depreciation and amortization	10,823	13,578	22,796	29,940
	Stock-based compensation	3,177	2,238	5,724	3,200
	Non-cash restructuring costs	—	—	—	4,833
	Deferred income taxes	(1,052)	(5,688)	(1,941)	(10,976)
	Unrealized foreign exchange (gain) loss and other	(1,048)	217	(758)	(2,457)
Funds flow from (used in) operations		18,795	(974)	39,869	2,361
Movements in non-cash working capital items:
	Decrease in trade and other receivables	3,659	6,826	1,816	18,090
	Decrease in prepaid expenses	700	868	258	1,004
	Decrease (increase) in income taxes recoverable	2,774	(840)	9,566	(3,583)
	(Decrease) increase in trade payables, accruals and stock-based compensation liability	(780)	(5,641)	3,134	461
	Effects of exchange rate changes	(522)	3,212	985	2,306
Cash generated from operating activities		24,626	3,451	55,628	20,639
	Income tax paid	(425)	(458)	(1,596)	(6,315)
Net cash from operating activities		24,201	2,993	54,032	14,324
Cash flows from (used in) financing activities
	Proceeds from issuance of common shares	2,374	2,512	3,080	3,122
	Payment of dividends	(14,419)	(14,327)	(28,813)	(28,621)
Net cash used in financing activities		(12,045)	(11,815)	(25,733)	(25,499)
Cash flows (used in) from investing activities
	Additions to property, plant and equipment	(4,439)	(3,912)	(5,280)	(8,795)
	Development costs	(660)	(1,017)	(953)	(2,714)
	Proceeds on disposal of investment and property, plant and equipment	11	447	14	556
	Acquisition	—	—	(4,750)	—
	Proceeds on sale of net operating assets	—	—	7,123	—
	Changes in non-cash working capital	515	(972)	326	(1,691)
Net cash from (used in) investing activities		(4,573)	(5,454)	(3,520)	(12,644)
Effect of exchange rate on cash and cash equivalents		(4,409)	165	(4,738)	(10,045)
Net increase (decrease) in cash and cash equivalents		3,174	(14,111)	20,041	(33,864)
Cash and cash equivalents, beginning of period		163,346	176,093	146,479	195,846
Cash and cash equivalents, end of period		166,520	161,982	166,520	161,982

Operating Segments

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

Three Months Ended June 30, 2017	Canada	United States	International	Total
	($)	($)	($)	($)
Revenue	10,479	39,195	6,118	55,792
Rental services and local administration	5,559	16,302	4,773	26,634
Depreciation and amortization	5,645	4,170	1,008	10,823
Segment operating (loss) profit	(725)	18,723	337	18,335
Research and development				6,261
Corporate services				3,536
Stock-based compensation				3,177
Other income				(1,689)
Income taxes				155
Net Income				6,895
Capital expenditures	171	4,929	(1)	5,099
Goodwill	1,259	6,995	2,600	10,854
Intangible assets	28,146	655	—	28,801
Segment assets	119,681	240,334	52,976	412,991
Segment liabilities	22,209	10,182	14,734	47,125

Three Months Ended June 30, 2016

Revenue	5,000	16,391	5,782	27,173
Rental services and local administration	3,995	10,749	4,188	18,932
Depreciation and amortization	6,331	5,463	1,784	13,578
Segment operating (loss) profit	(5,326)	179	(190)	(5,337)
Research and development				5,629
Corporate services				4,082
Stock-based compensation				2,238
Other expense				761
Income taxes				(6,728)
Net loss				(11,319)
Capital expenditures	966	3,884	79	4,929
Goodwill	—	24,218	2,600	26,818
Intangible assets	26,666	171	414	27,251
Segment assets	130,076	271,808	55,010	456,894
Segment liabilities	24,800	8,363	5,409	38,572

Six Months Ended June 30, 2017	Canada	United States	International	Total
	($)	($)	($)	($)
Revenue	34,466	69,161	11,214	114,841
Rental services and local administration	11,353	30,512	8,965	50,830
Depreciation and amortization	11,579	9,171	2,046	22,796
Segment operating profit	11,534	29,478	203	41,215
Research and development				12,138
Corporate services				7,604
Stock-based compensation				5,724
Other expenses				(250)
Income tax expense				1,951
Net income				14,048
Capital expenditures	118	6,215	(100)	6,233
Goodwill	1,259	6,995	2,600	10,854
Intangible assets	28,146	655	—	28,801
Segment assets	119,681	240,334	52,976	412,991
Segment liabilities	22,209	10,182	14,734	47,125

Six Months Ended June 30, 2016

Revenue	20,825	40,017	12,144	72,986
Rental services and local administration	9,319	25,994	9,719	45,032
Depreciation and amortization	13,913	12,236	3,791	29,940
Segment operating (loss) profit	(2,407)	1,787	(1,366)	(1,986)
Research and development				12,257
Corporate services				8,404
Stock-based compensation				3,200
Other expense				9,877
Income tax recovery				(13,545)
Net loss				(22,179)
Capital expenditures	2,683	8,658	168	11,509
Goodwill	—	24,218	2,600	26,818
Intangible assets	26,666	171	414	27,251
Segment assets	130,076	271,808	55,010	456,894
Segment liabilities	24,800	8,363	5,409	38,572

Other (Income) Expenses

	Three Months Ended June 30,		Six Months Ended June 30,
	2017	2016	2017	2016
	($)	($)	($)	($)
Foreign exchange loss (gain)	(689)	396	(466)	(2,323)
Restructuring costs	—	—	—	10,861
Other	(1,000)	365	216	1,339
Other (income) expenses	(1,689)	761	(250)	9,877

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.

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]; Jon Faber, Chief Financial Officer, 403-301-3400, [email protected]

Browse News Releases

News Releases Overview

Multimedia Gallery

Multimedia Gallery Overview

Trending Topics

Pason Reports Second Quarter 2017 Results

News provided by

Related Links

Organization Profile

Pason Systems Inc.

Contact Cision

Products

About

My Services