Horizon North Logistics Inc. Announces Results For the Quarter and Year Ended December 31, 2012

TSX Symbol: HNL

CALGARY, Feb. 20, 2013 /CNW/ - Horizon North Logistics Inc. ("Horizon" or the "Corporation") reported its financial and operating results for the quarter and years ended December 31, 2012 and 2011.

Highlights

  • Horizon continues to be significantly levered to oil sands activity with 63% of consolidated revenues derived from oil sands in 2012 as compared to 55% in 2011.
  • Consolidated revenues increased 31% year over year:
    • Revenues from the Camps & Catering segment increased by 30% as compared to the prior year with increases in camp rental and catering operations as well as strong camp sales and associated installation and transportation revenues;
    • Revenues from the Matting segment increased by 34% as compared to the prior year driven by significant demand for mat sales throughout the year.
  • Consolidated EBITDAS for the year improved significantly to $145.0 million or 28% of revenues as compared to $102.6 million or 25% of revenues in the prior year, an increase of 41% year over year:
    • EBITDAS from the Camps and Catering segment was $134.2 million or 30% of revenues as compared to $93.5 million or 27% of revenues in the prior year, a year over year increase of 44%;
    • EBITDAS from the Matting segment increased to $22.6 million or 25% of revenues as compared to $17.9 million or 26% of revenues in the prior year, a year over year increase of 26%.

Annual Financial Summary

 
  Years ended December 31
(000's except per share amounts)     2012 % change               2011 % change               2010
Revenue  $      526,616 31% $      402,993 68% $       239,258
EBITDAS(1)      145,027 41%      102,636 96%          52,483
EBITDAS as a % of revenue   28%      25%           22%
Operating earnings before impairment loss(1)    102,758 45%        70,794 174%       25,855
Operating earnings before impairment loss as a % of revenue    20%        18%           11%
Impairment loss               - -    8,071 -               -
Operating earnings after impairment loss     102,758 64%         62,723 143%       25,855
Total profit before impairment loss $      72,883 38% $ 52,893 222%   $  16,430
Total profit after impairment loss    72,883 63%          44,822 173%       16,430
Total comprehensive income     72,933 62%         44,980 174%       16,430
Earnings per share before impairment loss   - basic $ 0.67 31% $ 0.51 213% $ 0.16
  - diluted   0.66 33%   0.49 206%    0.16
Earnings per share after impairment loss  - basic $      0.67 60% $     0.42 163% $  0.16
  - diluted   0.66 61%   0.41 156%   0.16
Total assets  $    495,993 39% $  357,137 29% $    277,837
Long-term loans and borrowings       116,872 112%       55,234 82%        30,363
Funds from operations(1)     113,062 38%        82,124 103%       40,419
Capital spending      139,346 38%      101,034 143%       41,561
Debt to total capitalization ratio(1)              0.30 43%       0.21 11%       0.19
Dividends declared  $   21,662   $ 12,770     $  -
Dividends declared per share $ 0.20   $ 0.12    $ -

(1)     See financial measures definitions on the last page of the press release for details.

 Overview

2012 proved to be another successful year for Horizon on virtually all fronts. Revenue, EBITDAS and Earnings per Share increased by 31%, 41% and 33%, respectively, over the results achieved in 2011.  At the same time, the Company executed the most ambitious capital spending program in its 6 year history, deploying $139 million to increase and maintain its operating asset base. Most notably, our rentable bed count increased by 2,000 to exit 2012 at 8,500.  Horizon's continued growth also resulted in improved bottom line performance as measured by return on invested capital which was 20.4% for the 2012 fiscal year compared to 19.6% in 2011.

Outlook

Horizon's customer base expanded in 2012 with new customers engaged in SAGD oil sands projects, natural gas development in northeast British Columbia and northwestern Alberta, as well as infrastructure projects throughout western Canada.  Oil sands development activities, driven primarily by SAGD projects, continue to be the main driver of Horizon's growth and are expected to remain robust over the next few years. Oil sands activity accounted for 63% of Horizon's consolidated revenues for 2012.

Coming into 2013, Horizon saw a reduction in bed requirements for a specific project from a major customer.  While reduced utilization and visibility on the revenue from these assets is likely in the near term, activity in the region from other operators remains robust and Horizon continues to see opportunities to remarket or reposition these beds as we move through the second half of 2013.

Capital spending for 2013 is expected to be $80 million, focused primarily on adding 1,000 beds to the camp and catering operations throughout the year.  Of the expected 1,000 beds, 36% are under contract to be deployed in the second quarter, primarily in the oil sands region of Alberta on a SAGD project. Capital spending in 2013 is expected to be less than the $140 million 2012 program so as to match the continued growth of our operating and service delivery capabilities and maintaining a conservative balance sheet.

Dividend payment

Horizon North Logistic Inc. announced today that its Board of Directors has declared a dividend for the first quarter of 2013 at $0.0625 per share, an increase of 25% from the previous quarterly dividend of $0.05 per share in 2012. The dividend is payable to shareholders of record at the close of business on March 31, 2013 to be paid on April 12, 2013. The dividends are eligible dividends for Canadian tax purposes.

Segment realignment

During the quarter ended December 31, 2012, the Corporation realigned the business segments to include the Marine services operations within the Camps & Catering segment. This was done to better represent the nature of Horizon's northern operations where revenue is generated mainly from accommodation barge rental and equipment rental. All comparatives have been revised to reflect the change.

Fourth Quarter Financial Summary
  Three months ended December 31
(000's except per share amounts)   2012   2011 % Change
Revenue $  138,558 $  110,929 25%
EBITDAS(1)    36,039   29,369       23%
EBITDAS as a % of revenue         26%   26%  
Operating earnings before impairment loss(1)   23,390   19,936       17%
Operating earnings before impairment loss as a % of revenue      17%   18%       (6%)
Impairment loss    -    8,071       -
Operating earnings    23,390   11,865       97%
Total profit before impairment loss $  15,991 $  16,680       (4%)
Total profit after impairment loss      15,991   8,609       86%
Total comprehensive income   15,959   8,537       87%
Earnings per share before impairment loss  - basic $  0.15 $  0.16       (6%)
  - diluted    0.15   0.15       -%
Earnings per share after impairment loss   - basic    0.15   0.08       88%
  - diluted     0.15   0.08       88%
Total assets $  495,993 $  357,137       39%
Long-term loans and borrowings   116,872   55,234       112%
Funds from operations(2)   28,323   17,202       65%
Capital spending   23,378   21,926       7%
Debt to total capitalization ratio(3)    0.30   0.21       43%
Dividends declared $  5,439 $  4,270       27%
Dividends declared per share $  0.05 $  0.04       25%

(1)      See financial measures definitions on the last page of the press release for details.

 

 
Fourth Quarter Financial Results
  Three months ended December 31, 2012
(000's)   Camps &
Catering
  Matting   Corporate   Inter-segment
Eliminations
  Total
Revenue $  117,214 $  24,151 $  - $  (2,807) $  138,558
Expenses                    
  Direct costs   81,691   18,752   34    (2,688)     97,789
  Selling & administrative   1,728     196    2,806        -    4,730
EBITDAS   33,795   5,203    (2,840)    (119)    36,039
EBITDAS as a % of revenue   29%   22%           26%
Share based payments   379      55   291      -     725
Depreciation & amortization    9,867    2,122   122    (56)    12,055
Gain on disposal of property, plant and equipment   (38)    (80)     (13)      -    (131)
Operating earnings (loss) $  23,587 $  3,106 $  (3,240) $  (63) $  23,390
Finance costs                          971
Share of equity accounted investees                   504
Income tax expense                   5,924
Other comprehensive loss                   32
Total comprehensive income                 $  15,959
Earnings per share  - basic                  $  0.15
  - diluted                     $  0.15

                     
  Three months ended December 31, 2011
(000's)   Camps &
Catering
  Matting   Corporate   Inter-segment
Eliminations
  Total
Revenue  $  94,674 $  20,797 $  - $  (4,542) $  110,929
Expenses                    
  Direct costs   66,750   15,970   1   (4,597)   78,124
  Selling & administrative   960   146   2,330    -   3,436
EBITDAS   26,964   4,681   (2,331)    55   29,369
EBITDAS as a % of revenue   28%   23%   -   -   26%
Share based payments   79   16   51    -   146
Depreciation & amortization   5,999   1,863   85   (24)   7,923
Loss on disposal of property, plant and equipment   1,364    -   -    -   1,364
Operating earnings before impairment loss $  19,522 $  2,802 $  (2,467) $  79 $  19,936
Impairment loss   8,071   -   -   -    8,071
Operating earnings (loss) $  11,451 $  2,802 $  (2,467) $  79 $  11,865
Finance costs                   637
Share of equity accounted investees                   (12)
Income tax expense                    2,631
Other comprehensive loss                   72
Total comprehensive income                 $  8,537
Earnings per share before impairment loss  - basic                 $  0.16
  - diluted                 $  0.15
Earnings per share after impairment loss      - basic                 $  0.08
  - diluted                 $  0.08

Camps & Catering

Camps & Catering revenue is comprised of camp rental and catering operations revenue, manufacturing and space unit sales revenue and space rental and service revenue.

Effective October 1, 2012, presentation of Camps & Catering segment has been realigned to include Marine services to better represent the businesses within the Camps & Catering segment. Marine services revenue is now reported as Camp rental and catering operations revenue and includes the following components: barge camp rental, equipment rental and other ancillary revenue. 2011 comparatives have been similarly revised to ensure meaningful comparatives.

   
  Three months ended December 31
(000's except bed rental days and catering only days)   2012   2011   % change
Camp rental and catering operations revenue $  76,668  $  55,383   38%
Manufacturing sales   38,019   37,029   3%
Space rental and service revenue   2,527   2,262   12%
Total revenue $  117,214 $  94,674   24%
EBITDAS $  33,795 $  26,964   25%
EBITDAS as % of revenue   29%   28%    
Operating earnings $  23,587 $  11,451   106%
Bed rental days(1)   433,832   220,678   97%
Catering only days(2)   58,794   78,958   (26%)
(1)      One bed rental day represents;the provision of one bed for one day under a combined rental and catering manday rate; or the provision of one bed for one day under an equipment rental rate for dedicated camp equipment.
(2)     One catering only day equals the provision of catering and housekeeping services with no related bed rental for one day.

Revenues from the Camps & Catering segment were $117.2 million for the three months ended December 31, 2012 as compared to $94.7 million for the three months ended December 31, 2011, an increase of $22.5 million or 24%. EBITDAS for the three months ended December 31, 2012 were $33.8 million or 29% of revenue compared to $27.0 million or 28% of revenue for the three months ended December 31, 2011, an increase of $6.8 million or 25%.

Horizon's growth in the Camps & Catering segment for the comparative quarters was led by camp rental and catering operations with revenue growth of $21.3 million or 38%. These operations are highly levered to activity levels in the Alberta oil sands area and Horizon operated an additional 2,277 beds for the three months ended December 31, 2012 as compared to the same period of 2011 with the majority of the additional beds being deployed in the Alberta oil sands area to take advantage of the high levels of activity.

Camp rental and catering operations revenue

Revenues are derived from the following main business areas: large camp operations, drill camp operations, catering only operations, and the associated service work with each operation. Service work includes the transportation, setup and de-mobilization of the camp and catering projects. Revenues from camp and catering operations were $76.7 million for the three months ended December 31, 2012 compared to $55.4 million for the three months ended December 31, 2011, an increase of $21.3 million or 38%.

The table below outlines the key performance metrics used by management to measure performance in the large camp and drill camp operations:

   
  Three months ended December 31
(000's for revenue only) 2012   2011
    Large
camp
  Drill
camp
  Total     Large
camp
  Drill
camp
  Total
Revenue $ 59,718 $ 3,925 $ 63,643   $ 37,525 $ 3,389 $ 40,914
Bed rental days(1)   410,456   23,376   433,832     200,421   20,257   220,678
Revenue per bed rental day $ 145 $ 168 $ 147   $ 187 $ 167 $ 185
Rentable beds at period end   6,905   871   7,776     4,850   950   5,800
Average rentable beds available(2)   6,897   836   7,733     4,506   950   5,456
Utilization(3)   65%   30%   61%     48%   23%   44%
(1)     One bed rental day represents; the provision of one bed for one day under a combined rental and catering manday rate; or the provision of one bed for one day under an equipment rental rate for dedicated camp equipment.
(2)   Average rentable beds available is equal to total average beds in the fleet over the period less beds required for staff.
(3)   Utilization equals the total number of bed rental days divided by average rentable beds available times days in the quarter.

Revenues from large camp operations for the three months ended December 31, 2012 increased by $22.2 million or 59% compared to the same period in 2011, primarily as a result of a larger fleet mainly deployed in the oil sands area.

Within the large camp operations revenue is derived from two styles of camp offerings, open camps and dedicated single customer camps. In 2012 an increased focus on securing longer term contracts for dedicated single customers camps resulted in a higher proportion of large camp revenue being generated from these dedicated camps as compared to 2011. Generally the contracted revenue for open camps has a short contract duration typically priced with a single rate on bed rental day basis. The dedicated single customer camps usually are longer term contracts and priced using an equipment rental charge and a room occupancy charge. The contracts with the two charge structure have a significant impact on both utilization and on the revenue per bed rental day. With the two charge pricing structure the beds are considered to be 100% utilized since the customer is paying an equipment rental charge, in comparison, the single rate bed rental day pricing is based on occupancy. The changing mix of the two contract types was a contributing factor to the 35% increase in utilization for fourth quarter of 2012 as compared to the fourth quarter of 2011. An additional effect of the contract mix is to decrease in the revenue per bed rental day as a result of the increased number of beds considered rented, the bed rental day rate in 2012 was $145, a decrease of $42, or 22%.

Of note, a large portion of the dedicated camps have been contracted with customers new to Horizon, particularly on SAGD oil sands projects, resulting in a more diverse customer base in 2012 as compared to 2011.

Revenues from drill camp operations for the three months ended December 31, 2012 increased by $0.5 million or 16% compared to the same period of 2011. The increase was a result of higher volumes as compared to the comparative quarter in 2011.

The tables below outline the key performance metrics used by management to measure performance in the catering only and equipment rental operations.

         
  Three months ended December 31
(000's for revenue only)    2012   2011
Catering only revenue $  6,119 $  7,400
Catering only days(1)     58,794   78,958
Revenue per catering only day  $ 104 $ 94

(1)     One catering only day equals the provision of catering and housekeeping services with no related bed rental for one day.

Revenues from the provision of catering and housekeeping only services, with no associated bed rentals, decreased $1.3 million or 17% for the three months ended December 31, 2012 as compared to same period of 2011. The lower volumes were mainly a result of the close out of a significant catering only job at a mining operation in the Northwest Territories. The higher rate was mainly the result of change in customer mix due to close out of the large catering job.

The table below outlines the service revenue generated from the camp and catering operations:

         
  Three months ended December 31
(000's)   2012    2011
Camp and catering operations service related revenue $  6,906 $  7,069

Service revenues in the camp & catering operations is related to the transportation, setup and de-mobilization of camps. Revenue was relatively consistent in the comparative quarters mainly due to the nature of the specific service projects undertaken in the comparative quarters.

Manufacturing sales

Manufacturing sales revenues include the manufacture of camps sold to third parties and the transportation and installation associated with those sales. Revenues for the three months ended December 31, 2012 were $38.0 million as compared to $37.0 million for the same period in 2011, an increase of $1.0 million or 3%. Manufacturing production capacity is regularly reviewed by management to determine the allocation of production required to meet external third party sales contracts and internal fleet requirements. The increase in revenue was a result of the allocation of production capacity between sales and fleet build in the comparative quarters. Actual direct manufacturing hours were 188,234 hours for the three months ended December 31, 2012 as compared to 138,507 in the comparative period, an increase of 49,727 hours or 36%. The increase was a result of additional production staff for the three months ended December 31, 2012 compared to the same period of 2011. In the fourth quarter of 2012 57% of direct hours were allocated to external sales contracts compared to 64% in the same period of 2011. Service revenue, which includes the transportation and installation components of the sale, for the three months ended December 31, 2012, was focused primarily on close out of a significant oil sands related camp project and ramping up for the next significant project which is currently in the manufacturing phase.

Space rental revenues

Space rental revenues for the three months ended December 31, 2012 were $2.5 million as compared to $2.3 million for the same period in 2011, an increase of $0.2 million or 12%. The increase came from slightly higher volumes with fleet utilization of 87% for the three months ended December 31, 2012 compared to 85% for the same period in 2011.

Direct costs

Direct costs for the three months ended December 31, 2012 were $81.7 million or 70% of revenue as compared to $66.8 million or 71% of revenue for the same period of 2011. Direct costs are closely related to business volumes and the increased direct costs are primarily a result of the higher activity levels in the comparative periods. As a percentage of revenue, direct costs decreased by 1% in the comparative periods, the decrease is reflecting fixed costs in relation to the levels of activity, as activity levels increase fixed costs become a smaller proportion of revenue.

Matting

Matting revenue is comprised of mat rental revenue, mat sales revenue, installation, transportation, service, and other revenue as follows:

   
  Three months ended December 31
(000's except mat rental days and numbers of mats)   2012   2011   % change
Access mat rental revenue(1) $  2,919 $   1,842   58%
Other mat and rental equipment revenue(2)   888   465   91%
Mat sales revenue   10,893   10,694   2%
Installation, transportation, service, and other revenue    9,451   7,796   21%
Total revenue $  24,151 $   20,797   16%
             
EBITDAS $  5,203 $   4,681   11%
EBITDAS as a % of revenue   22%   23%   (4%)
Operating earnings $  3,106 $   2,802   11%
Access mat rental days - owned mats(3)   777,350    619,727   25%
Access mat rental days - third party mats(4)   263,808   -   100%
Total access mat rental days   1,041,158   619,727   68%
             
Average owned access mats in rental fleet(5)   14,190   9,863   44%
Average sub rental access mats in rental fleet(6)   2,866    -   100%
Access mats in rental fleet at quarter end(7)   13,714   9,739   41%
Mats sold:            
       New mats   13,910   13,557   3%
       Used Mats   992   437   127%
Total mats sold   14,902   13,994   6%

(1)    Access mat rental revenue includes revenues generated from the rental of traditional oak and oak edged mats.
(2)     Other mat rental equipment revenue includes the rental of rig mats, quad mats, other ancillary equipment such as well site accommodation units and light towers.
(3)     One mat rental day equals the rental of one owned access mat for one day.
(4)     One mat rental day equals the rental of one third party sub rented access mat for one day.
(5)      Average access mat rental fleet numbers reflect only owned access mats.
(6)     Average sub rental access mats is the average number of non-owned access mats in the rental fleet. These mats are rented from third parties on a short term basis.
(7)     Access mats in rental fleet at quarter end represents the number of owned access mats in the Matting fleet on December 31, 2012.

Revenues from the Matting segment for the three months ended December 31, 2012 were $24.2 million as compared to $20.8 million for the same period of 2011, an increase of $3.4 million or 16%. EBITDAS for the three months ended December 31, 2012 were $5.2 million or 22% of revenue as compared to $4.7 million or 23% of revenue for the same period of 2011, an increase of $0.5 million or 11%.

Mat and equipment rental revenue

Total mat and equipment rental revenues for the three months ended December 31, 2012 were $3.8 million as compared to $2.3 million for the same period of 2011, an increase of $1.5 million or 65%. The growth in rental revenue was mainly driven by the increase in mat rental days partially offset by slightly lower revenues per mat rental day. Volumes increased in the fourth quarter of 2012 as compared to the same period in 2011 by 421,431 days. The owned access mat fleet was 60% utilized compared to 68% in the comparative quarter of 2011. The revenue per mat rental day decreased slightly to $2.80 per day in the fourth quarter of 2012 from $2.97 in the same period of 2011, this decrease was mainly due to the duration of contracts in the comparative periods.

Mat sales revenue

Revenues from mat sales for the three months ended December 31, 2012 were relatively consistent in the comparative quarters with 2012, higher by $0.2 million. The mix of new and used access mat sales changed with used mats sales being a higher proportion of total mat sales in the three months ended December 31, 2012 as compared to the same period of 2011. As a result of the sales mix, revenue per mat decreased by $33 per mat as used mats have a lower selling price.

Installation, transportation, service, and other revenue

Installation, transportation, service, and other revenues are driven primarily from the level of activity in the mat rental and mat sale businesses and are charged for separately from rentals and sales. Revenues for the three months ended December 31, 2012 were $9.5 million as compared to $ 7.8 million the same period in 2011, an increase of $1.7 million or 21%. The increase is mainly reflective of the higher volume of rentals in the three months ended December 31, 2012, as compared to the same period of 2011.

Direct costs

Direct costs for the three months ended December 31, 2012 were $18.8 million or 78% of revenue as compared to $16.0 million or 77% of revenue for the same period of 2011. Direct costs are driven by the level of business activity, with the increase in revenue, as compared to the same period of 2011, direct costs have increased accordingly. Direct costs as a percentage of revenue increased by 1% for the three months ended December 31, 2012 as compared the same period of 2011. The increase is primarily a result of costs in the rental operation as a result of sub renting mats as compared to 2011 when there was no mat sub rental.

Corporate

Corporate costs are the costs of the head office which include the President and Chief Executive Officer, Chief Financial Officer, Vice President of Health, Safety, and Environment, Vice President of Aboriginal Relations, Corporate Secretary, corporate accounting staff, and associated costs of supporting a public company. Corporate costs for the three months ended December 31, 2012 were $2.8 million as compared to $2.3 million in the same period in 2011. This increase of $0.5 million reflects the increased cost to support the higher level of business activity. Corporate costs, as a percentage of total revenue, remained consistent for the comparative periods at 2.0%.

Other Items

Depreciation and amortization
  Three months ended December 31,
(000's)              2012              2011   % change
Depreciation $  10,004 $  5,842   71%
Amortization   2,051   2,081   (1%)
Total depreciation and amortization $  12,055 $  7,923   52%

Depreciation and amortization costs for the three months ended December 31, 2012 were $12.1 million as compared to $7.9 million in the same period of 2011. The increase was a result of depreciation which increased by $4.2 million or 71%. The increased depreciation was a result of camp asset additions which include camp setup and installation costs that are depreciated over the term of the contract. Depreciation for the camp setup and installation was $2.0 million higher in the fourth quarter of 2012 as compared to the same period of 2011.

Financing costs

Financing costs include interest on loans and borrowings and accretion on notes payable. For the three months ended December 31, 2012 financing costs were $1.0 million as compared to $0.6 million in the same period of 2011, an increase of $0.4 million as a result of a higher interest expense on loans and borrowings. The increased interest expense was due to higher weighted average debt of $105.1 million for the three months ended December 31, 2012 compared to $49.6 million in the same period of 2011.The interest rate decreased in the comparative quarters as a result of lower rates in the renewed credit facility and a higher proportion of debt being converted to bankers acceptance in the fourth quarter of 2012 as compared to the same period of 2011.

Income taxes

Income tax expense was $5.9 million, an effective tax rate of 27%, for the three months ended December 31, 2012 as compared to a tax expense of $2.6 million, an effective rate of 24% for the same period of 2011. The effective tax rate in the fourth quarter of 2011 was low due to the timing of the realization of tax losses in the four quarter of 2011.

Selling and administrative

Selling and administrative expense was $4.7 million for the three months ended December 31, 2012 as compared to $3.4 million in the same period of 2011. The increase is reflective of the higher levels of business activity in 2012 as compared to 2011. As a percentage of revenue, selling and administrative expense increased to 3.4% in 2012 as compared to 3.1% in 2011.

Consolidated statement of financial position
(000's)   December 31,
            2012
  December 31,
2011
Assets        
Current assets:        
       Trade and other receivables   133,195   83,484
       Inventories   13,321    15,334
       Prepayments   2,506   3,981
       Income taxes receivable   146    -
    149,168   102,799
Non-current assets:        
       Property, plant and equipment   330,205    228,793
       Intangible assets   10,028   18,232
       Goodwill   2,136   2,136
       Investments in equity accounted investees   -   529
       Deferred tax assets   1,772   1,837
       Other assets   2,684    2,811
    346,825   254,338
  $  495,993  $  357,137
         
Liabilities and Shareholders' Equity        
Current liabilities:        
       Trade and other payables   59,511   41,833
       Deferred revenue   588   13,601
       Income taxes payable   12,661   4,380
      Current portion of loans and borrowings   1,416   1,281
    74,176   61,095
Non-current liabilities:        
       Asset retirement obligations   1,364   1,283
       Loans and borrowings   116,872   55,234
       Deferred tax liabilities   29,318   23,456
    221,730   141,068
Shareholders' equity:        
       Share capital   179,999    173,438
       Contributed surplus   10,783   10,421
       Accumulated other comprehensive income   208   158
       Retained earnings   83,273   32,052
    274,263   216,069
  $  495,993 $  357,137



Consolidated statement of comprehensive income
Twelve months ended December 31, 2012 and 2011
(000's except per share amounts)   December 31,
            2012
  December 31,
2011
Revenue $  526,616 $  402,993
Operating expenses:        
       Direct costs   364,361   285,837
       Depreciation   32,007   21,420
      Amortization of intangible assets   44    163
       Share based compensation   1,268   377
       Impairment loss   -   8,071
       (Gain) loss on disposal of property, plant and equipment   (93)   1,521
Direct operating expenses   397,587   317,389
Gross profit   129,029   85,604
           
Selling & administrative expenses:        
       Selling & administrative expenses   17,228   14,520
      Amortization of intangible assets   8,160   8,140
       Share based compensation   883   221
Selling & administrative expenses   26,271   22,881
Operating earnings   102,758   62,723
           
Finance costs   3,557   2,467
Share of equity accounted investees   529   27
Profit before tax   98,672   60,229
       Current tax expense   19,862   8,248
       Deferred tax expense   5,927   7,159
Income tax expense   25,789   15,407
Total profit   72,883   44,822
           
Other comprehensive income:        
       Translation of foreign operations   (50)   (158)
Other comprehensive income, net of income tax   (50)   (158)
Total comprehensive income $  72,933 $  44,980
         
Earnings per share:        
      Basic $  0.67 0.42
      Diluted $  0.66 0.41




Consolidated statement of changes in equity
(000's)        Share
            Capital
  Contributed
Surplus
  Accumulated
Other
Comprehensive
Income
        Retained
            Earnings
            (Deficit)
        Total
Balance at December 31, 2010 $  245,353 $  11,446 $  - $  (78,000) $  178,799
Reduction of capital   (78,000)    -   -   78,000   -
Total profit   -    -   -   44,822   44,822
Share based compensation   -   598   -   -   598
Share options exercised   6,085   (1,623)   -   -   4,462
Translation of foreign operations   -   -   158   -   158
Dividends declared and paid ($0.08 per share)               (8,500)   (8,500)
Dividends declared ($0.04 per share)   -   -   -   (4,270)   (4,270)
Balance at December 31, 2011 $  173,438 $  10,421 $  158 $  32,052 $  216,069
                     
Total profit   -   -   -   72,883   72,883
Share based compensation   -   2,151   -   -   2,151
Share options exercised   6,561   (1,789)   -   -   4,772
Translation of foreign operations   -   -   50   -   50
Dividends declared and paid ($0.15 per share)   -   -   -   (16,223)    (16,223)
Dividends declared ($0.05 per share)   -   -   -   (5,439)   (5,439)
Balance at December 31, 2012 $  179,999 $  10,783 $  208 $  83,273 $  274,263




Consolidated statement of cash flows
Twelve months ended December 31, 2012 and 2011
    December 31,   December 31,
(000's)   2012   2011
Cash provided by (used in):        
Operating activities:        
Profit for the period $  72,883 $  44,822
Adjustments for:        
       Depreciation   32,007   21,420
       Amortization of intangible assets   8,204   8,303
       Impairment loss   -   8,071
       Share based compensation   2,151   598
       Amortization of other assets   127   123
       Share of equity accounted investees   529   27
       Gain on sale of property, plant and equipment   (2,924)   (1,267)
       Unrealized foreign exchange   85   27
       Finance costs   3,557   2,467
       Income tax expense   25,789   15,407
    142,408   99,998
Income taxes paid   (11,727)   (5,211)
Interest paid   (2,904)   (1,708)
Changes in non-cash working capital items   (41,572)   (5,368)
    86,205   87,711
Investing activities:        
Purchase of property, plant and equipment   (139,346)   (101,034)
Proceeds on sale of property, plant and equipment   8,831   8,683
    (130,515)   (92,351)
Financing activities:        
Shares issued on exercise of options   4,772   4,462
Net proceeds from loans and borrowings   61,200   12,893
Payment of dividends   (20,493)   (8,500)
    45,479   8,855
Change in non-cash working capital items   (1,169)   (4,215)
    44,310   4,640
Change in cash position   -   -
           
Cash, beginning of period   -   -
Cash, end of period $  - $  -

Financial Measures Definitions

EBITDAS

EBITDAS (Earnings before interest, taxes, depreciation, amortization, impairment, gain/loss on equity investments, gain/loss on disposal of property, plant and equipment, and share based compensation) is not a recognized measure under IFRS.  Management believes that in addition to total profit and total comprehensive income, EBITDAS is a useful supplemental measure as it provides an indication of the Corporation's ability to generate cash flow in order to fund working capital, service debt, pay current income taxes and fund capital programs, and it is regularly provided to and reviewed by the Chief Operating Decision Maker and operating earnings provides an indication of the results generated by the Corporation's principal business activities prior to consideration of how those activities are financed or taxed.  Horizon's method of calculating EBITDAS may differ from other entities and accordingly, may not be comparable to measures used by other entities. EBITDAS should not be construed as alternatives to total profit and comprehensive income determined in accordance with IFRS as an indicator of the Corporation's performance.

Funds from operations

Funds from operations is not a recognized measure under IFRS.  Management believes that in addition to cash flow from operations, funds from operations is a useful supplemental measure as it provides an indication of the cash flow generated by the Corporation's principal business activities prior to consideration of changes in working capital. Investors should be cautioned, however, that funds from operations should not be construed as an alternative to cash flow from operations determined in accordance with IFRS as an indicator of the Corporation's performance.  Horizon's method of calculating funds from operations may differ from other entities and accordingly, funds from operations may not be comparable to measures used by other entities.  Funds from operations is equal to cash flow from operations before changes in non-cash working capital items related to operations, interest and income taxes paid, financing costs, and income tax expense.

Debt to total capitalization

Debt to total capitalization is calculated as the ratio of debt to total capitalization. Debt is defined as the sum of current and long-term portions of loans and borrowings. Total capitalization is calculated as the sum of debt and shareholders' equity.

Caution Regarding Forward-Looking Information and Statements

Certain statements contained in this Management Discussion and Analysis ("MD&A") constitute forward-looking statements or information.  These statements relate to future events or future performance of Horizon. All statements other than statements of historical fact are forward-looking statements. The use of any of the words "anticipate", "plan" "continue", "estimate", "expect", "may", "will", "project", "predict", "potential", "should", "believe" and similar expressions are intended to identify forward-looking statements.

In particular, such forward looking statements include: under the heading "Outlook" the statements that "Oil sands development activities, driven primarily by SAGD projects, continue to be the main driver of Horizon's growth and are expected to remain robust over the next few years.", "While reduced utilization and visibility on the revenue from these assets is likely in the near term, activity in the region from other operators remains strong and Horizon continues to see opportunities to remarket or reposition these beds as we move through the second half of 2013", "Capital spending for 2013 is expected to be $80 million, focused primarily on adding 1,000 beds to the camp and catering operations throughout the year.  Of the expected 1,000 beds, 36% are under contract to be deployed in the second quarter, primarily in the oil sands region of Alberta on a SAGD project. Capital spending in 2013 is expected to be less than the $140 million 2012 program so as to match the continued growth of our operating and service delivery capabilities and maintaining a conservative balance sheet."

Many factors could cause the performance or achievements of the Corporation to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements.

Corporate Information

Additional information related to the Corporation, including the Corporation's annual information form, financial statements, and MD&A is available on SEDAR at www.sedar.com. Unless otherwise indicated, the consolidated financial statements have been prepared in accordance with IFRS and the reporting currency is in Canadian dollars. 

 

 

 

 

 

 

SOURCE: Horizon North Logistics Inc.

For further information:

Bob German, President and Chief Executive Officer, or Scott Matson, Vice President Finance and Chief Financial Officer,
1600, 505 - 3rd Street S.W., Calgary, Alberta T2P 3E6, Telephone: (403) 517-4654,  Fax: (403) 517- 4678;
website: www.horizonnorth.ca