Stock Exchange: TSX
Symbol: PSICALGARY, Feb. 24 /CNW/ - Pason Systems Inc. ("Pason" or "the Company")
today announced its 2008 fourth quarter and year-end results.PERFORMANCE DATA
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Three Months Ended Years Ended
December 31, December 31,
2008 2007 Change 2008 2007 Change
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(000s, except per share ($) ($) (%) ($) ($) (%)
data) (unaudited)
Revenue 84,617 60,548 40 292,528 236,439 24
EBITDA(1) 32,415 32,179 1 144,883 128,088 13
As a % of revenue 38.3 53.1 (28) 49.5 54.2 (9)
Per share - basic 0.40 0.40 - 1.78 1.61 11
Per share - diluted 0.40 0.40 - 1.77 1.59 11
Funds flow from
operations(1) 31,287 26,462 18 124,726 103,766 20
Per share - basic 0.38 0.33 15 1.53 1.30 18
Per share - diluted 0.38 0.33 15 1.52 1.29 18
Earnings 12,639 15,503 (18) 61,321 55,052 11
Per share - basic 0.15 0.19 (21) 0.75 0.69 9
Per share - diluted 0.15 0.19 (21) 0.75 0.68 10
Capital expenditures 12,641 19,013 (34) 56,292 76,615 (27)
Working capital 152,337 77,806 96 152,337 77,806 96
Total assets 427,016 302,593 41 427,016 302,593 41
Shareholders' equity 354,589 270,717 31 354,589 270,717 31
Common shares
outstanding (No.)
Basic 81,799 80,224 2 81,426 79,586 2
Diluted 81,799 80,853 1 81,936 80,630 2
Shares outstanding
end of period 81,456 80,346 1 81,456 80,346 1
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(1) 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, stock-based compensation
expense, future 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 Canadian
generally accepted accounting principles, and accordingly, may not be
comparable to measures used by other companies.
SUMMARY DATA
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Three Months Ended Years Ended
December 31, December 31,
2008 2007 Change 2008 2007 Change
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(000s, except per share ($) ($) (%) ($) ($) (%)
data) (unaudited)
Revenue
Drilling recorder
rentals 38,288 26,239 46 130,645 102,955 27
Pit volume totalizer
rentals 16,093 11,927 35 56,385 46,660 21
Communications rentals 6,952 5,683 22 25,890 22,729 14
Automatic driller
rentals 7,157 5,157 39 24,424 19,368 26
Geological services 4,482 3,227 39 15,068 13,425 12
Total gas rentals 4,976 3,706 34 17,174 14,171 21
Choke control rentals 1,265 931 36 4,171 3,425 22
Service recorder
rentals 555 436 27 2,616 2,014 30
Hazardous gas alarm
rentals 742 199 273 2,193 417 426
Mobilization income 2,418 1,818 33 8,546 7,609 12
Other Income 1,206 772 56 4,012 2,196 83
Interest income 483 453 7 1,404 1,470 (4)
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Total revenue 84,617 60,548 40 292,528 236,439 24
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Expenses
Rental services 28,653 18,258 57 96,948 73,862 31
Geological services 2,602 2,370 10 9,652 9,196 5
Manufacturing and
distribution 180 878 (79) 2,683 2,636 2
Research and
development 3,522 3,074 15 12,888 9,566 35
Corporate services 1,993 1,863 7 5,977 5,729 4
Local administration 1,946 2,086 (7) 7,273 6,979 4
Stock-based
compensation 3,549 1,267 180 7,525 5,248 43
Interest 20 27 (26) 209 143 46
Depreciation and
amortization 16,339 7,466 119 55,719 42,797 30
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Total expenses 58,804 37,289 58 198,874 156,156 27
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Other expenses (income) 13,306 (160) - 12,224 383 -
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Earnings (after taxes) 12,639 15,503 (18) 61,321 55,052 11
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Per share - basic 0.15 0.19 (21) 0.75 0.69 9
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Funds flow from
operations(1) 31,287 26,462 18 124,726 103,766 20
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Per share - basic 0.38 0.33 15 1.53 1.30 18
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Margins
Rental services 64% 68% (6) 65% 67% (3)
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Geological services 42% 27% 56 36% 32% 13
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(1) For the purposes of funds flow per share calculations, funds flow
from operations is defined as earnings adjusted for depreciation and
amortization expense, stock-based compensation expense, future income
taxes and other non-cash items impacting operations as presented in
the Consolidated Statements of Cash Flows. This definition is not a
recognized measure under Canadian generally accepted accounting
principles, and accordingly, may not be comparable to measures used
by other companies.Mr. Jim Hill, President and CEO of Pason, reports that the Company
finished the fourth quarter of 2008 with a year-over-year revenue increase of
40% to $84.6 million with earnings down 18% to $12.6 million or $0.15 per
diluted share after having deducted a US$14.3 million pre-tax charge for the
potential payment of an automatic driller patent infringement judgment against
the Company. For the year ended December 31, 2008, revenue was up 24% from
2007 to $292.5 million and earnings for the year increased 11% to $61.3
million or $0.75 per diluted share. Prior to recording the automatic driller
provision, the Company had a record year in all financial metrics. Return on
shareholders' equity for the year was 20%.
Canadian segment operating profit for the fourth quarter increased 2% to
$13.2 million from the $13.0 million recorded in 2007. Revenue per industry
drilling day was flat in the fourth quarter of 2008 at $785 versus $788 in the
prior year.
Fourth quarter segment operating profit from United States operations
totaled $20.7 million compared to $16.2 million in 2007. This 28% increase was
due to increased product rentals per well site and improvements in geological
services margins. Fourth quarter revenue per industry drilling day increased
54% to $291 from $189 recorded a year ago, or US$240, up 24% from US$193 in
2007. Geological services provided a record margin contribution of $1.9
million versus the $0.9 million recorded a year ago.
International segment profit was flat at $1.1 million for the quarter,
the same amount recorded in 2007 due to a change in the profit splitting
arrangement with our Latin American partner. In the fourth quarter of 2008,
the Company merged its Mexican operations under its South American partner to
form a new Latin American business headquartered in Bogota, Colombia. In
Mexico, the Company's EDR was installed on 42 rigs at the end of 2008 versus
20 a year ago due to an expansion of integrated service products from the
national oil company, Pemex. In Australia, instrumentation equipment was
installed on 20 rigs at year end versus 8 rigs in 2007.
The outlook for 2009 clearly indicates a difficult year for all oilfield
service companies. The Canadian rig count is off 30% this winter from 2008
while the U.S. rig count has declined by 35% from its 2008 high. Most industry
analysts, including Pason, had forecast a U.S. rig count bottom at about 1,200
rigs but that level has now been reached and the rigs are still stacking so
clearly the bottom will be lower. Most customers are in a survival mode and
are formally demanding price reductions, which leaves little option for any
service company if they do not wish to risk losing significant market share.
Pason will be reducing prices on average 13.5% effective March 1st in the
United States and 10% effective April 1st in Canada. The Canadian price
reduction should be mitigated by the addition of new products such that
average revenue per rig should be effectively unchanged. Reduced rig counts
and prices will impact Pason's profitability despite ongoing efforts to reduce
costs. Unfortunately for Pason, where its field costs are all fixed, in the
short term, the leverage that benefits the Company in a rising market, works
against its profitability in a declining market. Management is actively
working to adjust Pason's cost structure to mitigate the financial impact of
the industry downturn. While the prognosis for earnings this year is poor,
Pason still expects to generate positive cash flow and with no debt and
currently $150 million of working capital, the Company has the financial
staying power to weather a lengthy downturn without sacrificing its capacity
to respond swiftly when the drilling market inevitably rebounds. In the
interim, Pason continues to invest in new products and upgrades to its
existing offerings.
Pason Systems Inc. is the world's largest provider of rental oilfield
instrumentation systems that are designed and manufactured for use on
land-based drilling and service rigs. Pason offers a tightly integrated
package of complex services including data acquisition, wellsite reporting
software, remote communications and Internet information management tools.
Common shares of Pason Systems Inc. are listed for trading on the Toronto
Stock Exchange under the ticker symbol PSI. For additional information, visit
Pason's website at www.pason.com.
For additional information, the Company's 2008 Management Discussion and
Analysis ("MD&A") and Audited Consolidated Financial Statements have been
posted on SEDAR.
A conference call to review the 2008 fourth quarter and year-end results
has been scheduled for 9:00 a.m. (Calgary time) on Wednesday, February 25,
2009. The conference call dial-in number is 1-800-733-7560. Seven-day replay
to March 4, 2009 is 1-877-289-8525. Pass Code 21293375 followed by the number
sign.
Shareholders are also invited to attend the Company's Annual General
Meeting on Monday, May 11, 2009 at 3:30 p.m. (Calgary time) in the offices of
Pason Systems Inc., 6120 Third Street S.E., Calgary, Alberta.
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.CONSOLIDATED BALANCE SHEETS
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December 31, 2008 2007
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(000s) ($) ($)
ASSETS
Current
Cash, net of bank indebtedness 100,610 23,159
Accounts receivable 78,568 73,454
Prepaid expenses 2,023 1,987
Income taxes recoverable 12,539 2,652
Future income tax assets 9,153 1,023
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202,893 102,275
Investments 2,802 3,000
Capital assets 207,342 192,620
Deferred development costs 8,979 4,698
Future income tax asset 5,000 -
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427,016 302,593
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LIABILITIES
Current
Accounts payable and accrued liabilities 38,123 17,647
Current portion of stock-based compensation
liability 2,656 -
Dividends payable 9,777 6,822
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50,556 24,469
Stock-based compensation liability 1,475 -
Future income tax liabilities 20,396 7,407
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72,427 31,876
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SHAREHOLDERS' EQUITY
Share capital 71,517 51,505
Contributed surplus 8,834 10,323
Accumulated other comprehensive income (loss) 2,450 (29,710)
Retained earnings 271,788 238,599
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354,589 270,717
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427,016 302,593
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CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
Three Months Ended Years Ended
December 31, December 31,
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2008 2007 2008 2007
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(000's, except per share data) ($) ($) ($) ($)
Revenue
Rental revenue 79,652 56,868 276,056 221,544
Geological services 4,482 3,227 15,068 13,425
Interest 483 453 1,404 1,470
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84,617 60,548 292,528 236,439
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Expenses
Rental services 28,653 18,258 96,948 73,862
Geological services 2,602 2,370 9,652 9,196
Manufacturing and distribution 180 878 2,683 2,636
Research and development 3,522 3,074 12,888 9,566
Corporate services 1,993 1,863 5,977 5,729
Local administration 1,946 2,086 7,273 6,979
Stock-based compensation 3,549 1,267 7,525 5,248
Interest 20 27 209 143
Depreciation and amortization 16,339 7,466 55,719 42,797
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58,804 37,289 198,874 156,156
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Earnings before the under
noted items 25,813 23,259 93,654 80,283
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Other expenses (income) 13,306 (160) 12,224 383
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Earnings before income taxes 12,507 23,419 81,430 79,900
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Income taxes
Current 1,242 5,690 20,082 24,179
Future (1,374) 2,226 27 669
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(132) 7,916 20,109 24,848
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Earnings 12,639 15,503 61,321 55,052
Retained earnings, beginning
of period 275,075 229,918 238,599 196,347
Dividends (9,777) (6,822) (17,964) (12,800)
Purchase of common shares (6,149) - (10,168) -
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Retained earnings, end
of period 271,788 238,599 271,788 238,599
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Earnings per share
Basic 0.15 0.19 0.75 0.69
Diluted 0.15 0.19 0.75 0.68
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
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Three Months Ended Years Ended
December 31, December 31,
2008 2007 2008 2007
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(000s) ($) ($) ($) ($)
Earnings 12,639 15,503 61,321 55,052
Other comprehensive income
(loss), net of tax
Foreign currency translation
adjustment 24,789 1,028 32,160 (19,357)
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Total comprehensive income 37,428 16,531 93,481 35,695
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CONSOLIDATED STATEMENTS OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
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Three Months Ended Years Ended
December 31, December 31,
2008 2007 2008 2007
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(000s) ($) ($) ($) ($)
Accumulated other comprehensive
loss, beginning of period (22,339) (30,738) (29,710) (10,353)
Other comprehensive income
(loss), net of tax
Foreign currency translation
adjustment 24,789 1,028 32,160 (19,357)
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Accumulated other comprehensive
income (loss), end of period 2,450 (29,710) 2,450 (29,710)
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CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended Years Ended
December 31, December 31,
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2008 2007 2008 2007
(000s) ($) ($) ($) ($)
Cash flows related to the
following activities:
Operating
Earnings 12,639 15,503 61,321 55,052
Adjustments for non-cash
items:
Depreciation and amortization 16,339 7,466 55,719 42,797
Stock-based compensation 2,800 1,267 6,776 5,248
Future income taxes (1,374) 2,226 27 669
Gain on sale of investment - - (999) -
Unrealized foreign
exchange loss 883 - 1,882 -
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31,287 26,462 124,726 103,766
Changes in non-cash
working capital (2,540) (6,688) 15,031 (18,794)
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Cash flow from operating
activities 28,747 19,774 139,757 84,972
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Financing
Issue of common shares under
the stock option plan 810 2,251 17,356 11,365
Purchase of common shares (6,639) - (10,908) -
Purchase of stock options (1,486) - (1,486) -
Payment of dividends - - (15,009) (11,881)
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(7,315) 2,251 (10,047) (516)
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Investing
Additions to capital assets (10,371) (18,695) (52,315) (76,083)
Deferred development costs,
net of investment tax
credits received (2,270) (318) (3,977) (532)
Proceeds on disposal of
capital assets 68 15 292 118
Purchase of investment (2,802) - (2,802) -
Proceeds on sale of
investment - - 4,003 -
Changes in non-cash
working capital 1,807 (2,072) (1,598) (2,974)
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(13,568) (21,070) (56,397) (79,471)
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Effect of exchange rate
changes on cash 630 (164) 4,138 (3,683)
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Net increase in cash and
cash equivalents 8,494 791 77,451 1,302
Cash and cash equivalents,
beginning of period 92,116 22,368 23,159 21,857
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Cash and cash equivalents,
end of period 100,610 23,159 100,610 23,159
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Represented by:
Cash 90,833 28,112 90,833 28,112
Cash held in trust 9,777 6,822 9,777 6,822
Bank indebtedness - (11,775) - (11,775)
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100,610 23,159 100,610 23,159
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SEGMENTED INFORMATION
United Inter-
Canada States national Total
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(000s) ($) ($) ($) ($)
Year ended December 31, 2008
Revenue 107,753 174,905 9,870 292,528
Operating costs 37,378 74,046 2,449 113,873
Depreciation and amortization 25,202 27,916 2,601 55,719
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Segment operating profit 45,173 72,943 4,820 122,936
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Research and development 12,888
Stock-based compensation 7,525
Corporate services 5,977
Manufacturing and distribution 2,683
Interest 209
Other expenses 12,224
Income taxes 20,109
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Earnings 61,321
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Total assets 217,075 191,946 17,995 427,016
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Capital expenditures 5,747 44,523 6,022 56,292
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Year ended December 31, 2007
Revenue 95,647 133,147 7,645 236,439
Operating costs 32,955 55,726 1,356 90,037
Depreciation and amortization 22,536 18,818 1,443 42,797
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Segment operating profit 40,156 58,603 4,846 103,605
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Research and development 9,566
Stock-based compensation 5,248
Corporate services 5,729
Manufacturing and distribution 2,636
Interest 143
Other expenses 383
Income taxes 24,848
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Earnings 55,052
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Total assets 161,782 128,348 12,463 302,593
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Capital expenditures 31,861 39,309 5,445 76,615
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United Inter-
Canada States national Total
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(000s) ($) ($) ($) ($)
Three Months Ended
December 31, 2008
Revenue 28,209 53,134 3,274 84,617
Operating costs 9,310 22,609 1,282 33,201
Depreciation and amortization 5,695 9,778 866 16,339
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Segment operating profit 13,204 20,747 1,126 35,077
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Research and development 3,522
Stock-based compensation 3,549
Corporate services 1,993
Manufacturing and distribution 180
Interest 20
Other expenses 13,306
Income taxes (132)
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Earnings 12,639
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Capital expenditures 3,275 7,644 1,722 12,641
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Three Months Ended
December 31, 2007
Revenue 24,926 33,478 2,144 60,548
Operating costs 7,209 14,956 549 22,714
Depreciation and amortization 4,711 2,283 472 7,466
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Segment operating profit 13,006 16,239 1,123 30,368
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Research and development 3,074
Stock-based compensation 1,267
Corporate services 1,863
Manufacturing and distribution 878
Interest 27
Other income (160)
Income taxes 7,916
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Earnings 15,503
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Capital expenditures 3,577 13,342 2,094 19,013
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For further information: Jim Hill, President and CEO, Phone: (403)
301-3401, Fax: (403) 301-3499, E-mail: jim.hill@pason.com; Jim Glasspoole,
Chief Financial Officer, Phone: (403) 692-3840, Fax: (403) 301-3499, E-Mail:
jim.glasspoole@pason.com
