Horizon North Logistics Inc. Announces Results For The Year Ended December
31, 2009

CALGARY, Feb. 25 /CNW/ - TSX Symbol: HNL - Horizon North Logistics Inc. ("Horizon" or the "Corporation") reported its financial and operating results for the year ended December 31, 2009 and 2008.

    
    Highlights
    -------------------------------------------------------------------------
                                                  Year       Year       Year
                                                 ended      ended      ended
                                              December   December   December
    (000's except per share amounts)          31, 2009   31, 2008   31, 2007
    -------------------------------------------------------------------------
    Revenue                                  $ 143,892  $ 180,779  $  95,846
    EBITDAS(1)                                  33,517     45,143     23,054
    Operating earnings(1)                        8,486     20,086      7,764
    Earnings before goodwill impairment
     loss(2)                                     5,456     12,588      6,080
    Goodwill impairment loss                         -    110,537          -
    Net (loss) earnings                          5,456    (97,949)     6,080
    Net (loss) earnings per share - diluted  $    0.05  $   (0.89) $    0.07
    Total assets                               239,507    247,181    321,413
    Total long-term financial liabilities(3)    44,702     47,946     23,387
    Funds from operations(4)                    29,381     36,356     14,872
    Capital spending                            33,026     56,174     32,104
    Proceeds from issuance of common shares          -          -     56,950
    Business acquisitions, net of cash
     acquired                                      818        581     59,170
    Debt to total capitalization ratio          0.21:1     0.22:1     0.08:1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) EBITDAS (Earnings before interest, taxes, depreciation, amortization,
        gain/loss on disposal of property, plant and equipment and stock
        based compensation) and operating earnings are not recognized
        measures under Canadian generally accepted accounting principles
        (GAAP). Management believes that in addition to net earnings, 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. Management believes that in addition to net earnings,
        operating earnings is a useful supplemental measure as it 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. Investors should be cautioned, however, that
        EBITDAS and operating earnings should not be construed as
        alternatives to net earnings determined in accordance with GAAP as an
        indicator of the Corporation's performance. Horizon's method of
        calculating EBITDAS and operating earnings may differ from other
        entities and accordingly, EBITDAS and operating earnings may not be
        comparable to measures used by other entities. For a reconciliation
        of EBITDAS and operating earnings to net earnings.
    (2) Earnings before goodwill impairment loss is not a recognized measure
        under GAAP. Horizon's method of calculating earnings before goodwill
        impairment loss may differ from other entities and accordingly,
        earnings before goodwill impairment loss may not be comparable to
        measures used by other entities. For a reconciliation of earnings
        before goodwill impairment loss to net earnings.
    (3) Long-term financial liabilities include operating lines of credit,
        the current and long-term portions of long-term debt, and exclude
        deferred financing costs.
    (4) Funds from operations is not a recognized measure under GAAP.
        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 GAAP 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.
    

Overview of Horizon's Objectives, Strategies and Outlook

Horizon's primary objective in 2009 was to maintain the strength of the Corporation's balance sheet in the face of the difficulties facing the world economy. Total borrowings at the end of 2009 amounted to $44.7 million compared to $47.9 million at the end of 2008. Pro-active measures were taken to achieve this objective including employee salary reductions led by a 20% rollback in senior management ranks, maintaining staffing levels consistent with activity levels particularly in our manufacturing plants and strict capital spending controls. The Corporation's annual bonus incentive plans are also designed to be sensitive to profitability levels.

A strong balance sheet and relatively good cash flow from operations of $29.4 million facilitated a number of initiatives that should have a positive impact on future results. These initiatives include the following:

    
    -   In late 2008, the Grande Prairie camp manufacturing facility was
        expanded by 25% to now include 40,300 square feet of heated, covered
        space. The expansion was left idle in 2009 but is now being fully
        utilized.

    -   In late 2009, 20,000 square feet of additional space was acquired
        adjacent to the primary Kamloops manufacturing facility. Total space
        at this location now amounts to 72,000 square feet. Minor
        modifications to the new space are currently underway and the
        facility will be fully functional by the end of March 2010.

    -   In July 2009, the Corporation acquired Paramount Structures Inc., a
        company that had developed a unique blast resistant structure for use
        at refineries and petrochemical plants to protect employees whose
        jobs take them close to potential blast sources. Units are currently
        being built in our Grande Prairie manufacturing facilities and first
        sale and rental revenues will be recognized in the first quarter of
        2010.

    -   In December 2009, Horizon acquired the Canadian based drill camp
        fleet from Ensign Energy Services Inc., significantly increasing the
        Corporation's share of the side by side drill camp market. What made
        this transaction particularly attractive was the opportunity to forge
        a close working relationship with one of Canada's premier drilling
        contractors.

    -   During 2009, the Corporation repurchased 5.2 million of its common
        shares at an average price of $1.23 per share. The Corporation took
        this action as a result of its view that its shares were undervalued
        and the purchase and cancelation of shares represented an attractive
        investment that would benefit all shareholders.
    

It is cliché to say "what a difference a year makes", but it is very true when you consider the business prospects Horizon is now facing compared to this time last year. Commitments for camp manufacturing and sales are growing weekly and bidding activity is strong with new projects being announced on a regular basis. The BlackSands camp facilities in Fort McMurray are fully occupied and plans are in place to expand the executive accommodation at that location by 148 beds. We continue to look for locations and opportunities to build another such facility.

Much of the optimism portrayed in the preceding paragraph stems from improved economic conditions in the oil sands and minerals mining businesses. Crude oil prices have improved from the low $30 range to hold steady in the $70 to $80 range. With the expansion and other improvements at the site, Horizon's 2010 capital budget has increased from $15.0 million to $23.0 million. Mineral prices have also improved, led by record prices for gold. The worst of the financial markets crisis appears to be over and capital markets have opened up to provide funding for resource development projects. We expect these developments to have a positive impact on 2010 results.

    
    Financial Results
    -------------------------------------------------------------------------
                                 Year ended December 31, 2009
                                                            Inter-
                                                           segment
                   Camps &              Marine              Elimi-
    (000's)       Catering   Matting  Services Corporate   nations     Total
    -------------------------------------------------------------------------
    Revenue       $120,516  $ 19,798  $  5,102  $      -  $ (1,524) $143,892
    Expenses
      Cost of
       goods sold   22,474     3,264         -         -      (104)   25,634
      Operating     63,132    10,011     3,638         -    (1,386)   75,395
      General &
       adminis-
       trative       2,549       479         4     6,251         -     9,283
      Foreign
       exchange
       loss (gain)      19       190        (3)     (143)        -        63
    -------------------------------------------------------------------------
    EBITDAS       $ 32,342  $  5,854  $  1,463  $ (6,108) $    (34) $ 33,517

      Stock based
       compensation    335        99         9        78         -       521
      Depreciation &
       amortization 18,775     5,821     1,165       240       (84)   25,917
      Gain on
       disposal of
       property,
       plant &
       equipment    (1,398)       (9)        -         -              (1,407)

    -------------------------------------------------------------------------
    Operating
     earnings
     (loss)       $ 14,630  $    (57) $    289  $ (6,426) $     50  $  8,486
    ---------------------------------------------------------------

    Interest
     income                                                              (88)
    Interest
     expense on
     operating
     lines of
     credit                                                              270
    Interest
     expense on
     long-term
     debt                                                              1,350
    Earnings on
     equity
     investments                                                        (729)
    Income tax
     expense                                                           2,227
                                                                   ----------

    Net earnings                                                    $  5,456
                                                                   ----------
                                                                   ----------



    -------------------------------------------------------------------------
                                 Year ended December 31, 2008
                                                            Inter-
                                                           segment
                   Camps &              Marine              Elimi-
    (000's)       Catering   Matting  Services Corporate   nations     Total
    -------------------------------------------------------------------------
    Revenue       $137,025  $ 36,166  $ 10,447  $      -  $ (2,859) $180,779
    Expenses
      Cost of
       goods sold   23,138    12,389       218         -      (193)   35,552
      Operating     69,456    14,942     7,288         -    (2,356)   89,330
      General &
       adminis-
       trative      2,413        494         -     7,799         -    10,706
      Foreign
       exchange
       loss (gain)      -        179         -      (131)        -        48
    -------------------------------------------------------------------------
    EBITDAS       $ 42,018  $  8,162  $  2,941  $ (7,668) $   (310) $ 45,143

      Stock based
       compensation    809       196        19       738         -     1,762
      Depreciation
       &
       amortization 16,037     6,060     1,075       174       (64)   23,282
      Loss
       (gain) on
       disposal of
       property,
       plant &
       equipment        30       (17)        -         -                  13

    -------------------------------------------------------------------------
    Operating
     earnings
     (loss)       $ 25,142  $  1,923  $  1,847  $ (8,580) $   (246) $ 20,086
    ---------------------------------------------------------------

    Interest
     income                                                              (39)
    Interest
     expense on
     operating
     lines of
     credit                                                              647
    Interest
     expense on
     long-term
     debt                                                              1,657
    Earnings on
     equity
     investments                                                        (589)
    Income tax
     expense                                                           5,822
                                                                   ----------
    Earnings
     before
     goodwill
     impairment
     loss                                                             12,588
    Goodwill
     impairment
     loss                                                            114,910
    Income tax
     recovery
     associated
     with
     goodwill
     impairment
     loss                                                             (4,373)

                                                                   ----------
    Net loss                                                        $(97,949)
                                                                   ----------
                                                                   ----------


    Camps & Catering

    Camps & Catering revenue is comprised of camp, catering and service
revenue, camp and space sales, and space rental revenue as follows:

                                                                        Year
                                      Three months ended               ended
    (000's except           --------------------------------------- ---------
     rental days               March      June September  December  December
     and mandays)               2009      2009      2009      2009      2009
                            --------------------------------------- ---------
    Revenue from operations
      Camps, catering &
       service revenue      $ 26,583  $ 16,088  $ 17,536  $ 16,736  $ 76,943
      Camp sales revenue       3,262    10,488     5,437     7,334    26,521
      Space sales revenue      1,690       451     2,067       942     5,150
      Space rental revenue       642     1,450     1,063       747     3,902
                            --------------------------------------- ---------
    Revenue from operations $ 32,177  $ 28,477  $ 26,103  $ 25,759   112,516
      Contract cancellation
       fee                         -     8,000         -         -     8,000
                            --------------------------------------- ---------
    Total revenue           $ 32,177  $ 36,477  $ 26,103  $ 25,759  $120,516
                            --------------------------------------- ---------
                            --------------------------------------- ---------
    EBITDAS
      Operations            $ 11,881  $  6,551  $  4,785  $  1,125  $ 24,342
      Contract cancellation
       fee                         -     8,000         -         -     8,000
                            --------------------------------------- ---------
    Total EBITDAS           $ 11,881  $ 14,551  $  4,785  $  1,125  $ 32,342
                            --------------------------------------- ---------
    Operating earnings
      Operations            $  6,632  $  2,357  $    896  $ (3,255) $  6,630
      Contract cancellation
       fee                         -     8,000         -         -     8,000
                            --------------------------------------- ---------
    Total Operating
     earnings               $  6,632  $ 10,357  $    896  $ (3,255) $ 14,630
                            --------------------------------------- ---------

    Bed rental days(1)       133,315   108,801   109,417    83,966   435,499
    Catering mandays(2)      111,893    92,017    87,439    83,364   374,713

                                                                       Year
                                      Three months ended               ended
     (000's except          --------------------------------------- ---------
     rental days               March      June September  December  December
     and mandays)               2008      2008      2008      2008      2008
                            --------------------------------------- ---------
    Camps, catering &
     service revenue        $ 18,787  $ 17,969  $ 27,288  $ 32,380  $ 96,424
    Camp sales revenue         6,197     3,430     6,563    10,245    26,435
    Space sales revenue        2,723     1,680     2,787     2,048     9,238
    Space rental revenue       1,100     1,473     1,084     1,271     4,928
                            --------------------------------------- ---------
    Total revenue           $ 28,807  $ 24,552  $ 37,722  $ 45,944  $137,025
                            --------------------------------------- ---------
                            --------------------------------------- ---------
    EBITDAS                 $  8,776  $  6,141  $ 12,527  $ 14,574  $ 42,018
    Operating earnings      $  5,398  $  2,372  $  7,779  $  9,593  $ 25,142

    Bed rental days(1)       148,775   115,854   154,682   168,311   587,622
    Catering mandays(2)      122,188    85,909   117,959   137,839   463,895

    (1) One bed rental day equals the rental of one bed for one day.
    (2) One catering manday equals 3 meals for one person for one day.

    Fourth Quarter
    --------------
    

Revenue from the Camps & Catering segment was $25,759,000 for the 3 months ended December 31, 2009, a decrease of $20,186,000 or 44% as compared to the same period in 2008.

Revenues from the BlackSand facilities were $7,137,000 as compared to $17,375,000 for the same period in 2008. Bed rental days were 46,612 in Q4 2009 as compared to 89,585 in Q4 2008. Utilization in the fourth quarter was primarily from beds under contract to a major customer, while 2008 included a number of additional, short term clients. In Q4 2008, utilization was significantly higher, with utilization by our major customer increasing steadily throughout the quarter with the facilities nearing full occupancy in December 2008.

On a per bed rental day basis, revenues declined from $194 per day in Q4 2008 to $153 per day in Q4 2009. Contract terms with a major customer were renegotiated in the third quarter of 2009 resulting in a reduction of the per manday rates charged for both the lodge and the craft camp facilities taking into account an extension in the timeline of the overall commitment. This also resulted in a shift in the mix of rooms occupied with more craft camp rooms as opposed to higher-priced executive lodge rooms.

In Q4 2009, a rate reduction was granted to a major customer reflecting significantly reduced occupancy of rooms over the Christmas break. A reduced rate was charged during this period to reflect the decreased number of beds occupied for a total reduction of $485,000. Adjusting for this amount, the actual rate per day charged was $163 per day.

Revenues from conventional equipment were $4,982,500 as compared to $10,943,000 in the same period in 2008. Activity levels declined significantly following reduced drilling and exploration, construction and infrastructure activities. These declines were felt across all revenue streams, with the largest declines seen in our open camp facilities. Bed rental days decreased by 53%, from 78,726 in Q4 2008 to 37,354 in Q4 2009 and catering mandays fell by 50% from 73,558 in Q4 2008 to 36,637 in Q4 2009. On a per bed rental day basis, revenues declined from an average of $139 per day in Q4 2008 to $133 per day in Q4 2009 as competitive pressures had a negative effect on pricing during the quarter. In addition, a larger proportion of revenues in the fourth quarter were derived from lower priced catering only revenues.

Combined camp and space sales revenues were $8,276,000 for Q4 2009 as compared to $12,293,000 in Q4 2008. Demand for newly manufactured units was reduced as compared to the prior year as projects were either put on hold or cancelled. Revenues mostly came from smaller units produced throughout the quarter as compared to 2008 where several large contracts were completed and delivered.

Revenues from service work were slightly above prior year levels at $4,616,000 in Q4 2009 as compared to $4,062,000 in Q4 2008. Service revenues were higher in the quarter mainly driven by the completion of several larger projects which extended throughout the quarter.

Space rental revenues declined by $524,000 as demand from all sectors including mining, forestry, construction and oil and gas dropped due to global economic conditions.

EBITDAS from the BlackSand facilities were essentially breakeven in the quarter and included $1,837,000 of costs related to the correction of moisture accumulation problems at the Lodge. The project was completed in early 2010 for a total project cost of $2.5 million. Also included in Q4 2009 was the effect of the rate reduction over the Christmas break as described above which affected EBITDAS in the amount of $235,000, as costs such as labour and utilities did not decline in direct proportion with revenues due to the short term duration of the credit. Adjusting for these two amounts, EBITDAS from BlackSand facilities would have been $2,370,000 or 31% of revenues as compared to $9,290,000 or 54% of revenues in Q4 2008. EBITDAS at the BlackSand facilities were impacted by the amended contract terms as discussed above with a significant number of beds at BlackSand in Q4 2008 were billed on a take-or-pay basis for which full revenues were earned that did not have associated catering and housekeeping costs.

EBITDAS on conventional, service and sales revenues declined from $5,380,000 million or 19% of revenues to $1,175,000 or 6% of revenues in Q4 2009 driven predominantly by the reduction in sales activity and pressure seen on pricing as a result of competition. One time charges in the amount of $460,000 were recognized related to inventory and asset verifications undertaken in the quarter. Results for the quarter also included costs related to the start up of the blast resistant structures business which amounted to $177,000, of which no costs were included in 2008 as the business was acquired in mid 2009.

During the fourth quarter of 2009, employees at the BlackSand site undertook a union certification vote. Based upon the outcome of this vote, the Alberta Labor Relations Board certified the union as the exclusive agent to represent the employees at the site. Management has since entered into negotiations with the union with the intent of signing a collective agreement.

    
    Year ended December 31, 2009
    ----------------------------
    

Revenue from the Camps & Catering segment for the year ended December 31, 2009 was $120,516,000, a decrease of $16,509,000 or 12% as compared to the year ended December 31, 2008.

Revenues from the BlackSand facilities were $32,543,000 for the year, a slight decrease from the prior year's total of $34,718,000. Revenues for 2008 reflect 6 months of operations as the facilities commenced operations in the third quarter of 2008, while 2009 results include 12 months of operations. After opening in Q3 2008, occupancy steadily increased throughout the year and peaked near the end of the 2008. Utilization remained strong through the first quarter of 2009, but decreased in the second quarter with the restructuring of a long term contract with a major customer resulting in a reduction of the overall number of contracted beds and a change in mix with more craft rooms utilized as opposed to higher-priced executive rooms. Bed rental days for 2009 totalled 200,536 as compared to 179,344 in 2008, with the average revenue per bed rental day dropping to $162 per day in 2009 from $194 in 2008 reflecting the change in the mix with more craft rooms than higher priced executive style lodge rooms, and the effect of a credit granted to our major customer reflecting reduced occupancy of rooms over the 2009 holiday period.

Revenues from conventional equipment were $27,456,000 for the year as compared to $46,162,000 in 2008. Bed rental days decreased by 42%, from 408,278 in 2008 to 234,963 in 2009 as activity levels in all sectors declined significantly as compared to the prior year reflecting the general downturn in the economy. On a per bed rental day basis, revenues for 2009 were $117 per day as compared to $113 per day in 2008 reflecting a larger proportion of revenues derived from lower priced catering only revenues.

Combined camp and space sales revenues were $31,671,000 in 2009 compared to $35,673,000 in 2008. Demand for newly manufactured units was reduced as compared to the prior year as projects were either put on hold or cancelled.

Revenues from service work were slightly above prior year levels at $16,944,000 in 2009 as compared to $14,375,000 in 2008. Service revenues were generated from larger projects carried on during the year. Space rental revenues declined by $1,025,000 as demand from all sectors including mining, forestry, construction and oil and gas dropped due to global economic conditions.

Revenue, EBITDAS and operating earnings included the effect of an $8.0 million contract cancellation fee related to the restructuring of a long term contract with a large oil sands customer which flowed directly into EBITDAS and operating earnings during the year.

EBITDAS from the BlackSand facilities was $10,017,000 or 31% of revenues in 2009 as compared to $16,397,000 or 47% of revenue in 2008. Results for the year included $2,376,000 of costs related to the correction of moisture accumulation problems at the lodge. The project was completed in early 2010 for a total cost of $2.5 million. Also included was the effect of credit granted to a major customer in Q4 2009 reflecting reduced occupancy of rooms over the Christmas break which affected EBITDAS in the amount of $235,000. Adjusting for these two amounts, EBITDAS from the BlackSand facilities would have been $12,778,000 or 38% of revenues. EBITDAS at the BlackSand facilities were impacted by the amended contract terms as discussed above with a significant number of beds at BlackSand in Q4 2008 were billed on a take-or-pay basis for which full revenues were earned that did not have associated catering and housekeeping costs.

EBITDAS from conventional operations, service and sales were $14,325,000 or 18% of revenues as compared to $25,688,000 or 25% of revenues in 2008 reflecting the reduction of sales volumes as compared to 2008. Also included in 2009 were one time charges of $460,000 related to inventory and asset verifications undertaken in the fourth quarter, and costs related to the initial setup of the blast resistant structures business totalling $354,000.

Matting

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

    
                                                                        Year
                                      Three months ended               ended
    (000's except      ------------------------------------------ -----------
     rental days           March       June  September   December   December
     and mats)              2009       2009       2009       2009       2009
                       ------------------------------------------ -----------
    Mat rental revenue $     905  $   1,309  $   1,504  $   1,817  $   5,535
    Mat sales revenue      1,523        597      1,220        875      4,215
    Installation,
     transportation,
     service and other
     revenue               2,699      2,133      2,394      2,822     10,048
                       ------------------------------------------ -----------
    Total revenue      $   5,127  $   4,039  $   5,118  $   5,514  $  19,798
                       ------------------------------------------ -----------
                       ------------------------------------------ -----------
    EBITDAS            $   1,037  $   1,245  $   1,791  $   1,781  $   5,854
    Operating (loss)
     earnings          $    (598) $    (240) $     372  $     409  $     (57)

    Mat rental days      305,638    538,209    649,750    856,236  2,349,833
    Average mats in
     rental fleet         13,437     12,479     13,421     13,826     13,289

    Mats sold
      New mats             1,226         48        870      1,150      3,294
      Used mats            1,109        981      1,738        305      4,133
                       ------------------------------------------ -----------
    Total mats sold        2,335      1,029      2,608      1,455      7,427


                                                                        Year
                                      Three months ended               ended
    (000's except      ------------------------------------------ -----------
     rental days           March       June  September   December   December
     and mats)              2008       2008       2008       2008       2008
                       ------------------------------------------ -----------
    Mat rental revenue $   1,926  $     840  $   1,303  $   1,394  $   5,463
    Mat sales revenue      2,805        145      7,387      4,447     14,784
    Installation,
     transportation,
     service and other
     revenue               5,275      2,802      4,187      3,655     15,919
                       ------------------------------------------ -----------
    Total revenue      $  10,006  $   3,787  $  12,877  $   9,496  $  36,166
                       ------------------------------------------ -----------
                       ------------------------------------------ -----------
    EBITDAS            $   3,129  $     456  $   2,926  $   1,651  $   8,162
    Operating earnings
     (loss)            $   1,613  $  (1,102) $   1,322  $      90  $   1,923

    Mat rental days      620,605    259,329    434,441    442,130  1,756,505
    Average mats in
     rental fleet         17,189     18,222     18,398     14,953     17,029

    Mats sold
      New mats             2,201        103      9,119      2,277     13,700
      Used mats            1,123        266        330      4,674      6,393
                       ------------------------------------------ -----------
    Total mats sold        3,324        369      9,449      6,951     20,093


    Fourth Quarter
    --------------
    

Revenue from the Matting segment decreased $3,982,000 in the three months ended December 31, 2009 as compared to the three months ended December 31, 2008.

Mat rental revenues for the three months ended December 31, 2009 were $423,000 higher than the three months ended December 31, 2008. Mat rental days were significantly higher during the quarter due to increased activity in shale gas development projects in north eastern British Columbia. Mat utilization was considerably higher, with 67% of mats rented during the quarter as compared to 32% during the same period in the prior year. However, offsetting the increase in activity was a decline in rental rates. Rates in the quarter were $2.12 per mat rental day as compared to $3.15 per mat rental day in Q4 2008. General economic conditions and competition had a negative effect on pricing as customers demanded significant rate concessions.

Mat sales revenues for the three months ended December 31, 2009 were $3,572,000 lower than the three months ended December 31, 2008. The total number of mats sold decreased significantly as customers shifted from mat purchases to mat rentals. The shift was a result of the type of projects being undertaken and a focus by customers on reducing capital expenditures in favour of mat rentals. Revenue per mat sold was $601 per mat as compared to $640 per mat in the same period in 2008. The majority of mats sold in Q4 2009 were HD hybrid ("HD hybrid") mats which sell at a discount compared to traditional oak mats, whereas in Q4 2008 the majority of mats sold were used oak mats. The HD hybrid mats utilize a combination of oak and softwood material while still retaining structural rigidity and durability.

Installation, transportation, service and other revenues for the three months ended December 31, 2009 were $833,000 lower than the three months ended December 31, 2008. The decrease was driven primarily by a drop in trucking related to mat sales which were stronger in Q4 2008. Mat management customers were focused on project specific services and reduced staging and strategic relocation work. Although rental volumes were higher, Q4 2009 saw the continued trend of the need to bundle services, often including transportation and installation services within rental rates to obtain or maintain jobs in an increasingly competitive environment.

EBITDAS and operating earnings increased by $130,000 and $319,000 respectively, driven primarily by the relative increase in mat rentals as compared to the same period in the prior year. Mat rental days were significantly higher than the same period in the prior year; however, rental margins were negatively impacted by competitive pressures and the bundling of transportation and installation services resulting in decreased margins for these services as well. Efforts were focused on reducing costs in a number of areas and a shift in manufacturing towards construction of HD hybrid mats. The hybrid mats are less costly to manufacture, and their reduced weight helps lower trucking and installation costs.

    
    Year ended December 31, 2009
    ----------------------------
    

Revenue from the Matting segment decreased $16,368,000 in the year ended December 31, 2009 as compared to the year ended December 31, 2008.

Mat rental revenues for 2009 were consistent with 2008 levels. Customers working on shale gas projects in north eastern British Columbia drove stronger utilization rates and higher rental volumes throughout the year, but at the expense of rental rates which declined steadily throughout the year. Rates were negatively impacted as competitors continually reduced rates in an effort to keep and secure work.

Mat sales volumes for the year decreased significantly, with customers focused on mat rentals due to the types of projects being undertaken and in an effort to reduce capital spending. New mat sales declined most significantly, with used mat sales also declining as a result of the above factors.

Installation, transportation, service and other revenue was $5,871,000 lower than 2008. This decrease was driven primarily as a result of decreased mat sales. Stronger mat rental volumes helped offset some of the shortfall, but customers focused more on specific projects and less on strategic staging and relocation of managed mats overshadowing the gains on the rental side. We also saw the impact of bundling of transportation and installation services within rental rates in order to remain competitive.

EBITDAS decreased by $2,308,000 as compared to the prior year driven by the overall reduction in mat sales revenues. As a percentage of revenues, EBITDAS for 2009 was 30% as compared to 23% in 2008. This increase was driven by 28% of 2009 revenues coming from mat rentals as compared to 15% in 2008, which typically generate higher margins despite the impacts of competitive pressures. In addition, efforts were focused on reducing costs in a number of areas.

Marine Services

Marine Services revenue is comprised of tug and barge revenue, barge camp revenue, and rental and other revenue as follows:

    
                                       Three months                     Year
                                          ended                        ended
                      ------------------------------------------- -----------
    (000's)               March       June  September   December    December
                           2009       2009       2009       2009        2009
                      ------------------------------------------- -----------
    Tug revenue       $       -  $      30  $     517  $       1   $     548
    Barge revenue             -          -        191          -         191
    Barge camp revenue    1,282      1,676         75          1       3,034
    Rental and other
     revenue                473        286        326        244       1,329
                      ------------------------------------------- -----------
    Total revenue     $   1,755  $   1,992  $   1,109  $     246   $   5,102
                      ------------------------------------------- -----------
                      ------------------------------------------- -----------
    EBITDAS           $     891  $     929  $    (175) $    (182)  $   1,463
    Operating
    earnings (loss)   $     599  $     637  $    (468) $    (479)  $     289


                                       Three months                     Year
                                          ended                        ended
                      ------------------------------------------- -----------
    (000's)               March       June  September   December    December
                           2008       2008       2008       2008        2008
                      ------------------------------------------- -----------
    Tug revenue       $       -  $     351  $   3,281  $      83   $   3,715
    Barge revenue           196        212        178         15         601
    Barge camp revenue    2,575        539        185      1,273       4,572
    Rental and other
     revenue                608        269        335        347       1,559
                      ------------------------------------------- -----------
    Total revenue     $   3,379  $   1,371  $   3,979  $   1,718   $  10,447
                      ------------------------------------------- -----------
                      ------------------------------------------- -----------
    EBITDAS           $   2,150  $      96  $     428  $     267   $   2,941
    Operating
     earnings (loss)  $   1,890  $    (170) $     151  $     (24)  $   1,847
    

Fourth Quarter

--------------

Revenues from the Marine Services segment for the three months ended December 31, 2009 decreased $1,472,000 as compared to the same period in the prior year. Tug and barge revenues were lower in the three months ended December 31, 2009, down $97,000 from the same period in the prior year as overall activity in the Northwest Territories was minimal. Barge camp revenues in Q4 2008 related to a winter drilling support project which did not occur in 2009. Rental and other revenues were generated from a combination of providing maintenance services and storage of equipment and supplies for customers. This revenue decreased by $103,000 in the three months ended December 31, 2009 compared to the prior period. $73,000 of this amount was attributable to reduced maintenance services and $30,000 to lower rentals.

EBITDAS and operating earnings for the three months ended December 31, 2009 were $449,000 and $455,000 lower compared to the same period in the prior year directly related to the reduction in overall activity in the region.

Year ended December 31, 2009

----------------------------

Revenues from the Marine Services segment for the year ended December 31, 2009 decreased $5,345,000 as compared to the same period in the prior year. Tug and barge revenues were lower throughout the year with very little activity in the Northwest Territories with the majority of our marine equipment not utilized during the year. 2009 activity was comprised of limited cargo and supply transportation. Barge camp revenues included a winter drilling support project in the first quarter and a $500,000 cancelation fee related to a barge camp rental contract in the second quarter of 2009. Very little work was contracted for the period when the northern waterways are typically open. Rental and other revenues decreased $230,000 compared to the prior year due to reduced activity, $150,000 was attributable to reduced maintenance services and $80,000 due to lower rentals.

For the year ended December 31, 2009 EBITDAS and operating earnings were $1,478,000 and $1,558,000 lower as compared to the same period in the prior year as a result of reduced activity levels throughout the year.

Corporate

Corporate costs are the costs of the head office which include the Chief Executive Officer, President, Chief Financial Officer, Vice President of Safety, Corporate Secretary, Corporate Accounting staff, and associated costs of supporting a public company. Overall cash costs were $1,603,000 (excluding Stock Based Compensation and Depreciation & Amortization) in the three months ended December 31, 2009 as compared to $2,701,000 in the same period in 2008. 2008 fourth quarter costs included onetime costs of $475,000 related to the departure of a senior executive. For the year ended December 31, 2009 corporate cash costs decreased to $6,251,000 or 4.3% of revenues from $7,799,000 or 4.3% of revenues in the year ended December 31, 2008. This decrease is largely a result of salary rollbacks implemented in the second quarter of 2009, led by senior management at 20%, and an overall focus on managing costs.

Other Items

Foreign exchange loss

Foreign exchange loss increased for the year ended December 31, 2009 to $63,000 as compared to $48,000 in the year ended December 31, 2008. The loss in the year ended December 31, 2009 is a result of the decrease in value of the Corporations U.S. dollar denominated accounts.

Interest income

Interest income of $88,000 was earned on long-term receivables. In the year ended December 31, 2008, interest income of $39,000 was earned on related party loans provided as well as deposits held as guarantees.

Interest on operating lines of credit and long-term debt

Interest on operating lines of credit and long-term debt decreased to $1,620,000 in the year ended December 31, 2009 from $2,304,000 in the year ended December 31, 2008. The decrease in interest expense is attributable to the decrease in the average amount of debt held of $31,125,000 in the year ended December 31, 2009 as compared to $42,819,000 in the year ended December 31, 2008.

Earnings on equity investments

The earnings on equity investments of Kitikmeot Caterers Ltd. ("Kitikmeot"), Sakku Caterers Limited ("Sakku"), Mackenzie Valley Logistics Inc. ("Mackenzie Valley"), and Mackenzie Delta Integrated Oilfield Services Ltd. ("MDIOS") were $729,000 in the year ended December 31, 2009, net of a one-time impairment charge of $412,000 related to Sakku as compared to earnings of $589,000 in the year ended December 31, 2008.

    
    -   Mackenzie Valley, MDIOS and Beaufort Logistics Inc. contributed
        earnings of $171,000 for the year ended December 31, 2009 as compared
        to loss of $191,000 in the year ended December 31, 2008.

    -   Kitikmeot contributed earnings of to $1,008,000 for the year ended
        December 31, 2009 as compared to earnings $510,000 in the year ended
        December 31, 2008.

    -   Sakku contributed a loss of $38,000 for the year ended December 31,
        2009 as compared to earnings of $270,000 in the year ended
        December 31, 2008. A one-time impairment charge of $412,000 related
        to Sakku was recorded reflecting reduced activity and benefits
        anticipated from this ongoing relationship.
    

Income taxes

Income tax expense increased to $2,227,000, an effective tax rate of 29.0%, for the year ended December 31, 2009 from $1,449,000, an effective tax rate of 1.5%, for the year ended December 31, 2008. Included in the December 31, 2008 tax expense is approximately $4,373,000 of tax recovery attributable to the goodwill impairment loss. If tax expense is adjusted for this recovery, it results in an adjusted tax expense of $5,822,000. If the 2008 loss before income taxes is adjusted for the goodwill impairment loss to arrive at adjusted earnings before income taxes of $18,410,000, the effective tax rate is 31.6% for 2008.

    
    Liquidity and Capital Resources

    The Corporation has a strong working capital position and borrowing
capacity as set out below:

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (000's)                              December 2009         December 2008
    -------------------------------------------------------------------------
    Current assets                          $  40,102              $  50,465

    Operating lines of credit                   6,900                  8,834
    Current liabilities excluding
     borrowings(1)                             12,964                 18,177
    Current portion of long-term debt           1,939                    488
    -------------------------------------------------------------------------
    Current liabilities                        21,803                 27,499
    -------------------------------------------------------------------------
    Working capital(2)                         18,299                 22,966

    Bank borrowing
      Operating lines of credit                 6,900                  8,834
      Senior secured revolving term facility   29,100                 38,400
    -------------------------------------------------------------------------
    Total Bank borrowings                      36,000                 47,234

    Available bank lines(3)(4)                 80,000                 80,500

    Borrowing capacity(5)                      44,000                 33,266
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) Calculated as the sum of bank indebtedness, accounts payable and
        accrued liabilities, deferred revenue and income taxes payable.
    (2) Calculated as current assets less current liabilities.
    (3) For 2009, includes $80,000,000 available to Horizon.
    (4) For 2008, includes $80,000,000 available to Horizon and $1,000,000
        (Horizon's 50% portion - $500,000) available to Horizon's joint
        venture, Arctic Oil & Gas Services Inc.
    (5) Calculated as available bank lines less total bank borrowing.
    

At December 31, 2009, Horizon's working capital position of $18,299,000 decreased from 2008 levels of $22,966,000 with total bank borrowings declining to $36,000,000 at December 31, 2009 from $47,234,000 at December 31, 2008. Bank borrowings were reduced using funds from operations and proceeds from the sale of used equipment which remained after funding capital additions.

Subsequent to December 31, 2009, Horizon renewed its revolving credit and senior secured revolving term credit facilities. The credit facilities were renewed for an additional 16 months, extending the maturity date on the senior secured revolving term facility and operating line to July 2, 2011. The interest rate on the operating line was increased to the bank prime rate plus 1.25% and the senior secured revolving term facility remained unchanged at the bank prime rate plus 1.50%. Borrowing capacity under the senior secured revolving term facility was reduced from $60,000,000 to $40,000,000 at management's request to better align borrowing capacity with anticipated borrowing requirements.

Horizon's borrowing facilities through its 50% owned joint venture, Arctic Oil & Gas Services Inc., were revised during the year. As a result, the facility is now in place only to support letters of credit, with borrowings no longer available.

During the year ended December 31, 2009, the Corporation spent $33,026,000 ($56,174,000 - December 31, 2008) on capital asset additions of which $24,521,000 was purchased using cash and $8,505,000 using notes payable. Capital spending was concentrated on the acquisition of the camp rental assets from Ensign Energy Services Inc., replacement camp rental fleet, replacement rental mats, configuration and site preparation work at the BlackSand facilities and improvements, and investment in the blast resistant structures rental fleet. Horizon evaluates and manages its capital spending plans taking into account proceeds from disposals, which for the year ended December 31, 2009 totalled $10,574,000. In the year ended December 31, 2008, the Corporation's spending was concentrated on the completion of the BlackSand Executive Lodge facilities, land for a second executive lodge facility, additional beds and space rental equipment and the addition of mats to its rental fleet.

The Corporation's contractual obligations for the next five years are as follows:

    
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (000's)                                 Operating
                                             lines of  Long-term   Operating
                                               credit       debt      leases
    -------------------------------------------------------------------------
    Year 1 or less                          $   6,900  $   1,939   $   1,892
    Year 2                                          -     13,166       1,548
    Year 3                                          -     15,554       1,049
    Year 4                                          -      3,425         584
    Year 5+                                         -      3,718         493
    -------------------------------------------------------------------------
    Total                                   $   6,900  $  37,802   $   5,566
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

The Corporation was granted approval from the Toronto Stock Exchange for a normal course issuer bid to repurchase up to a maximum of 7,426,978 common shares of the Corporation over the period from July 24, 2009 to July 23, 2010. All shares repurchased will be cancelled. As at February 25, 2010, 5,185,000 common shares had been repurchased and cancelled for a weighted average purchase price of $1.23 excluding transaction costs.

The Corporation does not anticipate having any issues with respect to credit facility covenant violations. The Corporation is in compliance with its four debt covenants on its bank borrowings as set out below:

    
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Debt Covenant                                          December 31, 2009
    -------------------------------------------------------------------------
    Current ratio(1) - must be greater than 1.2:1                     1.84:1
    Debt(2) to EBITDAS(3)(4) - must be less than 2:1                   1.3:1
    Debt service coverage(5) - must be greater than 1.5:1              9.2:1
    Debt(2) to total capitalization(6) - must be less than 0.5:1      0.21:1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) Current ratio is calculated as ratio of current assets to current
        liabilities.

    (2) Calculated as the sum of operating lines of credit and long-term
        debt.

    (3) EBITDAS (Earnings before interest, taxes, depreciation, amortization,
        gain/loss on disposal of property, plant and equipment and stock
        based compensation) is not a recognized measure under Canadian
        generally accepted accounting principles (GAAP). Management believes
        that in addition to net earnings, 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. Investors should
        be cautioned, however, that EBITDAS should not be construed as an
        alternative to net earnings determined in accordance with GAAP as an
        indicator of the Corporation's performance. Horizon's method of
        calculating EBITDAS may differ from other entities and accordingly,
        EBITDAS may not be comparable to measures used by other entities.

    (4) Debt to EBITDAS is calculated as the ratio of debt to trailing
        12 months EBITDAS.

    (5) Debt service coverage is calculated as the ratio of trailing
        12 months EBITDAS less cash taxes to debt service. EBITDAS less cash
        taxes is calculated as the trailing 12 months EBITDAS less trailing
        12 months current tax expense. Debt service is calculated as the sum
        of trailing 12 months interest expense on operating lines of credit,
        trailing 12 months interest expense on long-term debt and current
        portion of long-term debt.

    (6) Debt to total capitalization is calculated as the ratio of debt to
        total capitalization. Total capitalization is calculated as the sum
        of debt and shareholder's equity.


    Consolidated Balance Sheets

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (000's)                              December 2009         December 2008
    -------------------------------------------------------------------------

    Assets

    Current assets:
      Cash & cash equivalents               $     602              $       -
      Accounts receivable                      24,915                 37,873
      Inventory                                11,771                  9,960
      Prepaid expenses                          1,824                  1,682
      Income taxes receivable                     990                    950
    -------------------------------------------------------------------------
                                               40,102                 50,465

    Other Assets                                3,061                      -

    Property, plant and equipment, net        156,425                147,924

    Goodwill                                      472                      -

    Intangible assets, net                     35,320                 43,032

    Long-term investments                       4,127                  5,760
    -------------------------------------------------------------------------
                                            $ 239,507              $ 247,181

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity

    Current liabilities:
      Bank indebtedness                     $       -              $   1,776
      Operating lines of credit                 6,900                  8,834
      Accounts payable and accrued
       liabilities                             10,896                 14,234
      Deferred revenue                          2,068                  2,167
      Current portion of long-term debt         1,939                    488
    -------------------------------------------------------------------------
                                               21,803                 27,499

    Long-term debt                             35,863                 38,624

    Future income tax liability                12,687                 11,456
    -------------------------------------------------------------------------
                                               70,353                 77,579

    Shareholders' equity:
      Share capital                           245,353                257,505
      Contributed surplus                      11,812                  5,564
      Deficit                                 (88,011)               (93,467)
    -------------------------------------------------------------------------
                                              169,154                169,602
    -------------------------------------------------------------------------
                                            $ 239,507              $ 247,181
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Consolidated Statements of Operations and (Deficit) Retained Earnings
    For the year ended December 31, 2009 and 2008

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (000's)                              December 2009         December 2008
    -------------------------------------------------------------------------

    Revenue                                 $ 143,892              $ 180,779

    Expenses:
      Cost of goods sold                       25,634                 35,552
      Operating                                75,395                 89,330
      General and administrative                9,283                 10,706
      Stock based compensation                    521                  1,762
      Depreciation of property,
       plant and equipment                     17,048                 14,315
      Amortization of intangible assets         8,869                  8,967
      (Gain) loss on disposal of property,
       plant and equipment                     (1,407)                    13
      Foreign exchange loss                        63                     48
    -------------------------------------------------------------------------
                                              135,406                160,693
    -------------------------------------------------------------------------
    Operating earnings                          8,486                 20,086

    Goodwill impairment loss                        -                114,910
    Interest income                               (88)                   (39)
    Interest expense on operating
     lines of credit                              270                    647
    Interest expense on long-term debt          1,350                  1,657
    Earnings on equity investments               (729)                  (589)
    -------------------------------------------------------------------------
    Earnings (loss) before income taxes         7,683                (96,500)

    Income taxes:
      Current income tax expense                  924                  3,654
      Future income tax expense (recovery)      1,303                 (2,205)
    -------------------------------------------------------------------------
                                                2,227                  1,449

    -------------------------------------------------------------------------
    Net earnings (loss) and comprehensive
     (loss) income                              5,456                (97,949)

    (Deficit) Retained earnings,
     beginning of period                      (93,467)                 4,482

    -------------------------------------------------------------------------
    Deficit, end of period                  $ (88,011)             $ (93,467)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings (loss) per share:
      Basic                                 $    0.05              $   (0.89)
      Diluted                               $    0.05              $   (0.89)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Consolidated Statements of Cash Flows
    For the year ended December 31, 2009 and 2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (000's)                             December 2009          December 2008
    -------------------------------------------------------------------------
    Cash provided by (used in):

    Operating activities:

    Net earnings (loss)                     $   5,456              $ (97,949)
    Items not involving cash:
      Depreciation of property,
       plant and equipment                     17,048                 14,315
      Amortization of intangible assets         8,869                  8,967
      Future income tax expense (recovery)      1,303                 (2,205)
      Stock based compensation                    521                  1,762
      Goodwill impairment loss                      -                114,910
      Earnings on equity investments             (729)                  (589)
      Gain on sale of property,
       plant and equipment                     (3,087)                (2,855)
    -------------------------------------------------------------------------
                                               29,381                 36,356

    Changes in non-cash working capital
     items                                      6,254                (16,751)
    -------------------------------------------------------------------------
                                               35,635                 19,605
    Investing activities:

    Purchase of other assets                   (3,061)                     -
    Purchase of property, plant and
     equipment                                (24,521)               (56,174)
    Purchase of intangibles                      (864)                     -
    Proceeds on sale of property,
     plant and equipment                       10,574                  8,572
    Return of capital from equity
     investments                                2,362                    334
    Business acquisitions                        (818)                  (581)
    -------------------------------------------------------------------------
                                              (16,328)               (47,849)

    Changes in non-cash working
     capital items                              1,900                    914
    -------------------------------------------------------------------------
                                              (14,428)               (46,935)

    Financing activities:

    (Repayment of) proceeds from bank
     indebtedness                              (1,776)                 1,776
    Share purchase costs                          (57)                   (15)
    Repurchase of Shares                       (6,368)                     -
    Repayment of operating lines of credit     (1,934)               (12,156)
    Proceeds from long-term debt               23,101                 43,800
    Repayment of long-term debt               (32,916)                (6,578)
    Repayment of capital leases                     -                   (507)
    -------------------------------------------------------------------------
                                              (19,950)                26,320

    Changes in non-cash working capital
     items                                       (655)                  (210)
    -------------------------------------------------------------------------
                                              (20,605)                26,110

    -------------------------------------------------------------------------
    Increase (decrease) in cash position          602                 (1,220)

    Cash, beginning of period                       -                  1,220
    -------------------------------------------------------------------------
    Cash, end of period                     $     602              $       -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplementary information:
      Income taxes paid                     $     958              $   7,009
      Interest received                            88                     39
      Interest paid                             1,784                  2,197
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

This press release may contain forward-looking statements that are subject to risk factors associated with the oil and gas and mining businesses and the overall economy. The Corporation believes that the expectations reflected in this press release are reasonable, but results may be affected by a variety of variables. The Corporation relies on litigation protection for "forward-looking" statements.

SOURCE Horizon North Logistics Inc.

For further information: 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


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