Pason Reports Fourth Quarter & Year-End 2007 Results



    Stock Exchange: TSX
    Symbol: PSI

    CALGARY, Feb. 26 /CNW/ - Pason Systems Inc. ("Pason" or "the Company")
today announced its 2007 fourth quarter and year-end results.

    
    PERFORMANCE DATA
    -------------------------------------------------------------------------
                    Three Months Ended December 31,  Years Ended December 31,
                             2007     2006  Change     2007     2006  Change
    -------------------------------------------------------------------------
    (000s, except per
     share data)                ($)       ($)   (%)      ($)       ($)    (%)

    Revenue
      Drilling recorder
       rentals              26,239    26,583    (1)  102,955   102,115     1
      Pit volume totalizer
       rentals              11,927    12,339    (3)   46,660    48,869    (5)
      Communications
       rentals               5,683     6,064    (6)   22,729    25,122   (10)
      Automatic driller
       rentals               5,157     4,886     6    19,368    19,012     2
      Geological services    3,227     4,047   (20)   13,425    15,145   (11)
      Total gas rentals      3,706     3,698     -    14,171    15,266    (7)
      Service recorder
       rentals                 436       427     2     2,014     1,108    82
      Choke control and
       other income          1,904     1,430    33     6,038     5,653     7
      Mobilization income    1,818     1,914    (5)    7,609     7,541     1
      Interest                 451       242    86     1,470       753    95
    -------------------------------------------------------------------------
      Total revenue         60,548    61,630    (2)  236,439   240,584    (2)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Expenses
      Rental services       18,325    17,745     3    72,872    63,966    14
      Geological services    2,370     2,524    (6)    9,196     8,967     3
      Manufacturing and
       distribution          2,333     2,636   (11)    8,738     9,459    (8)
      Research and
       development           3,074     2,136    44     9,566     8,255    16
      Administration         2,256     2,097     8     7,979     6,699    19
      Stock-based
       compensation          1,267     1,297    (2)    5,248     4,597    14
      Interest                  38        33    15       143       622   (77)
      Depreciation and
       amortization          7,466    11,557   (35)   42,797    39,923     7
    -------------------------------------------------------------------------
      Total expenses        37,129    40,025    (7)  156,539   142,488    10
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings (after taxes)  15,503    15,079     3    55,052    64,531   (15)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
      Per share - basic       0.19      0.19     -      0.69      0.83   (17)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash flow from
     operations             26,462    24,818     7   103,766   107,451    (3)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
      Per share - basic       0.33      0.32     3      1.30      1.38    (6)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Margins
      Rental services          68%       69%    (1)      67%       72%    (7)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
      Geological services      27%       38%   (29)      32%       41%   (22)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    For the purposes of cash flow per share calculations, cash flow is
    defined as earnings adjusted for depreciation and amortization expense,
    stock-based compensation expense and future income taxes. 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
completed its fourth quarter in 2007 with year-over-year revenue down 2% to
$60.5 million and earnings up 3% to $15.5 million or $0.19 per diluted share.
For the year ended December 31, 2007, revenue totaled $236.4 million, down 2%
from 2006, while earnings for the year were off 15% to $55.1 million or $0.68
per diluted share. Return on shareholders' equity for the year was 22% despite
a challenging 23% decline in Canadian industry days in 2007.
    Canadian segment operating profit for the fourth quarter totaled
$10.5 million, a 4% decrease from the $11.0 million recorded in 2006. Revenue
per industry drilling day for the three-month period was $787 versus $748 in
the prior year. This was due to increased usage of our newer products.
    Record fourth quarter segment operating profit from United States
operations totaled $16.2 million compared to $13.5 million in 2006 despite
being offset by a stronger Canadian dollar. The 20% increase was due to a
growing market share for Pason's Electronic Drilling Recorder (EDR), which is
now installed on 53% of all U.S. land rigs, and increased product rentals per
wellsite. Fourth quarter revenue per industry drilling day was US$195, up 14%
from US$171 in 2006. Geological services provided a margin contribution of
$0.9 million, off from a record $1.5 million a year ago.
    International segment profit was $1.1 million for the quarter, up 42% from
$0.8 million in 2006. In South America, the EDR was installed on 85 rigs at
the end of 2007 versus 74 in 2006 and Automatic Drillers were installed on 49
rigs versus 47 rigs at the end of 2006. In Mexico, the EDR was installed on 20
rigs at year end but Mexico continues to face budget challenges with Pemex. In
Australia instrumentation was installed on 8 rigs at year end versus 4 rigs in
2006.
    Pason's Electronic Service Recorder (ESR) contributed $0.4 million of
revenue during the fourth quarter of both 2007 and 2006, despite an overall 9%
reduction in 2007 Canadian service rig days. Pason's new Hazardous Gas Alarm
contributed a further $0.2 million in revenue during the 2007 fourth quarter.
    The Company completed its plan during the year to outsource its
manufacturing operations to third party contract manufacturers. As the
anticipated and inevitable industry recovery in the next business cycle
approaches, Pason has the financial and operational capacity to meet the
expected demand from this environment. Accordingly, the Company is increasing
its investment in R&D in order to develop new products and has approved a $50
million capital expenditures budget for 2008.

    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.

    A conference call to review the 2007 fourth quarter and year-end results
has been scheduled for 9:00 a.m. (Calgary time) on Wednesday, February 27,
2008. The conference call dial-in number is 1-800-733-7571. Seven-day replay
to March 5, 2008 is 1-877-289-8525. Pass Code 21256055 followed by the number
sign.
    Shareholders are also invited to attend the Company's Annual General
Meeting on Monday, May 12, 2008 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

    -------------------------------------------------------------------------
    December 31,                                             2007       2006
    -------------------------------------------------------------------------
    (000s)                                                     ($)        ($)

    ASSETS
    Current
      Cash, net of bank indebtedness                       23,159     21,857
      Accounts receivable                                  73,454     70,173
      Prepaid expenses                                      1,987      1,816
      Income taxes receivable                               2,652          -
    -------------------------------------------------------------------------
                                                          101,252     93,846
    Investment                                              3,000      3,000
    Capital assets                                        192,620    171,458
    Deferred development costs                              4,698      2,556
    -------------------------------------------------------------------------
                                                          301,570    270,860
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    LIABILITIES
    Current
      Accounts payable and accrued liabilities             17,647     22,256
      Income taxes payable                                      -      7,192
      Dividends payable                                     6,822      5,903
    -------------------------------------------------------------------------
                                                           24,469     35,351
    Future income taxes                                     6,384      4,300
    -------------------------------------------------------------------------
                                                           30,853     39,651
    -------------------------------------------------------------------------
    SHAREHOLDERS' EQUITY
    Share capital                                          51,505     38,085
    Contributed surplus                                    10,323      7,130
    Accumulated other comprehensive loss                  (29,710)   (10,353)
    Retained earnings                                     238,599    196,347
    -------------------------------------------------------------------------
                                                          270,717    231,209
    -------------------------------------------------------------------------
                                                          301,570    270,860
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------




    CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS

                                    Three Months Ended           Years Ended
                                           December 31,          December 31,
    -------------------------------------------------------------------------
                                       2007       2006       2007       2006
    -------------------------------------------------------------------------
    (000's, except per share data)       ($)        ($)        ($)        ($)

    Revenue
      Equipment rentals              56,870     57,341    221,544    224,686
      Geological services             3,227      4,047     13,425     15,145
      Interest                          451        242      1,470        753
    -------------------------------------------------------------------------
                                     60,548     61,630    236,439    240,584
    -------------------------------------------------------------------------
    Expenses
      Rental services                18,325     17,745     72,872     63,966
      Geological services             2,370      2,524      9,196      8,967
      Manufacturing and
       distribution                   2,333      2,636      8,738      9,459
      Research and development        3,074      2,136      9,566      8,255
      Administration                  2,256      2,097      7,979      6,699
      Stock-based compensation        1,267      1,297      5,248      4,597
      Interest                           38         33        143        622
      Depreciation and amortization   7,466     11,557     42,797     39,923
    -------------------------------------------------------------------------
                                     37,129     40,025    156,539    142,488
    -------------------------------------------------------------------------
    Earnings before income taxes     23,419     21,605     79,900     98,096
    -------------------------------------------------------------------------
    Income taxes
      Current                         5,690      9,641     24,179     35,165
      Future                          2,226     (3,115)       669     (1,600)
    -------------------------------------------------------------------------
                                      7,916      6,526     24,848     33,565
    -------------------------------------------------------------------------
    Earnings                         15,503     15,079     55,052     64,531
    Retained earnings, beginning
     of period                      229,918    187,171    196,347    141,609
    Dividends                        (6,822)    (5,903)   (12,800)    (9,793)
    -------------------------------------------------------------------------
    Retained earnings, end
     of period                       238,599    196,347    238,599   196,347
    -------------------------------------------------------------------------
    Earnings per share
      Basic                             0.19       0.19       0.69      0.83
      Diluted                           0.19       0.19       0.68      0.81
    -------------------------------------------------------------------------



    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

    -------------------------------------------------------------------------
                                    Three Months Ended           Years Ended
                                           December 31,          December 31,
                                       2007       2006       2007       2006
    -------------------------------------------------------------------------
    (000s)                               ($)        ($)        ($)        ($)

    Earnings                         15,503     15,079     55,052     64,531

    Other comprehensive income (loss)
      Foreign currency translation
       adjustment                     1,028      4,936    (19,357)     1,173
    -------------------------------------------------------------------------
    Total comprehensive income       16,531     20,015     35,695     65,704
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    CONSOLIDATED STATEMENTS OF ACCUMULATED OTHER COMPREHENSIVE LOSS

    -------------------------------------------------------------------------
                                    Three Months Ended           Years Ended
                                           December 31,          December 31,
                                       2007       2006       2007       2006
    -------------------------------------------------------------------------
    (000s)                               ($)        ($)        ($)        ($)

    Accumulated other
     comprehensive loss,
     beginning of period            (30,738)   (15,289)   (10,353)         -
    Reclassification from
     foreign currency
     translation adjustment               -          -          -    (11,526)
    Other comprehensive
     income (loss)
      Foreign currency
       translation adjustment         1,028      4,936    (19,357)     1,173
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Accumulated other
     comprehensive loss, end
     of period                      (29,710)   (10,353)   (29,710)   (10,353)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    CONSOLIDATED STATEMENTS OF CASH FLOWS

                                    Three Months Ended           Years Ended
                                           December 31,          December 31,
    -------------------------------------------------------------------------
                                       2007       2006       2007       2006

    (000s)                               ($)        ($)        ($)        ($)

    Cash flows related to the
    following activities:
    Operating
      Earnings                       15,503     15,079     55,052     64,531
      Adjustments for
       non-cash items:
      Depreciation and amortization   7,466     11,557     42,797     39,923
      Stock-based compensation        1,267      1,297      5,248      4,597
      Future income taxes             2,226     (3,115)       669     (1,600)
    -------------------------------------------------------------------------
                                     26,462     24,818    103,766    107,451
    Changes in non-cash
     working capital                (13,510)    (1,594)   (19,713)    (4,345)
    -------------------------------------------------------------------------
                                     12,952     23,224     84,053    103,106
    -------------------------------------------------------------------------
    Financing
      Repayment of credit facility        -          -          -    (10,000)
      Issue of common shares
       under the stock option plan    2,251      1,710     11,365      7,542
      Payment of dividends                -          -    (11,881)    (3,890)
      Dividends payable               6,822      5,903        919      5,903
    -------------------------------------------------------------------------
                                      9,073      7,613        403       (445)
    -------------------------------------------------------------------------
    Investing
      Additions to capital assets   (18,695)   (24,270)   (76,083)   (69,698)
      Deferred development
       costs, net of investment
       tax credits received            (318)      (166)      (532)    (1,535)
      Proceeds on disposal of
       capital assets                    15        158        118        387
      Changes in non-cash working
       capital                       (2,072)     3,738     (2,974)    (3,588)
    -------------------------------------------------------------------------
                                    (21,070)   (20,540)   (79,471)   (74,434)
    -------------------------------------------------------------------------
    Effect of exchange rate
     changes on cash                   (164)       132     (3,683)        89
    -------------------------------------------------------------------------
    Net increase in cash and cash
     equivalents                        791     10,429      1,302     28,316
    Cash and cash equivalents,
     beginning of period             22,368     11,428     21,857     (6,459)
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period                   23,159     21,857     23,159     21,857
    -------------------------------------------------------------------------
    Represented by:
      Cash                           28,112     15,954     28,112     15,954
      Cash held in trust              6,822      5,903      6,822      5,903
      Bank indebtedness             (11,775)         -    (11,775)         -
    -------------------------------------------------------------------------
                                     23,159     21,857     23,159     21,857
    -------------------------------------------------------------------------



    SEGMENTED INFORMATION

    -------------------------------------------------------------------------
                                                United     Inter-
                                     Canada     States   national      Total
    -------------------------------------------------------------------------
    (000s)                               ($)        ($)        ($)        ($)

    Year ended December 31, 2007
    Revenue                          95,647    133,147      7,645    236,439
    Depreciation and amortization    22,536     18,818      1,443     42,797
    Operating costs                  41,198     55,726      1,356     98,280
    -------------------------------------------------------------------------
    Segment operating profit         31,913     58,603      4,846     95,362
    --------------------------------------------------------------
    --------------------------------------------------------------
    Research and development                                           9,566
    Stock-based compensation                                           5,248
    Corporate expenses                                                   505
    Interest                                                             143
    Income taxes                                                      24,848
                                                                    ---------
    Earnings                                                          55,052
                                                                    ---------
                                                                    ---------
    Total assets                    160,759    128,348     12,463    301,570
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Capital expenditures             31,861     39,309      5,445     76,615
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Year ended December 31, 2006
    Revenue                         119,662    115,227      5,695    240,584
    Depreciation and amortization    20,737     18,170      1,016     39,923
    Operating costs                  39,873     47,253      1,384     88,510
    -------------------------------------------------------------------------
    Segment operating profit         59,052     49,804      3,295    112,151
    --------------------------------------------------------------
    --------------------------------------------------------------
    Research and development                                           8,255
    Stock-based compensation                                           4,597
    Corporate expenses                                                   581
    Interest                                                             622
    Income taxes                                                      33,565
                                                                    ---------
    Earnings                                                          64,531
                                                                    ---------
                                                                    ---------
    Total assets                    157,707    104,598      8,555    270,860
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Capital expenditures             23,906     40,862      6,465     71,233
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                                                United     Inter-
                                    Canada      States   national      Total
    -------------------------------------------------------------------------
    (000s)                               ($)        ($)        ($)        ($)

    Three Months Ended
    December 31, 2007
    Revenue                          24,926     33,478      2,144     60,548
    Depreciation and amortization     4,711      2,283        472      7,466
    Operating costs                   9,666     14,956        549     25,171
    -------------------------------------------------------------------------
    Segment operating profit         10,549     16,239      1,123     27,911
    --------------------------------------------------------------
    Research and development                                           3,074
    Stock-based compensation                                           1,267
    Corporate expenses                                                   113
    Interest                                                              38
    Income taxes                                                       7,916
                                                                    ---------
    Earnings                                                          15,503
    -------------------------------------------------------------------------
    Capital expenditures              3,577     13,342      2,094     19,013
    -------------------------------------------------------------------------


    Three Months Ended
    December 31, 2006
    Revenue                          27,254     32,834      1,542     61,630
    Depreciation and amortization     5,863      5,433        261     11,557
    Operating costs                  10,440     13,918        490     24,848
    -------------------------------------------------------------------------
    Segment operating profit         10,951     13,483        791     25,225
    --------------------------------------------------------------
    Research and development                                           2,136
    Stock-based compensation                                           1,297
    Corporate expenses                                                   154
    Interest                                                              33
    Income taxes                                                       6,526
                                                                    ---------
    Earnings                                                          15,079
    -------------------------------------------------------------------------
    Capital expenditures              8,562     11,790      4,084     24,436
    -------------------------------------------------------------------------
    





For further information:

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


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