Pason Reports Fourth Quarter & Year-End 2008 Results



    
    Stock Exchange: TSX
    Symbol: PSI
    

    CALGARY, Feb. 24 /CNW/ - Pason Systems Inc. ("Pason" or "the Company")
today announced its 2008 fourth quarter and year-end results.

    
    PERFORMANCE DATA
    -------------------------------------------------------------------------
                                Three Months Ended            Years Ended
                                   December 31,               December 31,
                               2008     2007  Change    2008     2007  Change
    -------------------------------------------------------------------------
    (000s, except per share      ($)      ($)    (%)      ($)      ($)    (%)
     data) (unaudited)
    Revenue                  84,617   60,548     40  292,528  236,439     24
    EBITDA(1)                32,415   32,179      1  144,883  128,088     13
      As a % of revenue        38.3     53.1    (28)    49.5     54.2     (9)
      Per share - basic        0.40     0.40      -     1.78     1.61     11
      Per share - diluted      0.40     0.40      -     1.77     1.59     11
    Funds flow from
     operations(1)           31,287   26,462     18  124,726  103,766     20
      Per share - basic        0.38     0.33     15     1.53     1.30     18
      Per share - diluted      0.38     0.33     15     1.52     1.29     18
    Earnings                 12,639   15,503    (18)  61,321   55,052     11
      Per share - basic        0.15     0.19    (21)    0.75     0.69      9
      Per share - diluted      0.15     0.19    (21)    0.75     0.68     10
    Capital expenditures     12,641   19,013    (34)  56,292   76,615    (27)
    Working capital         152,337   77,806     96  152,337   77,806     96
    Total assets            427,016  302,593     41  427,016  302,593     41
    Shareholders' equity    354,589  270,717     31  354,589  270,717     31
    Common shares
     outstanding (No.)
      Basic                  81,799   80,224      2   81,426   79,586      2
      Diluted                81,799   80,853      1   81,936   80,630      2
    Shares outstanding
     end of period           81,456   80,346      1   81,456   80,346      1
    -------------------------------------------------------------------------
    (1) EBITDA is defined as earnings before interest expense, income taxes,
        stock-based compensation expense and depreciation and amortization
        expense. Funds flow from operations is defined as earnings adjusted
        for depreciation and amortization expense, stock-based compensation
        expense, future income taxes and other non-cash items impacting
        operations as presented in the Consolidated Statements of Cash Flows.
        These definitions are not recognized measures under Canadian
        generally accepted accounting principles, and accordingly, may not be
        comparable to measures used by other companies.



    SUMMARY DATA
    -------------------------------------------------------------------------
                                Three Months Ended            Years Ended
                                   December 31,               December 31,
                               2008     2007  Change    2008     2007  Change
    -------------------------------------------------------------------------
    (000s, except per share      ($)      ($)    (%)      ($)      ($)    (%)
      data) (unaudited)
    Revenue
      Drilling recorder
       rentals               38,288   26,239     46  130,645  102,955     27
      Pit volume totalizer
       rentals               16,093   11,927     35   56,385   46,660     21
      Communications rentals  6,952    5,683     22   25,890   22,729     14
      Automatic driller
       rentals                7,157    5,157     39   24,424   19,368     26
      Geological services     4,482    3,227     39   15,068   13,425     12
      Total gas rentals       4,976    3,706     34   17,174   14,171     21
      Choke control rentals   1,265      931     36    4,171    3,425     22
      Service recorder
       rentals                  555      436     27    2,616    2,014     30
      Hazardous gas alarm
       rentals                  742      199    273    2,193      417    426
      Mobilization income     2,418    1,818     33    8,546    7,609     12
      Other Income            1,206      772     56    4,012    2,196     83
      Interest income           483      453      7    1,404    1,470     (4)
    -------------------------------------------------------------------------
      Total revenue          84,617   60,548     40  292,528  236,439     24
    -------------------------------------------------------------------------
    Expenses
      Rental services        28,653   18,258     57   96,948   73,862     31
      Geological services     2,602    2,370     10    9,652    9,196      5
      Manufacturing and
       distribution             180      878    (79)   2,683    2,636      2
      Research and
       development            3,522    3,074     15   12,888    9,566     35
      Corporate services      1,993    1,863      7    5,977    5,729      4
      Local administration    1,946    2,086     (7)   7,273    6,979      4
      Stock-based
       compensation           3,549    1,267    180    7,525    5,248     43
      Interest                   20       27    (26)     209      143     46
      Depreciation and
       amortization          16,339    7,466    119   55,719   42,797     30
    -------------------------------------------------------------------------
      Total expenses         58,804   37,289     58  198,874  156,156     27
    -------------------------------------------------------------------------
    Other expenses (income)  13,306     (160)     -   12,224      383      -
    -------------------------------------------------------------------------
    Earnings (after taxes)   12,639   15,503    (18)  61,321   55,052     11
    -------------------------------------------------------------------------
      Per share - basic        0.15     0.19    (21)    0.75     0.69      9
    -------------------------------------------------------------------------
    Funds flow from
     operations(1)           31,287   26,462     18  124,726  103,766     20
    -------------------------------------------------------------------------
      Per share - basic        0.38     0.33     15     1.53     1.30     18
    -------------------------------------------------------------------------
    Margins
      Rental services           64%      68%     (6)     65%      67%     (3)
    -------------------------------------------------------------------------
      Geological services       42%      27%     56      36%      32%     13
    -------------------------------------------------------------------------
    (1) For the purposes of funds flow per share calculations, funds flow
        from operations is defined as earnings adjusted for depreciation and
        amortization expense, stock-based compensation expense, future income
        taxes and other non-cash items impacting operations as presented in
        the Consolidated Statements of Cash Flows. This definition is not a
        recognized measure under Canadian generally accepted accounting
        principles, and accordingly, may not be comparable to measures used
        by other companies.
    

    Mr. Jim Hill, President and CEO of Pason, reports that the Company
finished the fourth quarter of 2008 with a year-over-year revenue increase of
40% to $84.6 million with earnings down 18% to $12.6 million or $0.15 per
diluted share after having deducted a US$14.3 million pre-tax charge for the
potential payment of an automatic driller patent infringement judgment against
the Company. For the year ended December 31, 2008, revenue was up 24% from
2007 to $292.5 million and earnings for the year increased 11% to $61.3
million or $0.75 per diluted share. Prior to recording the automatic driller
provision, the Company had a record year in all financial metrics. Return on
shareholders' equity for the year was 20%.
    Canadian segment operating profit for the fourth quarter increased 2% to
$13.2 million from the $13.0 million recorded in 2007. Revenue per industry
drilling day was flat in the fourth quarter of 2008 at $785 versus $788 in the
prior year.
    Fourth quarter segment operating profit from United States operations
totaled $20.7 million compared to $16.2 million in 2007. This 28% increase was
due to increased product rentals per well site and improvements in geological
services margins. Fourth quarter revenue per industry drilling day increased
54% to $291 from $189 recorded a year ago, or US$240, up 24% from US$193 in
2007. Geological services provided a record margin contribution of $1.9
million versus the $0.9 million recorded a year ago.
    International segment profit was flat at $1.1 million for the quarter,
the same amount recorded in 2007 due to a change in the profit splitting
arrangement with our Latin American partner. In the fourth quarter of 2008,
the Company merged its Mexican operations under its South American partner to
form a new Latin American business headquartered in Bogota, Colombia. In
Mexico, the Company's EDR was installed on 42 rigs at the end of 2008 versus
20 a year ago due to an expansion of integrated service products from the
national oil company, Pemex. In Australia, instrumentation equipment was
installed on 20 rigs at year end versus 8 rigs in 2007.
    The outlook for 2009 clearly indicates a difficult year for all oilfield
service companies. The Canadian rig count is off 30% this winter from 2008
while the U.S. rig count has declined by 35% from its 2008 high. Most industry
analysts, including Pason, had forecast a U.S. rig count bottom at about 1,200
rigs but that level has now been reached and the rigs are still stacking so
clearly the bottom will be lower. Most customers are in a survival mode and
are formally demanding price reductions, which leaves little option for any
service company if they do not wish to risk losing significant market share.
Pason will be reducing prices on average 13.5% effective March 1st in the
United States and 10% effective April 1st in Canada. The Canadian price
reduction should be mitigated by the addition of new products such that
average revenue per rig should be effectively unchanged. Reduced rig counts
and prices will impact Pason's profitability despite ongoing efforts to reduce
costs. Unfortunately for Pason, where its field costs are all fixed, in the
short term, the leverage that benefits the Company in a rising market, works
against its profitability in a declining market. Management is actively
working to adjust Pason's cost structure to mitigate the financial impact of
the industry downturn. While the prognosis for earnings this year is poor,
Pason still expects to generate positive cash flow and with no debt and
currently $150 million of working capital, the Company has the financial
staying power to weather a lengthy downturn without sacrificing its capacity
to respond swiftly when the drilling market inevitably rebounds. In the
interim, Pason continues to invest in new products and upgrades to its
existing offerings.

    Pason Systems Inc. is the world's largest provider of rental oilfield
instrumentation systems that are designed and manufactured for use on
land-based drilling and service rigs. Pason offers a tightly integrated
package of complex services including data acquisition, wellsite reporting
software, remote communications and Internet information management tools.
Common shares of Pason Systems Inc. are listed for trading on the Toronto
Stock Exchange under the ticker symbol PSI. For additional information, visit
Pason's website at www.pason.com.

    For additional information, the Company's 2008 Management Discussion and
Analysis ("MD&A") and Audited Consolidated Financial Statements have been
posted on SEDAR.
    A conference call to review the 2008 fourth quarter and year-end results
has been scheduled for 9:00 a.m. (Calgary time) on Wednesday, February 25,
2009. The conference call dial-in number is 1-800-733-7560. Seven-day replay
to March 4, 2009 is 1-877-289-8525. Pass Code 21293375 followed by the number
sign.
    Shareholders are also invited to attend the Company's Annual General
Meeting on Monday, May 11, 2009 at 3:30 p.m. (Calgary time) in the offices of
Pason Systems Inc., 6120 Third Street S.E., Calgary, Alberta.

    Certain information regarding the Company contained herein may constitute
forward-looking statements under applicable securities laws. Such statements
are subject to known or unknown risks and uncertainties that may cause actual
results to differ materially from those anticipated or implied in the
forward-looking statements.



    
    CONSOLIDATED BALANCE SHEETS

    -------------------------------------------------------------------------
    December 31,                                             2008       2007
    -------------------------------------------------------------------------
    (000s)                                                     ($)        ($)

    ASSETS
    Current
      Cash, net of bank indebtedness                      100,610     23,159
      Accounts receivable                                  78,568     73,454
      Prepaid expenses                                      2,023      1,987
      Income taxes recoverable                             12,539      2,652
      Future income tax assets                              9,153      1,023
    -------------------------------------------------------------------------
                                                          202,893    102,275
    Investments                                             2,802      3,000
    Capital assets                                        207,342    192,620
    Deferred development costs                              8,979      4,698
    Future income tax asset                                5,000          -
    -------------------------------------------------------------------------
                                                          427,016    302,593
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    LIABILITIES
    Current
      Accounts payable and accrued liabilities             38,123     17,647
      Current portion of stock-based compensation
       liability                                            2,656          -
      Dividends payable                                     9,777      6,822
    -------------------------------------------------------------------------
                                                           50,556     24,469
    Stock-based compensation liability                      1,475          -
    Future income tax liabilities                          20,396      7,407
    -------------------------------------------------------------------------
                                                           72,427     31,876
    -------------------------------------------------------------------------
    SHAREHOLDERS' EQUITY
    Share capital                                          71,517     51,505
    Contributed surplus                                     8,834     10,323
    Accumulated other comprehensive income (loss)           2,450    (29,710)
    Retained earnings                                     271,788    238,599
    -------------------------------------------------------------------------
                                                          354,589    270,717
    -------------------------------------------------------------------------
                                                          427,016    302,593
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS

                                    Three Months Ended           Years Ended
                                           December 31,          December 31,
    -------------------------------------------------------------------------
                                       2008       2007       2008       2007
    -------------------------------------------------------------------------

    (000's, except per share data)       ($)        ($)        ($)        ($)

    Revenue
      Rental revenue                 79,652     56,868    276,056    221,544
      Geological services             4,482      3,227     15,068     13,425
      Interest                          483        453      1,404      1,470
    -------------------------------------------------------------------------
                                     84,617     60,548    292,528    236,439
    -------------------------------------------------------------------------
    Expenses
      Rental services                28,653     18,258     96,948     73,862
      Geological services             2,602      2,370      9,652      9,196
      Manufacturing and distribution    180        878      2,683      2,636
      Research and development        3,522      3,074     12,888      9,566
      Corporate services              1,993      1,863      5,977      5,729
      Local administration            1,946      2,086      7,273      6,979
      Stock-based compensation        3,549      1,267      7,525      5,248
      Interest                           20         27        209        143
      Depreciation and amortization  16,339      7,466     55,719     42,797
    -------------------------------------------------------------------------
                                     58,804     37,289    198,874    156,156
    -------------------------------------------------------------------------
    Earnings before the under
     noted items                     25,813     23,259     93,654     80,283
    -------------------------------------------------------------------------
    Other expenses (income)          13,306       (160)    12,224        383
    -------------------------------------------------------------------------
    Earnings before income taxes     12,507     23,419     81,430     79,900
    -------------------------------------------------------------------------
    Income taxes
      Current                         1,242      5,690     20,082     24,179
      Future                         (1,374)     2,226         27        669
    -------------------------------------------------------------------------
                                       (132)     7,916     20,109     24,848
    -------------------------------------------------------------------------
    Earnings                         12,639     15,503     61,321     55,052
    Retained earnings, beginning
     of period                      275,075    229,918    238,599    196,347
    Dividends                        (9,777)    (6,822)   (17,964)   (12,800)
    Purchase of common shares        (6,149)         -    (10,168)         -
    -------------------------------------------------------------------------
    Retained earnings, end
     of period                      271,788    238,599    271,788    238,599
    -------------------------------------------------------------------------
    Earnings per share
      Basic                            0.15       0.19       0.75       0.69
      Diluted                          0.15       0.19       0.75       0.68
    -------------------------------------------------------------------------



    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

    -------------------------------------------------------------------------
                                    Three Months Ended           Years Ended
                                           December 31,          December 31,
                                       2008       2007       2008       2007
    -------------------------------------------------------------------------
    (000s)                               ($)        ($)        ($)        ($)

    Earnings                         12,639     15,503     61,321     55,052

    Other comprehensive income
     (loss), net of tax
      Foreign currency translation
       adjustment                    24,789      1,028     32,160    (19,357)
    -------------------------------------------------------------------------
    Total comprehensive income       37,428     16,531     93,481     35,695
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    CONSOLIDATED STATEMENTS OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

    -------------------------------------------------------------------------
                                    Three Months Ended           Years Ended
                                           December 31,          December 31,
                                       2008       2007       2008       2007
    -------------------------------------------------------------------------
    (000s)                               ($)        ($)        ($)        ($)

    Accumulated other comprehensive
     loss, beginning of period      (22,339)   (30,738)   (29,710)   (10,353)

    Other comprehensive income
     (loss), net of tax
      Foreign currency translation
       adjustment                    24,789      1,028     32,160    (19,357)
    -------------------------------------------------------------------------
    Accumulated other comprehensive
     income (loss), end of period     2,450    (29,710)     2,450    (29,710)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    CONSOLIDATED STATEMENTS OF CASH FLOWS

                                    Three Months Ended           Years Ended
                                           December 31,          December 31,
    -------------------------------------------------------------------------
                                       2008       2007       2008       2007

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

    Cash flows related to the
     following activities:

    Operating
      Earnings                       12,639     15,503     61,321     55,052
      Adjustments for non-cash
       items:
      Depreciation and amortization  16,339      7,466     55,719     42,797
      Stock-based compensation        2,800      1,267      6,776      5,248
      Future income taxes            (1,374)     2,226         27        669
      Gain on sale of investment          -          -       (999)         -
      Unrealized foreign
       exchange loss                    883          -      1,882          -
    -------------------------------------------------------------------------
                                     31,287     26,462    124,726    103,766
      Changes in non-cash
       working capital               (2,540)    (6,688)    15,031    (18,794)
    -------------------------------------------------------------------------
    Cash flow from operating
     activities                      28,747     19,774    139,757     84,972
    -------------------------------------------------------------------------
    Financing
      Issue of common shares under
       the stock option plan            810      2,251     17,356     11,365
      Purchase of common shares      (6,639)         -    (10,908)         -
      Purchase of stock options      (1,486)         -     (1,486)         -
      Payment of dividends                -          -    (15,009)   (11,881)
    -------------------------------------------------------------------------
                                     (7,315)     2,251    (10,047)      (516)
    -------------------------------------------------------------------------
    Investing
      Additions to capital assets   (10,371)   (18,695)   (52,315)   (76,083)
      Deferred development costs,
       net of investment tax
       credits received              (2,270)      (318)    (3,977)      (532)
      Proceeds on disposal of
       capital assets                    68         15        292        118
      Purchase of investment         (2,802)         -     (2,802)         -
      Proceeds on sale of
       investment                         -          -      4,003          -
      Changes in non-cash
       working capital                1,807     (2,072)    (1,598)    (2,974)
    -------------------------------------------------------------------------
                                    (13,568)   (21,070)   (56,397)   (79,471)
    -------------------------------------------------------------------------
    Effect of exchange rate
     changes on cash                    630       (164)     4,138     (3,683)
    -------------------------------------------------------------------------
    Net increase in cash and
     cash equivalents                 8,494        791     77,451      1,302
    Cash and cash equivalents,
     beginning of period             92,116     22,368     23,159     21,857
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period                  100,610     23,159    100,610     23,159
    -------------------------------------------------------------------------
    Represented by:
      Cash                           90,833     28,112     90,833     28,112
      Cash held in trust              9,777      6,822      9,777      6,822
      Bank indebtedness                   -    (11,775)         -    (11,775)
    -------------------------------------------------------------------------
                                    100,610     23,159    100,610     23,159
    -------------------------------------------------------------------------



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

    Year ended December 31, 2008
    Revenue                         107,753    174,905      9,870    292,528
    Operating costs                  37,378     74,046      2,449    113,873
    Depreciation and amortization    25,202     27,916      2,601     55,719
    -------------------------------------------------------------------------
    Segment operating profit         45,173     72,943      4,820    122,936
    --------------------------------------------------------------
    Research and development                                          12,888
    Stock-based compensation                                           7,525
    Corporate services                                                 5,977
    Manufacturing and distribution                                     2,683
    Interest                                                             209
    Other expenses                                                    12,224
    Income taxes                                                      20,109
    -------------------------------------------------------------------------
    Earnings                                                          61,321
    -------------------------------------------------------------------------
    Total assets                    217,075    191,946     17,995    427,016
    -------------------------------------------------------------------------
    Capital expenditures              5,747     44,523      6,022     56,292
    -------------------------------------------------------------------------

    Year ended December 31, 2007
    Revenue                          95,647    133,147      7,645    236,439
    Operating costs                  32,955     55,726      1,356     90,037
    Depreciation and amortization    22,536     18,818      1,443     42,797
    -------------------------------------------------------------------------
    Segment operating profit         40,156     58,603      4,846    103,605
    --------------------------------------------------------------
    Research and development                                           9,566
    Stock-based compensation                                           5,248
    Corporate services                                                 5,729
    Manufacturing and distribution                                     2,636
    Interest                                                             143
    Other expenses                                                       383
    Income taxes                                                      24,848
    -------------------------------------------------------------------------
    Earnings                                                          55,052
    -------------------------------------------------------------------------
    Total assets                    161,782    128,348     12,463    302,593
    -------------------------------------------------------------------------
    Capital expenditures             31,861     39,309      5,445     76,615
    -------------------------------------------------------------------------


                                                United     Inter-
                                     Canada     States   national      Total
    -------------------------------------------------------------------------

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

    Three Months Ended
     December 31, 2008

    Revenue                          28,209     53,134      3,274     84,617
    Operating costs                   9,310     22,609      1,282     33,201
    Depreciation and amortization     5,695      9,778        866     16,339
    -------------------------------------------------------------------------
    Segment operating profit         13,204     20,747      1,126     35,077
    --------------------------------------------------------------
    Research and development                                           3,522
    Stock-based compensation                                           3,549
    Corporate services                                                 1,993
    Manufacturing and distribution                                       180
    Interest                                                              20
    Other expenses                                                    13,306
    Income taxes                                                        (132)
    -------------------------------------------------------------------------
    Earnings                                                          12,639
    -------------------------------------------------------------------------
    Capital expenditures              3,275      7,644      1,722     12,641
    -------------------------------------------------------------------------

    Three Months Ended
     December 31, 2007
    Revenue                          24,926     33,478      2,144     60,548
    Operating costs                   7,209     14,956        549     22,714
    Depreciation and amortization     4,711      2,283        472      7,466
    -------------------------------------------------------------------------
    Segment operating profit         13,006     16,239      1,123     30,368
    --------------------------------------------------------------
    Research and development                                           3,074
    Stock-based compensation                                           1,267
    Corporate services                                                 1,863
    Manufacturing and distribution                                       878
    Interest                                                              27
    Other income                                                        (160)
    Income taxes                                                       7,916
    -------------------------------------------------------------------------
    Earnings                                                          15,503
    -------------------------------------------------------------------------
    Capital expenditures              3,577     13,342      2,094     19,013
    -------------------------------------------------------------------------
    





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


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890