Pason Reports Fourth Quarter and Year End 2011 Results

CALGARY, Feb. 21, 2012 /CNW/ - Pason Systems Inc. (TSX: PSI) announced today its 2011 fourth quarter and year end results.

Performance Data

  Three Months Ended
December 31,
Year Ended
December 31,
 

2011
2010(1)
Change

2011
2010 (1)
Change
(CDN 000s, except per share data) ($) ($) (%) ($) ($) (%)
Revenue 97,622 73,494 33 333,520 249,562 34
EBITDA (2) 50,700 36,016 41 176,241 117,524 50
  As a % of revenue 51.9 49.0 6 52.8 47.1 12
  Per share - basic 0.62 0.44 40 2.15 1.44 49
  Per share - diluted 0.61 0.44 39 2.13 1.44 48
Funds flow from operations (2) 42,089 27,899 51 145,358 93,973 55
  Per share - basic 0.51 0.34 50 1.78 1.15 54
  Per share - diluted 0.51 0.34 50 1.76 1.15 53
Earnings 31,702 10,525 201 86,223 36,474 136
  Per share - basic 0.39 0.13 200 1.05 0.45 135
  Per share - diluted 0.38 0.13 197 1.04 0.45 131
Capital expenditures and acquisitions 22,951 32,329 (29) 102,951 59,108 74
Working capital 126,605 105,815 20 126,605 105,815 20
Total assets 455,901 402,082 13 455,901 402,082 13
Total long-term debt -- -- -- -- -- --
Shareholders' equity 367,269 309,684 19 367,269 309,684 19
Market capitalization 982,848 1,140,729 (14) 982,848 1,140,729 (14)
Cash dividends declared 0.20 0.17 17 0.38 0.33 15
Common shares outstanding (#)            
  Basic 81,903 81,619 -- 81,851 81,525 --
  Diluted 82,077 82,007 -- 82,572 81,525 --
Shares outstanding end of period (#) 81,904 81,714 -- 81,904 81,714 --
(1) Comparative figures for 2010 have been restated to conform to International Financial Reporting Standards.
(2) EBITDA is defined as earnings before interest expense, income taxes, stock-based compensation expense, depreciation and amortization expense and impairment losses. Funds flow from operations is defined as earnings adjusted for depreciation and amortization expense, impairment losses, stock-based compensation expense, deferred 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 International Financial Reporting Standards, and accordingly, may not be comparable to measures used by other companies.
   

Management's Discussion and Analysis

The following discussion and analysis has been prepared by management as of February 21, 2012, and is a review of the financial condition and results of operations of Pason Systems Inc. (Pason or the Company) based on International Financial Reporting Standards (IFRS) and should be read in conjunction with the Company's consolidated financial statements and accompanying notes.

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.

All financial measures presented in this report are expressed in Canadian dollars unless otherwise indicated.

Overview of the 2011 Fourth Quarter

  Three Months Ended
December 31,
Year Ended
December 31,
  2011 2010 (1) 2009 (1) 2011 2010 (1) 2009 (1)
(000s, except per share data) ($) ($) ($) ($) ($) ($)
Revenue 97,622 73,494 41,013 333,520 249,562 145,861
EBITDA (2) 50,700 36,016 13,620 176,241 117,524 46,651
  As a % of revenue 51.9 49.0 33.2 52.8 47.1 32.0
  Per share - basic 0.62 0.44 0.17 2.15 1.44 0.57
  Per share - diluted 0.61 0.44 0.17 2.13 1.44 0.57
Funds flow from operations(2) 42,089 27,899 12,238 145,358 93,973 41,354
  Per share - basic 0.51 0.34 0.15 1.78 1.15 0.51
  Per share - diluted 0.51 0.34 0.15 1.76 1.15 0.51
Earnings (loss) 31,702 10,525 2,480 86,223 36,474 (5,510)
  Per share - basic 0.39 0.13 0.03 1.05 0.45 (0.07)
  Per share - diluted 0.38 0.13 0.03 1.04 0.45 (0.07)
Total assets 455,901 402,082 373,097 455,901 402,082 373,097
Total long-term debt -- -- -- -- -- --
(1)  Comparative figures for 2010 have been restated to conform to International Financial Reporting Standards. Figures for 2009 are presented in accordance with the Company's previous accounting framework, Canadian generally accepted accounting principles.
(2) EBITDA is defined as earnings before interest expense, income taxes, stock-based compensation expense, depreciation and amortization expense and impairment losses. Funds flow from operations is defined as earnings adjusted for depreciation and amortization expense, impairment losses, stock-based compensation expense, deferred 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 International Financial Reporting Standards, and accordingly, may not be comparable to measures used by other companies.
   

Overall Performance

  Three Months Ended
December 31,
Year Ended
December 31,
  2011 2010 Change 2011 2010 Change
(000s) ($) ($) (%) ($) ($) (%)
Revenue            
  Electronic Drilling Recorder 40,079 30,024 33 134,935 99,857 35
  Pit Volume Totalizer 16,888 13,532 25 58,591 45,610 28
  Communications 12,937 9,547 36 43,579 31,201 40
  Automatic Driller 11,520 8,761 31 39,395 28,567 38
  Total Gas System 6,413 4,846 32 21,306 16,601 28
  Hazardous Gas Alarm System 1,490 789 89 5,258 2,945 79
  Mobilization 2,481 1,956 27 9,523 8,270 15
  Other 5,814 4,039 44 20,933 16,511 27
Total revenue 97,622 73,494 33 333,520 249,562 34

  Canada
  Three Months Ended December 31, Year Ended December 31,
  2011 2010 Change 2011 2010 Change
      (%)     (%)
EDR rental days (#) 40,800 33,700 21 141,200 110,700 28
PVT rental days (#) 37,900 32,700 16 135,400 107,900 25

  United States
  Three Months Ended December 31, Year Ended December 31,
  2011 2010 Change 2011 2010 Change
      (%)     (%)
EDR rental days (#) 100,200 95,100 5 381,700 337,000 13
PVT rental days (#) 70,100 63,500 10 264,200 221,800 19
             

Electronic Drilling Recorder

Consistent with prior years, the Pason Electronic Drilling Recorder ("EDR") remains the Company's prime product. The EDR provides a complete system of drilling data acquisition, data networking and drilling management tools and reports at both the wellsite and customer offices.  The EDR is the base product from which all other rig site instrumentation products are linked. By linking these products, a number of otherwise redundant elements such as data processing, display, storage, and networking are eliminated.  This ensures greater reliability and a more robust system of instrumentation for the customer. The EDR generated a 33% increase in revenue for the fourth quarter of 2011 compared to 2010 and an increase of 35% on a full year basis versus the prior year. These increases are due to increased rig activity in the Company's major markets, price increases in both Canada and the U.S., the Company's purchase of its former Latin American partner in 2010 and expanding demand by customers for EDR peripheral devices.

During 2011, the EDR was installed on 97% of all active land rigs in Canada and approximately 57% of the land rigs in the U.S.

In Canada, until the start of 2011, industry days used to calculate market share were based upon a 24-hour period. As a result, since the adoption of the Company's new billing policy described below, Canada was reporting slightly lower market share figures than was actually the case. Starting in 2011, the industry drilling day definition now recognizes these partial days and brings this method of activity reporting in line with how the Company bills.

In the U.S. the opposite impact is occurring. The Company is tracking EDR rental days under the new partial- billing method, but the industry days that are reported are still calculated on a 24-hour basis. The Company's calculated U.S. market share for 2011 was 57% but management believes this is understated by almost three percentage points due to the inconsistency between Pason's method of tracking rental days and how the industry calculates drilling days.

The method by which the Company bills its customers has impacted both the Canadian and U.S. market share figures. Previously, the Company billed for an entire day's worth of rentals regardless of whether the equipment was activated for the entire 24-hour period or not. To address customer concerns, the Company implemented a change to bill in increments, recognizing that during the initial start up or tear down of a rig the equipment is only utilized a portion of the day.

This partial billing process has been in place in Canada since 2009 and was rolled out to the U.S. market beginning in 2010.

Pit Volume Totalizer

The Pit Volume Totalizer ("PVT") is Pason's proprietary solution for the detection and early warning of "kicks" that are caused by hydrocarbons entering the wellbore under high-pressure and expanding as they migrate to the surface.  Revenue increases for this product were in line with the rise in drilling days in North America. During 2011, the PVT was installed on 96% of rigs with a Pason EDR in Canada and 69% in the U.S., compared to 97% and 66%, respectively, in 2010.

Communications

Pason's communications rental revenue is derived from the Company's automatic aiming satellite system.  This system provides high-speed wellsite communications for email and web application management tools.  Pason displays all data in standard forms on its Internet DataHub, although if customers require greater analysis or desire to have the information transferred to another supplier's database, data is available for export from the Pason DataHub using WITSML (a specification for transferring data amongst oilfield service companies, drilling contractors and operators).  During 2010, the Company began complementing its satellite equipment with High Speed Packet Access ("HSPA"), a high speed wireless ground system that requires  lower capital cost, less service and lower cost per internet kilobyte, benefiting company margins. In Canada, HSPA has been installed on 90% of the rigs, and the majority of the rigs running will benefit from the investment in HSPA given the growth in cellular coverage. In the U.S. field coverage tests for HSPA are under way.

Total Gas System and Gas Analyzer

The Pason Total Gas System ("TGAS") , which is being replaced by the Company's new Gas Analyzer, measures the total hydrocarbon gases (C1 through C5) exiting the wellbore, and then calculates the lag time to show the formation depth where the gases were produced.  The new Gas Analyzer increases this functionality to include the actual break down by type of gas and also provides chromatograph features. For the year ended Decemer 31, 2011, both of these systems combined were installed on 43% of Canadian and 17% of U.S. land rigs operating with a Pason EDR system. The market penetration in both countries is an increase of approximately two percentage points over 2010 levels.

Automatic Driller

Pason's Automatic Driller ("ADR") is used to maintain constant weight on the drill bit while a well is being drilled. During 2011, Pason's ADR was installed on 78% of Canadian and 47% of U.S. land rigs operating with a Pason EDR system compared to 77% and 38%, respectively, in 2010.

Hazardous Gas Alarm System

Pason's Hazardous Gas Alarm System monitors both lower explosive limit gases (LEL) and H2S where both readings and an alarm system are integrated with the EDR. Pason's Hazardous Gas Alarm System was installed on 18% of Canadian rigs in 2011, up from 15% for the same period in 2010, and 6% of U.S. land rigs operating with a Pason EDR system, an increase from 3% in 2010.

Discussion of Operations

United States Operations

  Three Months Ended
December 31,
Year Ended
December 31,
  2011 2010 Change 2011 2010 Change
(000s) ($) ($) (%) ($) ($) (%)
Revenue            
  Electronic Drilling Recorder 23,685 20,001 18 84,040 67,042 25
  Pit Volume Totalizer 8,959 8,026 12 32,623 27,561 18
  Communications 5,871 4,404 33 20,399 14,363 42
  Automatic Driller 6,230 4,943 26 21,900 15,776 39
  Total Gas System 2,134 2,021 6 7,906 6,679 18
  Hazardous Gas Alarm System 565 280 102 1,620 701 131
  Mobilization 1,924 1,809 6 6,939 6,938 --
  Other 3,376 1,066 217 7,963 5,857 36
Total revenue 52,744 42,550 24 183,390 144,917 27
Operating costs 20,422 14,108 45 72,204 60,979 18
Depreciation and amortization 5,538 4,525 22 22,535 19,573 15
Segment operating profit 26,784 23,917 12 88,651 64,365 38
             

U.S. segment revenue increased by 24% in the fourth quarter of 2011 over the 2010 comparable period (18% increase when measured in U.S dollars (USD)), which compared with U.S. drilling industry days that were up 18% over the fourth quarter of 2010. For the year, revenue increased 27% versus 2010 results (a 29% increase when measured in USD), compared to an increase in U.S. drilling industry days of 22%.

Revenue was impacted by the following factors:

  • Better pricing. Prices increased by approximately 30% in the second quarter of 2010 and have held steady since. The net impact of average weighted pricing, when comparing the full 12-month period of 2011 to 2010, was to increase revenue by approximately 10% in USD.
  • More products on each rig.  Revenue was increased by more products on each rig, primarily with gains in ADR rentals and customer acceptance of the Company's live rig view and rig data software. Increased product penetration contributed to approximately a 2% revenue gain for 2011.

The factors explained above resulted in the U.S. segment being able to realize an increase in revenue per EDR day during the fourth quarter of $53 (USD$52) from 2010 amounts while the full year increase was $61 (USD$62). These increases are due to the Company's customers requesting additional Pason products on their rigs.

In the fourth quarter of 2011, revenue per industry day was $280 (USD$275) compared to $277 (USD$276) in 2010 and $153 (USD$146) in 2009. The U.S. business unit realized annual revenue per industry day of $266 (USD$272) for 2011, compared to $264 (USD$256) for 2010 and $186 (USD$155) for 2009.

The majority of the increase in "Other" revenue relates to sales realized by 3PS, Inc., the U.S. based company acquired in August of 2011.

Segment profit, as a percentage of revenue, was 51% for the fourth quarter of 2011, compared to 56% realized in 2010 and a loss of 14% in the fourth quarter of 2009.

For 2011, segment profit, as a percentage of revenue, was 48%, compared to 44% generated in 2010 and a loss of 7% realized in 2009.

The benefit of the increase in revenue for the fourth quarter and twelve months ending December 31, 2011, was reduced by increases in operating costs from 2010 levels:

  • An increase in field technician related costs, to support the increase in rig activity, of $1.5 million for the quarter and $6.8 million year to date, mostly attributable to increased staff levels and the costs associated to support such an increase, including vehicle expense and consumable supplies.

  • Year to date net operating expenses of 3PS Inc. of $1.7 million.

  • Increase in depreciation expense for the quarter of $1.0 million and year to date of $3.0 million, due in most part to the continuing increase in capital expenditures as well as accelerating the depreciation rate on the Company's TGAS systems, which are being phased out by the new gas analyzer.

  • Legal costs increased by $0.9 million due to the continuing ADR litigation.

Canadian Operations

  Three Months Ended
December 31,
Year Ended
December 31,
  2011 2010 Change 2011 2010 Change
(000s) ($) ($) (%) ($) ($) (%)
Revenue            
  Electronic Drilling Recorder 13,464 8,916 51 41,130 26,882 53
  Pit Volume Totalizer 6,445 4,968 30 21,649 15,247 42
  Communications 7,233 5,111 42 23,020 16,529 39
  Automatic Driller 4,678 3,543 32 15,175 11,514 32
  Total Gas System 3,405 2,583 32 11,252 8,064 40
  Hazardous Gas Alarm System 682 425 60 2,603 1,566 66
  Mobilization 198 108 83 781 750 4
  Other 2,018 1,889 7 6,194 5,493 13
Total revenue 38,123 27,543 38 121,804 86,045 42
Operating costs 9,149 9,462 (3) 36,088 28,870 25
Depreciation and amortization 6,897 5,677 21 25,934 20,884 24
Segment operating  profit 22,077 12,404 78 59,782 36,291 65

Canadian segment revenue rose 38% for the three months ended December 31, 2011, a significant increase over the change in the number of Canadian drilling industry days of 18%. On an annual basis, revenue increased 42% compared to industry days increasing by 22%.

The improvement in revenue for both the fourth quarter and 2011 was due to:

  • An increase in EDR rental days of 21% for the fourth quarter of 2011 and 28% for the full year, compared to the corresponding period in 2010.

  • Improved pricing. Prices were reduced by approximately 20% in the second quarter of 2009 and did not rise again until a 10% price increase was applied in the fourth quarter of 2010. In addition, a price increase was implemented in the fourth quarter of 2011. The net impact of average weighted pricing, when comparing the fourth quarter and year to date 2011 to 2010, was an increase to revenue of approximately 12%.

  • More products on each rig.  Revenue was increased by more products on each rig, primarily with gains in sensors, workstations and sidekick rentals. Increased product penetration contributed to approximately a 3% revenue gain for 2011.

The factors explained above resulted in fourth quarter revenue per industry day of $927 in 2011 compared to $748 in 2010 and $695 in 2009.  For 2011, revenue per industry day was $827, compared to $709 in 2010 and $712 in 2009.

The segment profit for the fourth quarter of 2011 of $22.1 million is significantly higher than the $12.4 million profit in 2010 and a significant improvement over the $7.6 million profit in 2009. During the fourth quarter of 2011, the Canadian business unit was able to reduce its operating costs by $0.3 million over the same period in 2010 and at the same time increase revenue by 38%.

Other factors impacting the fourth quarter of 2011 results include:

  • A price increase applied in October 2011.

  • An increase in the inventory obsolescence reserve of $1.5 million, due to the phasing out of the Company's TGAS system as well as the EDR evolution project. This increase is included in depreciation and amortization expense.

Segment profit, as a percent of revenue, was 49% for 2011, up from 42% when compared to 2010 levels, and a significant improvement from the 24% realized in 2009. The profit for the year was impacted by the following factors:

  • Improvement in the business unit's ability to leverage its cost structure. Rental costs rose 25%, while at the same time revenue increased by 42%. The increase in rental costs is due in large part to higher field costs as a result of the increase in the rig count.

  • Legal costs increased by $1.5 million as a result of the ADR litigation.

  • $1.5 million of net expenses relating to water treatment. The Company disposed of this segment in the fourth quarter of 2011.

  • Increase in the inventory obsolescence reserve of $3.4 million.

  • Increase in repair costs of $0.7 million.

International Operations

  Three Months Ended
December 31,
Year Ended
December 31,
  2011 2010 Change 2011 2010 Change
(000s) ($) ($) (%) ($) ($) (%)
Revenue            
  Electronic Drilling Recorder 2,930 1,107 165 9,765 5,933 65
  Pit Volume Totalizer 1,484 538 176 4,319 2,802 54
  Communications (167) 32 (622) 160 309 (48)
  Automatic Driller 612 275 123 2,320 1,277 82
  Total Gas System 874 242 261 2,148 1,858 16
  Hazardous Gas Alarm System 243 84 189 1,035 678 53
  Mobilization 359 39 821 1,803 582 210
  Other 420 1,084 (61) 6,776 5,161 31
Total revenue 6,755 3,401 99 28,326 18,600 52
Operating costs 6,791 3,431 98 19,758 12,911 53
Depreciation and amortization 3,903 2,647 47 10,096 8,651 17
Segment operating loss (3,939) (2,677) 47 (1,528) (2,962) (48)
             

.

Revenue in the International operations improved 99% from the fourth quarter of 2010, while the operating loss increased by $1.3 million. For 2011, revenue increased by 52% while the operating loss improved by $1.4 million from 2010. At the close of 2010, the Company purchased the distribution rights and operating companies of its Latin American partner. This purchase increased revenue and costs in 2011 relative to 2010 as the Company now benefits from 100% of the operating results.

A number of factors influenced these results:

  • The South American operations recorded significant expenses in 2011 due to the change in the business model that was implemented as a result of the change in ownership that occurred when the company purchased the distribution rights. One-time costs were incurred relating to changing the ownership of the assets to comply with local laws and regulations as well as integration costs. These one-time costs, a majority of which were incurred in the fourth quarter of 2011, exceeded $2.0 million.

  • Drilling activity in Mexico continued to increase in 2011 from the lows seen in the second half of 2010. Full year 2011 revenue was up approximately 29% over 2010 results and the business unit was able to record operating profit of $0.9 million, an increase of 10% over 2010 levels.

  • Results in Australia continue to improve with the operation posting record revenues in Q4 2011.  The business continues to benefit from increased drilling activity in Australia. This, combined with cost control initiatives, resulted in this segment generating $1.0 million of operating profit for the full year 2011 compared to $0.5 million for 2010.

  • The Company's International segment includes Pason Offshore, which represents the offshore portion of the business acquired from Petron. In 2011, a decision was made to only offer Pason equipment for rent in lieu of Petron systems, which were historically sold.  Progress has been made with Pason equipment being installed on offshore rigs both in the Gulf of Mexico and internationally.  Offshore operating results have increased by approximately $1.9 million for the year ending December 31, 2011, as compared to the same period in 2010.

Q4 2011 versus Q4 2010

The active rig count in both Canada and the U.S. improved over the fourth quarter of 2010, resulting in gains in all of the Company's key metrics. Revenue increased 33%, while EBITDA increased by 41% and funds flow from operations was up 51%.

Net earnings increased to $31.7 million or $0.39 per share compared to $10.5 million or $0.13 per share in the fourth quarter of 2010. The fourth quarter consolidated results were impacted by the following items:

  • Increase in depreciation expense of $3.5 million, attributable mostly to increased capital expenditures, the accelerated depreciation on the Company's TGAS systems, and an increase in the inventory obsolescence reserve.

  • Increase in research and developments costs of $1.8 million as the Company hires additional staff to support its EDR evolution project.

  • Corporate services costs primarily relate to personnel located in the corporate headquarters who directly support the Company's field operations and perform other corporate functions.  The increase in corporate operating expenses from 2010 of $0.9 million is mainly due to higher expenses as a result of more resources dedicated to the Company's growth strategy.

  • Stock-based compensation decreased by $7.0 million compared to the fourth quarter of 2010 due to a reduction in the Company's stock price, which impacts the pricing under the Black-Scholes pricing model.

  • Gains and losses from foreign exchange changes relating to monetary assets and liabilities must be taken into earnings in the period in which they occurred.  The fluctuation in the exchange rate between the Canadian dollar and U.S dollar resulted in a foreign exchange loss of $0.7 million compared to a loss of $3.4 million in 2010.

  • In 2011, the Company recorded an impairment loss against its U.S water treatment assets of $2.8 million. In the fourth quarter of 2010, the Company recorded an impairment loss against its Offshore business unit of $5.6 million.

  • The effective tax rate for 2011 of 7%, compared to a rate of 20% in 2010, is a result of a change in the relative amounts of taxable income earned in each respective tax jurisdiction combined with prior year adjustments flowing through the current quarter provision. Taxable income increased year over year in lower rate jurisdictions.

Q4 2011 versus Q3 2011

Revenue was higher in the fourth quarter of 2011 versus the third quarter due to an increase in drilling days in both the Canadian and U.S. markets. Operating profit of $44.9 million in the fourth quarter exceeded the third quarter results by $5.2 million, due mostly to the combination of increased rig activity and the Company's ability to leverage its cost structure, which is largely fixed in nature.

The Canadian business unit realized a profit of $22.1 million, compared to $16.4 million in the third quarter of 2011. Revenue was up 13% while operating profit increased by $5.7 million.

The U.S. business unit operating profit of $26.8 million was up $4.5 million compared to the results achieved in the third quarter of 2011. Revenue was up 10% while operating profit, as a percentage of revenue, was 51% versus 46% in the previous quarter.

Other items affecting the results of the fourth quarter of 2011 as compared to the third quarter of 2011 include the following items:

  • In the fourth quarter, an impairment loss was recorded against the Company's U.S water treatment assets of $2.8 million.

  • Increase in research and developments costs of $1.0 million, as the Company invests in maintaining and upgrading its product offerings.

  • Increase in costs in Latin America relating to integration and logistic costs of $1.5 million.

  • Increase in foreign exchange expense of $6.9 million.

  • Reduction in the effective tax rate of approximately 14%.

Fourth Quarter & Year End Conference Call

Pason will be conducting a conference call for interested analysts, brokers, investors and media representatives to review its fourth quarter and annual results at 9:00 a.m. (Calgary time) Thursday, February 23, 2012.  The conference call dial-in number is 1-888-231-8191 or 1-647-427-7450.  You can access the 7-day replay by dialing 1-855-859-2056 or 416-849-0833 password 31089821.

Pason's common shares trade on the Toronto Stock Exchange under the symbol PSI.  Additional information, including the Company's Annual Report and Annual Information Form for the year ended December 31, 2011, is available on SEDAR at www.sedar.com or on the Company's website at www.pason.com.

Shareholders are also invited to attend the Company's Annual General Meeting on Tuesday, May 8, 2012, at 3:30 pm at the offices of Pason Systems Inc., 6120 Third Street S.E., Calgary, Alberta.

Consolidated Balance Sheets

         
As at December 31,   2011          2010
(CDN 000s)   ($)   ($)
Assets        
Current        
  Cash and cash equivalents   104,993   110,400
  Trade and other receivables   102,321   79,880
  Prepaid expenses   1,970   1,489
  Income taxes recoverable   --   --
  Total current assets   209,284   191,769
Non-current        
  Property, plant and equipment   183,007   161,882
  Intangible assets   58,071   38,588
  Deferred tax assets   5,539   9,843
  Total non-current assets   246,617   210,313
Total assets   455,901   402,082
Liabilities and equity        
Current        
  Trade payables, accruals and provisions   55,211   51,398
  Income taxes payable   5,318   9,021
  Stock-based compensation liability   5,770   11,645
  Dividend payable   16,380   13,890
  Total current liabilities   82,679   85,954
Non-current        
  Stock-based compensation liability   1,030   1,360
  Deferred tax liabilities   4,923   5,084
  Total non-current liabilities   5,953   6,444
Equity        
  Share capital   77,613   75,040
  Employee benefits reserve   12,927   13,228
  Foreign currency translation reserve   (5,835)   (6,048)
  Retained earnings   282,564   227,464
  Total equity   367,269   309,684
Total liabilities and equity   455,901   402,082
         
         

Consolidated Statements of Operations

    Three Months Ended
December 31,
Year Ended
December 31,
    2011      2010 2011 2010
(CDN 000s, except per share data)   ($) ($) ($) ($)
Revenue          
  Equipment rentals and other   97,622 73,494 333,520 249,562
Operating expenses          
  Rental services   31,264 24,824 111,364 94,299
  Local administration   5,098 2,177 16,686 8,461
  Depreciation and amortization   16,338 12,849 58,565 49,108
    52,700 39,850 186,615 151,868
           
Operating profit   44,922 33,644 146,905 97,694
Other expenses          
  Research and development   5,371 3,561 17,366 16,472
  Corporate services   3,816 2,945 12,975 9,309
  Stock-based compensation   (2,561) 4,393 1,309 11,233
  Manufacturing and distribution   683 534 1,601 1,450
  Foreign exchange and other   690 3,437 (2,713) 2,047
  Impairment loss   2,780 5,575 4,580 6,656
    10,779 20,445 35,118 47,167
           
Income before income taxes   34,143 13,199 111,787 50,527
  Income taxes   2,441 2,674 25,564 14,053
Net income   31,702 10,525 86,223 36,474
Earnings per share          
  Basic   0.39 0.13 1.05 0.45
  Diluted   0.38 0.13 1.04 0.45
             
             

Consolidated Statements of Cash Flows

    Three Months Ended
December 31,
Year Ended
December 31,
    2011 2010 2011 2010
(CDN 000s)   ($) ($) ($) ($)
Cash flows from operating activities          
  Net income   31,702 10,525 86,223 36,474
Adjustment for non-cash items:          
  Depreciation and amortization   16,338 12,849 58,565 49,108
  Impairment loss   2,780 5,575 4,580 6,656
  Stock-based compensation   (3,048) 2,839 (2,112) 7,109
  Deferred income taxes   (6,660) (5,783) 1,329 (5,771)
  Unrealized foreign exchange loss (gain)   977 1,894 (3,227) 397
    42,089 27,899 145,358 93,973
Movements in working capital          
  Increase in  trade and other receivables   (6,376) (4,775) (19,896) (35,010)
  Decrease (increase) in prepaid expenses   2,481 279 (446) (112)
  Increase in income taxes payable/recoverable   3,448 9,026 13,819 13,450
  (Decrease) increase in trade payables, accruals and provisions   (221) (5,538) 5,444 6,248
  (Decrease) increase in stock-based compensation liability   (3,524) (1,878) (732) 639
  Effects of exchange rate changes   (46) (1,489) 832 1,667
    (4,238) (4,375) (979) (13,118)
Cash generated from operating activities   37,851 23,524 144,379 80,855
  Income tax paid   (1,400) -- (18,050) (1,500)
Net cash from operating activities   36,451 23,524 126,329 79,355
Cash flows (used in) from financing activities          
  Proceeds from issuance of common shares under the option plan   33 2,538 2,265 2,736
  Purchase of stock options   (89) (1,849) (3,355) (1,854)
  Payment of dividends   -- -- (28,631) (24,448)
Net cash (used in) from financing activities   (56) 689 (29,721) (23,566)
Cash flows used in investing activities          
  Additions to property, plant and equipment   (20,647) (23,924) (71,382) (45,419)
  Additions to intangibles   (184) -- (184) (358)
  Deferred development costs   (1,279) (2,290) (6,975) (4,387)
  Proceeds on disposal of property, plant and equipment   505 (22) 505 72
  Business acquisitions, net of cash acquired   (841) (6,115) (24,410) (8,944)
  Changes in non-cash working capital   2,248 7,266 (520) 5,973
Net cash used in investing activities   (20,198) (25,085) (102,966) (53,063)
Effect of exchange rate changes on cash   (1,096) (1,540) 951 (2,175)
Net increase (decrease) in cash and cash equivalents   15,101 (2,412) (5,407) 551
Cash and cash equivalents, beginning of year   89,892 112,812 110,400 109,849
Cash and cash equivalents, end of year   104,993 110,400 104,993 110,400
           
           

Segmented Information

Three months ended December 31, 2011 Canada United States International Total
  ($) ($) ($) ($)
Revenue 38,123 52,744 6,755 97,622
Operating costs 9,149 20,422 6,791 36,362
Depreciation and amortization 6,897 5,538 3,903 16,338
Segment operating profit (loss) 22,077 26,784 (3,939) 44,922
Research and development       5,371
Corporate services       3,816
Stock-based compensation       (2,561)
Manufacturing and distribution       683
Foreign exchange and other       690
Impairment loss       2,780
Income taxes       2,441
Net income       31,702
Capital expenditures and acquisitions 10,270 11,844 837 22,951
Goodwill -- 18,823 2,600 21,423
Intangible assets 20,188 11,890 4,570 36,648
Segment assets 149,453 243,423 63,025 455,901
Segment liabilities 64,194 15,433 9,005 88,632
         
Three months ended December 31, 2010        
         
Revenue 27,543 42,550 3,401 73,494
Operating costs 9,462 14,108 3,431 27,001
Depreciation and amortization 5,677 4,525 2,647 12,849
Segment operating profit (loss) 12,404 23,917 (2,677) 33,644
Research and development       3,561
Corporate services       2,945
Stock-based compensation       4,393
Manufacturing and distribution       534
Foreign exchange and other       3,437
Impairment loss       5,575
Income taxes       2,674
Net income       10,525
Capital expenditures and acquisitions 12,022 10,859 9,448 32,329
Goodwill -- 5,676 2,600 8,276
Intangible assets 13,482 6,070 10,760 30,312
Segment assets 169,309 163,483 69,290 402,082
Segment liabilities 63,223 15,421 13,754 92,398

Year ended December 31, 2011 Canada United States International Total
  ($) ($) ($) ($)
Revenue 121,804 183,390 28,326 333,520
Operating costs 36,088 72,204 19,758 128,050
Depreciation and amortization 25,934 22,535 10,096 58,565
Segment operating profit (loss) 59,782 88,651 (1,528) 146,905
Research and development       17,366
Corporate services       12,975
Stock-based compensation       1,309
Manufacturing and distribution       1,601
Foreign exchange and other       (2,713)
Impairment loss       4,580
Income taxes       25,564
Net income       86,223
Capital expenditures and acquisitions 29,488 64,249 9,214 102,951
Goodwill -- 18,823 2,600 21,423
Intangible assets 20,188 11,890 4,570 36,648
Segment assets 149,453 243,423 63,025 455,901
Segment liabilities 64,194 15,433 9,005 88,632
         
         
Year ended December 31, 2010        
         
Revenue 86,045 144,917 18,600 249,562
Operating costs 28,870 60,979 12,911 102,760
Depreciation and amortization 20,884 19,573 8,651 49,108
Segment operating profit (loss) 36,291 64,365 (2,962) 97,694
Research and development       16,472
Corporate services       9,309
Stock-based compensation       11,233
Manufacturing and distribution       1,450
Foreign exchange and other       2,047
Impairment loss       6,656
Income taxes       14,053
Net income       36,474
Capital expenditures and acquisitions 18,192 22,545 18,371 59,108
Goodwill -- 5,676 2,600 8,276
Intangible assets 13,482 6,070 10,760 30,312
Segment assets 169,309 163,483 69,290 402,082
Segment liabilities 63,223 15,421 13,754 92,398
         
         

Pason Systems Inc.

Pason Systems Inc. is a leading provider of instrumentation systems to land-based and offshore drilling rigs worldwide. The company's rental solutions, which include data acquisition, wellsite reporting, remote communications, and web-based information management, maximize rig uptime, improve work efficiency, and minimize operating costs. Pason's common shares trade on the Toronto Stock Exchange under the symbol PSI.

Certain information regarding the Company contained herein may constitute forward-looking information under applicable securities law.  The words "anticipate", "expect", "believe", "may", "should", "will", "estimate", "project", "outlook", "forecast" or other similar words are used to identify such forward-looking information and statements.  Forward-looking statements in this document may include statements, express or implied regarding the anticipated business prospects and financial performance of Pason; expectations or projections about future strategies and goals for growth and expansion; expected and future cash flows and revenues; and expected impact of future commitments.  These forward-looking statements are based upon various underlying factors and assumptions, including the state of the economy and the oil and gas exploration and production business, in particular; the Company's business prospects and opportunities; and estimates of the financial and operational performance of Pason.

Forward-looking information and 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 information and statements.  Risk factors that could cause actual results or events to differ materially from current expectations include, among others, the ability of Pason to successfully implement its strategic initiatives and whether such strategic initiatives will yield the expected benefits, the operating performance of Pason's assets and businesses, the price of energy commodities, competitive factors in the energy industry, changes in laws and regulations affecting Pason's businesses, technological developments, and general economic conditions.

Readers are cautioned not to place undue reliance on forward-looking statements as there can be no assurance that the plans, intentions or expectations upon which they are placed will occur.  Such forward looking statements, although considered reasonable by management as of the date hereof, may prove to be incorrect and actual results may differ materially from those anticipated.  Forward-looking statements contained in this press release are expressly qualified by this cautionary statement.

Additional information on risks and uncertainties and other factors that could affect Pason's operations or financial results are included in Pason's reports on file with the Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com or through Pason's website www.pason.com).  Furthermore, any forward looking statements contained in this news release are made as of the date of this news release, and Pason does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by securities law. 

 

SOURCE Pason Systems Inc.

For further information:

about Pason Systems Inc., visit the company's website at www.pason.com or contact:

Marcel Kessler 
President and CEO
403-301-3400
marcel.kessler@pason.com

David Elliott
Chief Financial Officer
403-301-3441
david.elliott@pason.com


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