Pason Systems Inc. reports first quarter earnings



    
    Stock Exchange: TSX
    Symbol: PSI
    

    CALGARY, May 4 /CNW/ - Pason Systems Inc. ("Pason" or "the Company")
today announced its results for the three-month period ended March 31, 2009.

    
    Performance Data

    -------------------------------------------------------------------------
    Three Months Ended March 31,                    2009      2008    Change
    -------------------------------------------------------------------------
    (000s, except per share data) (unaudited)         ($)       ($)       (%)

    Revenue                                       54,175    73,253       (26)
    EBITDA(1)                                     23,776    43,274       (45)
      As a % of revenue                             43.9      59.1       (26)
      Per share - basic                             0.29      0.53       (45)
      Per share - diluted                           0.29      0.53       (45)
    Funds flow from operations(1)                 18,685    34,907       (46)
      Per share - basic                             0.23      0.43       (47)
      Per share - diluted                           0.23      0.43       (47)
    Earnings                                       4,916    20,866       (76)
      Per share - basic                             0.06      0.26       (77)
      Per share - diluted                           0.06      0.26       (77)
    Capital expenditures                           5,711    12,604       (55)
    Working capital                              172,637   107,954        60
    Total assets                                 425,646   333,246        28
    Shareholders' equity                         367,461   306,590        20
    Common shares outstanding (No.)
      Basic                                       81,461    80,580         1
      Diluted                                     81,461    80,674         1
    Shares outstanding end of period              81,467    81,001         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.
    

    President's Message

    For the first quarter of what will undoubtedly be a very challenging
year, Pason saw all of its financial metrics decline from the record fourth
quarter in 2008. Revenue decreased 26% from the prior year to $54.2 million,
funds flow from operations declined by 46% to $18.7 million and net earnings
fell a much larger 76% to $4.9 million. Earnings per diluted share were $0.06
compared to $0.26 in the first quarter of 2008.
    Rapidly declining drilling activity resulting in fewer days and
competitive price pressure, compounded by Pason's largely fixed cost
structure, all contributed to this substantial reduction in profitability. The
explanation for the much greater decline in profitability as compared to cash
flow is that although Pason's activity in Canada and United States was down
approximately 35%, consolidated depreciation actually increased $3.2 million
or 25%. Our depreciation is largely declining balance or time dependent rather
than activity dependent so we incur proportionately higher depreciation
charges in periods of low activity. Profitability was further eroded when we
reduced prices in the U.S. during the quarter and repeated this action in
Canada beginning in the second quarter. The decision to roll back prices was
disappointing but necessary as this particular downturn in the oil and gas
service industry is the most severe that we have experienced in our company
history. The demands for cost reductions from our customers came from their
most senior managers and there was no time to debate quality. Prices simply
had to be reduced or we faced significant loss of business. Late in the
quarter, we reduced our headcount by 15% and incurred $2.0 million in
severance payments. Our cash expenses were down $0.3 million over the first
quarter of 2008 but, of greater note, they were down $11.5 million when
compared to the fourth quarter of 2008 and we expect further declines in the
second quarter as well.
    Canadian first quarter segment operating profit fell by 57% to $9.0
million from $21.1 million in 2008 and by 32% from the $13.2 million earned in
the previous quarter. Our revenue per industry day declined slightly to $770
from $784 in the prior year while industry days dropped 38% for the quarter.
While our revenue per industry day will be impacted by price declines of
approximately 10% in the second quarter we hope to recover some of that loss
with our new directional drilling facilitation product, which will be
commercial in that period. In the United States, the rig count has fallen by
over 1,000 rigs from its October 2008 high and continues to trend down. The
U.S. first quarter segment operating profit fell 74% to $3.6 million versus
$13.8 million in 2008 and 83% from the record quarter earnings of $20.7
million generated just the quarter before. Our electronic drilling recorder
days dropped 33% compared to last year and 44% sequentially with the fourth
quarter. Industry drilling days were down 24% year over year. Our revenue per
industry day, in Canadian dollars shows a 13% improvement from $207 to $233,
which is completely due to the foreign exchange effect of the Canadian dollar
significantly declining against the U.S. dollar. In U.S. dollars, our revenue
per industry day actually fell 10%.
    Our International segment, which is substantially Latin America, had
mixed results. Activity in South America and primarily Argentina followed a
similar reduction to that of North America. However, our activity in Mexico
tripled over the prior year. This resulted in significant equipment shipments
to Mexico while much of our equipment was idled elsewhere in South America.
Latin American customs and duty regulations make it difficult to import used
equipment or to transfer from one country to another. Despite increased
revenue, restructuring costs of $0.8 million in Mexico, higher operating costs
largely from freight and importation fees, plus higher depreciation all
contributed to a decline in segment profit from $1.1 million to a break even
level.
    Clearly the combined results of extremely low natural gas prices,
relatively low oil prices and reduced bank credit for our customers will
continue to negatively impact drilling activity in the near term. The timing
for a drilling resurgence is less certain. The success of the North American
shale plays in raising gas production has contributed to the present gas
surplus. The future gas supply rates from these new reserves seem to generate
widely diverging estimates, which compounds the difficulty in predicting when
a turn around might occur. At Pason, we have ample cash reserves to weather
the downturn and in fact added a further $33 million during the quarter,
bringing our total cash balance to $133 million, which represents nearly 80%
of our working capital of $173 million at quarter end.

    
    On behalf of the Board of Directors,

    Jim Hill
    President & Chief Executive Officer
    May 4, 2009
    

    First Quarter Conference Call and Annual General Meeting

    Pason will be conducting a conference call for interested analysts,
brokers, investors and media representatives to review its first quarter
results at 8:00 a.m. (Calgary time) on Tuesday, May 5, 2009. The conference
call dial-in number is 1-800-732-9307. Seven-day replay: 1-877-289-8525 and
enter 21301603 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.

    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.
    Pason's common shares trade on the Toronto Stock Exchange under the
symbol PSI. Additional information on Pason, including the Interim Report to
Shareholders which includes the Management Discussion and Analysis for the
period ended March 31, 2009 is available on the website at www.pason.com.

    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

    -------------------------------------------------------------------------
    As at                                             March 31,  December 31,
                                                          2009          2008
    -------------------------------------------------------------------------
    (000s) (unaudited)                                      ($)           ($)

    Assets
    Current
      Cash, net of bank indebtedness                   133,473       100,610
      Accounts receivable                               51,683        78,568
      Prepaid expenses                                   1,606         2,023
      Income taxes recoverable                          11,123        12,539
      Future income tax assets                          11,998         9,153
    -------------------------------------------------------------------------
                                                       209,883       202,893
    Investment                                           2,883         2,802
    Capital assets                                     199,163       207,342
    Deferred development costs                           9,678         8,979
    Future income tax asset                              4,039         5,000
    -------------------------------------------------------------------------
                                                       425,646       427,016
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Liabilities
    Current
      Accounts payable and accrued liabilities          36,412        38,123
      Current portion of stock-based compensation
       liability                                           834         2,656
      Dividend payable                                       -         9,777
    -------------------------------------------------------------------------
                                                        37,246        50,556
    Stock-based compensation liability                     532         1,475
    Future income tax liabilities                       20,407        20,396
    -------------------------------------------------------------------------
                                                        58,185        72,427
    -------------------------------------------------------------------------
    Shareholders' Equity (Note 2)
    Share capital                                       71,643        71,517
    Contributed surplus                                 11,793         8,834
    Accumulated other comprehensive income               7,321         2,450
    Retained earnings                                  276,704       271,788
    -------------------------------------------------------------------------
                                                       367,461       354,589
    -------------------------------------------------------------------------
                                                       425,646       427,016
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the consolidated financial statements.



    Consolidated Statements of Earnings and Retained Earnings

    -------------------------------------------------------------------------
    Three Months Ended March 31,                          2009          2008
    -------------------------------------------------------------------------
    (000s, except per share data) (unaudited)               ($)           ($)

    Revenue
      Equipment rentals                                 51,896        70,040
      Geological services                                2,043         2,920
      Interest                                             236           293
    -------------------------------------------------------------------------
                                                        54,175        73,253
    -------------------------------------------------------------------------
    Expenses
      Rental services                                   22,002        20,367
      Geological services                                1,999         2,170
      Manufacturing and distribution                        78           775
      Research and development                           3,333         3,493
      Corporate services                                 1,669         1,249
      Local administration                               1,514         1,823
      Stock-based compensation                             378         1,336
      Interest                                               1           110
      Depreciation and amortization                     16,091        12,884
    -------------------------------------------------------------------------
                                                        47,065        44,207
    -------------------------------------------------------------------------
    Earnings before the under noted items                7,110        29,046
    Other (income) expenses                               (196)          102
    -------------------------------------------------------------------------
    Earnings before income taxes                         7,306        28,944
    -------------------------------------------------------------------------
    Income taxes
      Current                                            4,419         8,257
      Future                                            (2,029)         (179)
    -------------------------------------------------------------------------
                                                         2,390         8,078
    -------------------------------------------------------------------------
    Earnings                                             4,916        20,866
    Retained earnings, beginning of period             271,788       238,599
    -------------------------------------------------------------------------
    Retained earnings, end of period                   276,704       259,465
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings per share

      Basic                                               0.06          0.26

      Diluted                                             0.06          0.26
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the consolidated financial statements.



    Consolidated Statements of Comprehensive Income

    -------------------------------------------------------------------------
    Three Months Ended March 31,                          2009          2008
    -------------------------------------------------------------------------
    (000s) (unaudited)                                      ($)           ($)

    Earnings                                             4,916        20,866
    Other comprehensive income, net of tax
      Unrealized gain on investment                          -           850
      Foreign currency translation adjustment            4,871         7,148
    -------------------------------------------------------------------------
    Total comprehensive income                           9,787        28,864
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the consolidated financial statements.



    Consolidated Statements of Accumulated Other Comprehensive Income (Loss)

    -------------------------------------------------------------------------
    Three Months Ended,                               March 31,  December 31,
                                                          2009          2008
    -------------------------------------------------------------------------
    (000s) (unaudited)                                      ($)           ($)

    Accumulated other comprehensive income (loss),
     beginning of period                                 2,450       (22,339)
    Other comprehensive income, net of tax
      Foreign currency translation adjustment            4,871        24,789
    -------------------------------------------------------------------------
    Accumulated other comprehensive income end
     of period                                           7,321         2,450
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the consolidated financial statements.



    Consolidated Statements of Cash Flows

    -------------------------------------------------------------------------
    Three Months Ended March 31,                          2009          2008
    -------------------------------------------------------------------------
    (000s) (unaudited)                                      ($)           ($)

    Cash flows related to the following activities:
    Operating
      Earnings                                           4,916        20,866
      Adjustments for non-cash items:
        Depreciation and amortization                   16,091        12,884
        Stock-based compensation                          (320)        1,336
        Future income taxes                             (2,029)         (179)
        Unrealized foreign exchange loss                    27             -
    -------------------------------------------------------------------------
                                                        18,685        34,907
      Changes in non-cash working capital               31,010          (795)
    -------------------------------------------------------------------------
                                                        49,695        34,112
    -------------------------------------------------------------------------
    Financing
      Issue of common shares under the stock
       option plan                                         105         5,674
      Purchase of stock options                           (163)            -
      Payment of dividends                              (9,777)       (6,822)
    -------------------------------------------------------------------------
                                                        (9,835)       (1,148)
    -------------------------------------------------------------------------
    Investing
      Additions to capital assets                       (4,854)      (12,123)
      Deferred development costs, net of
       investment tax credits received                    (857)         (481)
      Proceeds on disposal of capital assets               124           121
      Changes in non-cash working capital               (2,066)       (2,034)
    -------------------------------------------------------------------------
                                                        (7,653)      (14,517)
    -------------------------------------------------------------------------
    Effect of exchange rate changes on cash                656         1,372
    -------------------------------------------------------------------------
    Net increase in cash and cash equivalents           32,863        19,819
    Cash and cash equivalents, beginning of period     100,610        23,159
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of period           133,473        42,978
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Represented by:
      Cash                                             133,473        48,778
      Bank indebtedness                                      -        (5,800)
    -------------------------------------------------------------------------
    Cash and cash equivalents                          133,473        42,978
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the consolidated financial statements.



    Notes to Interim Consolidated Financial Statements

    Three Months Ended March 31, 2009 and 2008

    (000s, except per share data) (unaudited)

    1.  Significant Accounting Policies

    These interim consolidated financial statements have been prepared in
    accordance with the same accounting policies and methods of computation
    as those outlined in the annual audited financial statements. These
    interim consolidated financial statements do not include all disclosures
    normally provided in annual financial statements and should be read in
    conjunction with the Company's audited annual financial statements for
    the year ended December 31, 2008.

    Significant Accounting Changes

        a. Beginning in the first quarter of 2009, the Company adopted the
           new Section 3064 "Goodwill and Intangible Assets" standard issued
           by the Canadian Institute of Chartered Accountants ("CICA"). The
           new standard establishes guidelines for the recognition,
           measurement, presentation and disclosure of research and
           development ("R&D") costs. This resulted in no significant impact
           on the Company's financial statements.

    Future Changes in Accounting Policies

        b. The CICA issued Section 1601 "Consolidated financial statements".
           This new section will be applicable to financial statements
           relating to the Company's interim and fiscal year beginning on or
           after January 1, 2011. Early adoption is permitted. This section
           establishes standards for the preparation of consolidated
           financial statements. The Company has not yet determined the
           impact of the adoption of this new Section on the Consolidated
           Financial Statements.

        c. Canada's Accounting Standards Board ratified a plan that will
           result in Canadian generally accepted accounting principles
           ("GAAP") being converged with International Financial Reporting
           Standards ("IFRS") by 2011. Management has performed a preliminary
           gap analysis and highlighted areas where its current Canadian
           accounting practices differ form IFRS. Measurement of the impact
           on the Company's consolidated financial statements is ongoing.


    2. Share Capital

    Authorized

    Unlimited number of common shares
    Unlimited number of preferred shares, issuable in series

    Issued

    Common shares
    -------------------------------------------------------------------------
                                                        Shares        Amount
    -------------------------------------------------------------------------
                                                          (No.)           ($)

    Balance, December 31, 2008                          81,456        71,517
      Exercise of stock options                             11           105
      Contributed surplus adjustment on exercise
       of stock options                                      -            21
    -------------------------------------------------------------------------
    Balance, March 31, 2009                             81,467        71,643
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Stock Option Plan

    At March 31, 2009, 5,817 stock options were outstanding for common shares
    at exercise prices ranging from $7.38 to $17.75 per share, expiring
    between 2009 and 2014 as follows:

    -------------------------------------------------------------------------
                                              2009                2008
    -------------------------------------------------------------------------
                                                Weighted            Weighted
                                                 Average             Average
                                         Share  Exercise     Share  Exercise
                                       Options     Price   Options     Price
    -------------------------------------------------------------------------
                                          (No.)       ($)     (No.)       ($)

    Outstanding, beginning of period     6,753     12.88     6,908     11.91
      Granted                               50     12.31         1     15.10
      Exercised                            (44)     9.37      (655)     8.65
      Forfeited                           (942)    13.75      (182)    14.05
    -------------------------------------------------------------------------
    Outstanding, end of period           5,817     12.76     6,072     12.20
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Exercisable, end of period           1,772               2,519
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Available for grant, end of period   2,330               2,028
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    All options are issued at market price and vest over three years. The
    following table summarizes the life of options issued:

    -------------------------------------------------------------------------
    Date of Issuance                                                   Years
    -------------------------------------------------------------------------

    Prior to November 2004                                              5.00
    November 2004 through October 2006                                  3.17
    November 2006 through October 2008                                  3.50
    November 2008 and thereafter                                        5.00

    The following table summarizes information about stock options
    outstanding at March 31, 2009:

    -------------------------------------------------------------------------
                         Options Outstanding          Options Exercisable
    -------------------------------------------------------------------------
                                  Weighted
                                   Average
                                 Remaining  Weighted                Weighted
    Range of                       Contrac-  Average                 Average
    Exercise             Options      tual  Exercise  Exercisable   Exercise
    Prices           Outstanding      Life     Price      (Vested)     Price
    -------------------------------------------------------------------------
    ($)                     (No.)   (Years)       ($)        (No.)        ($)

    7.38 - 11.79             125      0.42      7.84          125       7.84
    11.80 - 12.00          2,357      4.66     11.80            -      11.80
    12.01 - 13.00          1,904      2.24     12.18          643      12.18
    13.01 - 17.75          1,431      0.91     15.55        1,004      15.61
    -------------------------------------------------------------------------
                           5,817      2.85     12.76        1,772      13.82
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The total number of options outstanding must not exceed 10% of the total
    common shares outstanding.

    All stock options granted to employees and directors were accounted for
    using the fair value method estimated on the date of grant using the
    Black-Scholes option pricing model. This method was in effect until the
    shareholders approved adjustments to the stock option plan on October 23,
    2008. As of this date, stock options have been accounted for using a
    combination of both the fair value and intrinsic value methods.

    Weighted average assumptions for the fair value method employed were as
    follows:

    -------------------------------------------------------------------------
                                                                        2009
    -------------------------------------------------------------------------

    Fair value of stock options ($)                                     3.09
    Expected forfeiture rate (%)                                       15.86
    Risk-free interest rate (%)                                         3.77
    Expected option life (years)                                        3.13
    Expected volatility (%)                                            32.00
    Expected annual dividends per share (%)                             1.00
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Contributed Surplus

    Amounts recorded to contributed surplus are as follows:
    -------------------------------------------------------------------------
    Three Months Ended, March 31,                         2009          2008
    -------------------------------------------------------------------------
                                                            ($)           ($)

    Balance, beginning of period                         8,834        10,323
      Stock-based compensation expense                     880         1,336
      Stock options exercised                              (21)       (1,118)
        Intrinsic value adjustment                       2,100             -
    -------------------------------------------------------------------------
    Balance, end of period                              11,793        10,541
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Restricted Share Unit ("RSU") Plan

    In November of 2008, the Company introduced an RSU program for employees
    and directors. At March 31, 2009, 602 RSUs were outstanding. All RSU's
    vest over three years and will result in a cash payment to holders based
    upon the corresponding future market value of the Company's common
    shares. Stock-based compensation expense arising from the RSU plan of
    $698 (2008 - $nil) was recorded in the Consolidated Statements of
    Earnings and the corresponding liability is recorded in the March 31,
    2009 Consolidated Balance Sheets.

    Stock-based Compensation Expense and Liability

    The stock option and RSU plans can be summarized as follows:

    -------------------------------------------------------------------------
    Three Months Ended March 31,                          2009          2008
    -------------------------------------------------------------------------
                                                            ($)           ($)

    Stock options                                         (320)        1,336
    RSUs                                                   698             -
    -------------------------------------------------------------------------
    Stock-based compensation expense                       378         1,336
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    As at March 31,                                       2009          2008
    -------------------------------------------------------------------------
                                                            ($)           ($)

    Stock options                                          210             -
    RSUs                                                   624             -
    -------------------------------------------------------------------------
    Current portion of stock-based compensation
     liability                                             834             -
    -------------------------------------------------------------------------

    Stock options                                            -             -
    RSUs                                                   532             -
    -------------------------------------------------------------------------
    Long-term portion of stock-based compensation
     liability                                             532             -
    -------------------------------------------------------------------------
    Total stock-based compensation liability             1,366             -
    -------------------------------------------------------------------------

    Purchase of Common Shares

    On March 20, 2009, the Company received regulatory approval to renew its
    normal course issuer bid program. The Company did not purchase any shares
    during the first quarter of either 2009 or 2008. The Company is
    authorized to purchase and cancel up to 4,000 common shares before the
    bid terminates on March 23, 2010. The daily purchase limit is 40 common
    shares.

    3.  Financial Instruments and Risk Management

    Financial Instruments

    The carrying amounts for all of the Company's financial instruments
    approximate their fair values due to the short term nature of these
    items.

    Industry and Seasonality Risk

    The major area of uncertainty for the Company is that the demand for its
    services is directly related to the strength of its customers' capital
    expenditure programs. The level of capital programs is strongly affected
    by the level and stability of commodity prices, which can be extremely
    difficult to predict and beyond the control of the Company and its
    customers. During periods of uncertainty, oil and gas companies tend to
    bias their capital decisions on conservative outlooks for commodity
    prices.

    In addition to the cyclical nature of its business, the Company is also
    subject to risks and uncertainties associated with weather and
    seasonality. The Company continues to react to unfavourable weather
    conditions and spring breakup, which limit well access in Canada, through
    diversification into geographic regions such as the United States and
    internationally where these factors are less likely to influence
    activity.

    Credit Risk

    Credit risk refers to the possibility that a customer will fail to meet
    its contractual obligations. Credit risk arises from the Company's
    accounts receivable balances which are predominantly with customers who
    explore for and develop oil and natural gas reserves in Canada and the
    United States. The Company has a process in place which assesses the
    credit worthiness of its customers as well as monitoring the age and
    balances outstanding on an ongoing basis. In addition, the Company's
    services are a minor component when looking at the overall cost of
    drilling a well, reducing credit risk accordingly.

    Payment terms with customers are 30 days from invoice date however
    industry practice can extend these terms. As at March 31, 2009, the
    Company had $4,452 in accounts receivable balances greater than 90 days
    past due and had recorded an allowance for doubtful accounts of $2,580.
    The balance of the Company's allowance for doubtful accounts did not
    significantly change during the first quarter of 2009.

    Foreign exchange risk

    The Company operates internationally and is primarily exposed to exchange
    risk relative to the U.S. dollar.

    The Canadian operations are exposed to currency risk on U.S. denominated
    financial assets and liabilities with fluctuations in the rate recognized
    as foreign exchange gains or losses in the Consolidated Statements of
    Earnings.

    The Company's self-sustaining international subsidiaries expose the
    Company to exchange rate risk on the translation of its financial assets
    and liabilities to Canadian dollars for consolidation purposes.
    Adjustments arising when translating these subsidiaries into Canadian
    dollars are reflected in the Consolidated Statements of Comprehensive
    Income as unrealized foreign currency translation adjustments.

    The Company has not hedged either one of these risks.

    For the first quarter of 2009, had the Canadian dollar weakened or
    strengthened by 1% against the U.S. dollar, with all other variables held
    constant, earnings and other comprehensive income would have been
    impacted as follows:


    -------------------------------------------------------------------------
                                                Quarter Ended March 31, 2009
    -------------------------------------------------------------------------
                                    Impact to Earnings       Impact to Other
                                                        Comprehensive Income
    -------------------------------------------------------------------------
                                                    ($)                   ($)
    1% decrease in value
     of Canadian dollar                             12                 1,755
    1% increase in value
     of Canadian dollar                            (12)               (1,755)


    Interest rate risk

    The Company is exposed to changes in interest rates with respect to its
    credit facility. Management believes this risk to be minor given the
    small amounts drawn on the facility.

    4.  Sale of Investment

    On April 8, 2008, the Company sold its investment in a privately held
    company and realized a gain of $999. This investment was recorded at
    market value on the balance sheet with the unrealized net gain in Other
    Comprehensive Income as of March 31, 2008.

    5.  Contingencies

    Since late 2003, the Company has defended its position in patent
    infringement lawsuits in Canada and the United States regarding the
    Company's automatic driller. In the U.S. case in 2004, the trial court
    refused to grant the requested injunction to prevent the Company from
    renting its automatic driller. In 2006, a Federal Appeals Court ruled
    that the trial court had misconstrued the language of one of the claims
    in the patent at issue and remanded the case to the trial court to hold a
    full trial on the merits of the claim of infringement and the Company's
    defenses, including that the patent in question is invalid and that there
    is no infringement. Trial on the U.S. lawsuit concluded on November 6,
    2008. The jury determined Pason's automatic driller infringed three
    claims of the patent at issue, denied the Company's claim that the patent
    was invalid, and awarded damages in the amount of US$14,300. The Company
    accrued this amount in the 2008 consolidated financial statements. On
    April 30, 2009, the trial judge denied Pason's motion for a case
    dismissal judgment as a matter of law and the alternative motion for a
    new trial. The judge approved the jury's damages award of US$14.3
    million, plus interest and court costs. As to the plaintiff's request for
    enhanced damages based on willful infringement, the judge denied the
    plaintiff's motion. The plaintiff was not granted a permanent injunction
    preventing the rental of Pason's automatic driller in the United States.

    In the Canadian case, which is not likely to get to a trial until 2010 at
    the earliest, management's assessment of the outcome continues to be that
    the asserted claims of the patent are not valid, and/or the Company does
    not infringe on any valid claims, and as a result, the Canadian
    litigation is not expected to have a significant adverse impact on the
    Company's financial position or operations. The outcome of the U.S. case
    does not bind a Canadian Court. Accordingly, no amount has been accrued
    for any potential loss under the Canadian case in the consolidated
    financial statements at March 31, 2009.

    The Company is involved in other legal actions and potential claims in
    the normal course of business. In the opinion of management, the
    aggregate amount of any potential liability is not expected to have a
    material adverse impact on the Company's financial position or results.

    6.  Segmented Information

    The Company operates in three geographic segments within one industry
    segment. Rental services are provided in Canada, the United States and
    internationally (Latin America and Australia). The amounts related to
    each segment are as follows:

    -------------------------------------------------------------------------
                                                  United   Intern-
                                        Canada    States   ational     Total
    -------------------------------------------------------------------------
                                            ($)       ($)       ($)       ($)
    Three Months Ended March 31, 2009

    Revenue                             22,334    29,290     2,551    54,175

    Operating costs                      7,407    16,452     1,656    25,515

    Depreciation and amortization        5,921     9,209       961    16,091
    -------------------------------------------------------------------------
    Segment operating profit             9,006     3,629       (66)   12,569
    ---------------------------------------------------------------
    ---------------------------------------------------------------
    Research and development                                           3,333
    Stock-based compensation                                             378
    Corporate services                                                 1,669
    Manufacturing and distribution                                        78
    Interest                                                               1
    Other income                                                        (196)
    Income taxes                                                       2,390
                                                                    ---------
    Earnings                                                           4,916
                                                                    ---------
                                                                    ---------
    Total assets                       200,456   206,777    18,413   425,646
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Capital expenditures                   805     2,580     2,326     5,711
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Three Months Ended March 31, 2008

    Revenue                             36,450    34,877     1,926    73,253
    Operating costs                      8,913    15,207       240    24,360
    Depreciation and amortization        6,485     5,847       552    12,884
    -------------------------------------------------------------------------
    Segment operating profit            21,052    13,823     1,134    36,009
    ---------------------------------------------------------------
    ---------------------------------------------------------------
    Research and development                                           3,493
    Stock-based compensation                                           1,336
    Corporate services                                                 1,249
    Manufacturing and distribution                                       775
    Interest                                                             110
    Other expenses                                                       102
    Income taxes                                                       8,078
                                                                    ---------
    Earnings                                                          20,866
                                                                    ---------
                                                                    ---------
    Total assets                       162,403   157,316    13,527   333,246
    -------------------------------------------------------------------------
    Capital expenditures                 2,663     9,262       679    12,604
    -------------------------------------------------------------------------
    





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) 301-3411, E-Mail:
jim.glasspoole@pason.com


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