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Horizon North Logistics Inc. Announces Fourth Consecutive Quarter of Increasing Revenues and EBITDAS


News provided by

Horizon North Logistics Inc.

Aug 01, 2012, 17:58 ET

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TSX Symbol: HNL

CALGARY, Aug. 1, 2012 /CNW/ - Horizon North Logistics Inc. ("Horizon" or the "Corporation") reported its financial and operating results for the three and six months ended June 30, 2012 and 2011.

Second Quarter Highlights

  • Fourth consecutive quarter of increasing consolidated revenues and EBITDAS;
  • Second quarter revenues and EBITDAS included a payment of $5.1 million representing an end of contract billing for minimum utilization over the term of a particular contract in excess of actual utilization;
  • Growth was led by the Camps & Catering segment, excluding the $5.1 million payment, revenues increased by $37.1 million, and
  • Continued investment and focus on the Alberta oil sands region with 64% of second quarter revenues generated from oil sands related projects.

Second Quarter Financial Summary

                                                           
        Three months ended June 30     Six months ended June 30
(000's except per share amounts)           2012         2011       % Change         2012         2011       % Change
Revenue       $   139,551     $   86,607             61%     $   268,148     $   189,766             41%
EBITDAS(1)           40,463         22,019             84%         74,908         44,824             67%
EBITDAS as a % of revenue           29%         25%                 28%         24%        
Operating earnings(1)           30,056         14,652             105%         56,136         30,193             86%
Total profit           21,769         10,233             113%         40,630         21,145             92%
Total comprehensive income           21,854         10,233             114%         40,646         21,145             92%
Earnings per share                                                        
  - basic       $   0.20     $   0.10       100%     $   0.38     $   0.20       90%
  - diluted       $   0.20     $   0.10       100%     $   0.37     $   0.20       85%
Total assets           428,494         315,251             36%         428,494         315,251             36%
Long-term loans and borrowings           86,161         42,773             101%         86,161         42,773             101%
Funds from operations(2)           30,422         17,232             77%         57,845         34,399             68%
Capital spending           35,346         30,423                       69,523         56,247              
Debt to total capitalization ratio(3)           0.26         0.19                 0.26         0.19        
(1)    See financial measures definitions on the last page of the press release for details.
   

Overview and Outlook

Horizon reported its fourth consecutive quarter of increasing revenue and EBITDAS, with results for the three months ended June 30, 2012 establishing new records for both revenue and EBITDAS. Revenue and EBITDAS are expected to maintain at or near current levels for the remaining two quarters of 2012 with increases coming early in 2013 as new assets are deployed and with winter projects getting underway.

Oil sands development and related activities continue to be the main driver of Horizon's growth with 64% of consolidated second quarter revenues driven from these activities. With robust oil sands development expected to continue, Horizon will focus the majority of its capital deployment in support of oil sands development. As a result of the focus on oil sands development seasonality in Horizon's revenue has been significantly reduced.

Horizon's manufacturing facilities continue to be highly utilized, with capacity allocated between external sales projects and investment in the camp rental fleet. During the first six months of the year, 77% of capacity was allocated to third party sales projects with the remaining 23% dedicated to internal fleet build projects. Considering the current manufacturing backlog, allocation of production for the remainder of 2012 will continue to be heavily weighted to third party sales, consistent with the first half of 2012.

Horizon's matting division had its strongest second quarter on record. Wet conditions along with the mix of oil sands related projects drove very strong utilization in the access mat rental fleet and significant mat sales. The remainder of 2012 will see rentals and sales continue to be driven by; oil sand, natural gas, and pipeline development projects.

Dividend Payment

Horizon North Logistic Inc. announced today that its Board of Directors has declared a dividend for the third quarter of 2012 at $0.05 per share. The dividend is payable to shareholders of record at the close of business on September 28, 2012 to be paid on October 12, 2012. The dividends are eligible dividends for Canadian tax purposes.

Second Quarter Financial Results

                                                           
             Three months ended June 30, 2012          
(000's)         Camps &
Catering
        Matting         Marine
Services
        Corporate       Inter-segment
Eliminations
        Total
Revenue     $   116,937     $   25,232     $   679     $   -     $ (3,297)     $   139,551
Expenses                                                          
   Direct costs         78,349         18,918         500         (1)       (3,174)         94,592
   Selling & administrative         1,635         153         4         2,704       -         4,496
EBITDAS         36,953         6,161         175         (2,703)       (123)         40,463
EBITDAS as a % of revenue         32%         24%         26%         -       -         29%
Share based payments         339         52         -         262       -         653
Depreciation & amortization         7,290         2,152         106         130       (38)         9,640
Loss (gain) on disposal of property,
  plant and equipment
        142         (28)         -         -       -         114
Operating earnings (loss)     $   29,182     $   3,985     $   69     $   (3,095)     $ (85)     $   30,056
Finance costs                                                         849
Loss on equity investments                                                         19
Income tax expense                                                         7,419
Other comprehensive income                                                         (85)
Total comprehensive income                                                     $   21,854
Earnings per share - basic & diluted                                                     $   0.20
                                                           
                                                           
      Three months ended June 30, 2011          
(000's)         Camps &
Catering
        Matting         Marine
Services
        Corporate       Inter-segment
Eliminations
        Total
Revenue     $   74,695     $   12,255         $975     $   -     $ (1,318)     $   86,607
Expenses                                                          
   Direct costs         53,313         8,711         746         2       (1,280)         61,492
   Selling & administrative         853         95         7         2,141       -         3,096
EBITDAS     $   20,529     $   3,449         $222     $   (2,143)     $ (38)     $   22,019
EBITDAS as a % of revenue         27%         28%         23%         -       -         25%
Share based payments         90         9         1         53       -         153
Depreciation & amortization         5,557         1,507         115         88       (22)         7,245
Gain on disposal of property,
  plant and equipment
        (1)         (30)         -         -       -         (31)
Operating earnings (loss)     $   14,883     $   1,963         $106     $   (2,284)     $ (16)     $   14,652
Finance costs                                                         576
Loss on equity investments                                                         20
Income tax expense                                                         3,823
Other comprehensive income                                                         -
Total comprehensive income                                                     $   10,233
Earnings per share - basic & diluted                                                     $   0.10
                                                           
                                                           
      Six months ended June 30, 2012          
(000's)         Camps &
Catering
        Matting         Marine
Services
        Corporate       Inter-segment
Eliminations
        Total
Revenue     $   229,123     $   43,570     $   1,420     $   -     $ (5,965)     $   268,148
Expenses                                                          
   Direct costs         156,509         32,773         894         -       (5,574)         184,602
   Selling & administrative         2,648         264         4         5,722       -         8,638
EBITDAS         69,966         10,533         522         (5,722)       (391)         74,908
EBITDAS as a % of revenue         31%         24%         37%         -       -         28%
Share based payments         372         63         1         307       -         743
Depreciation & amortization         13,611         3,909         217         244       (61)         17,920
Loss (gain) on disposal of property,
  plant and equipment
        137         (28)         -         -       -         109
Operating earnings (loss)     $   55,846     $   6,589     $   304     $   (6,273)     $ (330)     $   56,136
Finance costs                                                         1,543
Gain on equity investments                                                         (27)
Income tax expense                                                         13,990
Other comprehensive income                                                         (16)
Total comprehensive income                                                     $   40,646
Earnings per share                                                          
   - basic                                                     $   0.38
   - diluted                                                     $   0.37
                                                           
                                                           
      Six months ended June 30, 2011          
(000's)         Camps &
Catering
        Matting         Marine
Services
        Corporate       Inter-segment
Eliminations
        Total
Revenue     $   160,818     $   30,096         $1,807     $   -     $ (2,955)     $   189,766
Expenses                                                          
   Direct costs         118,031         22,179         1,205         2       (2,864)         138,553
   Selling & administrative         1,727         194         7         4,461       -         6,389
EBITDAS     $   41,060     $   7,723         $595     $   (4,463)     $ (91)     $   44,824
EBITDAS as a % of revenue         26%         26%         33%         -       -         24%
Share based payments         174         19         2         114       -         309
Depreciation & amortization         10,968         2,817         222         172       (38)         14,141
Loss on disposal of property,
  plant and equipment
        83         98         -         -       -         181
Operating earnings (loss)     $   29,835     $   4,789         $371     $   (4,749)     $ (53)     $   30,193
Finance costs                                                         1,189
Loss on equity investments                                                         41
Income tax expense                                                         7,818
Other comprehensive income                                                         -
Total comprehensive income                                                     $   21,145
Earnings per share - basic & diluted                                                     $   0.20
                                                           
                                                           

Camps & Catering

                                                           
        Three months ended June 30     Six months ended June 30
(000's except bed rental days and catering
only days)
          2012         2011       %
change
        2012         2011       %
change
Camp rental and catering operations revenue       $   60,109     $   43,978       37%     $   135,111     $   90,461       49%
Manufacturing sales and service revenue           54,036         28,541       89%         87,350         66,784       31%
Space rental and service revenue           2,792         2,176       28%         6,662         3,573       86%
Total revenue       $   116,937     $   74,695       57%     $   229,123     $   160,818       42%
                                                           
EBITDAS       $   36,953     $   20,529       80%     $   69,966     $   41,060       70%
EBITDAS as % of revenue           32%         27%       19%         31%         26%       19%
                                                           
Operating earnings       $   29,182     $   14,883       96%     $   55,846     $   29,835       87%
Bed rental days(1)           250,403         206,491       21%         587,577         416,046       41%
Catering only days(2)           53,697         45,618       18%         126,216         104,563       21%
(1)     One bed rental day equals the rental of one bed and the provision of related catering and housekeeping services for one day.
(2)     One catering only day equals the provision of catering and housekeeping services with no related bed rental for one day.
   

Revenues from the Camps & Catering segment were $116.9 million for the three months ended June 30, 2012 compared to $74.7 million for the three months ended June 30, 2011, an increase of $42.2 million or 56%. EBITDAS for the three months ended June 30, 2012 were $37.0 million or 32% of revenue compared to $20.5 million or 27% of revenue for the three months ended June 30, 2011, an increase of $16.5 million or 80%.

Included in revenue and EBITDAS for the quarter was a payment of $5.1M representing an end of contract billing for minimum utilization over the term of a particular contract in excess of the actual utilization. Excluding this payment, revenues were $111.8 million and EBITDAS were $31.9 million or 29% of revenues, significantly above the same period of 2011.

Horizon's Camps & Catering segment continued its trend of strong revenue and EBITDAS growth driven mainly by significant oil sands development activity and investment by oil sands operators. 66% of segment revenue, for the six months ended June 30, 2012 were derived from oil sands related activity compared to 64% for the same period of 2011.

Camp rental and catering operations revenue

Revenues are derived from the following main business areas: large camp operations, drill camp operations, catering only operations, and the associated service work with each operation. Service work includes the transportation, setup and de-mobilization of the camp and catering operations. Revenues from camp and catering operations were $60.1 million for the three months ended June 30, 2012 compared to $44.0 million for the three months ended June 30, 2011, an increase of $16.1 million or 37%.

The table below outlines the key performance metrics used by management to measure performance in the large camp and drill camp operations.

                                                     
            Three months ended June 30
(000's for revenue only)           2012       2011
            Large
camp
      Drill
camp
      Total       Large
camp
      Drill
camp
      Total
Revenue           $49,363       $808       $50,171       $34,917       $867       $35,784
Bed rental days           246,237       4,166       250,403       201,201       5,290       206,491
Revenue per bed rental day           $180(1)       $194       $180(1)       $174       $164       $173
                                                     
Rentable beds at period end           5,116       950       6,066       3,861       1,018       4,879
Available beds(2)           5,108       950       6,058       3,657       1,018       4,675
Utilization(3)           53%       5%       45%       60%       6%       49%
                                                     
                                                     
            Six months ended June 30
(000's for revenue only)           2012       2011
            Large
camp
      Drill
camp
      Total       Large
camp
      Drill
camp
      Total
Revenue           $102,143       $8,963       $111,106       $68,227       $4,059       $72,286
Bed rental days           539,975       47,602       587,577       391,496       24,550       416,046
Revenue per bed rental day           $180(1)       $188       $180(1)       $174       $165       $174
                                                     
Rentable beds at period end           5,116       950       5,961       3,861       1,018       4,879
Average rentable beds available(2)           4,894       950       5,844       3,488       1,018       4,506
Utilization(3)           61%       26%       55%       62%       13%       51%
(1) Revenue per bed rental day for the three months ended June 30, 2012 and the six months ended June 30, 2012 excludes the $5.1 million payment.
(2)     Available rentable beds available is equal to total average beds in the fleet over the period less beds required for staff.
(3)     Utilization equals the total number of bed rental days divided by average rentable beds available times days in the quarter.  

Revenues from large camp operations for the three months ended June 30, 2012, excluding the $5.1 million payment, increased by $9.3 million or 27% as compared to the same period in 2011. The revenue growth was driven by Horizon's ability to leverage the continued strong demand from Alberta oil sands operators for turnkey camp solutions. The majority of Horizon's 2011 and 2012 capital plan is focused on growing the rental fleet in the oil sands region. As at June 30, 2012, total rentable beds in the Alberta oil sands region were 5,116 as compared to 3,861 in the same period of 2011.

Utilization of the expanded large camp fleet dipped slightly in the second quarter as compared to the same period in the prior year, primarily due to timing of completed contracts. There is typically several months between contracts as equipment is de-mobilized from completed contracts and redeployed onto new projects. The quarter ended June 30, 2012, saw a higher number of beds in transition as compared to the same period of 2011.

Revenue per bed rental day, excluding the payment of $5.1 million, increased over the comparative quarters to $180, as compared to $174 in the same period of 2011. The increase of $6 is more reflective of revenue mix and the nature of current contracts, rather than increasing rates.

Revenues from drill camp operations for the three months ended June 30, 2012 decreased slightly as compared to the same period of 2011. The decrease was driven by lower industry activity with The Canadian Association of Oilwell Drilling Contractors (CAODC) reporting rig utilization down by 2% in the comparative periods. Offsetting the lower volumes, revenue per bed rental day increased by $30 per day due to a combination of additional equipment and services requested by the customer once the camp is operational.

The tables below outline the key performance metrics used by management to measure performance in the catering only and equipment rental operations.

                                         
            Three months ended June 30         Six months ended June 30
(000's for revenue only)             2012       2011         2012       2011
Catering only revenue           $ 5,577     $ 4,035       $ 13,121     $ 9,796
Catering only days(1)             53,697       45,618         126,216       104,563
Revenue per catering only day           $ 104     $ 88       $ 104     $ 94
(1)     One catering only day equals the provision of catering and housekeeping services with no related bed rental for one day.
   

Revenues from the provision of catering and housekeeping only services, with no associated bed rentals, increased $1.5 million or 38% for the three months ended June 30, 2012 as compared to same period of 2011. The increased volumes came from an expanded customer base as compared to the same period of 2011. The remainder of the revenue increase came from a higher revenue per catering day, a result of additional services requested by the customer and the mix of contracts as compared to the same period of 2011.

The table below outlines the service revenue generated from the camp and catering operation.

                                         
            Three months ended June 30       Six months ended June 30
(000's)             2012       2011         2012       2011
Camp and catering operations service related revenue           $ 4,361     $ 4,161       $ 10,884     $ 8,379
                                         

Service revenues in the camp & catering operations is related to the transportation, setup and de-mobilization of camps. Revenue was relatively consistent in the comparative quarters mainly due to similar levels of activity in the set up and demobilization of both large camps and drill camps.

Manufacturing sales and service revenue

Manufacturing sales and service revenue includes new manufacturing operations and the transportation and installation associated with new manufacturing. Revenues for the three months ended June 30, 2012 were $54.0 million as compared to $28.5 million for the same period in 2011, an increase of $25.5 million or 89%. The increase was a result of higher levels of activity in both manufacturing and installation operations.

Manufacturing capacity increased by 10% through the addition of production staff for the three months ended June 30, 2012 as compared to the same period of 2011. Total production capacity is constantly reviewed by management and allocated as required to meet external third party contracts and internal fleet requirements. In the second quarter of 2012 a significantly higher proportion of production was allocated to meet external orders as compared to the same period of 2011. For the six months ended June 30, 2012, 77% of total production was allocated to external third party contacts as compared to 57% in the same period of 2011. The service revenue, which includes the transportation and installation components of the sale, typically follows the manufacturing activity and for the three months ended June 30, 2012 service was focused primarily on two significant oil sands related camp projects, compared to one significant project in the same period of 2011.

Space rental and service revenue

Space rental and service revenue for the three months ended June 30, 2012 was $2.8 million as compared to $2.2 million for the same period in 2011. The rental fleet performance was consistent in the comparative periods with utilization at 88% and rental rates up slightly due to the location and mix of rental contracts.

Direct costs

Direct costs for the three months ended June 30, 2012 were $78.3 million or 70% of the revenue normalized for the payment of $5.1M, compared to $53.3 million or 71% of revenue for the same period of 2011. Direct costs are closely related to business volumes and the increase in overall direct costs was primarily a result of the higher activity levels in the comparative periods. As a percentage of revenue, direct costs remained relatively static in the comparative periods indicating cost escalation has not been a significant factor.

Matting

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

                                                 
      Three months ended June 30     Six months ended June 30
(000's except mat rental days and numbers of mats)       2012                   2011       %
change
      2012       2011       %
change
Access mat rental revenue(1)     $ 6,311     $ 1,904       231%     $ 8,439     $ 2,109       300%
Other mat and rental equipment revenue(2)     $ 422     $ 163       159%     $ 1,103     $ 589       87%
Total mat and equipment rental revenue     $ 6,733     $ 2,067       226%     $ 9,542     $ 2,698       254%
Mat sales revenue       8,440       4,993       69%       15,009       15,580       (4%)
Installation, transportation, service, and other revenue       10,059       5,195       94%       19,019       11,818       61%
Total revenue     $ 25,232     $ 12,255       106%     $ 43,570     $ 30,096       45%
EBITDAS     $ 6,161     $ 3,449       79%     $ 10,533     $ 7,723       36%
EBITDAS as a % of revenue       24%       28%       (14%)       24%       26%       (8%)
Operating earnings     $ 3,985     $ 1,963       103%     $ 6,589     $ 4,789       38%
Access mat rental days(3)       2,164,495       787,029       175%       2,908,839       1,057,616       175%
Average owned access mats in rental fleet(4)       15,377       9,109       69%       13,172       8,181       61%
Average sub rental access mats in rental fleet(5)       11,375       -       100%       5,688       -       100%
Access mats in rental fleet at quarter end(4)       15,287       10,302       48%       15,287       10,302       48%
Mat sold:                                                
      New mats       10,135       6,219       63%       17,542       18,604       (6%)
      Used Mats       1,647       111       1384%       3,546       2,493       42%
Total mats sold       11,782       6,330       86%       21,088       21,097       0%
(1)     Access mat rental revenue includes revenues generated from the rental of traditional oak and oak edged mats.
(2)     Other mat rental equipment revenue includes the rental of rig mats, quad mats, other ancillary equipment such as well site accommodation units and light towers.
(3)     One mat rental day equals the rental of one access mat for one day.
(4)     Average access mat rental fleet numbers reflect only owned access mats.
(5)     Average sub rental access mats is the average number of non-owned access mats in the rental fleet. These mats are rented from third parties on a short term basis.
   

Revenues from the Matting segment were $25.2 million for the three months ended June 30, 2012 compared to $12.3 million in the same period of 2011, an increase of $12.9 million or 105%. EBITDAS for the three months ended June 30, 2012 were $6.2 million or 24% of revenue as compared to $3.4 million or 28% of revenue for the same period of 2011, an increase of $2.8 million or 82%.

The revenue and EBITDAS growth was driven by an unusually wet spring and by continued strong demand to purchase mats for oil sands and pipeline construction projects.

Mat and equipment rental revenue

Total mat and equipment rental revenues increased by $4.7 million or 226% in the comparative periods, driven by both increased volume of mat rental days and higher revenues per mat rental day. The increased level of rental activity in the comparative quarters was a combination of a wet spring and the mix of projects and customers. Higher rental day volumes were achieved by a larger owned rental fleet for the three months ended June 30, 2012 as compared to the same period of 2011, and by sub renting mats from a third party. Sub renting mats was an effective method to temporarily increase the fleet size to meet peak customer demand. Sub renting was not done in the comparative period of 2011. Stronger market conditions also helped boost access mat rental rates with revenue per rental day of $2.92 in the three months ended June 30, 2012 as compared to $2.42 in the same period of 2011.

Mat sales revenue

Revenues from mat sales for the three months ended June 30, 2012 increased by $3.4 million or 69% as compared to the same period of 2011. The higher revenue was a result of 3,916 more new mats sold in the three months ended June 30, 2012 as compared to the same period of 2011. The higher sales volume was partially offset by lower revenue per mat with revenue per mat sold for three months ended June 30, 2012 of $716, down from $789 in the same period of 2011. The decrease is a result of the mix of mats sold with fewer new mats and more used mats sold in the three months ended June 30, 2012 as compared to the same period of 2011. Used mat sales have a significantly lower selling price than new mats.

Installation, transportation, service, and other revenue

Installation, transportation, service, and other revenues are driven primarily from the level of activity in the mat rental and mat sale businesses and are charged for separately from rentals and sales. Revenues for the three months ended March 31, 2012 were higher by $4.9 million or 94% as compared to the same period in 2011. The increase is mainly due to the higher volume of both rentals and mat sales throughout the quarter.

Direct costs

Direct costs for the three months ended June 30, 2012 were $18.9 million or 75% of revenue as compared to $8.7 million or 71% of revenue for the same period of 2011. Direct costs are driven by the level of business activity, with the significant increase in activity for the comparative quarters, directs costs have increased accordingly. Costs in the rental operations increased in the three months ended June 30, 2012 as a result of costs related to the sub rental of access mats. Direct costs, as a percentage of revenue, increased by 4% due to the increased rental costs.

Marine Services

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

                                                                         
            Three months ended June 30       Six months ended June 30
(000's)                 2012           2011       % Change             2012           2011       % Change
Barge camp revenue           $     664     $     642       3%       $     1,391     $     1,308       6%
Rental and other revenue                 15           333       (95%)             29           499       (94%)
Total revenue           $     679     $     975       (30%)       $     1,420     $     1,807       (21%)
EBITDAS           $     175     $     222       (21%)       $     522     $     595       (12%)
Operating earnings           $     69     $     106       (35%)       $     304     $     371       (18%)
                                                                         

Revenues from the Marine Services segment for the three months ended June 30, 2012 were $0.7 million as compared to $1.0 million in the same period of 2011, a decrease of $0.3 million or 30%. The decrease was primarily due to lower levels of activity in the three months ended June 30, 2012 as compared to the same period of 2011.

EBITDAS remained relatively consistent in the comparative quarters. EBITDAS as a percentage of revenue was 26% in the three months ended June 30, 2012 as compared to 23% in the same period of 2011.

Corporate

Corporate costs are the costs of the head office which include the President and Chief Executive Officer, Chief Financial Officer, Vice President of Health, Safety, and Environment, Vice President of Aboriginal Relations, Corporate Secretary, corporate accounting staff, and associated costs of supporting a public company. Corporate costs for the three months ended June 30, 2012 were $2.7 million as compared to $2.1 million in the same period in 2011. This increase of $0.6 million is driven by the increased cost to support the higher level of business activity. Corporate costs, as a percentage of total revenue, were 2.0% for the three months ended June 30, 2012 compared to 2.5% in same period of 2011.

Other Items

Depreciation and amortization

Depreciation and amortization costs for the three months ended June 30, 2012 were $9.6 million as compared to $7.2 million in the same period of 2011. The increase was mainly from depreciation which increased from $5.2 million to $7.6 million or 47%, as a result of net capital additions of $101.3 million in depreciable assets from June 30, 2011 to June 30, 2012 primarily in camp facilities. Amortization of intangibles remained relatively unchanged in the comparative periods at $2.0 million.

Financing costs

Financing costs on loans and borrowings for the three months ended June 30, 2012 were $0.8 million as compared to $0.6 million in the same period of 2011. The increase of $0.2 million was a result of a higher weighted average level of debt held. For the three months ended June 30, 2012 the weighted average debt was $69.9 million compared to $31.8 million in the same period of 2011.

Income taxes

Income tax expense was $7.4 million, an effective tax rate of 25.4%, for the three months ended June 30, 2012 as compared to a tax expense of $3.8 million, an effective rate of 27.2%, for the same period of 2011. The effective tax rate decreased due to a 1.0% decrease in federal tax rates from 2011 to 2012 as well as the change in estimated timing of realization of temporary differences.

Selling and administrative

Selling and administrative expense was $4.5 million for the three months ended June 30, 2012 as compared to $3.1 million in the same period of 2011. The increase is reflective of the higher levels of business activity in 2012 as compared to 2011. However, as a percentage of revenue, selling and administrative expense declined to 3.2% of revenue in 2012 as compared to 3.6% in 2011.

Condensed consolidated statement of financial position (Unaudited)          
(000's)   June 30,
2012
      December 31,
2011
Assets            
             
Current assets:            
  Trade and other receivables $ 105,030     $ 83,484
  Inventories               15,025                   15,334
  Prepayments               5,126                   3,981
  Income taxes receivable   345       -
                125,526                   102,799
Non-current assets:            
  Property, plant and equipment               281,615                   228,793
  Intangible assets               14,130                   18,232
  Goodwill               2,136                   2,136
  Investments in equity accounted investees               556                   529
  Deferred tax assets               1,784                   1,837
  Other assets               2,747                   2,811
                302,968                   254,338
  $ 428,494     $ 357,137
             
Liabilities and Shareholders' Equity            
             
Current liabilities:            
  Trade and other payables $ 52,848     $ 41,833
  Deferred revenue               2,256                   13,601
  Income taxes payable               8,279                   4,380
  Current portion of loans and borrowings               1,149                   1,281
                64,532                   61,095
Non-current liabilities:            
  Asset retirement provisions               1,334                   1,283
  Loans and borrowings               86,161                   55,234
  Deferred tax liabilities               26,329                   23,456
                178,356                   141,068
Shareholders' equity:            
  Share capital               178,211                   173,438
  Contributed surplus               9,870                   10,421
  Accumulated other comprehensive income               174                   158
  Retained earnings               61,883                   32,052
                250,138                   216,069
  $ 428,494     $ 357,137
             
             
Condensed consolidated statement of comprehensive income (Unaudited)
Three and Six months ended June 30, 2012 and 2011
        Three months ended
June 30
    Six months ended
June 30
(000's)                     2012                   2011                   2012                   2011
Revenue       $ 139,551     $ 86,607     $ 268,148     $ 189,766
                                   
Operating expenses:                                  
    Direct costs                     94,592                   61,492                   184,602                   138,553
    Depreciation                     7,589                   5,164                   13,818                   10,000
    Amortization of intangible assets                     44                   41                   88                   82
    Share based compensation                     391                   99                   436                   194
    Loss (gain) on disposal of property, plant and equipment                     114                   (31)                   109                   181
Direct operating expenses                     102,730                   66,765                   199,053                   149,010
Gross profit                     36,821                   19,842                   69,095                   40,756
                                   
Selling & administrative expenses:                                  
    Selling & administrative expenses                     4,496                   3,096                   8,638                   6,389
    Amortization of intangible assets                     2,007                   2,040                   4,014                   4,059
    Share based compensation                     262                   54                   307                   115
Selling & administrative expenses                     6,765                   5,190                   12,959                   10,563
Operating earnings                     30,056                   14,652                   56,136                   30,193
                                   
Finance costs                     849                   576                   1,543                   1,189
Share of loss (gain) of equity accounted investees                     19                   20                   (27)                   41
Profit before tax                     29,188                   14,056                   54,620                   28,963
                                   
    Current tax expense                     6,304                   2,731                   11,064                   7,419
    Deferred tax expense                     1,115                   1,092                   2,926                   399
Income tax expense                     7,419                   3,823                   13,990                   7,818
Total profit                     21,769                   10,233                   40,630                   21,145
                                   
Other comprehensive income:                                  
    Translation of foreign operations                     (85)                   -                   (16)                   -
Other comprehensive income, net of income tax                     (85)                   -                   (16)                   -
Total comprehensive income       $ 21,854     $ 10,233     $ 40,646     $ 21,145
                                   
Earnings per share:                                  
    Basic       $ 0.20     $ 0.10     $ 0.38     $ 0.20
    Diluted       $ 0.20     $ 0.10     $ 0.37     $ 0.20
                                     
                                     
Condensed consolidated statement of changes in equity (Unaudited)
(000's)           Share
Capital
        Contributed
Surplus
      Accumulated
Other
Comprehensive
Income
        Retained
Earnings
(Deficit)
        Total
Balance at December 31, 2010       $   245,353     $   11,446     $ -     $   (78,000)     $   178,799
                                                   
Reduction of capital           (78,000)         -       -         78,000         -
Total profit           -         -       -         21,145         21,145
Share based compensation           -         309       -         -         309
Share options exercised           2,674         (736)       -         -         1,938
Dividends declared ($0.04 per share)           -         -       -         (4,215)         (4,215)
Balance at June 30, 2011           170,027         11,019       -         16,930         197,976
                                                   
Total profit           -         -       -         23,677         23,677
Share based compensation           -         289       -         -         289
Share options exercised           3,411         (887)       -         -         2,524
Translation of foreign operations           -         -       158         -         158
Dividends paid ($0.04 per share)           -         -       -         (4,285)         (4,285)
Dividends declared ($0.04 per share)           -         -       -         (4,270)         (4,270)
Balance at December 31, 2011           173,438         10,421       158         32,052         216,069
                                                   
Total profit           -         -       -         40,630         40,630
Share based compensation           -         743       -         -         743
Share options exercised           4,773         (1,294)       -         -         3,479
Translation of foreign operations           -         -       16         -         16
Dividends paid ($0.05 per share)           -         -       -         (5,392)         (5,392)
Dividends declared ($0.05 per share)           -         -       -         (5,407)         (5,407)
Balance at June 30, 2012       $   178,211     $   9,870     $ 174     $   61,883     $   250,138
                                                   
                                                 
Condensed consolidated statement of cash flows (Unaudited)
Six months ended June 30, 2012 and 2011
           
          June 30,       June 30,
(000's)               2012       2011
Cash provided by (used in):            
             
Operating activities:            
Profit for the period $ 40,630     $ 21,145
Adjustments for:            
      Depreciation               13,818                   10,000
      Amortization of intangible assets               4,102                   4,141
      Share based compensation               743                   309
      Amortization of other assets               64                   60
      Loss on equity investments               (27)                   41
      Gain on sale of property, plant and equipment               (1,508)                   (1,297)
      Unrealized foreign exchange               23                   -
      Finance costs               1,543                   1,189
      Income tax expense               13,990                   7,818
                73,378                   43,406
             
Income taxes paid               (7,510)                   (3,515)
Interest paid               (1,140)                   (811)
Changes in non-cash working capital items               (22,793)                   15,584
                41,935                   54,664
Investing activities:            
Purchase of property, plant and equipment               (69,523)                   (56,247)
Proceeds on sale of property, plant and equipment               4,400                   2,955
                (65,123)                   (53,292)
Financing activities:            
Proceeds from loans and borrowings               30,508                   905
Shares issued               3,479                   1,938
Payment of dividends               (9,662)                   -
                24,325                   2,843
             
Changes in non-cash working capital items   (1,137)       (4,215)
    23,188       (1,372)
Increase in cash position               -                   -
             
Cash, beginning of period               -                   -
Cash, end of period $ -     $ -
             

Financial Measures Definitions

EBITDAS

EBITDAS (Earnings before interest, taxes, depreciation, amortization, gain/loss on equity investments, gain/loss on disposal of property, plant and equipment, share of income/loss from equity accounted investees and share based compensation) is not a recognized measure under IFRS.  Management believes that in addition to total profit and total comprehensive income, EBITDAS is a useful supplemental measure as it provides an indication of the Corporation's ability to generate cash flow in order to fund working capital, service debt, pay current income taxes and fund capital programs, and it is regularly provided to and reviewed by the Chief Operating Decision Maker and operating earnings provides an indication of the results generated by the Corporation's principal business activities prior to consideration of how those activities are financed or taxed.  Horizon's method of calculating EBITDAS may differ from other entities and accordingly, may not be comparable to measures used by other entities. EBITDAS should not be construed as alternatives to total profit and comprehensive income determined in accordance with IFRS as an indicator of the Corporation's performance.

Funds from operations

Funds from operations is not a recognized measure under IFRS.  Management believes that in addition to cash flow from operations, funds from operations is a useful supplemental measure as it provides an indication of the cash flow generated by the Corporation's principal business activities prior to consideration of changes in working capital. Investors should be cautioned, however, that funds from operations should not be construed as an alternative to cash flow from operations determined in accordance with IFRS as an indicator of the Corporation's performance.  Horizon's method of calculating funds from operations may differ from other entities and accordingly, funds from operations may not be comparable to measures used by other entities.  Funds from operations is equal to cash flow from operations before changes in non-cash working capital items related to operations, interest and income taxes paid, financing costs, and income tax expense.

Debt to total capitalization

Debt to total capitalization is calculated as the ratio of debt to total capitalization. Debt is defined as the sum of current and long-term portions of loans and borrowings. Total capitalization is calculated as the sum of debt and shareholders' equity.

Caution Regarding Forward-Looking Information and Statements

Certain statements contained in this Management Discussion and Analysis ("MD&A") constitutes forward-looking statements or information.  These statements relate to future events or future performance of Horizon. All statements other than statements of historical fact are forward-looking statements. The use of any of the words "anticipate", "plan" "continue", "estimate", "expect", "may", "will", "project", "predict", "potential", "should", "believe" and similar expressions are intended to identify forward-looking statements.

In particular, such forward looking statements include: under the heading "Overview and Outlook" the statements that "Revenue and EBITDAS are expected to maintain at or near current levels for the remaining two quarters of 2012 with increases coming early in 2013 as new assets are deployed and with winter projects getting underway", "With robust oil sands development expected to continue, Horizon will focus the majority of its capital deployment in support of oil sands development", "allocation of production for the remainder of 2012 will continue to be heavily weighted to third party sales" and "The remainder of 2012 will see rentals and sales continue to be driven by; oil sand, natural gas, and pipeline development projects." and Under the heading "Quarterly Summary of Results" the statements that "Horizon's strong performance is expected to continue in 2012 based on increasing customer demand driven by levels of project investment and Horizon's continuing capital investment in expanding its fleet. With the high levels of investment being made by the energy sector and continued robust activity in the oil sands, strengthening demand and improving utilization is significantly reducing the seasonal nature of Horizon's business."

The foregoing statements are based on the assumption that the demand for Horizon's products and services will remain strong through 2012 and that Horizon will continue to experience significant year round revenues from its oil sands and other energy customers.

There are a number of risks which could impact these generally high levels of activity which could negatively impact the Corporation's business.  As such, many factors could cause the performance or achievements of the Corporation to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements.

Corporate Information

Additional information related to the Corporation, including the Corporation's annual information form, financial statements, and MD&A is available on SEDAR at www.sedar.ca. Unless otherwise indicated, the consolidated financial statements have been prepared in accordance with IFRS and the reporting currency is in Canadian dollars. 

 

 

SOURCE: Horizon North Logistics Inc.

For further information:

Bob German, President and Chief Executive Officer, or Scott Matson, Vice President Finance and Chief Financial Officer, 1600, 505 - 3rd Street S.W., Calgary, Alberta T2P 3E6, Telephone: (403) 517-4654,  Fax: (403) 517- 4678; website: www.horizonnorth.ca

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Horizon North Logistics Inc.

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