TSX Symbol: HNL
CALGARY, Oct. 28, 2015 /PRNewswire/ – Horizon North Logistics Inc. (“Horizon North” or the “Corporation”) reported its financial and operating results for the three and nine months ended September 30, 2015 and 2014.
Third Quarter Highlights
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Third Quarter Financial Summary |
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Three months ended September 30 |
Nine months ended September 30 |
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(000's except per share amounts) |
2015 |
2014 |
% |
2015 |
2014 |
% |
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Revenue |
$ |
82,311 |
$ |
121,895 |
(32%) |
$ |
301,167 |
$ |
340,200 |
(11%) |
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EBITDAS(1) |
14,435 |
26,046 |
(45%) |
53,942 |
65,092 |
(17%) |
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EBITDAS as a % of revenue |
18% |
21% |
18% |
19% |
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Operating earnings |
313 |
12,691 |
(98%) |
11,718 |
25,992 |
(55%) |
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Operating earnings as a % of revenue |
– |
10% |
4% |
8% |
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Total (loss) profit |
(170) |
8,065 |
(102%) |
4,154 |
16,463 |
(75%) |
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Total comprehensive(loss) income |
(273) |
8,178 |
(103%) |
4,119 |
16,697 |
(75%) |
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Earnings per share |
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Basic |
$ |
– |
$ |
0.07 |
(100%) |
$ |
0.04 |
$ |
0.15 |
(76% ) |
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Diluted |
$ |
– |
$ |
0.07 |
(100%) |
$ |
0.04 |
$ |
0.15 |
(76%) |
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Total assets |
483,745 |
534,776 |
(10%) |
483,745 |
534,776 |
(10%) |
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Long-term loans and borrowings |
47,316 |
146,433 |
(68%) |
47,316 |
146,433 |
(68%) |
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Cash from operations |
11,252 |
6,117 |
84% |
83,913 |
39,515 |
112% |
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Capital spending |
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Purchase of property, plant & equipment |
13,098 |
20,817 |
(37%) |
41,236 |
97,041 |
(58%) |
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Proceeds from disposals of property, plant & equipment |
(1,326) |
(3,619) |
(63%) |
(7,452) |
(12,979) |
(43%) |
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Net Capital spending |
11,772 |
17,198 |
(32%) |
33,784 |
84,062 |
(60%) |
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Senior debt to EBITDAS |
0.64:1.00 |
1.79:1.00 |
(64%) |
0.64:1.00 |
1.79:1.00 |
(64%) |
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Total debt to EBITDAS |
0.64:1.00 |
1.79:1.00 |
( 64%) |
0.64:1.00 |
1.79:1.00 |
(64%) |
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Debt to total capitalization ratio(1) |
0.13:1.00 |
0.34:1.00 |
(62%) |
0.13:1.00 |
0.34:1.00 |
(62%) |
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Dividends declared |
$ |
10,609 |
$ |
8,825 |
20% |
$ |
28,337 |
$ |
26,467 |
7% |
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Dividends declared per share |
$ |
0.08 |
$ |
0.08 |
– |
$ |
0.24 |
$ |
0.24 |
– |
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(1) |
See Non-GAAP measures definitions within the press release for details. |
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Third Quarter Overview
Horizon North's results for the three months ended September 30, 2015 (“Q3 2015”) were generally as expected. However when compared to the three months ended September 30, 2014 (“Q3 2014”) results were markedly down across most financial measures. The decrease was not surprising given the depressed and fluctuating commodity prices and uncertain economic environment experienced over the last 12 months resulting in downward pressure on pricing as customers reign in capital budgets, delaying or deferring their capital spending. Against this backdrop, Horizon North continues to work closely with its current customers to help control their costs with the majority of these contract revisions completed in Q2 2015 and the changes fully reflected in Q3 2015. Additionally, Horizon North continues to work with suppliers to find efficiencies and reduce our costs.
The decreases in Horizon Norths results were mainly attributable to the manufacturing and matting operations which experienced significantly lower revenues and volumes in Q3 2015 compared to Q3 2014. Customers are cutting capital budgets and are looking to reduce their supply costs in response to the challenging and uncertain economic environment. The lower manufacturing and matting results were partially offset by stronger revenues and volumes in Camps & Catering operations, primarily attributable to significantly higher fire camp activity as a result of the very dry weather northern Alberta experienced over the summer.
Manufacturing revenues decreased $27.0 million or 73% in the comparative quarters primarily as a result of completing and turning over a major camp project in the Alberta oil sands and fewer projects generating less revenue compared to Q3 2014. Horizon North applied for and received approval for a federal government work share program in the Kamloops, British Columbia manufacturing operation. The program was implemented early September and effectively decreased direct labour by 50% yet allows us to maintain a critical core of workers and manage cost. Total direct hours, which include all direct hours in the manufacturing plants and installation hours on project sites, for Q3 2015 were down 55% compared to Q3 2014 as a result of the work share program and managing headcount to the manufacturing backlog. Of the total direct hours, 43% were allocated to third party contracts as compared to 63% in the same period of 2014.
Revenues from Camps & Catering were stronger than expected given the current challenging economic times but were softer than Q3 2014 by $2.4 million or 4%. The strength came from the large camp operations which increased revenue by 7% compared to Q3 2014 due to the high levels of fire camp activity as a result of very dry weather in northern Alberta. Partially offsetting the higher volumes was a 13% decrease in revenue per average available bed (RevPAAB) compared to Q3 2014, the decrease was a result of downward pricing pressure and the larger fleet size compared to Q3 2014. Utilization softened to 54% from 62% due to the addition of 1,595 beds between the comparative quarters. The growth in fleet was mainly a result of contract requirements for new projects which became fully operational in Q4 of 2014.
Matting revenues decreased by $10.5 million or 52% in the comparative quarters with decreases across all matting operations, the majority from lower mat sales and the related installation and transport activity due to customers' constrained capital programs. Access mat rental revenues decreased quarter over quarter due to lower rental volumes, down 7%, and a 39% decrease in revenue per mat rental day. Utilization of the owned mat fleet was 54%, down from 68% compared to Q3 2014 mainly due to a larger average fleet size of 30,651 mats compared to 20,257 mats in Q3 2014.
Horizon North's Q3 2015 EBITDAS decreased compared to Q3 2014 as a result of the lower revenues which were driven by the lower activity levels and the downward pressure on pricing experienced in each operation. Operating earnings and earnings per share for Q3 2015 decreased due to the reduced EBITDAS discussed above, as well, Q3 2014 included a $1.7 million gain on disposal of land and camp assets related to the northern operations with no comparable gain in Q3 2015.
Horizon North continues to have a strong balance sheet as a result of a continued focus on working capital, maintaining disciplined capital spending and a significant reduction of debt compared to Q3 2014. The reduction of debt was mainly a result of the bought deal equity financing which closed on July 8, 2015 and contributed net proceeds of $76.6 million. Total loans and borrowing at the end of the quarter were $52.1 million with a trailing twelve months (TTM) Debt to EBITDAS ratio of 0.64:1.00 compared to $147.9 million of debt and TTM Debt to EBITDAS ratio of 1.79:1.00.
Dividend payment
Horizon North announced today that its Board of Directors has declared a dividend for the fourth quarter of 2015 at $0.04 per common share. The dividend is payable to shareholders of record at the close of business on December 31, 2015 to be paid on January 15, 2016. The dividends are eligible dividends for Canadian tax purposes. The Board of Directors regularly monitors the strength of the balance sheet, cash from operations and capital requirements to ensure the overall sustainability of Horizon North is not compromised.
Capital Spending
For the nine months ended September 30, 2015, capital spending was $41.2 million compared to $97.0 million in the same period of 2014 as a result of a focused and disciplined 2015 capital program. Capital in the first nine months of 2015 was mainly focused on expansion of the camp rental fleet and on land improvements compared to the same period of 2014 which focused on the relocatable structures fleet.
Management evaluates and manages its capital spending plans taking into account proceeds from the sale of property, plant and equipment resulting in net capital spending for the nine months ended September 30, 2015 of $33.8 million compared to $84.1 million for the same period of 2014.
Horizon North does not currently have any material capital commitments associated with contracts to supply equipment or to purchase property, plant and equipment. Capital spending will be funded primarily from cash from operations and the credit facility.
Outlook
Horizon North continues to refine and moderate its outlook for the remainder of 2015 in response to fluctuations in commodity prices and a protracted challenging economic environment, particularly evident in Q3 2015. 2015 results to date reflect the impact of lower demand for Horizon North's products and services and downward pricing pressure. We expect Q4 2015 results to soften compared to Q3 2015, anticipating additional reductions to upcoming seasonal activity as we continue to see customers reluctant to commit to projects in the current economic environment. Horizon North will continue to work closely with our existing customers to remain competitive as well as focus on our own cost structure to find efficiencies and cost savings.
Although the short term outlook reflects the current difficult economic environment, Horizon North continues to make progress on several key initiatives intended to diversify our business base and position us for next up-cycle in the resource sector. These initiatives include; developing land positions near proposed LNG project sites, pursuing diversification of the business base through development of the market for modular construction of permanent facilities and driving structural changes to the business to improve efficiency and cost structure.
The 2015 capital program remains as expected, in the range of $50 million to $60 million. With a continued focus on reducing working capital, Horizon North has significant financial capacity in part as a result of the bought deal equity financing which closed on July 8, 2015 for net proceeds of $76.6 million.
However, Horizon North will continue to focus on maintaining a strong balance sheet in the face of an uncertain economic environment. Accordingly, the Board of Directors has determined it will take the proactive step of reducing the current quarterly dividend to $0.04 per common share effective for the fourth quarter of 2015. This reduction, on an annualized basis, will provide an additional $21.2 million of financial flexibility and help ensure Horizon North is well positioned to take advantage of opportunities as they arise.
Additional Information
A copy of the Corporation's Condensed Consolidated Interim Financial Statements for the three and nine months ended September 30, 2015 and 2014 and related Management's Discussion and Analysis have been filed with the Canadian securities regulatory authorities and is available on SEDAR at www.sedar.com and www.horizonnorth.ca. Unless otherwise indicated, the consolidated financial statements have been prepared in accordance with International Financial Reporting Standards and the reporting currency is in Canadian dollars
Conference call
Horizon North will host a conference call and webcast to begin promptly at 9:00 a.m. MT (11:00 a.m. ET) on – October 29, 2015 to discuss Horizon North's third quarter results.
To access the conference call by telephone the conference call dial in number is 1-888-231-8191
A live webcast of the conference call will be accessible on Horizon North's website at www.horizonnorth.ca by selecting the webcast link on the home page.
An archived recording of the conference call will be available approximately two hours after completion of the call until November 12, 2015 by dialing 1-403-451-9481 or 1-855-859-2056 – Passcode: 61681346.
Caution Regarding Forward-Looking Information and Statements
Certain statements contained in the document constitute forward-looking statements or information. These statements relate to future events or future performance of Horizon North. 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 information and statements include, but are not limited to, the following:
The forward-looking statements and information are based on certain assumptions made by Horizon North which include, but are not limited to, assumptions relating to:
Although Horizon North believes that the expectations and assumptions on which the forward-looking statements and information are based are reasonable, undue reliance should not be placed on the forward-looking statements and information because Horizon North cannot give any assurance that they will prove to be correct. Since forward-looking statements and information address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of known and unknown risks and uncertainties. Such risks and uncertainties include, but are not limited to, the following:
Readers are cautioned that the foregoing list of risks and uncertainties is not exhaustive. Additional information on these and other risk factors that could affect Horizon North's operations and financial results are included in Horizon North's annual information form which may be accessed through the SEDAR website at www.sedar.com. In addition, the reader is cautioned that historical results are not indicative of future performance. The forward-looking statements and information contained in this document are made as of the date hereof and Horizon North does not undertake any obligation to update publicly or revise any forward-looking statements and information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.
Certain information set out herein may be considered as “financial outlook” within the meaning of applicable securities laws. The purpose of this financial outlook is to provide readers with disclosure regarding Horizon North's reasonable expectations as to the anticipated results of its proposed business activities for the periods indicated. Readers are cautioned that the financial outlook may not be appropriate for other purposes.
Non-GAAP measures
Certain measures in this document do not have any standardized meaning as prescribed by generally accepted accounting principles (“GAAP”) and, therefore, are considered non-GAAP measures. These measures are regularly reviewed by the Chief Operating Decision Maker and provide investors with an alternative method for assessing the Corporation's operating results in a manner that is focused on the performance of the Corporation's ongoing operations and to provide a more consistent basis for comparison between periods. These measures should not be construed as alternatives to total profit and total comprehensive income determined in accordance with GAAP as an indicator of the Corporation's performance. The method of calculating these measures may differ from other entities and accordingly, may not be comparable to measures used by other entities. The following non-GAAP measures are used to monitor the Corporation's performance:
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EBITDAS: Earnings before finance costs, taxes, depreciation, amortization, gain/loss on disposal of property, plant and equipment and share based compensation (“EBITDAS”). 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. |
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Debt to total capitalization: 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. |
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About Horizon North
Horizon North is a remote resource development service company that provides workforce accommodation solutions, camp management and catering services, and road and access matting solutions. Horizon North provides these services in support of oil sands development, oil and gas exploration, mining and infrastructure projects throughout Canada's western provinces and northern territories where local infrastructure does not meet project requirements.
SOURCE Horizon North Logistics Inc.