Horizon North Logistics Inc. Announces Results for the Quarter Ended December 31, 2017

TSX Symbol: HNL

CALGARY, March 13, 2018 /PRNewswire/ - Horizon North Logistics Inc. ("Horizon North" or the "Corporation") reported its financial and operating results for the three and twelve months ended December 31, 2017 and 2016.

Fourth Quarter Key Comments

• Results for Q4 2017 were stronger than Q4 2016 as a result of higher volumes across all operations.
• The Modular Solutions business gained significant momentum throughout Q4, closing 2017 with a backlog of $43.9 million and high probability opportunities of $148.0 million compared to $10.7 million and $50.0 million for year ended 2016;
• Horizon North finalized two new Aboriginal partnerships in Q4 of 2017, one north and one south of Fort McMurray, Alberta. Working with and developing strong Aboriginal relationships is one of Horizon North's core values; and
• Subsequent to year end, Horizon North completed a $14.0 million acquisition of the 288 bed Moose Haven Lodge south of Fort McMurray, Alberta. This acquisition was a key part of Horizon North's strategy to secure opportunities in the Fort McMurray, Alberta area.

Fourth Quarter Financial Summary

 

Fourth Quarter Overview

Results for the three months ended December 31, 2017 ("Q4 2017") improved across all financial measures, compared to the three months ended December 31, 2016 ("Q4 2016"). The improvement was driven by higher activity levels across all operations in Industrial Services and increased project volumes in Modular Solutions.

Revenues from camp rental and catering operations for Q4 2017 increased by 22% compared to Q4 2016 as a result of significantly higher catering only activity and a camp equipment sale. Higher catering only activity was primarily a result of recent Aboriginal partnerships in the Fort McMurray, Alberta area which resulted in an additional catering only contract significantly increasing catering only volumes compared to Q4 2016. Large camp activity increased, compared to Q4 2016, driven by continued strong activity in the W5/W6 region south of Grande Prairie, Alberta and higher demand in the Fort McMurray, Alberta region as a result of plant maintenance programs underway by major oil sands producers. The higher activity levels resulted in RevPAAB and utilization of $36 and 55% respectively, up from $32 and 45% in Q4 2016.

Revenues from Rentals and Logistics segment for Q4 2017 were consistent with Q4 2016. Access mat utilization was 3% stronger as a result of higher activity levels but was offset by softer pricing which decreased 2% compared to Q4 2016. Relocatable structures rental utilization strengthened by 9% as a result of an increase in rental activity combined with a decrease in fleet size compared to Q4 2016.

Modular Solutions revenues for Q4 2017 were above Q4 2016 as a result of the increased number and scope of projects. The projects in Q4 2017 included several government sponsored affordable housing projects, a hotel project and several commercial condominium projects compared to a single government sponsored affordable housing project and one hotel project in Q4 2016.

Horizon North's EBITDAS in Q4 2017 increased compared to Q4 2016 mainly as a result of the higher activity levels and volumes discussed above. Operating loss and loss per share for Q4 2017 improved compared to Q4 2016 as a result of stronger EBITDAS and lower depreciation and amortization expense due to camp setup costs becoming fully depreciated and used camp equipment sales throughout the year.

Horizon North continued to maintain a strong focus on managing the Statement of Financial Position through minimizing working capital and a reduced capital program. Total loans and borrowings were $74.6 million at December 31, 2017 compared to $75.3 million at December 31, 2016. As a result of the decreased debt and stronger EBITDAS, the Debt to EBITDAS ratio was 2.48:1.00 compared to 2.46:1.00 at December 31, 2016.

Outlook

Horizon North's focus in 2018 will continue to be on building out and expanding on initiatives started in 2017, initiatives intended to strengthen and diversify the Industrial Services business.

For 2018, Horizon North expects the revenue and EBITDAS momentum seen in Q4 2017 to continue with the Industrial Services business anticipating moderate strengthening of activity levels as compared to 2017. Although commodity prices have shown some stability, Horizon North does not expect to see any significant strengthening in pricing from 2017 levels and will continue to focus on cost control to improve EBITDAS levels. The Modular Solutions business exited 2017 with a significant backlog and is anticipated to have positive EBITDAS in 2018 through improving efficiencies as the production rate increases to execute on backlog.

The Industrial Services business will be focused on continuing to build-out and expand on the three phase strategy initiated in 2017:

• Leverage the Aboriginal relationships entered into in the second half of 2017 which cover regions north and south of Fort McMurray, Alberta. A significant project undertaken in the second half of 2017 has shown the potential of this region and 2018 is expected to bring several similar projects;
• Focus on the Grande Prairie, Alberta region through securing strategic land locations positioning Horizon North to participate fully in the continued high activity levels expected in the conventional W5/W6 market; and
• Grow Horizon North's presence in the mining sector, specifically on developing opportunities in northern Canada where Horizon North has a strong track record.

Late in 2014 Horizon North under took several initiatives to develop and secure suitable land positions near proposed LNG project sites on British Columbia's west coast. Horizon North maintained a longer term view of LNG development and continued these initiatives, completing the development of its land asset in Kitimat and building strong relationships with regional First Nations and the municipality. Given the recent renewed potential of LNG projects, Horizon North is now well positioned to take full advantage of opportunities as they arise.

The Modular Solutions business is expected to continue its growth based on a strengthening backlog and high quality opportunity pipeline which is underpinned largely by social infrastructure and affordable housing projects, a focus by all levels of government. The backlog and opportunity pipeline are providing a higher level of visibility to the business requiring an increase in labour force at our Kamloops, British Columbia manufacturing facility to achieve a critical mass of scale and manufacturing throughput. Horizon North anticipates that Modular Solutions will continue its trend of earnings improvement and contribute positive EBITDAS throughout 2018 as increased volumes drive improved economies of scale.

The strength of the Statement of Financial Position was a priority for Horizon North throughout 2017, and will continue to be a focus for 2018. Cost reduction measures across our operations and the continued centralization of certain general and administrative functions will drive improved cash flow through efficiencies. In addition to a limited and tightly managed capital program, 2018 will continue to assess Horizon North's portfolio of assets to ensure a focus on core business lines. This combination of actions will help ensure the continued strength with respect to the financial position of Horizon North.  

Dividend payment

Horizon North announced today that its Board of Directors has declared a dividend for the first quarter of 2018 at $0.02 per share. The dividend is payable to shareholders of record at the close of business on March 31, 2018 to be paid on April 12, 2018. The Board of Directors regularly monitors the strength of the Statement of Financial Position, cash from operations and capital requirements to ensure the overall sustainability of Horizon North is not compromised. The dividends will be eligible dividends for Canadian tax purposes.

Additional Information

A copy of the Corporation's Consolidated Financial Statements for the three and twelve months ended December 31, 2017 and 2016 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.

Non-GAAP measures

Certain measures in this MD&A 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:

EBITDAS: Earnings before interest, taxes, depreciation, amortization, impairment, 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.

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.

Caution Regarding Forward-Looking Statements and Information

Certain statements contained in this press release constitute forward-looking statements or information ("forward-looking statements"). 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 statements include:

Under the heading "Outlook" the statement that:

"Horizon North's focus in 2018 will continue to be on building out and expanding on initiatives started in 2017, initiatives intended to strengthen and diversify the Industrial Services business.

For 2018, Horizon North expects the revenue and EBITDAS momentum seen in Q4 2017 to continue with the Industrial Services business anticipating moderate strengthening of activity levels as compared to 2017. Although commodity prices have shown some stability, Horizon North does not expect to see any significant strengthening in pricing from 2017 levels and will continue to focus on cost control to improve EBITDAS levels. The Modular Solutions business exited 2017 with a significant backlog and is anticipated to have positive EBITDAS in 2018 through improving efficiencies as the production rate increases to execute on backlog.

The Industrial Services business will be focused on continuing to build-out and expand on the three phase strategy initiated in 2017:

• Leverage the Aboriginal relationships entered into in the second half of 2017 which cover regions north and south of Fort McMurray, Alberta. A significant project undertaken in the second half of 2017 has shown the potential of this region and 2018 is expected to bring several similar projects;
• Focus on the Grande Prairie, Alberta region through securing strategic land locations positioning Horizon North to participate fully in the continued high activity levels expected in the conventional W5/W6 market; and
• Grow Horizon North's presence in the mining sector, specifically on developing opportunities in northern Canada where Horizon North has a strong track record.

Late in 2014 Horizon North under took several initiatives to develop and secure suitable land positions near proposed LNG project sites on British Columbia's west coast. Horizon North maintained a longer term view of LNG development and continued these initiatives, completing the development of its land asset in Kitimat and building strong relationships with regional First Nations and the municipality. Given the recent renewed potential of LNG projects, Horizon North is now well positioned to take full advantage of opportunities as they arise.

The Modular Solutions business is expected to continue its growth based on a strengthening backlog and high quality opportunity pipeline which is underpinned largely by social infrastructure and affordable housing projects, a focus by all levels of government. The backlog and opportunity pipeline are providing a higher level of visibility to the business requiring an increase in labour force at our Kamloops, British Columbia manufacturing facility to achieve a critical mass of scale and manufacturing throughput. Horizon North anticipates that Modular Solutions will continue its trend of earnings improvement and contribute positive EBITDAS throughout 2018 as increased volumes drive improved economies of scale.

The strength of the Statement of Financial Position was a priority for Horizon North throughout 2017, and will continue to be a focus for 2018. Cost reduction measures across our operations and the continued centralization of certain general and administrative functions will drive improved cash flow through efficiencies. In addition to a limited and tightly managed capital program, 2018 will continue to assess Horizon North's portfolio of assets to ensure a focus on core business lines. This combination of actions will help ensure the continued strength with respect to the financial position of Horizon North".

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:

• industry activity for oil, natural gas and mineral exploration and development in the western Canadian provinces and northern territories;
• commodity prices;
• capital investment in the Canadian oil and gas sector;
• dividend payments;
• anticipated activity levels for 2018;
• operational results and capital spending;
• anticipated backlog in the Modular Solutions business;
• trade and other receivables;
• future operating costs and Corporation's access to capital;
• the effects of regulation by governmental agencies;
• the competitive environment in which the Corporation operates;
• the ability of the Corporation to attract and retain personnel;
• the development of LNG and commodity transportation infrastructure;
• the relationships between the Corporation and its customers; and
• general economic and financial conditions.

Although Horizon North believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because Horizon North cannot give any assurance that they will prove to be correct. Since forward-looking statements 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:

• volatility in the price and demand for oil, natural gas and minerals;
• fluctuations in the demand for the Corporation's services;
• availability of qualified personnel; and
• changes in regulation by governmental agencies, including environmental regulation.

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 press release 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.

About Horizon North

Horizon North is a publicly listed corporation (TSX: HNL.TO) providing a full range of industrial, commercial, and residential products and services. Our Industrial division supplies workforce accommodations, camp management services, access solutions, maintenance and utilities. Our Modular Construction division integrates modern design concepts and technology with state of the art, off-site manufacturing processes; producing high quality building solutions for commercial and residential offerings including offices, hotels, and retail buildings, as well as distinctive single detached dwellings and multi-family residential structures. As a result of our diverse product and service offerings, Horizon North is uniquely positioned to meet the needs of our customers in numerous sectors, anywhere in Canada.

SOURCE Horizon North Logistics Inc.