"The last quarter of 2019 was very challenging, to say it politely, which is reflective of the overall pressures associated with the current macro environment. The economy is clearly stuck in neutral, at best, contributing to what is referred to as freight recession, arising from weak shipper demand, accompanied by changes to the supply chain, an inventory overhang as suppliers ramped up shipments earlier in the year and excessive truck capacity. These factors are the primary reason the Trucking/Logistics segment struggled to show any meaningful growth during the quarter, in spite of a relatively strong performance in our LTL business, which continues to benefit from solid consumer demand. And while growth in this segment slowed, we still managed to increase revenue and grow market share, primarily through some small tuck-in type acquisitions. Overall, I am quite pleased with the results generated, given the competitive market conditions.
"Consolidated revenue was negatively impacted by declines in oilfield services. The issues surrounding western
"2019 ended just about on plan although the fourth quarter was more difficult than I had originally anticipated. Nevertheless, we generated another strong year in terms of cash from operations, paid shareholders a healthy
Key financial highlights for the fourth quarter of 2019 with comparison to 2018 are as follows:
HIGHLIGHTS | |||
(unaudited) ($ millions) | Three month periods ended | ||
2019 | 2018 | Change | |
$ | $ | % | |
Revenue | |||
Trucking/Logistics | 224.6 | 219.7 | 2.2 |
Oilfield Services | 91.4 | 114.1 | (19.9) |
Corporate and intersegment eliminations | (1.4) | (0.5) | - |
Total Revenue | 314.6 | 333.3 | (5.6) |
Operating income before depreciation and amortization (1) | |||
Trucking/Logistics | 37.5 | 33.2 | 13.0 |
Oilfield Services | 15.5 | 20.8 | (25.5) |
Corporate | (3.1) | (2.3) | (0.8) |
Total Operating income before depreciation and amortization (1) | 49.9 | 51.7 | (3.5) |
(1) Refer to notes section of Summary |
- generated consolidated revenue of
$314.6 million , a decrease of$18.7 million , or 5.6 percent, as compared to$333.3 million in 2018 due to: - record fourth quarter revenue in the Trucking/Logistics ("T/L") segment, a
$4.9 million increase to$224.6 million - a decrease of
$22.7 million or 19.9 percent in the Oilfield Services ("OFS") segment
- earned consolidated operating income before depreciation and amortization ("OIBDA") of
$49.9 million , a decrease of$1.8 million as compared to$51.7 million in 2018 due to: - record fourth quarter OIBDA of
$37.5 million in the T/L segment - a decrease of
$5.3 million or 25.5 percent in the OFS segment - a
$0.8 million increase in Corporate costs mainly due to foreign exchange
Fourth Quarter Financial Results
Revenue decreased by $18.7 million, or 5.6 percent, to $314.6 million and is summarized as follows:
- T/L segment grew by
$4.9 million , or 2.2 percent, to$224.6 million - a record compared to any previous fourth quarter period. Incremental revenue from acquisitions was$5.9 million while fuel surcharge revenue decreased by$2.7 million . Excluding acquisitions and the change in fuel surcharge revenue, growth resulted primarily from revenue increases atGardewine Group Limited Partnership andSmook Contractors Ltd. - OFS segment decreased by
$22.7 million , or 19.9 percent - this decrease is attributable to the decline in drilling activity in theWestern Canadian Sedimentary Basin ("WCSB"), and the Alberta Government's mandated crude oil curtailments that resulted in lower demand and very competitive pricing for the transportation of fluids and servicing of wells and drilling related services. These decreases were partially offset by strong results generated byPremay Pipeline Hauling L.P. ("Premay Pipeline").
OIBDA decreased by $1.8 million, or 3.5 percent, to $49.9 million and is summarized as follows:
- T/L segment grew by
$4.3 million , or 13.0 percent, to$37.5 million - a record compared to any previous fourth quarter period. The majority of this rise in OIBDA, specifically$3.2 million , was due to the adoption of IFRS 16 - Leases. In addition, acquisitions accounted for$0.9 million of incremental growth. When comparing our operating margin without the impact of IFRS 16 - Leases, it was 15.3 percent as compared to 15.1 percent in 2018. - OFS segment down by
$5.3 million to$15.5 million - those Business Units involved in the transportation of fluids and servicing of wells declined by$2.5 million due to the Alberta Government's mandated crude oil curtailments while those providing specialized services such as large diameter pipe stockpiling and stringing services as well as water management services declined by$2.2 million . Operating margin adjusted for the impact of IFRS 16 - Leases decreased to 16.5 percent from 18.2 percent in 2018 due to higher direct operating expenses including operating supplies expense, repairs and maintenance expense, and contractors costs.
Net income increased by
- The 2018 impairment of goodwill of
$100.0 million recorded by certain Business Units within the OFS segment due to the significant deterioration of industry conditions in the fourth quarter, a$4.5 million positive variance in net foreign exchange and a$2.0 million positive variance in the fair value of investments. - The above was partially offset by a
$10.0 million increase in depreciation of property, plant and equipment and right-of-use assets, a$1.8 million decrease in OIBDA, a$1.8 million increase in finance costs and a$1.4 million increase in income tax expense.
Net income - adjusted decreased to
A summary of
SUMMARY | |||||||
(unaudited) ($ millions, except per share amounts) | Three month periods ended | Twelve month periods ended | |||||
2019 | 2018 | Change | 2019 | 2018 | Change | ||
$ | $ | % | $ | $ | % | ||
Revenue | 314.6 | 333.3 | (5.6) | 1,278.5 | 1,260.8 | 1.4 | |
Operating income before depreciation and | |||||||
amortization(1) | 49.9 | 51.7 | (3.5) | 200.9 | 189.0 | 6.3 | |
Net foreign exchange (gain) loss | (2.3) | 2.2 | (204.5) | (14.1) | 8.5 | (265.9) | |
Decrease (increase) in fair value of investments | (0.3) | 1.7 | (117.6) | - | 3.1 | (100.0) | |
Net income (loss) | 8.4 | (81.1) | (110.4) | 72.2 | (43.8) | (264.8) | |
Net Income - adjusted(2) | 5.6 | 16.9 | (66.9) | 48.2 | 62.0 | (22.3) | |
Earnings (loss) per share(3) | 0.08 | (0.77) | (110.4) | 0.69 | (0.42) | (264.3) | |
Earnings per share - adjusted(2) | 0.05 | 0.16 | (68.8) | 0.46 | 0.59 | (22.0) | |
Net cash from operating activities | 54.2 | 56.5 | (4.1) | 170.6 | 140.7 | 21.3 | |
Net cash from operating activities per share(3) | 0.52 | 0.54 | (3.7) | 1.63 | 1.35 | 20.7 | |
Cash dividends declared per Common Share | 0.15 | 0.15 | - | 0.60 | 0.60 | - |
Notes: (1) Operating income before depreciation and amortization ("OIBDA") is defined as net income before depreciation of right-of-use assets and of property, plant and equipment, amortization of intangible assets, finance costs, net foreign exchange gains and losses, other (income) expense and income taxes. (2) Net income - adjusted and earnings per share - adjusted are calculated by adjusting net income and basic earnings per share by the amount of any net foreign exchange gains and losses, the change in fair value of investments, and the impairment of goodwill. (3) Earnings per share and net cash from operating activities per share are calculated based on the weighted average number of Common Shares outstanding for the period. Non-GAAP Terms -
Year End Financial Results
Revenue increased by $17.7 million, or 1.4 percent, to $1,278.5 million and is summarized as follows:
- T/L segment grew by
$8.3 million , or 1.0 percent, to$881.6 million - a record compared to any previous year. Our regional LTL business improved by$16.6 million to$447.4 million benefitting from acquisitions and modest market share gains. Our truckload services business decreased by$8.0 million to$446.1 million as a result of lower GDP growth and a lack of capital investments. Fuel surcharge revenue, excluding the effect of acquisitions, declined by$6.4 million to$83.4 million . - OFS segment increased by
$10.2 million , or 2.6 percent, to$400.1 million - this increase was mainly attributable to the$39.4 million of incremental revenue generated by the 2018 mid-year acquisition of the business and assets of AECOM'sCanadian Industrial Services Division ("AECOM ISD") and from the rise in demand for large diameter pipeline hauling and stringing services. These increases were partially offset by a$27.6 million decrease in revenue generated by those Business Units most directly tied to oil and natural gas drilling activity as a result of lower drilling activity in the WCSB. Revenue also decreased due to a decline in demand for the transportation of fluids and servicing of wells due to the Alberta Government's mandated crude oil curtailments.
OIBDA increased by $11.9 million, or 6.3 percent, to $200.9 million and is summarized as follows:
- T/L segment grew by
$11.2 million , or 8.7 percent, to$139.6 million - a record compared to any previous year. The majority of this increase, specifically$10.9 million , was due to the adoption of IFRS 16 - Leases while acquisitions accounted for$2.8 million of incremental OIBDA. These increases were somewhat offset by a reduction in OIBDA generated by certain of our truckload services Business Units. When comparing our operating margin without the impact of IFRS 16 - Leases, it was 14.6 percent, as compared to 14.7 percent in 2018, which was primarily due to the lower margins generated by the recent acquisitions. - OFS segment up by
$4.0 million to$70.8 million - those Business Units providing specialized services including that of Premay Pipeline increased by$7.0 million while those Business Units involved in the transportation of fluids and servicing of wells improved due to the 2018 mid-year acquisition of AECOM ISD. These increases were partially offset by a$6.9 million decrease from those Business Units tied to drilling and drilling related activity due to the decline in drilling activity in the WCSB. Operating margin adjusted for the impact of IFRS 16 - Leases improved by only 0.1 percent. The net margin gain was due to the integration of the AECOM ISD assets and the change in revenue mix associated with certain large diameter pipeline projects that had a beneficial effect on margin being mostly offset by the significant decline in margin generated by those Business Units mostly tied to drilling related activity.
Net income increased by
- The 2018 impairment of goodwill of
$100.0 million recorded by certain Business Units within the OFS segment due to the significant deterioration of industry conditions in the fourth quarter, a$22.6 million positive variance in net foreign exchange, an$11.9 million increase in OIBDA, a$9.3 million decrease in income tax expense and a$3.1 million positive variance in the fair value of investments. - The above was partially offset by a
$20.1 million increase in depreciation of property, plant and equipment and right-of-use assets, a$3.9 million increase in amortization of intangible assets, a$3.6 million increase in finance costs, a$2.4 million increase in the loss on sale of property, plant and equipment and a$0.9 million decrease in earnings from equity investments.
Net income - adjusted decreased by 22.3 percent to
Financial Position
The following summarizes our financial position as at
- Exited the fourth quarter with working capital of
$243.3 million , which included$79.0 million of cash and cash equivalents. - Total net debt (
$470.6 million ) to operating cash flow ($204.7 million ) of 2.30:1 as defined per our Private Placement Debt agreement (financial covenant threshold of 3.50:1). - Net book value of property, plant and equipment of
$954.6 million , which includes$495.1 million of real property (carrying costs of$571.4 million ).
Our Plans for 2020
"2020 will be a growth year for our company primarily because we will use a strong balance sheet to acquire some really good companies. And to the very loyal shareholders who stuck with our company during some difficult times in the last decade, as the oil and natural industry came under significant realignment, I confidently say we are now positioned to resume a growth trajectory.
"The oil and natural gas industry is an important and large part of the Canadian economy however we have concluded that it is not a growth industry any longer, as such we will be reporting operating results to shareholders in a manner that reflects the business we are focused on today. LTL is the fastest growing part of our business as we build out a network across
Financial Goals and Capital Budget:
- Generate consolidated revenue in excess of
$1.4 billion . - Achieve operating earnings in the range of
$210.0 -$220.0 million , with volatility in operating margins based upon the timing of acquisitions. - Invest
$50.0 million in capital expenditures, exclusive of acquisitions and new land or buildings.
To support these goals, we will focus on the following initiatives:
- Pursue acquisitions.
- Invest in new technologies that can improve operating efficiencies and position ourselves for the digital world, including Moveitonline and Haulistic, technologies that can change the way we do business.
- Continue to streamline business processes and reduce redundancies where appropriate.
Dividends and Share Buyback:
- We will continue to pay annual dividends of
$0.60 per Common Share on a monthly basis, being the largest portion of our annual free cash. - The board of directors approved management to pursue a normal course issuer bid.
2020 Operating Segments:
Effective
About
Disclaimer
This news release may contain forward-looking information that is subject to risk factors associated with the oil and natural gas business and the overall economy. This information relates to future events and
Contact Information
Mr.
Mr.
Mr.
Telephone: 403-995-5200
Fax: 403-995-5296
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