Mr. Rod Graham reports

HORIZON NORTH LOGISTICS INC. ANNOUNCES RESULTS FOR THE QUARTER ENDED JUNE 30, 2015

Horizon North Logistics Inc. is releasing its financial and operating results for the three and six months ended June 30, 2015, and June 30, 2014.

Second quarter highlights:

• The second quarter of 2015 experienced generally higher activity levels in large camps, relocatable structures and mat rentals compared with the second quarter of 2014, but was negatively impacted by pricing concessions provided to key customers and the effects of competitive pricing on new projects.
• First quarter 2015 EBITDAS (earnings before interest, taxes, depreciation and amortization, and stock-based compensation) decreased compared with the second quarter of 2014, and was impacted by three significant cost items which are not anticipated to reoccur, namely higher costs related to a large-camp installation project, restructuring costs incurred to drive efficiency improvements and a provincial sales tax assessment related to prior periods.
• The balance sheet continued to strengthen as a result of reduced working capital and disciplined capital spending exiting the quarter with a trailing 12-month-debt-to-EBITDAS ratio of 1.28:1.0.
• On July 8, 2015, Horizon North successfully completed a bought-deal equity financing for net proceeds of $76.6-million, with the proceeds used to initially pay down the corporation's outstanding credit facilities, which can then be redrawn to accelerate expansion related to LNG projects and other corporate opportunities.

                              SECOND QUARTER FINANCIAL SUMMARY
              (in thousands of dollars, except per-share amounts and as indicated)

                                               Three months ended June 30,   Six months ended June 30,
                                                           2015      2014              2015      2014

Revenue                                                $ 84,888  $ 96,094          $218,856  $218,305
EBITDAS                                                  10,093    15,496            39,507    39,046
EBITDAS as a percentage of revenue                          12%       16%               18%       18%
Operating earnings (loss)                                (4,034)    1,871            11,405    13,301
Operating earnings as a percentage of revenue               (5%)       2%                5%        6%     
Total profit (loss)                                      (5,958)      680             4,324     8,398
Total comprehensive income (loss)                        (6,308)      602             4,392     8,519
Earnings per share     
Basic                                                  $  (0.05) $   0.01          $   0.04  $   0.08
Diluted                                                $  (0.05) $   0.01          $   0.04  $   0.08
Total assets                                            489,950   513,060           489,950   513,060
Long-term loans and borrowings                          114,235   126,417           114,235   126,417
Cash from operations                                     40,275    37,579            72,661    33,399
Capital spending                                                                                        
Purchase of property, plant and equipment                12,950    48,346            28,138    76,224
Proceeds from disposals of property, plant 
and equipment                                            (3,168)   (3,833)           (6,126)   (9,360)
Net capital spending                                      9,782    44,513            22,012    66,864
Senior debt to EBITDAS                                1.28:1.00 1.30:1.00         1.28:1.00 1.30:1.00
Total debt to EBITDAS                                 1.28:1.00 1.33:1.00         1.28:1.00 1.33:1.00
Debt to total capitalization ratio                    0.31:1.00 0.30:1.00         0.31:1.00 0.30:1.00
Dividends declared                                     $ 19,497  $  8,825          $ 28,337  $ 17,642
Dividends declared per share                           $   0.16  $   0.08          $   0.24  $   0.16

Second quarter overview

Horizon North's results for the three months ended June 30, 2015, compared with the three months ended June 30, 2014, decreased for most financial measures. However, results came in close to expectations with the exception of $5.6-million in non-recurring charges as a result of higher costs associated with a large-camp installation project, restructuring costs incurred to drive efficiency improvements throughout the organization and a provincial sales tax assessment. The second quarter of 2015 is where Horizon North saw the impact of the current uncertain economic environment, with results reflecting the effect of pricing accommodations negotiated on existing contracts and reduced pricing on new projects. The second quarter of 2015 was a busy quarter for large camps, space rentals and mat rentals, each experiencing higher volumes compared with the second quarter of 2014, demonstrating the continuing demand for Horizon North's services and the company's commitment to working with its key customers through the current uncertain economic environment. As well, Horizon North continues to work with suppliers to find efficiencies and reduce costs.

Manufacturing revenues were consistent between the comparative quarters, with activity similarly focused on site installation projects in each quarter. Total direct hours, which include all direct hours in the manufacturing plants and installation hours on project sites, for the second quarter of 2015, were down 28 per cent, mainly attributable to the reduction of manufacturing capacity as management continues to align head count with the reduced manufacturing order backlog. Of the total direct hours, 67 per cent were allocated to third party contracts, as compared with 42 per cent in the same period of 2014.

Revenues from camp rental and catering operations for the second quarter of 2015 decreased compared with the same period of 2014, as a result of negotiated pricing accommodations on existing contracts and reduced service revenues. Partially offsetting the downward pricing pressure was a 13-per-cent increase in manday volumes in the large-camp operations, driven by a very active fire camp season in the second quarter of 2015, and the addition of several large camps in the second half of 2014. Utilization in the comparative quarters softened to 56 per cent, from 60 per cent, and revenue per average available bed decreased to $97, from $117, primarily due to the decline in revenues and the increase in fleet by 1,526 beds between the comparative quarters.

Matting revenues decreased in the comparative quarters, with the majority of the decrease coming from lower mat sales as a result of customers reducing their capital programs. Access mat rental revenues remained relatively consistent quarter over quarter, with the rental volumes up 42 per cent, offsetting decreases in rental pricing. The higher volumes drove utilization to 80 per cent, from 79 per cent in the comparative quarters, but with an average fleet size of 30,705 mats, compared with 17,393 mats in the second quarter of 2014.

Horizon North's EBITDAS in the second quarter of 2015 decreased compared with the second quarter of 2014, mainly as a result of higher costs associated with a camp installation project, restructuring costs discussed above and a provincial sales tax assessment recorded in the quarter. With the exception of the manufacturing operation, EBITDAS in camps and catering, relocatable structures and matting increased, compared with the same period of 2014. Operating earnings and earnings per share for the second quarter of 2015 decreased, compared with the same period of 2014, due to the reduced revenues and EBITDAS discussed above. Depreciation and amortization remained relatively consistent in the comparative quarters.

Horizon North's balance sheet continued to improve in the second quarter of 2015. The improvement was mainly a result of reduced working capital, strong cash from operations and disciplined capital spending, which facilitated the reduction of debt by $21.0-million in the quarter, exiting the quarter with total loans and borrowing of $114.2-million, and trailing 12-month-debt-to-EBITDAS ratio of 1.28:1.0. The balance sheet was further strengthened by the receipt of net proceeds in the amount of $76.6-million from the bought-deal equity financing which closed July 8, 2015.

Dividend payment

On June 17, 2015, the corporation's board of directors declared a dividend for the third quarter of 2015, of eight cents per share. The dividend is payable to shareholders of record at the close of business on Sept. 30, 2015, to be paid on Oct. 15, 2015. Horizon North expects to maintain its quarterly dividend of eight cents per share based on a strong balance sheet, expectations of continued strong cash flow from operations and the potential for corporate growth opportunities. The board of directors regularly monitors these factors to ensure the overall sustainability of Horizon North is not compromised.

Capital spending

For the six months ended June 30, 2015, capital spending was $28.1-million, compared with $76.2-million in the same period of 2014, as a result of a focused and disciplined 2015 capital program. Capital in the first half of 2015 was mainly focused on expansion of the camp rental fleet, compared with the first half of 2014, which focused on building 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 six months ended June 30, 2015, of $22.0-million, compared with $66.9-million for the same period of 2014.

Outlook

Horizon North has not significantly changed its outlook for 2015, and anticipates the second half of the year will continue to be difficult while it waits for the current economic environment to improve. A challenging commodity price environment with depressed and fluctuating oil prices makes it difficult for customers to commit to new projects, and recent changes in the Alberta political landscape have added additional uncertainty. These factors have resulted in customers either delaying or deferring their capital spending programs.

The company continues to work closely with its customers through these challenging times, and the second quarter results reflect the effects of pricing concessions provided on existing contracts and the effects of competitive pricing on new projects. Horizon North's strategy is to work with key clients in order to remain competitive, while working toward a mutually beneficial solution over the longer term. The company continues to move forward with structural changes to its business, particularly in its manufacturing operations, which are being undertaken as part of realigning the direction of the corporation to improve operational efficiency, stabilize the operating base and prepare for the next up cycle. Horizon North has recently hired an experienced vice-president of business information systems to enhance its information technology capabilities. It is in the final stages of hiring a new vice-president of manufacturing and is excited about the changes this individual will bring to the manufacturing platform.

Bidding activity continues to be reasonably strong in certain areas despite the challenging environment. The company continues to focus on development of the market for modular construction of permanent facilities to solidify the demand for manufacturing capacity from areas other than traditional camp facility construction. However, it continues to act prudently, and has worked to align manufacturing head count and cost structure with current levels of demand.

Horizon North continues to progress on key development areas near proposed LNG project sites in British Columbia to be positioned for opportunities in this area. Suitable land positions have been secured in Kitimat and in Prince Rupert, B.C., near proposed LNG project sites, and the company continues to dialogue with project proponents and local businesses in anticipation of future activity and development. Horizon North anticipates allocating additional capital to these locations in the second half of 2015, starting with some initial open-camp developments to service existing customer request, which will be expanded as demand and opportunities unfold. As such, the board of directors has approved an increase in Horizon North's 2015 capital spending budget to $50.0-million in anticipation of focusing capital to accelerate expansion plans related to potential LNG projects in British Columbia, with an additional $10.0-million available subject to contract awards.

Horizon North's balance sheet continued to improve as a result of reduced working capital and disciplined capital spending, which resulted in a reduction in net debt of $32.1-million since the beginning of the year. The balance sheet was further strengthened by a bought-deal equity financing which was completed on July 8, 2015, and raised $76.6-million in net proceeds. The use of proceeds will be to initially pay down the corporation's outstanding credit facilities, which can then be redrawn to accelerate expansion related to LNG projects and other corporate opportunities.

Additional information

Copies of the corporation's condensed consolidated interim financial statements for the three and six months ended June 30, 2015, and June 30, 2014, and related management's discussion and analysis, have been filed with the Canadian securities regulatory authorities. They are available on SEDAR and the company's website. 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 a.m. MT (11 a.m. ET) on July 30, 2015, to discuss Horizon North's second 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 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 Aug. 13, 2015, by dialling 1-403-451-9481 or 1-855-859-2056, passcode 88292598.

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