Technicoil Corporation
TSX : TEC

Technicoil Corporation

May 08, 2008 17:17 ET

Technicoil Corporation Announces Financial and Operating Results for the First Quarter Ended March 31, 2008

CALGARY, ALBERTA--(Marketwire - May 8, 2008) -

NOT FOR DISTRIBUTION INTO THE UNITED STATES OR TO UNITED STATES WIRE SERVICES

Technicoil Corporation (TSX:TEC) -



SUMMARY OF FIRST QUARTER FINANCIAL RESULTS

Three months ended March 31
($ thousands except per share data)(unaudited) 2008 2007
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Number of rigs owned as at March 31 33 24
Average number of rigs available during the
period 32.9 24.7
Revenue $ 17,468 $ 12,996
Gross margin $ 6,159 $ 4,845
Gross margin % 35% 37%
General and administrative expenses $ 924 $ 931
EBITDA (1) $ 5,585 $ 4,771
Net income $ 2,190 $ 1,616
Earnings per share - basic $ 0.03 $ 0.03
Earnings per share - diluted $ 0.03 $ 0.03
Funds flow from operations (2) $ 4,724 $ 3,459
----------------------------------------------------------------------------
----------------------------------------------------------------------------
March 31, December 31,
2008 2007
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total assets $ 115,974 $ 115,243
Total long-term debt $ 23,000 $ 24,500
Debt to equity ratio (3) 0.50 0.53
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(1) EBITDA, or earnings before interest, taxes, depreciation and
amortization, is considered to be a non-GAAP measure that does not have
a standardized meaning prescribed by GAAP and therefore may not be
comparable to similar measures presented by other issuers. Management
believes EBITDA is useful for providing investors with a measure of
results generated by the Corporation's principal business activities
prior to consideration of how these activities are financed, taxed or
depreciated.

(2) Funds flow from operations is defined as cash from operating activities
before changes in non-cash working capital, as presented on the
Corporation's statement of cash flows. Funds flow from operations is a
measure that provides investors additional information regarding the
Corporation's liquidity and its ability to generate funds to finance its
operations. Funds from operations does not have a standardized meaning
prescribed by GAAP and may not be comparable to similar measures
provided by other companies.

(3) Debt to equity ratio is defined as total liabilities, including current
liabilities, long-term debt and future income taxes, divided by
shareholders' equity. Debt to equity ratio is a non-GAAP measure that
does not have a standardized meaning prescribed by GAAP, and therefore
may not be comparable to similar measures presented by other issuers.


HIGHLIGHTS

Technicoil continues to improve its financial and operational performance, resulting in first quarter revenue coming within $0.2 million of the record quarterly revenue generated in the first quarter of 2006 at the peak of the industry cycle. These positive results have been achieved while the industry in general is dealing with lower levels of activity. Management's steadfast focus on expanding and diversifying the Corporation's service offerings and controlling costs over the last two years has allowed Technicoil to break rank with the industry and provide consecutive quarters of improved financial and operational performance. Management believes that Technicoil's ability to produce positive results in a challenging industry environment is a strong testament to the underlying strength of Technicoil's business operations and will allow the Corporation to prosper further once a sustained recovery in industry activity occurs.

During the quarter the following accomplishments were achieved:

- Generated the second highest quarterly revenue in Technicoil's history through a 34% increase in revenue to $17.5 million from the $13.0 million generated in the first quarter of 2007;

- Increased the Corporation's service rig fleet utilization to 53% versus 25% in the first quarter of 2007. This is the highest utilization attained by this division since the fourth quarter of 2005;

- Continued to diversify the services provided by the Corporation's service rigs, which generated approximately 48% of their revenue from sources other than shallow natural gas fracturing. These new revenue sources included well servicing operations in the Montney and Fort McMurray regions;

- Commenced field operations with the Corporation's seventh coiled tubing drilling rig; and

- Expanded and enhanced the Corporation's sales and marketing team.

These accomplishments had a positive impact on Technicoil's first quarter results. The success of Technicoil's growth and diversification efforts will continue to benefit the Corporation in upcoming quarters.

While overall revenue and activity have improved for the Corporation, competitive pricing continues to create pressure on the gross margin and bottom line results. Charge out rates for the Corporation's services for the first quarter of 2008 were consistent with the rates earned in the fourth quarter of 2007, however, these rates are lower than the rates enjoyed in the first quarter of 2007.

As a result of the lower charge out rates, Technicoil's gross margin as a percentage of revenue was 35% versus 37% in the first quarter of 2007. The impact of lower charge out rates on gross margin as a percentage of revenue was partially mitigated by an increase in the proportion of revenue generated by Technicoil's service rigs versus drilling rigs. Well servicing revenue accounted for 73% of the Corporation's revenue in the quarter versus only 48% in the first quarter of 2007. This change in revenue profile had a positive impact as the margins generated in the well servicing division are higher than those generated in the drilling division. The proportional increase in well servicing revenue is due to a combination of the improved utilization of Technicoil's coiled tubing service rigs, the addition of Storm Service Rigs Inc. ("Storm") on August 1, 2007, and a decline in activity for the Corporation's drilling rigs due to lower industry activity.

The 34% increase in revenue in the quarter allowed Technicoil to increase gross margin to $6.2 million in the quarter from $4.8 million in the first quarter of 2007. This improved result also benefited EBITDA which increased to $5.6 million from $4.8 million in the first quarter of 2007. The first quarter of 2007 had benefited from $0.8 million being recognized in gains from the sale of one of the Corporation's original body-style coiled tubing service rigs. A similar gain on sale did not occur in the first quarter of 2008, however, $0.4 million in other revenue was recognized in the quarter from the forfeiture of a non-refundable deposit on the sale of the Corporation's final body-style coiled tubing service rig to the same purchaser. Under the sales contract, the purchaser had until February 29, 2008 to take delivery of this rig. This final delivery did not occur and the purchaser forfeited their deposit at that time. Subsequent to quarter end the purchaser has expressed an interest in still purchasing this rig, however, no delivery has taken place. The Corporation has extended a right of first refusal to the purchaser to take delivery of this rig until May 31, 2008 upon payment of the remaining proceeds owing on this rig of $0.9 million.

Net income for the quarter was $2.2 million versus $1.6 million in first quarter of 2007. Net income was positively impacted by the improved operating results discussed above. Partially offsetting the positive operating results was a $0.2 million increase in depreciation related to the asset additions made subsequent to the first quarter of 2007. Net income also benefited from $0.1 million in positive income tax adjustments related to the finalization of the Corporation's December 31, 2007 tax return.



RESULTS OF OPERATIONS

WELL SERVICING OPERATIONS
----------------------------------------------------------------------------
Three months ended March 31
($ thousands) 2008 2007 Variance % Change
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Well servicing revenue $ 12,805 $ 6,215 $ 6,590 106%
Operating expenses 7,869 3,694 4,175 113%
----------------------------------------------------------------------------
Gross margin $ 4,936 $ 2,521 $ 2,415 96%
Gross margin % 39% 41% (2%) (5%)
Utilization % 53% 25% 28% 112%
Average number of rigs available
during the period 26.0 18.7 7.3 39%
Operating hours during the
period 12,432 4,154 8,278 199%
Number of wells completed during
the period 959 612 347 57%
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Through the expansion of the division's operating fleet and services offered, the well servicing division was able to more than double its revenue to $12.8 million in the quarter from the $6.2 million generated in the first quarter of 2007. This strong performance was achieved at a time when the number of wells completed by the industry in the quarter versus the first quarter of 2007 declined by 24% (source: Daily Oil Bulletin).

Technicoil continues to make progress on diversifying its revenue base for the well servicing division. Since 2006 Technicoil has spent a considerable amount of effort marketing its coiled tubing service rigs for operations outside of shallow natural gas well fracturing. While still a key component of the revenue base for these rigs, the amount of non-shallow gas fracturing services completed by these rigs has been growing. Some of the recent success of these marketing efforts is the division's expansion in to well servicing activities in the Montney and Fort McMurray resource plays. The acquisition of Storm has also helped to expand the division's exposure to areas other than shallow gas well fracturing. As a result of these initiatives, the division's non-shallow gas fracturing revenue increased to 48% of the division's revenue versus only 10% in the first quarter of 2007.

The expansion of the division's rig fleet and services allowed the division to triple its operating hours to 12,432 hours in the quarter versus 4,154 in the first quarter of 2007. This increase in operating hours resulted in utilization for the well servicing rigs to increase to 53% in the quarter from only 25% in the first quarter of 2007. The utilization achieved in the quarter is the highest since the fourth quarter of 2005 which was in the peak of the industry cycle.

Revenue per operating hour in the quarter decreased to $1,030 from the $1,496 achieved in the first quarter of 2007. This decrease is due to a combination of competitive pricing pressures as well as an increase in the amount of revenue generated from non-shallow natural gas fracturing jobs. These jobs tend to take significantly longer and have a lower cost base than fracturing jobs, therefore, revenue rates on an operating hour basis tend to be lower with a corresponding lower cost per operating hour. The volume of operating hours generated by these projects more than offsets the lower revenue rates.

Through proactive cost management and the greater economies of scale created with the expansion of the well servicing fleet, Technicoil's service rigs have been able to maintain strong operating margins. Gross margin as a percentage of revenue was 39% in the quarter versus 41% in the first quarter of 2007. As a result, and consistent with the increase in revenue, the well servicing division was able to almost double its gross margin contribution to $4.9 million in the quarter from $2.5 million in the first quarter of 2007.



DRILLING OPERATIONS
----------------------------------------------------------------------------
Three months ended March 31
($ thousands) 2008 2007 Variance % Change
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Drilling revenue $ 4,663 $ 6,781 ($2,118) (31%)
Operating expenses 3,440 4,457 (1,017) (23%)
----------------------------------------------------------------------------
Gross margin $ 1,223 $ 2,324 ($1,101) (47%)
Gross margin % 26% 34% (8%) (24%)
Utilization % 42% 57% (15%) (26%)
Average number of rigs available
during the period 6.9 6.0 0.9 15%
Number of wells completed during
the period 90 80 10 13%
----------------------------------------------------------------------------
----------------------------------------------------------------------------


A continued slowdown in industry drilling activity caused a 15% decline in the number of wells drilled by the industry in the first quarter of 2008 versus the first quarter of 2007 (source: Daily Oil Bulletin). This decline in industry activity, combined with customer delays, caused utilization for the Corporation's drilling rigs to decline to 42% in the quarter versus 57% in the first quarter of 2007. This compares to an average industry utilization of 55% in the quarter versus 58% in the first quarter of 2007.

Technicoil's lower than industry utilization in the quarter was due to customer delays following Christmas break and management's decision to park the Corporation's oldest drilling rig and utilize some of its support equipment on Technicoil's newest drilling rig added to the fleet in the quarter. This operating decision was made in order to minimize the capital investment required to bring the Corporation's newest rig into the fleet during this period of lower industry activity.

The lower utilization for the drilling rigs was also a function of their increased exposure to oil sands core hole drilling projects during the quarter. During the quarter the division had three rigs performing oil sands core hole drilling projects which had the benefit of diversifying the division's operating revenue between oil and gas projects. However, due to timing of these projects, the rigs began shutting down following the first week of March, thus limiting their drilling time during the quarter.

This increased activity in oil sands coring demonstrates the flexibility and functionality of Technicoil's hybrid coiled tubing rigs as these projects are traditionally completed by conventional jointed pipe drilling rigs. Technicoil's drilling rigs were able to efficiently complete these projects using both jointed pipe and coiled tubing.

The lower industry utilization levels experienced in the quarter continued to increase competition which caused charge-out rates to decline significantly throughout the industry from the rates achieved in the first quarter of 2007. As a result, Technicoil's average all-in revenue per operating day rate declined by 20% to $17,730 per day from $22,160 per day generated in the first quarter of 2007. This all-in rate includes items such as fuel, crew subsistence allowance and other third party costs such as trucking. Depending upon the individual customer contracts, these items may or may not be provided directly by the customer, thus they can significantly skew the average all-in revenue rates. If these items are excluded, the average base revenue per day rate has declined approximately 14% quarter over quarter.

The lower activity levels and charge-out rates in the quarter caused revenue to decline to $4.7 million from $6.8 million in the first quarter of 2007. The lower activity and rate reductions also caused gross margin as a percentage of revenue to decline to 26% in the quarter from 34% in the first quarter of 2007. As a result of the lower activity and gross margin percentages, gross margin declined to $1.2 million in the quarter versus $2.3 million in the first quarter of 2007.

General and Administrative Expenses

General and administrative expenses were $0.9 million which is consistent with the first quarter of 2007, but represents an increase of $0.3 million over the fourth quarter of 2007. The increase in general and administrative expenses over the fourth quarter of 2007 was primarily due to $0.2 million in higher compensation costs being incurred from the expansion of the Corporation's marketing group and the payment of variable compensation arrangements. The remaining increase relates to costs incurred for completion and filing of the Corporation's annual year end reporting documents and an increase in general expenditures associated with the increased size of the Corporation.

General and administrative expenses were 5% of revenue in quarter versus 7% in the first quarter of 2007 and 4% in the fourth quarter of 2007.

Depreciation

Depreciation expense increased to $2.3 million in quarter versus $2.1 million in the first quarter of 2007. The increase in depreciation expense is due to the addition of Storm during the third quarter of 2007 and equipment additions made subsequent to the first quarter of 2007. The depreciation related to these items was partially offset by a $0.3 million decrease in excess depreciation expense recognized in the first quarter of 2007 from the write-off of two mud pumps which were damaged beyond repair during the quarter. A similar write-off did not occur in the first quarter of 2008.

Interest Expense

Technicoil incurred $0.4 million of interest expense in the quarter which is consistent with the first quarter of 2007. Outstanding debt at the end of the quarter was only $2.5 million higher than the debt balance at March 31, 2007. The increase in interest related to this nominal increase in debt was offset by a reduction in prime interest rates quarter over quarter.

Other Revenue

During the quarter Technicoil recognized $0.4 million in revenue from the forfeiture of a non-refundable deposit paid by a prospective purchaser of the Corporation's last remaining body-style coiled tubing service rig. Under the sales agreement the purchaser was required to make the final payment for the rig and take delivery by February 29, 2008. This final payment and delivery did not occur, at which time the purchaser forfeited their deposit.

Subsequent to quarter end, the purchaser indicated a desire to still purchase this rig. Technicoil has granted the purchaser a right of first refusal until May 31, 2008 to purchase this rig for $0.9 million representing the previous agreed sales price less their forfeited deposit. The purchaser has not yet acted upon this right of first refusal.

Income Taxes

Technicoil recorded income tax expense of $0.7 million during the quarter representing a 24.6% effective tax rate versus the 29.5% statutory rate. The lower effective tax rate is primarily due to the gain related to the forfeited rig sale deposit receiving the lower capital gains tax rate. In addition $0.1 million in positive adjustments arising from the finalization of the Corporation's December 31, 2007 corporate tax return were recognized in the quarter.

LIQUIDITY AND CAPITAL RESOURCES

Technicoil exited the first quarter of 2008 with $0.4 million in cash and $23.0 million in total long-term debt compared to $0.4 million in cash and $24.5 million in total long-term debt as at December 31, 2007. The Corporation continues to apply excess cash against its outstanding debt balance. During the quarter the Corporation generated positive funds flow from operations of $4.7 million versus $3.5 million in the first quarter of 2007. This generation of positive funds flow from operations has allowed the Corporation to decrease its net debt, long-term debt less positive working capital, to $10.7 million from $14.6 million at December 31, 2007. Technicoil's consistent track record of positive funds flow generation has allowed the Corporation to continue to expand its breadth of business operations during the current slowdown in industry activity while still maintaining a strong balance sheet.

During the quarter Technicoil incurred $0.9 million in new equipment expenditures which were primarily related to the completion of the seventh drilling rig, carry over items from 2007 and various sustaining capital items. Currently the Corporation has an approved capital budget of $2.5 million. Management and the board of directors intend to review this budget following the second quarter of 2008 once greater clarity of industry activity levels is known.

The Corporation's revolving debt facility is scheduled for renewal in May 2008 at which time it is expected that the revolving term of this facility will be extended for an additional year. If the revolving term of this facility is not extended, the facility will convert into a 24 month term loan with a 48 month amortization.

As at March 31, 2008, the Corporation had 72,392,182 common shares issued and outstanding and 3,555,331 stock options issued and outstanding, of which 1,682,995 were vested.

RISKS AND UNCERTAINTIES

A complete discussion of the business risks faced by the Corporation can be found in Technicoil's annual report for the year ended December 31, 2007, and the Corporation's Annual Information Form dated March 13, 2008, each of which are available on SEDAR.

OUTLOOK

Technicoil has had a strong start to 2008 and management is more optimistic regarding potential activity levels for the remainder of the year. With the current stronger than expected commodity prices, it appears that sentiment in the industry is becoming more positive and capital spending budgets are beginning to increase. So far in the second quarter activity levels have been higher for the Corporation's service rigs than the second quarter of 2007. These activity levels have been curtailed somewhat due to wet ground conditions caused by the recent high snowfall experienced in the middle of April. However, once ground conditions improve which will allow for the movement of equipment on roadways, activity levels are once again expected to increase to levels above those experienced in the second quarter of 2007.

Activity for the Corporation's drilling rigs is expected to be strong following spring breakup, with a number of customers ready to commence their drilling programs once road bans allow for the movement of the drilling rigs onto their well site locations. Marketing efforts have been focused on building relationships with companies who have larger well programs which should allow for more sustained and consistent activity levels for Technicoil's drilling rigs.

If activity levels continue to improve, management and the board of directors intend to assess the Corporation's equipment needs and will make appropriate expansion decisions to satisfy customer demand. Depending upon the opportunity, these expansion decisions may involve the continued organic growth of the Corporation's existing equipment or the potential acquisition of a business with complementary equipment. Management's focus is on continuing to improve the balance of Technicoil's operations which will be accomplished through the expansion of the Corporation's non-shallow gas fracturing business lines.

One of the more exciting areas of growth opportunity for the Corporation's existing equipment is the Montney shale gas play in northeastern British Columbia. The Montney shale gas play is a significant and growing area of exploration and development interest. Since the fourth quarter of 2007, Technicoil has had one coiled tubing service rig operating in the Montney play performing well cleanouts, perforations and deep well fracturing. Technicoil's coiled tubing service rigs have a capacity of 5,400 meters of 2" coil which gives Technicoil's rigs a competitive advantage over other coiled tubing rigs operating in the area. In addition, Technicoil's masted free standing rig design provides additional benefits over other non-masted coiled tubing rigs traditionally used. Due to the success of Technicoil's operations in this resource play, additional rigs are anticipated to be deployed in the area as exploration and development efforts expand.

Another area of growth currently being experienced for the Corporation's coiled tubing service rigs is in Fort McMurray. Currently Technicoil has two rigs operating in Fort McMurray performing SAGD drilling support operations as well as servicing existing operating SAGD wells. Technicoil's slant capable coiled tubing rig design has proven to be significantly more efficient than previous services used by the Corporation's customer for the work being performed on their SAGD wells. Due to the success of the work performed for the Corporation's existing customer, interest is growing for the use of Technicoil's rigs by other potential customers in the area.

Demand for the Corporation's conventional service rigs continues to be strong with interest for Technicoil's rigs exceeding availability. Management is currently assessing the opportunities for these rigs to determine the appropriate timing and direction for expansion of this rig fleet. The expansion of this rig fleet is consistent with management's goal of diversifying the Corporation's business lines.

Management is proud of the accomplishments that have been made in improving Technicoil's business operations over the last two years and is excited about the opportunities which lie ahead of Technicoil in 2008 and beyond.

FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements within the meaning of securities laws. Forward-looking statements or information are often, but not always, identified by the use of words such as "anticipate", "expect", "plan", "forecast", "target", "project", "seek", "may", "intend", "will", "should", "could", "believe", "estimate", "predict" or similar expressions, statements that are based on current expectations and estimates about the markets in which the Corporation operates and statements of the Corporation's belief, intentions and expectations about development, results and events which will, or may occur in the future. Such forward-looking statements are based on certain assumptions and include, but are not limited to: statements with respect to future capital expenditures, including the amount and nature thereof; oil and gas prices and demand; other development trends of the oil and gas industry; business strategy; expansion and growth of the Corporation's business and operations, including the Corporation's market share and position in the oilfield service markets; and other such matters. In addition, other written or oral statements which constitute forward-looking statements may be made from time to time by and on behalf of the Corporation.

By their very nature, such forward-looking statements are subject to important risks and uncertainties that predictions, projections, forecasts and other forward-looking statements will not be achieved. Readers are cautioned not to place undue reliance on these statements as a number of important factors could cause the actual results to differ materially from the beliefs, plans, objectives, expectations and anticipations, estimates and intentions expressed in such forward-looking statements. These factors include, without limitation: the impact of general economic conditions; industry conditions, including the adoption of new environmental, tax, royalty and other laws and regulations and changes in how they are interpreted and enforced; volatility of oil and gas prices; oil and gas product supply and demand; inadequate insurance coverage; risks inherent in the Corporation's ability to generate sufficient cash flow from operations to meet its current and future obligations; increases in debt service charges; the Corporation's ability to access external sources of debt and equity capital; increased competition; the lack of availability of qualified personnel or management; labor unrest; fluctuations in foreign exchange or interest rates; stock market volatility; opportunities available to, or pursued by, the Corporation and other factors, many of which are beyond the control of the Corporation.

Further information regarding these factors may be found under the heading "Risks and Uncertainties" in the MD&A of the audited December 31, 2007 financial statements and the Corporation's most recent Annual Information Form, Information Circular, quarterly reports, material change reports and news releases. The Corporation's actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do, what benefits, including the amount of proceeds, the Corporation will derive there from. The Corporation disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Any forward-looking information contained herein is expressly qualified by this cautionary statement. The forward-looking statements in this document are provided for the limited purpose of enabling current and potential investors to evaluate an investment in the Corporation. Readers are cautioned that such statements may not be appropriate, and should not be used for other purposes.



Consolidated
BALANCE SHEETS

----------------------------------------------------------------------------

(Thousands) March 31, 2008 December 31, 2007
----------------------------------------------------------------------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 414 $ 388
Accounts receivable 14,491 10,740
Income taxes receivable - 1,662
Inventory 2,283 2,325
Prepaid expenses 363 343
----------------------------------------------------------------------------
17,551 15,458
Intangibles 1,476 1,634
Goodwill 7,385 7,385
Property, plant and equipment 89,562 90,766
----------------------------------------------------------------------------
$ 115,974 $ 115,243
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 4,982 $ 5,556
Income taxes payable 291 -
Current portion of long-term debt 4,792 3,573
----------------------------------------------------------------------------
10,065 9,129
Long-term debt 18,208 20,927
Future income taxes 10,158 9,946
----------------------------------------------------------------------------
38,431 40,002
----------------------------------------------------------------------------

Shareholders' equity:
Share capital 51,271 51,107
Contributed surplus 2,300 2,352
Retained earnings 23,972 21,782
----------------------------------------------------------------------------
77,543 75,241
----------------------------------------------------------------------------
$ 115,974 $ 115,243
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Consolidated Statements of
OPERATIONS and RETAINED EARNINGS

----------------------------------------------------------------------------
(Thousands except per share data) Three Months Ended Three Months Ended
(unaudited) March 31, 2008 March 31, 2007
----------------------------------------------------------------------------

Revenue $ 17,468 $ 12,996
Operating expenses 11,309 8,151
----------------------------------------------------------------------------
Gross margin 6,159 4,845
General and administrative expenses 924 931
Depreciation 2,305 2,079
Gain on sale of assets - (843)
Interest on long-term debt 375 363
Other revenue (350) (14)
----------------------------------------------------------------------------

Net income before income tax 2,905 2,329
----------------------------------------------------------------------------

Income tax expense:
Current 503 211
Future 212 502
----------------------------------------------------------------------------
715 713
----------------------------------------------------------------------------

Net income and comprehensive income 2,190 1,616

Retained earnings, beginning of
period 21,782 19,237
----------------------------------------------------------------------------

Retained earnings, end of period $ 23,972 $ 20,853
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Earnings per share
Basic $ 0.03 $ 0.03
Diluted $ 0.03 $ 0.03
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Consolidated Statements of
CASH FLOWS

----------------------------------------------------------------------------
Three Months Ended Three Months Ended
(Thousands) (unaudited) March 31, 2008 March 31, 2007
----------------------------------------------------------------------------
Cash provided by (used in):
Operating activities:
Net income for the period $ 2,190 $ 1,616
Add (deduct) non-cash items:
Depreciation 2,305 2,079
Gain on sale of assets - (843)
Stock-based compensation expense 17 105
Future income tax 212 502
----------------------------------------------------------------------------
4,724 3,459
Net change in non-cash working
capital from operations (890) (3,613)
----------------------------------------------------------------------------
Cash flow from operating activities 3,834 (154)
----------------------------------------------------------------------------
Financing activities:
Common shares issued 95 10
Net proceeds from revolving term
loans (1,500) -
Repayment of fixed term loans - (1,225)
----------------------------------------------------------------------------
Cash flow from financing activities (1,405) (1,215)
----------------------------------------------------------------------------
Investing activities:
Acquisition of property, plant and
equipment (942) (2,291)
Proceeds on sale of property, plant
and equipment - 1,874
Net change in non-cash working
capital from the purchase of
property, plant and equipment (1,461) 604
----------------------------------------------------------------------------
Cash flow from investing activities (2,403) 187
----------------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents 26 (1,182)
Cash and cash equivalents, beginning
of period 388 3,047
----------------------------------------------------------------------------
Cash and cash equivalent, end of
period $ 414 $ 1,865
----------------------------------------------------------------------------
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Cash interest paid $ 382 $ 319
Cash income taxes received $ 1,470 -
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Contact Information