Dexterra Group Inc. — Interim / Quarterly Report 2020

May 12, 2020

Condensed Consolidated Interim Financial Statements of

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Three months ended March 31, 2020 and 2019 (Unaudited)

Condensed consolidated statement of financial position (Unaudited)
			March 31,		December 31,
(000’s)	Note		2020		2019
Assets
Current assets
Trade and other receivables		$	135,411	$	116,307
Inventories			23,788		20,789
Prepayments			3,063		2,334
Income tax receivable			296		—
Finance lease receivable			749		735
Total current assets			163,307		140,165
Non-current assets
Property, plant and equipment	5		262,647		288,750
Right-of-use assets	6		28,046		28,799
Intangible assets			6,375		8,252
Goodwill			5,817		13,575
Finance lease receivable			1,836		2,028
Other assets			8,003		3,344
Total non-current assets			312,724		344,748
Total assets		$	476,031	$	484,913
Liabilities and Shareholders’ Equity
Current liabilities
Trade and other payables		$	73,567	$	80,142
Deferred revenue			2,973		2,833
Income taxes payable			—		561
Asset retirement obligations			5,395		5,810
Lease liabilities	6		6,974		6,231
Loans and borrowings	8		15,000		—
Total current liabilities			103,909		95,577
Non-current liabilities
Asset retirement obligations			5,934		6,350
Loans and borrowings	8		119,971		108,066
Lease liabilities	6		18,700		20,147
Deferred tax liabilities			8,415		13,008
Total liabilities			256,929		243,148
Shareholders’ equity
Share capital	11		340,353		340,353
Contributed surplus			18,421		18,245
Accumulated other comprehensive income			756		755
Retained deficit			(140,428)		(117,588)
Total shareholders’ equity			219,102		241,765
Total liabilities and shareholders’ equity		$	476,031	$	484,913

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

Condensed consolidated statement of comprehensive loss (Unaudited) Three months ended March 31, 2020 and 2019

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Condensed consolidated statement of comprehensive loss Three months ended March 31, 2020 and 2019	(Unaudited)
			Three months ended March 31,
(000’s except per share amounts)	Note		2020		2019
Revenue	9	$	115,016	$	128,745
Operating expenses
Direct costs			98,644		105,543
Depreciation	5,6		10,881		9,930
Amortization of intangible assets			1,056		472
Impairment loss	7		21,550		—
Share based compensation			(294)		202
Loss on disposal of property, plant and equipment			1,141		258
Direct operating expenses			132,978		116,405
Gross profit (loss)			(17,962)		12,340
Selling & administrative expenses
Selling & administrative expenses			7,608		5,797
Share based compensation			(352)		215
Selling & administrative expenses			7,256		6,012
Operating profit (loss)			(25,218)		6,328
Finance costs			2,239		1,038
Loss from equity investments			104		—
Earnings (loss) before tax			(27,561)		5,290
Current tax expense (recovery)			(127)		640
Deferred tax expense (recovery)			(4,594)		913
Income tax expense (recovery)	10		(4,721)		1,553
Total profit (loss)			(22,840)		3,737
Other comprehensive income
Translation of foreign operations, net of income tax			1		—
Other comprehensive income, net of income tax			1		—
Total comprehensive income (loss)		$	(22,839)	$	3,737
Earnings (loss) per share
Basic and diluted	12	$	(0.14)	$	0.02

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

Condensed consolidated statement of changes in equity (Unaudited)

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							Accumulated
							Other
			Share		Contributed		Comprehensive		Retained
(000’s)	Note		Capital		Surplus		Income		Deficit		Total
Balance at December 31, 2018		$	338,377	$	17,195	$	761	$	(19,590)	$	336,743
Total profit			—		—		—		3,737		3,737
Share based compensation			—		317		—		—		317
Dividends	13		—		—		—		(3,285)		(3,285)
Balance at March 31, 2019		$	338,377	$	17,512	$	761	$	(19,138)	$	337,512
Total loss			—		—		—		(88,523)		(88,523)
Share based compensation			—		851		—		—		851
Translation of foreign operations			—		—		(6)		—		(6)
Share options exercised			546		(118)		—		—		428
Issue of share capital			1,430		—		—		—		1,430
Dividends	13		—		—		—		(9,927)		(9,927)
Balance at December 31, 2019		$	340,353	$	18,245	$	755	$	(117,588)	$	241,765
Total loss			—		—		—		(22,840)		(22,840)
Share based compensation			—		176		—		—		176
Translation of foreign operations			—		—		1		—		1
Balance at March 31, 2020		$	340,353	$	18,421	$	756	$	(140,428)	$	219,102

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

Condensed consolidated statement of cash flows (Unaudited) Three months ended March 31, 2020 and 2019

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Three months ended March 31, 2020 and 2019
(000’s)	Note		March 31, 2020		March 31, 2019
Cash provided by (used in):
Operating activities:
Income (loss) for the period		$	(22,840)	$	3,737
Adjustments for:
Depreciation	5,6		10,881		9,930
Amortization of intangible assets			1,056		472
Impairment loss	7		21,550		—
Share based compensation			(646)		417
Amortization of other assets			—		256
Loss on disposal of property, plant and equipment			1,141		258
Book value of used fleet sales			371		2,203
Earnings on equity investments			104		—
Finance costs			2,239		1,038
Income tax expense (recovery)	10		(4,721)		1,553
Asset retirement obligation settled			(113)		(445)
Income taxes paid			(730)		(1,421)
Funds flow			8,292		17,998
Changes in non-cash working capital items			(22,433)		(735)
Net cash flows from (used in) operating activities			(14,141)		17,263
Investing activities:
Purchase of property, plant and equipment			(4,192)		(15,197)
Changes in non-cash working capital items			(2,523)		417
Equity Investment			(4,761)		—
Proceeds on disposal of property, plant and equipment			5,962		93
Net cash flows used in investing activities			(5,514)		(14,687)
Financing activities:
Payments for lease liabilities			(1,731)		(2,206)
Proceeds from loans and borrowings			27,100		3,362
Finance costs paid			(2,406)		(447)
Payment of dividends			(3,308)		(3,285)
Net cash flows from (used in) financing activities			19,655		(2,576)
Change in cash position			—		—
Cash, beginning of period			—		—
Cash, end of period		$	—	$	—

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

Notes to the condensed consolidated interim financial statements (Unaudited) Three months ended March 31, 2020 and 2019

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1. Reporting Entity

Horizon North Logistics Inc. (“Horizon North” or the “Corporation”) is a corporation registered and domiciled in Canada and is a publicly-traded corporation, listed on the Toronto Stock Exchange under the symbol HNL. The Corporation’s registered offices are at 900, 240 - 4[th] Avenue SW, Calgary, AB T2P 4H4. The condensed consolidated interim financial statements of the Corporation as at and for the three month period ended March 31, 2020 are comprised of the Corporation and its subsidiaries and the Corporation’s interest in associates and jointly controlled entities. Horizon North provides a full range of industrial, commercial, and residential products and services under its two operating divisions: Industrial Services and Modular Solutions. The Industrial Services business includes workforce accommodations, camp management services, access solutions, maintenance and utilities. The Modular Solutions business integrates modern design concepts and technology with state of the art, off-site manufacturing processes; producing high quality building solutions for commercial, industrial and residential offerings including offices, hotels, and retail buildings, as well as distinctive single detached dwellings and multi-family residential structures.

As announced on March 9, 2020 and disclosed in the annual consolidated financial statements for the year ended December 31, 2019, Horizon North and 10647802 Canada Limited, operating as Dexterra Integrated Facilities Management ("Dexterra", a whollyowned subsidiary of Fairfax Financial Holdings Limited (“Fairfax Financial”)), announced an agreement to combine the two companies (the "Proposed Transaction"). Horizon North will acquire all of the outstanding shares of Dexterra in exchange for Horizon North issuing Fairfax Financial such number of common shares of Horizon North such that Fairfax Financial will own 49% of Horizon North Shares on a fully-diluted basis after completion of the Proposed Transaction. A special meeting of holders of Horizon North Shares has been called for May 26, 2020 to approve the issuance of the Horizon North Shares in connection with the Proposed Transaction. As of the date hereof, the parties have received all regulatory approvals in relation to the Proposed Transaction, including receipt of a no-action letter in relation to the Proposed Transaction from the Canadian Competition Bureau and conditional approval from the Toronto Stock Exchange. Completion of the Proposed Transaction is subject to shareholder approval and a number of other customary conditions.

2. COVID-19 Market Update

In March 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization. Governments worldwide, including those in Canada, have enacted emergency measures to combat the spread of the virus. These measures, which include the implementation of travel bans, self-imposed quarantine periods and social distancing, have caused material disruption to businesses globally, resulting in an economic slowdown. Governments and central banks have responded with significant monetary and fiscal interventions designed to stabilize economic conditions; however, the success of these interventions is not currently determinable. In addition, global commodity prices have declined significantly due to a dispute between major oil producing countries combined with the decreased demand as a result of the COVID-19 pandemic. In response, many companies in the oil and gas industry have significantly reduced their capital budgets and outlooks for 2020. The current challenging economic situation has had and may continue to have adverse impacts on the Corporation, including reductions in revenue as a result of lower demand for its services, accounts receivable balances remaining outstanding for a longer period, or not being collectable, and potential disruptions of manufacturing and camp operations from emergency measures. The situation is dynamic and the ultimate duration and magnitude of the impact on the economy and the financial effect on the Corporation is currently unknown. These factors may have a direct impact on the Corporation’s liquidity and financial position.

As at March 31, 2020, the Corporation had working capital of $59.4 million, the ability to draw an additional $28.6 million on its credit facility and was in full compliance with all covenants on the credit facility. Based on management’s forecasts, which have incorporated the expected impacts of both the COVID-19 pandemic and the decline in commodity prices, the Corporation does not expect to be in breach of the credit facility covenants in future periods. As certain covenants are expected to be near the minimum amounts necessary, further market uncertainty and an extended impact of COVID-19 may cause a change to management’s forecasts which could result in the Corporation being in breach of its covenants making the credit facility payable on demand. In light of these factors and in consideration of the upcoming Proposed Transaction with Dexterra the Corporation is engaged with its lenders to negotiate a new credit facility for the combined entity.

Management is actively managing the Corporation’s liquidity position through the following:

• Reducing 2020 net capital spending by $20.0 million, including a pause in mat manufacturing, for a net capital spend of $7.0 million;

• Deferral of spending on the Fairfield by Marriott hotel in Kitimat, British Columbia until 2021;

• Two month deferral of remaining construction of the temporary construction modular units and large complexes for a client supporting LNG development;

• A continued pause of the Corporation's dividend;

• Closely monitoring account receivables and managing working capital;

• Salary reductions for the Corporation’s executive team, including reducing the salaries of the President and Chief Executive Officer, Senior Vice Presidents, and Vice Presidents by 25%, 15% and 10%, respectively, and reducing Board of Director compensation by 25%;

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Notes to the condensed consolidated interim financial statements (Unaudited) Three months ended March 31, 2020 and 2019

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• Analyzing eligibility for government relief programs related to COVID-19, such as the Canada Emergency Wage Subsidy, for which the Corporation expects to qualify for in April and May 2020;

• Organizational headcount has been reduced by approximately 40% since year-end including both seasonal and structural adjustments; and

• Selling idle assets which contributed $6.0 million to net capital proceeds in Q1 2020.

3. Basis of Presentation

(a) Statement of compliance

These financial statements have been prepared in accordance with IAS 34, “Interim Financial Reporting” as issued by the International Accounting Standards Board (“IASB”) and using the accounting policies the Corporation adopted in its consolidated financial statements for the year ended December 31, 2019. The condensed consolidated interim financial statements do not include all of the information required for full annual financial statements. These financial statements were approved by the board of directors of Horizon North on May 11, 2020.

(b) Use of estimates and judgments

The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The judgments, estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual outcomes may differ from these estimates.

The judgments, estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

In preparing these condensed consolidated interim financial statements, unless otherwise stated, the significant judgments, estimates and underlying assumptions made by management in applying the Corporation’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended December 31, 2019.

4. Significant Accounting Policies and Determination of Fair Values

The accounting policies and determination of fair values were set out in Note 3 and 4 of the Corporation’s annual consolidated financial statements for the year ended December 31, 2019. These policies have been applied consistently to all periods presented in these condensed consolidated interim financial statements.

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Notes to the condensed consolidated interim financial statements (Unaudited) Three months ended March 31, 2020 and 2019

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5. Property, Plant and Equipment

Carrying Amounts (000’s)		Camp facilities, setup & installation		Land & buildings	Automotive & trucking equipment	Automotive & trucking equipment		Mats		Furniture, fixtures & other equipment		Asset retirement obligations	Assets under construction	Assets under construction		Total
Cost
December 31, 2018	$	411,047	$	59,496	$	43,837	$	24,235	$	6,481	$	14,582	$	655	$	560,333
Additions from business combination		—		403		203		—		596		—		—		1,202
Reclassification of capital leases(1)		(988)		—		(90)		—		—		—		—		(1,078)
Additions		43,716		2,573		7,066		10,564		1,365		(32)		7,382		72,634
Disposals		(4,305)		—		(6,017)		(7,982)		(1,060)		—		—		(19,364)
December 31, 2019	$	449,470	$	62,472	$	44,999	$	26,817	$	7,382	$	14,550	$	8,037	$	613,727
Additions		—		—		—		—		—		—		4,192		4,192
Transfers		5,346		298		—		—		—		—		(5,644)		—
Change in estimate		—		—		—		—		—		(62)		—		(62)
Change in discount rate		—		—		—		—		—		(687)		—		(687)
Disposals		(1,004)		(6,917)		(420)		(769)		(11)		—		—		(9,121)
March 31, 2020	$	453,812	$	55,853	$	44,579	$	26,048	$	7,371	$	13,801	$	6,585	$	608,049
Accumulated Depreciation
December 31, 2018	$	161,975	$	13,012	$	31,984	$	14,848	$	4,590	$	6,801	$	—	$	233,210
Reclassification of capital leases(1)		(53)		—		(9)		—		—		—		—		(62)
Depreciation		25,068		1,918		4,128		4,497		948		1,880		—		38,439
Disposals		(2,877)		—		(5,840)		(4,810)		(1,042)		—		—		(14,569)
Impairment (Note 7)		67,959		—		—		—		—		—		—		67,959
December 31, 2019	$	252,072	$	14,930	$	30,263	$	14,535	$	4,496	$	8,681	$	—	$	324,977
Depreciation		5,956		465		1,012		1,039		264		367				9,103
Disposals		(823)		—		(394)		(424)		(8)		—		—		(1,649)
Impairment (Note 7)		12,971		—		—		—		—		—		—		12,971
March 31, 2020	$	270,176	$	15,395	$	30,881	$	15,150	$	4,752	$	9,048	$	—	$	345,402
Net book value
March 31, 2020	$	183,636	$	40,458	$	13,698	$	10,898	$	2,619	$	4,753	$	6,585	$	262,647
December 31, 2019	$	197,398	$	47,542	$	14,736	$	12,282	$	2,886	$	5,869	$	8,037	$	288,750

(1) Capital leases previously presented with Property, plant and equipment have been reclassified to Right-of-use assets under IFRS 16.

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Notes to the condensed consolidated interim financial statements (Unaudited) Three months ended March 31, 2020 and 2019

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6. Leases

(a) As a lessee

(i) Right-of-use assets

(i) Right-of-use assets
		Camp facilities,		Automotive &		Furniture,
		setup &		trucking	fixtures & other
(000’s)		installation	Buildings	equipment		equipment		Total
Cost
January 1, 2019	$	2,114 $	25,226 $	296	$	52	$	27,688
Additions		1,184	5,793	—		41		7,018
December 31, 2019	$	3,298 $	31,019 $	296	$	93	$	34,706
Additions		234	791	—		—	$	1,025
March 31, 2020	$	3,532 $	31,810 $	296	$	93	$	35,731
Accumulated Depreciation
January 1, 2019	$	53 $	— $	9	$	—	$	62
Depreciation		484	5,193	135		33		5,845
December 31, 2019	$	537 $	5,193 $	144	$	33	$	5,907
Depreciation		346	1,391	33		8	$	1,778
March 31, 2020	$	883 $	6,584 $	177	$	41	$	7,685
Net book value
March 31, 2020	$	2,649 $	25,226 $	119	$	52	$	28,046
December 31, 2019	$	2,761 $	25,826 $	152	$	60	$	28,799

(ii) Lease liabilities

Maturity Analysis – contractual undiscounted cash flows		(000's)
Less than one year	$	8,089
One to five years		13,262
More than five years		9,250
Total undiscounted lease payable as at March 31, 2020	$	30,601
Lease liabilities included in the statement of financial position at March 31, 2020	$	25,674
Current		6,974
Non-current		18,700

For the three months ended March 31, 2020 total interest on lease liabilities recognized in finance costs were $0.4 million (2019 - $0.3 million) and total operating leases expensed, not included in the measurement of the lease liabilities, was $0.3 million (2019 - $0.7 million).

At March 31, 2020, the Corporation has not sub-leased any right-of-use assets, there were no restrictions or covenants imposed by leases that would create a material impact on the financial statements and there were no sale and leaseback transactions.

7. Impairment

(a) Impairment indicators

For the purpose of impairment testing, the Corporation’s assets are grouped and reviewed at the cash generating unit ("CGU") level which represent the lowest level at which cash flows are generated. Goodwill is allocated to the Corporation’s CGU which represent the lowest level at which goodwill is monitored for internal management purposes and which are not higher than the Corporation’s operating segments.

During the quarter ended March 31, 2020 the Corporation determined that the market uncertainty caused by the COVID-19 pandemic as well as the decline in commodity prices represented indicators of impairment. These indicators of impairment triggered an impairment test for all CGUs which include: Camp & Catering, Matting, Relocatable Structures and Eastern Canada and Western

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Notes to the condensed consolidated interim financial statements (Unaudited) Three months ended March 31, 2020 and 2019

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Canada Manufacturing.

(b) Impairment testing for CGUs

The recoverable amounts of the CGUs were determined based on value in use calculation using discounted future cash flows generated from the continuing use of the unit over a five year period which incorporates the Corporation’s most recent forecasts, impacted for the factors noted above, and estimated growth rates in subsequent years. The calculation of the value in use was based on the following key assumptions:

• The most recent forecast uses current and anticipated contracts and market conditions to project revenue. Costs are calculated using historical gross margins and additional known or pending factors.

• The projections were based on a five year forecasted cash flow and extrapolated over the remaining useful life of the primary assets and discounted at a post-tax rate of 14.50% (December 31, 2019 - 13.50%) for all CGUs. The discount rate was estimated based on the Corporation’s weighted average cost of capital, taking into account the nature of the assets being valued and their specific risk profile.

• Based on management’s best estimates at March 31, 2020, a historic five-year average utilization, direct labour hours, revenue per rentable day and profit margins, plus a 2% inflation per year, were used to project cash flows from 2021 to 2024. Based on management’s best estimate at March 31, 2020 a 0% to 5% growth rate was used to project the cash flows from 2021 to 2024.

• The cash flows beyond 2024 have been extrapolated using a 2% per annum growth rate.

• The forecasted cash flows are based on management’s best estimates of future pricing, asset utilization, rates for available equipment and costs to maintain that equipment.

The results of the tests indicated impairment of $13.0 million for the Camp & Catering CGU and $8.6 million for the Western Canada Manufacturing CGU as at March 31, 2020 (December 31, 2019 - $85.2 million for the Camp & Catering CGU and $nil for the Western Canada Manufacturing CGU). The impairment for the Western Canada Manufacturing CGU was attributable to the carrying amount of the CGU's goodwill of $7.8 million and intangible assets of $0.8 million. No impairment was noted for the Relocatable Structures, Matting and Eastern Canada Manufacturing CGUs (December 31, 2019 - nil).

The most sensitive inputs to the value in use model used for all CGU’s are the discount rate and the growth rate:

• All else being equal, a 0.5% increase in the discount rate for the Camp & Catering CGU would have resulted in additional impairment of $5.1 million.

• All else being equal, a 1.0% decrease in the growth rates for the Camp & Catering CGU would have resulted in additional impairment of $17.8 million.

Sensitivities were not performed for the Western Canada Manufacturing CGU as the full amount of the impairment related to the carrying amounts of goodwill and intangible assets and the carrying value of the PP&E represents its fair value.

8. Loans and Borrowings

8. Loans and Borrowings
(000’s)		March 31, 2020		December 31, 2019
Committed credit facility	$	120,505	$	108,405
Committed temporary credit facility		15,000		—
Unamortized financing costs		(534)		(339)
Total borrowings	$	134,971	$	108,066

The carrying value of Horizon North’s debt approximates its fair value, as debt bears interest at variable rates which approximate market rates.

The credit facility has an available limit of $150.0 million and is secured by a $400.0 million first fixed and floating charge debenture over all assets of the Corporation and its wholly-owned subsidiaries. Effective September 26, 2019, Horizon North reached an agreement with its lenders to amend its credit facility and extend the maturity date to September 30, 2021.

Effective March 10, 2020, Horizon North amended its credit facility to include a $15.0 million temporary facility that is required to be repaid by July 31, 2020. The interest rate for both the credit facility and the temporary facility is calculated on a grid pricing structure based on the Corporation’s debt to EBITDAS ratio. Debt to EBITDAS is calculated as at the quarter end for the most recently completed calendar quarter and for the 12 months ended on such date. Amounts drawn on the credit facility incur interest at bank prime rate plus 0.45% to 3.00% or the Bankers’ Acceptance rate plus 1.45% to 4.00%. The credit facility has a standby fee ranging from 0.29% to 0.80%. The effective interest rate on loans and borrowings for the three months ended March 31, 2020 was 5.1% compared to 4.5% in the same period of 2019. The covenants were also amended as follows:

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Notes to the condensed consolidated interim financial statements (Unaudited) Three months ended March 31, 2020 and 2019

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					Q1 2021 and
Debt Covenants	Q1 2020	Q2 2020	Q3 2020	Q4 2020	thereafter
Minimum Trailing twelve months Adjusted EBITDAS(1)	$11.8 million	$23.7 million	$28.4 million	N/A	N/A
Maximum Senior debt(2)to Adjusted EBITDAS	N/A	N/A	N/A	3.75:1:00	3.00:1:00
Maximum Total debt(3)to Adjusted EBITDAS	N/A	N/A	N/A	4.25:1:00	4.25:1:00
Minimum Interest Coverage ratio(4)	2:00:1:00	3:00:1:00	3:00:1:00	3:00:1:00	3:00:1:00

The actual metrics for the covenants at March 31, 2020 are:

The actual metrics for the covenants at March 31, 2020 are:
Debt Covenants		Covenants Calculation March 31, 2020
Trailing twelve months Adjusted EBITDAS(1)	$	14.8 million
Minimum trailing twelve months Adjusted EBITDAS(1)	$	11.8 million
Minimum Consolidated Interest coverage ratio(4)(must be 2.00:1.00 or more)		2.64:1:00

(1) Trailing twelve months Adjusted EBITDAS (Earnings before interest, taxes, depreciation, amortization, share based compensation, impairment, gain/loss on disposal of property, plant and equipment, non-recurring costs less the impact of the adoption of IFRS 16) is not a recognized measure under IFRS. Management believes that in addition to total profit and total comprehensive income, EBITDAS is a useful supplemental earnings measure as it provides an indication of the Corporation’s operating performance and it is regularly provided to and reviewed by the Chief Operating Decision Maker. Horizon North’s method of calculating EBITDAS may differ from other entities and accordingly, EBITDAS may not be comparable to measures used by other entities.

(2) Senior debt is calculated as the sum of current and long-term portions of total loans and borrowing less vehicle and equipment financing.

(3) Total debt is calculated as the sum of current and long-term portions of total loans and borrowings, excluding lease liabilities under IFRS 16.

(4) Interest coverage is calculated as the ratio of Trailing twelve months Adjusted EBITDAS to twelve months trailing interest expense on loans and borrowings.

As at March 31, 2020, the Corporation was in compliance with all financial and non-financial covenants related to the credit facility and available borrowing capacity was $28.6 million. As discussed in Note 2, the Corporation expects to be in compliance with its covenants going forward.

9. Revenue

Disaggregation of revenue

In the following table, revenue is disaggregated by major products and service lines and timing of revenue recognition. The table also includes a reconciliation of the disaggregated revenue with the Corporations’ reportable segments.

		Camps &	Rentals &	Modular	Inter-segment
Three months ended March 31, 2020 (000's)		Catering	Logistics	Solutions	Eliminations		Total
Products & Service Lines
Camp Rental and Catering revenue	$	67,845 $	— $	— $	—	$	67,845
Construction contract revenue		—	—	36,314	(5,026)		31,288
Rendering of services		5,423	9,527	—	—		14,950
Sale of used fleet		501	432	—	—		933
	$	73,769 $	9,959 $	36,314 $	(5,026)	$	115,016
Timing of Revenue Recognition
Products and services transferred over time	$	73,268 $	9,527 $	36,314 $	(5,026)	$	114,083
Products and services transferred at a point in time		501	432	—	—		933
	$	73,769 $	9,959 $	36,314 $	(5,026)	$	115,016
		Camp &	Rentals &	Modular	Inter-segment
Three months ended March 31, 2019 (000's)		Catering	Logistics	Solutions	Eliminations		Total
Products & Service Lines
Camp Rental and Catering revenue	$	65,286 $	— $	— $	—	$	65,286
Construction contract revenue		—	—	45,747	—		45,747
Rendering of services		4,410	9,042	—	—		13,452
Sale of used fleet		256	3,438	—	(90)		3,604
Sale of other goods		—	656	—	—		656
	$	69,952 $	13,136 $	45,747 $	(90)	$	128,745
Timing of Revenue Recognition
Products and services transferred over time	$	69,696	9,042 $	45,747 $	—	$	124,485
Products and services transferred at a point in time		256	4,094	—	(90)		4,260
	$	69,952 $	13,136 $	45,747 $	(90)	$	128,745

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Notes to the condensed consolidated interim financial statements (Unaudited) Three months ended March 31, 2020 and 2019

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10. Income Taxes

The provision for income taxes differs from that which would be expected by applying statutory rates. A reconciliation of the difference is as follows:

difference is as follows:
		Three months ended March 31,
(000’s)		2020		2019
Profit (loss) before tax	$	(27,561)	$	5,290
Combined federal and provincial income tax rate		25.00%		27.00%
Expected income tax (recovery)	$	(6,890)	$	1,428
Non-deductible share based compensation		44		86
Changes in tax rates		(160)		(1)
Deferred taxes not recognized		115		27
Non-taxable portion of capital loss (gain)		118		(5)
Non-taxable portion of impairment loss		1,940		—
Non-deductible and other		112		18
	$	(4,721)	$	1,553

11. Share Capital

(a) Authorized

Unlimited number of voting common shares without nominal or par value. Unlimited number of preferred shares issuable in series.

• (b) Issued

							Number		Amount (000’s)
Balance at December	31,	2019	and March	31,	2020	$	165,416,904	$	340,353

12. Earnings Per Share

The calculation of basic earnings per share for the three months ended March 31, 2020 was based on the total loss attributable to common shareholders of $22.8 million (2019 – profit of $3.7 million).

A summary of the common shares used in calculating earnings per share is as follows:

	Three months ended March 31,
	2020	2019
Number of common shares, beginning of period	165,416,904	164,268,988
Weighted average common shares outstanding – basic	165,416,904	164,268,988
Effect of share purchase options(1)	—	840,975
Weighted average common shares outstanding – diluted	165,416,904	165,109,963

(1) The Corporation utilizes the treasury stock method for calculating the dilutive effect of share purchase options when the average market price of the Corporation’s common stock during the period exceeds the exercise price of the option

For the three months ended March 31, 2020, 7,368,544 share options (2019 – 5,831,592) were excluded from the calculation of weighted average common shares outstanding - diluted as the result would be anti-dilutive.

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Notes to the condensed consolidated interim financial statements (Unaudited) Three months ended March 31, 2020 and 2019

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13. Dividends

For the three months ended March 31, 2020, the Corporation paid dividends totaling $3.3 million (March 31, 2019 - $3.3 million).

(000's except per share amounts)		2020	2020		2019
		Amount per	Total	dividend	Amount per	Total dividend
Record Date		share		amount	share	amount
March 31	$	—	$	— $	0.02 $	3,285
June 30					0.02	3,309
September 30					0.02	3,309
December 31					0.02	3,309
	$	—	$	— $	0.08 $	13,212

14. Operating segments

The Corporation operates in Canada through three operating segments: Camp & Catering, Rentals & Logistics and Modular Solutions.

The Camp & Catering segment combines the camps and catering operations, and the associated services. The Rentals & Logistics segment combines all other rental operations; mat rental operations, relocatable structures rental operations, transportation operations and the associated services. The Modular Solutions segment is comprised of all modular manufacturing and installation operations for commercial and residential end markets. Corporate includes the costs of head office administration, interest costs, taxes, other corporate costs and residual assets and liabilities.

Information regarding the results of all segments is included below. Inter-segment pricing is determined on an arm’s length basis.

			Rentals &	Modular		Inter-segment
Three months ended March 31, 2020 (000's)	Camp & Catering		Logistics	Solutions	Corporate	Eliminations		Total
Revenue	$	73,769 $	9,959 $	36,314 $	— $	(5,026)	$	115,016
EBITDAS(1)		14,456	1,702	(2,756)	(4,239)	(457)		8,706
Depreciation and amortization		7,474	2,624	1,650	192	(3)		11,937
(Gain) loss on disposal of assets		1,095	100	(39)	(15)	—		1,141
Share based compensation		(220)	(44)	(30)	(352)	—		(646)
Operating profit (loss) before impairment		6,107	(1,023)	(4,338)	(4,065)	(349)		(3,668)
Impairment loss		12,971	—	8,579	—	—		21,550
Operating profit (loss)		(6,864)	(1,023)	(12,917)	(4,065)	(349)		(25,218)
Total assets		286,820	75,880	109,160	4,842	(671)		476,031
Capital expenditures		3,932	110	—	150	—		4,192
			Rentals &	Modular		Inter-segment
Three months ended March 31, 2019 (000's)	Camp & Catering		Logistics	Solutions	Corporate	Eliminations		Total
Revenue	$	69,952 $	13,136 $	45,747	— $	(90)	$	128,745
EBITDAS(1)		12,943	3,489	4,466	(3,403)	(90)		17,405
Depreciation and amortization		6,987	2,452	842	122	(1)		10,402
(Gain) loss on disposal of assets		89	136	43	(10)	—		258
Share based compensation		61	18	50	288	—		417
Operating profit (loss)		5,806	883	3,531	(3,803)	(89)		6,328
Total assets		371,972	60,125	77,334	3,389	—		512,820
Capital expenditures		21,413	6,957	16,116	799	—		45,285

(1) EBITDAS (Earnings before interest, taxes, depreciation, amortization, share based compensation, impairment and gain/loss on disposal of property, plant and equipment) is not a recognized measure under IFRS. Management believes that in addition to total profit and total comprehensive income, EBITDAS is a useful supplemental earnings measure as it provides an indication of the Corporation’s operating performance and it is regularly provided to and reviewed by the Chief Operating Decision Maker. Horizon North’s method of calculating EBITDAS may differ from other entities and accordingly, EBITDAS may not be comparable to measures used by other entities.

15. Seasonality

Some of Horizon North’s segments are affected by the seasonality associated with the western Canadian oil and natural gas drilling industry. The Camp & Catering segment is exposed to seasonality where the busiest months are January through March and the slowest months are April through September. The Rentals & Logistics segment is typically busiest in the spring and summer months of April through September when soft ground conditions hinder the movement of heavy equipment. The Modular Solutions segment is not impacted by seasonality other than NRB's manufacturing of classrooms which is slowest October through March.

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