CHC announces third quarter results ST. JOHN'S, NF and LABRADOR,
March 1 /PRNewswire-FirstCall/ -- CHC Helicopter Corporation (the
"Company") (TSX: FLY.A and FLY.B; NYSE: FLI) today announced
financial results (unaudited) for the quarter and nine months ended
January 31, 2004. Financial Highlights (in millions of Canadian
dollars, except per share amounts)
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Three Months Ended Nine Months Ended
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January 31, January 31, January 31, January 31, 2004 2003 2004 2003
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
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Revenue $171.9 $180.0 $518.2 $546.7 EBITDA(1) 29.2 34.9 87.1 105.8
Net earnings from operations(1) 13.2 15.6 45.1 51.2 Net earnings
9.0 15.6 38.3 43.2 Cash flow from operations(1) 14.9 18.0 60.7 77.5
Per share information Net earnings from operations:(1) Basic $0.63
$0.76 $2.15 $2.47 Diluted 0.59 0.70 2.01 2.28 Net earnings: Basic
$0.43 $0.76 $1.82 $2.09 Diluted 0.40 0.70 1.71 1.93
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------------------------ (1) See definitions under Non-GAAP
Earnings Measures in Management's Discussion and Analysis
Highlights - Revenue growth for the three months ended January 31,
2004, as compared to the same period last year, was $5.8 million
excluding the impact of foreign exchange. - EBITDA for the quarter
was in line with the prior year, excluding the impact of foreign
exchange. - Since the start of the third quarter the Company has
been awarded contracts worth approximately $732 million. -
Subsequent to the quarter end, the Company announced that it had
closed its acquisition of Schreiner Aviation Group ("Schreiner")
for a cash payment of $140 million, which included the assumption
of the outstanding debt of Schreiner. Investor Conference Call The
Company's 3rd quarter conference call and webcast will take place
Tuesday, March 2, 2004 at 10:30 a.m. EST. To listen to the
conference call, dial 1-416-640-1907 for local and overseas calls,
or toll-free 1-800-814-4853 for calls from within North America. To
hear a replay of the conference call, dial 1-416-640-1917, or
toll-free 1-877-289-8525 and enter passcode "21039191" followed by
the number sign. The replaywill be available until 5 p.m. EST,
March 5, 2004. The financial results and a webcast of the
conference call will be available through the Company's website at
http://www.chc.ca/fiscal.html and through Canada NewsWire at:
http://www.newswire.ca/webcast. CHC Helicopter Corporation is the
world's largest provider of heavy and medium helicopter services to
the global offshore oil and gas industry with aircraft operating in
30 countries and a team of approximately 3,500 professionals
worldwide. If you wish to be removed or included on the Company's
distribution list, please call 709-570-0749 or email .
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This press release and management's discussion and analysis may
contain projections and other forward-looking statements within the
meaning of the "safe harbour" provision of the United States
Private Securities Litigation Reform Act of 1995. While these
projections and other statements represent our best current
judgment, they are subject to risks and uncertainties including,
but not limited to, factors detailed in the Annual Report on Form
20-F and in other filings of the Company with the United States
Securities and Exchange Commission. Should one or more of these
risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual outcomes may vary materially
from those indicated.
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Management's Discussion and Analysis of Financial Condition and
Results of Operations - Three Months and Nine Months Ended January
31, 2004 Overview Real(2) revenue growth for the three months ended
January 31, 2004 was $5.8 million. This was offset by unfavourable
foreign exchange of $13.9 million, resulting in a net decrease in
revenue of $8.1 million compared to the same period last year. Year
to date real revenue growth of $7.9 million was offset by
unfavourable foreign exchange of $36.4 millionas compared to the
same period last year. EBITDA for the quarter decreased by $5.7
million, as compared to the same period last year, due to
unfavourable foreign exchange. Year to date EBITDA declined by
$18.7 million from the same period last year, ofwhich $16.5 million
was due to unfavourable foreign exchange. Net earnings from
operations for the quarter were $13.2 million ($0.59 per share,
diluted) on revenue of $171.9 million as compared to net earnings
from operations of $15.6 million ($0.70 per share, diluted) on
revenue of $180.0 million last year. The primary factors impacting
results for this quarter compared to the same period last year
included (i) unfavourable foreign exchange on EBITDA of
approximately $5.8 million; (ii) gain on disposal of assets of $1.4
million; (iii) increased financing charges of $1.9 million due
primarily to an increase in foreign exchange; and (iv) a lower
effective income tax rate. Net earning from operations for the nine
months ended January 31, 2004 were $45.1 million ($2.01 per share,
diluted) compared to $51.2 million ($2.28 per share, diluted) for
the same period last year. In addition to the aforementioned
changes to revenue and EBITDA, year to date net earnings from
operations included a gain on disposal of assets of $2.4 million, a
$4.7 million reduction in financing charges and a $6.2 million
reduction in tax expense. Net earnings during the quarter were $9.0
million ($0.40 per share, diluted) compared to net earnings of
$15.6 million ($0.70 per share, diluted) in the same quarter last
year. In addition to the above noted decline in net earnings from
operations, this quarter's results include an after-tax
restructuring charge of $4.2 million related to the consolidation
of the Company's European operations and other related activities.
Net earnings year to date were $38.3 million ($1.71 per share,
diluted) as compared to $43.2 million ($1.93 per share, diluted)
for the same period last year. Year to date net earnings included
an after-taxrestructuring charge of $6.8 million while the nine
months ended January 31, 2003 included after-tax debt settlement
costs of $7.9 million. ------------------------ (2) "Real" means
the amount of the change excluding the impact of foreign exchange.
Revenue Total revenue for the three months ended January 31, 2004
was $171.9 million compared to $180.0 million for the same period
last year. Over the corresponding nine month periods total revenue
decreased by $28.5 million, from $546.7million last year to $518.2
million this year. The following major factors account for the
change: - An increase in real revenue in the Company's
International flying segment of $7.0 million quarter over quarter
and an increase of $14.5 million year to date due to additional
contracts and higher flying activity on existing contracts. - A
decrease in real revenue in the Company's European flying segment
of $2.3 million quarter over quarter and $7.6 million year to date.
Over these same comparable periods, flying hours declined by 2.5%
and 3.7%, respectively. These declines in flying hours were
attributable to a general decline in North Sea oil and gas activity
and, in the case of the year to date decline in hours, to a pilots'
dispute in the first quarter of the current fiscal year.
Contributing to these negative revenue variances is a decline in
training revenue and ancillary revenue from several one-time
customers. - An increase in real third-party repair and overhaul
revenue of $0.8 million for the quarter. - Unfavourable foreign
exchange of $13.9 million for the quarter and $36.4 million year to
date. Of this, $8.3 million and $21.5 million, for the quarter and
year to date respectively, related to the translation of the
financial results of the Company's foreign subsidiaries into
Canadian dollars as a result of the weakening of the Norwegian
kroner and pound sterling, partially offset by the strengthening of
the Australian dollar and South African rand. The remainder was due
to the translation of U.S. dollar and euro denominated transactions
into the functional currencies of the Company's operating
divisions. Revenue Summary by Quarter (in millions of Canadian
dollars) (Unaudited)
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Total Repair Helicopter and Period Europe International Operations
Overhaul Composites Total
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Q4-F2002 $102.1 $46.7 $148.8 $10.9 $ - $159.7 Q1-F2003 118.0 45.8
163.8 10.9 1.3 176.0 Q2-F2003 125.4 44.5 169.9 19.6 1.2 190.7
Q3-F2003 116.2 46.4 162.6 15.9 1.5 180.0 Q4-F2003 108.6 48.0 156.6
16.6 2.4 175.6 Q1-F2004 113.0 43.6 156.6 13.3 1.5 171.4 Q2-F2004
112.4 46.7 159.1 14.4 1.4 174.9 Q3-F2004 105.8 49.0 154.8 15.3 1.8
171.9
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Flying Revenue and Hours The Company derives its flying revenue
from two primary types of contracts. Approximately 57% (2003 - 61%)
of the Company's year to date flying revenue was derived from
hourly charges (including hourly charges on contracts that also
have fixed charges), and the remaining 43% (2003 - 39%) was
generated by fixed monthly charges. Because of the significant
fixed component, an increase or decrease in flying hours may not
result in a proportionate change in revenue. While flying hours may
not correlate directly with revenue, they remain a good measure of
activity level. The followingtable provides a quarterly summary of
the Company's flying hours and number of aircraft utilized for the
past eight quarters.
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Flying Hours - Helicopter Operations (Unaudited)
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Flying Hours Number of Aircraft ----------------------------------
---------------------- Period Europe Int'l Total Europe Int'l
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Q4-F2002 21,650 10,975 32,625 72 88 Q1-F2003 23,257 11,165 34,422
72 87 Q2-F2003 22,994 10,618 33,612 73 87 Q3-F2003 20,316 11,189
31,505 73 90 Q4-F2003 19,430 11,067 30,497 71 88 Q1-F2004 22,351
11,057 33,408 72 90 Q2-F2004 21,951 11,926 33,877 70 94 Q3-F2004
19,806 12,066 31,872 72 95
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The following table shows flying revenue mix by segment and in
total by aircraft type (including the impact of foreign exchange)
for year to date fiscal 2004 and 2003. The mix of aircraft type has
remained relatively consistent year over year.
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Year-to-Date Flying Revenue Mix (in thousands of Canadian dollars)
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Nine Months Ended January 31, 2004 (Unaudited)
------------------------------------------- Heavy Medium Light
Total ------------------------------------------- Europe $246,411 $
60,992 $ - $307,403 International 39,915 83,905 7,631 131,451
------------------------------------------- Total Flying Revenue
$286,326 $144,897 $ 7,631 $438,854
------------------------------------------- Total % 65% 33% 2% 100%
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Nine Months Ended January 31, 2003 (Unaudited)
------------------------------------------- Heavy Medium Light
Total ------------------------------------------- Europe $258,498 $
69,094 $ - $327,592 International 39,809 85,774 6,254 131,837
------------------------------------------- Total Flying Revenue
$298,307 $154,868 $ 6,254 $459,429
------------------------------------------- Total % 65% 34% 1% 100%
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The following table details the hourly and fixed flying revenue by
segment (including the impact of foreign exchange) for year to date
fiscal 2004 and 2003. Fixed flying revenue as a percentage of total
flying revenue has increased from 39% last year to 43% this year.
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Flying Revenue - Hourly vs. Fixed Nine Months Ended January 31, (in
thousands of Canadian dollars) (Unaudited)
----------------------------------------------------------- Hourly
Fixed Total
----------------------------------------------------------- 2004
2003 2004 2003 2004 2003
----------------------------------------------------------- Europe
$207,120 $237,156 $100,283 $ 90,436 $307,403 $327,592 International
45,041 43,500 86,410 88,337 131,451 131,837
----------------------------------------------------------- Total
$252,161 $280,656 $186,693 $178,773 $438,854 $459,429
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The following table shows segment flying revenue by industry sector
(including the impact of foreign exchange) for year to date fiscal
2004 and 2003. Year to date January 31, 2004, the Company derived
approximately 86% of its flying revenue from the oil and gas
industry. The revenue from this industry is derived from production
support, which accounts for the majority of the Company's oil and
gas revenue, and from exploration and development activity.
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Flying Revenue - By Industry Sector Nine Months Ended January 31,
(in thousands of Canadian dollars) (Unaudited) Europe International
Total -----------------------------------------------------------
2004 2003 2004 2003 2004 2003
----------------------------------------------------------- Oil
& Gas $287,185 $299,760 $ 92,077 $ 89,650 $379,262 $389,410
EMS/SAR(3) 16,033 15,136 28,272 25,902 44,305 41,038 Other 4,185
12,696 11,102 16,285 15,287 28,981
----------------------------------------------------------- Total
$307,403 $327,592 $131,451 $131,837 $438,854 $459,429
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Other flying revenue has declined by $13.7 million, from $29.0
million last year to $15.3 million this year. This decline is
largely in Europe and is the result of a decrease in ad hoc flying
activity. ------------------------ (3) EMS/SAR - Emergency Medical
Services and Search and Rescue Services Aberdeen Airport in the
U.K. reports monthly helicopter passenger traffic at the Company's
largest base. The following table provides a quarterly summary of
all helicopter passenger traffic at Aberdeen Airport for fiscal
2000 to the third quarter of fiscal 2004.
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Aberdeen Airport - Helicopter Passengers Fiscal Year Ended April
30,
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2004 2003 2002 2001 2000
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Q1 101,757 116,102 121,868 103,874 101,073 Q2 95,227 112,449
123,012 114,376 92,355 Q3 87,588 92,918 114,606 104,381 85,167 Q4
92,686 108,247 101,166 85,190
------------------------------------------------- 414,155 467,733
423,797 363,785
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Source: Aberdeen Airport Ltd. The data in the above table shows
that helicopter passenger activity this quarter has declined from
the same period in fiscal 2003, 2002 and 2001. In addition, the
data demonstrates the modest level of seasonality in activity from
quarter to quarter. Contract Awards Contracts awarded since the
start of the third quarter are anticipated to generate total
revenue of $732 million over the initial contract terms, as
follows: Fiscal 2004, fourth quarter $ 10 million Fiscal 2005 115
million Fiscal 2006 150 million Fiscal 2007 140 million Fiscal 2008
92 million Thereafter 225 million -------------- $732 million
-------------- Review of Operations Europe European Flying Segment
(Unaudited) --------------------------------------- Q3-04 Q3-03
YTD-04 YTD-03
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Revenue $ 105.8 $ 116.2 $ 331.2 $ 359.6
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EBITDA $ 13.9 $ 20.9 $ 51.1 $ 70.5
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EBITDA % 13.1% 18.0% 15.4% 19.6%
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Revenue from the Company's European flying segment for the third
quarter of this fiscal year was $105.8 million, down $10.4 million
from revenue of$116.2 million for the third quarter of last year.
This $10.4 million decline was comprised of unfavourable foreign
exchange of $8.1 million and a real revenue decrease of $2.3
million. The latter reflects a $1.4 million increase in flying
revenue offset by a $3.7 million decrease in other revenue. The
decline in other revenue was due to the fact that other revenue for
the third quarter of last year included approximately $3.7 million
of non-recurring ancillary revenue. Over the nine month periods
ended January 31, 2003 and 2004, revenue fell from $359.6 million
to $331.2 million. This $28.4 million decrease was attributable to
unfavourable foreign exchange of $20.8 million and a real revenue
decline of $7.6 million. The real decline in revenue was comprised
of a decrease in flying revenue of $3.8 million, a reduction in
training revenue of $2.8 million and a decline in other revenue of
$1.0 million. Of the $3.8 million decline in flying revenue, $2.7
million was attributable to the pilots' dispute in the first
quarter of this year and the remainder reflects a general decline
in North Sea oil and gas activity. The decrease in training revenue
reflects the postponement of training by several international
customers following the travel ban in connection with the outbreak
of SARS. EBITDA from the European flying segment was $13.9 million
for the third quarter of this fiscal year, down $7.0 million from
EBITDA of $20.9 million for the third quarter of last year. This
$7.0 million decline was comprised of unfavourable foreign exchange
of $2.6 million and a real decline in EBITDA of $4.4 million. The
$4.4 million decline in real EBITDA was due primarily to increased
pension expense of $2.5 million and to the fact that EBITDA for the
first quarter of last year included $1.4 million earned on the
aforementioned one-time ancillary revenue stream of $3.7 million.
The increased pension expense was due to an increase in
amortization of net actuarial losses and to assumption changes
stemming from the most recent actuarial review. Over the nine month
periods ended January 31, 2003 and 2004, EBITDA fell from $70.5
million to $51.1 million. This $19.4 million decline reflects
unfavourable foreign exchange of $8.0 million and a real EBITDA
decrease of $11.4 million. The key drivers of the real EBITDA
reduction were increased pension expense of $7.8 million and the
previously noted real revenue decline in the nine month period
ended January 31, 2004. In January 2004, the Company was awarded a
new contract by a consortium comprised of Eni UK Ltd., BG
International Ltd. and ConocoPhillips Petroleum Company UK Ltd. The
contract is for three years, with a two year option, for the
provision of offshore helicopter flight hours from the Company's
pool of Super Puma aircraft. The contract will generate anticipated
revenue of approximately $34.0 million over the initial three year
period. Subsequent to the quarter end, the Company was awarded
multi-year contract renewals by Statoil ASA and Norsk HydroAS for
the provision of heavy helicopter transportation services in the
Norwegian North Sea. The contracts include the provision of three
dedicated new Sikorsky S-92 helicopters, one dedicated Super Puma
MkI, up to four dedicated Super Puma MkII's and back up from the
Super Puma fleet. These contracts have start dates ranging from
June 2004 to January 2005 with initial contract periods ranging
from three years to seven years. Including option periods, the
total potential contract periods range from five years to eleven
years. Combined annual revenue from these contracts is
approximately $86 million. Effective February 6, 2004, the Company
fully implemented a single management structure in its European
operations ("CHC Europe"). All necessary regulatory approvals have
been obtained and all key management personnel are in place. The
Company believes the new management structure provides an increased
focus on the critical areas of the business, such as employee and
customer relationships, and better positions the Company for growth
in Europe. Through staff reductions, improved information systems
and group purchasing leverage, combined with better fleet
utilization, the Company believes it will realize annual EBITDA
savings of $11 million. To date, actions to effect $7 million of
the $11 million in anticipated EBITDA savings have been completed
and the remainder is expected to be complete by July 31, 2004. The
Company has recorded a restructuring charge of $5.9 million (after
tax, $4.2 million)in this quarter related to the European
restructuring. International International Flying Segment
(Unaudited) --------------------------------------- Q3-04 Q3-03
YTD-04 YTD-03
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Revenue $ 49.0 $ 46.4 $ 139.3 $ 136.8
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EBITDA $ 7.2 $ 9.0 $ 20.0 $ 27.5
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EBITDA % 14.7% 19.4% 14.4% 20.1%
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Revenue from the Company's International flying segment was $49.0
million for the third quarter of this fiscal year compared to $46.4
million for the third quarter of last year. This $2.6 million
revenue increase was caused by real revenue growth of $7.0 million
offset by unfavourable foreign exchange of $4.4 million. The key
driver behind such real revenue growth was increased flying hours
attributable to oiland gas customers which produced incremental
real revenue of $7.3 million. On a quarter over quarter basis,
flying activity from oil and gas customers increased by 1,367
hours, flying activity from EMS/SAR customers decreased by 627
hours and activity from other customers increased by 137 hours. The
reduction in EMS/SAR flying hours had a minimal impact on real
revenue because the fixed component of EMS/SAR contracts accounts
for approximately 75% of this revenue stream. Geographically, the
$7.3 million of real revenue growth from oil and gas customers was
driven by (i) the deployment of an additional aircraft to contracts
in each of Angola, East Timor and Southeast Asia/Malaysia
generating incremental revenue of $1.9 million, $2.7 million and
$2.1 million, respectively, (ii) a new contract in Australia
producing revenue of $2.7 million, and (iii) new contracts in
Georgia, Ecuador and Asia yielding revenue of $1.4 million, offset
by (iv) reduced revenues in Venezuela, Iraq and Azerbaijan. On a
year to date basis, revenue grew by $2.5 million, from $136.8
million last year to $139.3 million this year. This increase
reflects real revenue growth of $14.5 million less unfavourable
foreign exchange of $12.0 million. On the same year to date
basis,flying activity from oil and gas customers increased by 3,468
hours, EMS/SAR flying activity fell by 967 hours and flying
activity from other customers increased by 424 hours. The
underlying causes of the real year to date revenue growth of $14.5
million, as well as the relative geographic distribution of such
growth, are consistent with those noted above for the quarterly
revenue results. EBITDA for the third quarter was $7.2 million,
down $1.8 million from EBITDA of $9.0 million for the third quarter
of last year. Real EBITDA growth of $1.1 million was offset by
unfavourable foreign exchange of $2.9 million to yield the noted
$1.8 million decline in quarterly EBITDA. The primary cause of the
$1.1 million real EBITDA growth in this quarter was the $7.0
million increase in real revenue levels for the quarter as
discussed earlier. EBITDA for the nine months ended January 31,
2004 was $20.0 million compared to $27.5 million for the
corresponding period in the previous fiscal year. This $7.5 million
decline was due to unfavourable foreign exchange. Year over year
real EBITDA was flat despite real revenue growth of $2.5 million.
In January 2004, the Company, through its business partner Thai
Aviation Services, was awarded a three year contract renewal, plus
two option years, with Chevron Offshore (Thailand) Ltd. Under this
contract the Company will continue to provide one Sikorsky S76A++,
under new terms and conditions, and will upgrade the second
aircraft to a Sikorsky S76C+. The contract will generate
anticipated revenues of approximately $22.0 million over the
initial three year term. Subsequent to the quarter end, the Company
successfully renewed its contract with the Commonwealth Government
of Australia to provide search and rescue helicopters and crews for
the Royal Australian Air Force for a period of ten years, plus two
option periods of two years each. This contract will generate
anticipated revenues of approximately $134.0 million over the
initial ten year period. Repair and Overhaul Repair and Overhaul
(Unaudited) --------------------------------------- Q3-04 Q3-03
YTD-04 YTD-03
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Total Revenue $ 50.8 $ 54.1 $ 140.1 $ 154.8
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Third-party Revenue $ 15.3 $ 15.9 $ 43.0 $ 46.4
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EBITDA $ 11.3 $ 9.3 $ 31.0 $ 27.9
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EBITDA % (x) 22.2% 17.2% 22.1% 18.0%
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(x) EBITDA % is calculated on total revenue Astec Total revenue
from theCompany's repair and overhaul segment was $50.8 million for
the third quarter this year, down $3.3 million from total revenue
of $54.1 million for the third quarter last year. Third party
revenue from this segment was $15.3 million for the current
quarter, down $0.6 million compared to $15.9 million in third party
revenue for the same period last year. This decrease of $0.6
million in third party revenue was comprised of unfavourable
foreign exchange of $1.4 million, offsetting a real revenue
increase of $0.8 million. This increase in real revenue of $0.8
million was due mainly to an increase in customer flying hours in
Europe and Asia, supported by "power-by-the-hour" ("PBTH")
agreements, resulting in real revenue growth of $0.5 million, along
with an increase in major component overhauls. On a year to date
basis, total revenue fell from $154.8 million last year to $140.1
million this year. This decrease of $14.7 million includes a
decrease in third party revenue of $3.4 million, which fell from
$46.4 million last year to $43.0 million this year. This $3.4
million decline in third party revenue reflects unfavourable
foreign exchange of $3.7 million and a real revenue increase of
$0.3 million. The real revenue increase in third party revenue
includes $1.1 million in growth from PBTH customers and an increase
in major component overhaul and other revenues of $3.6 million,
offset by a decrease in revenue from heavy maintenance projects of
approximately $4.4 million. The $4.4 million decline inheavy
maintenance revenue reflects the fact that heavy maintenance
activity during the nine months ended January 31, 2003 was
exceptionally high. EBITDA for the third quarter was $11.3 million,
up $2.0 million from $9.3 million for the same period last year.
Real EBITDA growth of $2.3 million for the quarter was offset by
unfavourable foreign exchange of $0.3 million. This real EBITDA
increase of $2.3 million was due to the above noted real growth in
revenue complemented by a decrease in total maintenance cost due to
a decline in the amount of work subcontracted to third party
suppliers. For the nine month periods ended January 31, 2003 and
2004, EBITDA increased from $27.9 million to $31.0 million. This
$3.1 million increase was comprised of unfavourable foreign
exchange of $1.1 million and a real EBITDA increase of $4.2
million. Consistent with the quarterly results, this increase in
real year to date EBITDA was the result of real revenue growth and
lower maintenance costs. In addition, year to date results this
year included a one-time refund of approximately $2.2 million
related to the cancellation of an external PBTH agreement with the
aircraft manufacturer for the repair and overhaul of Super Puma
MkII dynamic components, which are now serviced in-house. In
January 2004, the Company's repair and overhaul business in Norway
signed an agreement with the German Ministry of Interior for (i)
the upgrade and sale of five Super Puma aircraft from the Company's
existing fleet, and (ii) the upgrade of five of the customers Super
Puma aircraft. This contract was signed with helicopter
manufacturer Eurocopter as co-contractor and the total value of the
Company's portion of this contract is approximately $64.0 million.
The contract will commence in April 2004 and will be completed by
2007. Composites Composites Manufacturing (Unaudited)
--------------------------------------- Q3-04 Q3-03 YTD-04 YTD-03
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Revenue $ 1.8 $ 1.5 $ 4.7 $ 4.0
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EBITDA ($0.7) ($0.7) ($1.8) ($3.3)
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Composites Total revenue from the Company's composites
manufacturing segment increased by $0.3 million for the three
months ended January 31, 2004 as compared to the same period last
year. For the nine months ended January 31, 2004 total revenue has
increased $0.7 million as compared to the same period last year.
Both the quarter over quarter and the year to date increases in
revenue were due mainly to initial revenue from a contract with
Aero Vodochody for the manufacture of S76 components. Full
production on the Aero Vodochody contract is expected to commence
in March 2004. EBITDA for the current quarter was $(0.7) million,
identical to the same period last year. Quarterly EBITDA was flat
despite the noted revenue increase due to increased wages resulting
from recent labour negotiations and increased consulting fees.
EBITDA for the nine months ended January 31, 2004 shows an
improvement of $1.5 million from the same period last year due to
increased revenue and cost control measures. Corporate and Other
The Corporate and other segment recorded costs of $2.4 million in
the current quarter compared to $3.5 million in the same period
last year. For the nine months ended January 31, 2004, costs were
$13.3 million compared to $16.9 million for the same period last
year. The improvement quarter over quarter and year over year is
due mainly to lower variable compensation costs. Financing Charges
Financing charges for the three months ended January 31, 2004, as
described in Note 7 to the Consolidated Interim Financial
Statements, increased by $1.9 million as compared to the same
period last year. This increase was due mainly to an additional
$4.3 million of foreign exchange losses from operating activities
and working capital revaluation, a $0.9 million reduction in
foreign exchange gains on debt repayments and a $0.8 million
increase in interest charges, offset by a $3.7 million foreign
exchange gain on the maturity of a forward currency contract this
quarter. Financing charges for the nine months ended January 31,
2004 decreased by $4.7 million as compared to the same period last
year. This decrease was due primarily to $9.8 million of foreign
exchange gains on the maturity of forward currency contracts and a
$2.1 million decline in interest charges, offset by a $7.2 million
increase in foreign exchange losses on operating activities and
working capital revaluation. The average interest rate on the
Company's variable-rate senior credit facilities for the current
quarter was approximately 4.6% compared to 5.4% in the same period
last year. Income Taxes Total income tax recovery recorded during
the quarter was $1.1 million compared to income tax expense of $4.2
million recorded in the same quarter last year. During this quarter
the Company recorded an income tax recovery of $1.7 million on
restructuring costs related to the consolidation of the Company's
European operations. Income tax expense included in net earnings
from operations was $0.6 million for the quarter versus $4.2
million for the same quarter last year. On a year to date basis,
income tax expense on net earnings from operations fell from $14.2
million last year to $8.0 million this year. These declines reflect
a fall in the Company's effective income tax rate on earnings from
operations from 21.7% last year to 15.1% this year. The lower rate
this year is primarily the result of decreased earnings in
jurisdictions with higher tax rates. Cash Flows, Liquidity and
Capital Resources Operating Activities Cash flow from operations
for the quarter was $14.9 million, a $3.1 million decrease from
last year. This decline was driven primarily by (i) reduced EBITDA
of $5.7 million due to unfavourable foreign exchange, (ii) a
restructuring charge (after tax) of $4.2 million, and by (iii) a
$1.9 million increase in financing charges as noted above, offset
by (iv) a 5.2 million increase in deferred revenue and (v) a $3.5
million reduction in pension contributions due to timing. On a year
to date basis, cash flow from operations declined from $77.5
million in the nine months ended January 31, 2003 to $60.7 million
in the corresponding period in the current fiscal year. This $16.8
million decline was comprised primarily of a reduction in EBITDA of
$18.7 million due mainly to unfavourable foreign exchange, offset
by a $4.7 million reduction in financing charges as noted above.
Non-cash working capital increased by $0.6 million during the
quarter ended January 31, 2004. This reflects a continuing focus on
careful working capital management. This compares to a $3.5 million
increase in working capital during the third quarter of last year
which was driven primarily by increased inventory levels in the
Company's repair and overhaul segment in support of higher activity
levels from both external customers and the Company's flying
divisions. For the nine months ended January 31, 2004 working
capital increased by $29.7 million compared to a $9.7 million
increase during the corresponding period in the previous fiscal
year. The $29.7 million increase in the current year was
attributable to (i) the repayment, in the first quarter of this
fiscal year, of an $8.0 million grant related to 1998 asset
dispositions, (ii) a $4.6 million reduction of accrued interest on
the Company's euro denominated debt during the first nine months of
the current fiscal year and (iii) a $17.1 million increase in
inventory levels in the Company's repair and overhaul segment. This
inventory increase was driven largely by the need to support higher
customer activity and to support internal repair and overhaul work
on Super Puma MkII dynamic components which was previously
performed externally. Also contributing to the inventory increase
was the purchase, in January 2004, of a 6-12 months supply of
certain engine and dynamic parts. Financing Activities The
Company's net debt (net of cash) decreased by $1.8 million during
the quarter, from $273.9 million to $272.1 million. This decrease
consists of a real debt decrease of $16.9 million, a real cash
increase of $2.1 million and unfavourable foreign exchange of $17.2
million. The real increase in cash of $2.1 million was driven
primarily by cash flow from operations of $14.9 million and
proceeds from asset disposals of $70.6 million, offset by (i)
capital expenditures of $56.1 million, (ii) debt repayments of
$16.9 million and (iii) an increase in advance rental payments and
long term receivables of $11.8 million. Item (iii) and virtually
all of the $70.6 million of disposition proceeds stem from aircraft
sale and leaseback transactions during thequarter. The foreign
exchange impact of $17.2 million was due almost entirely to the
effect of exchange rate fluctuations on the Company's pound
sterling and euro denominated debt. As at January 31, 2004 the
Company had unused credit facilities of $54.7 million and cash of
$42.3 million, for a total of $97.0 million. Change in Net Debt
Position During Q2 (in millions of Canadian dollars) (Unaudited)
--------------------------------- Opening balance $ 273.9 Real
decrease in debt (16.9) Real increase in cash (2.1) Foreign
exchange 17.2 --------------------------------- Ending balance $
272.1 ---------------------------------
--------------------------------- During the third quarter of the
current fiscal year the Company also paid dividends totally $2.6
million and issued shares for proceeds of $2.0 million. The share
issuances were primarily in connection with the exercise of stock
options. Investing Activities Capital expenditures of $56.1 million
during the quarter included $38.5 million for the purchase of three
aircraft. One of these three aircraft was sold and leased back
under an operating lease during the quarter. The remaining two
aircraft are expected to be sold and leased back under operating
leases in March, 2004. Capital expenditures for the quarter also
included $9.2 million in aircraft modifications, $1.9 million in
building and hangar costs, $2.6 million for major spares and $1.2
million primarily for other equipment. Inaddition, the Company
incurred expenditures of $0.9 million related to helicopter major
inspections. The Company recorded amortization of helicopter
component costs of $26.4 million during the quarter compared to
component expenditures of $28.2 millionfor a net of $1.8 million.
All major component repair and overhaul expenditures including
major inspections are capitalized and expensed over their period of
future benefit as described in note 1 to the Company's fiscal 2003
audited consolidated financial statements. The Company made
deposits during the quarter of $2.9 million toward the purchase of
new aircraft and applied $8.2 million of pre-existing deposits
toward the above noted purchase of three aircraft during the
quarter. The Company made advance aircraft rental payments of $5.8
million and made long term receivables advances of $6.0 million
during the quarter in connection with aircraft sale and leaseback
transactions. Additionally, $3.0 million of cash was reclassified
during the quarterto other assets to reflect its non-current
nature. This represents the amount of cash that the Company's
reinsurance subsidiary must retain to fund its required claims
reserves. Foreign Currency The Company's reporting currency is the
Canadian dollar. However, a significant portion of revenue and
operating expenses are denominated in pound sterling, Norwegian
kroner, Australian dollars and South African rand, the reporting
currencies of the Company's principal foreign operating
subsidiaries. In addition, certain revenue and operating expenses
are transacted in U.S. dollars and euros. The translation of the
financial results of the Company's foreign subsidiaries into
Canadian dollars resulted in foreign exchange that reduced revenue
by $8.3 million for the three months ended January 31, 2004 and
reduced revenue by $21.5 million for the nine months ended January
31, 2004. This was primarily a result of the weakening of the
Norwegian kroner and pound sterling somewhat offset by the
strengthening of the Australian dollar and South Africa rand
quarter over quarter and year over year. The impact on revenue due
to the translation of U.S. dollar and euro denominated transactions
into the reporting currencies of the Company's divisions was
unfavourable by $5.6 million for the quarter and unfavourable by
$14.9 million year to date. The total unfavourable foreign exchange
impact on revenue was $13.9 million for the three months ended
January 31, 2004 and $36.4 million for the nine months ended
January31, 2004. The unfavourable impact of foreign exchange on
EBITDA during the quarter was $5.8 million, while the year to date
impact was $16.5 million. For the quarter, $1.5 million of this
foreign exchange impact was due to the translation of the financial
results of the foreign subsidiaries into Canadian dollars, with
$4.8 million year to date. The remaining $4.3 million for the
quarter was attributable to the translation of U.S. dollar and euro
denominated transactions, with $11.7 million year to date. Since
financing charges, amortization, income tax expense, capital
expenditures and debt repayments are also generally in European
currencies and U.S. dollars, the net impact of foreign exchange on
net earnings and cash flow is not as significant. The Company's
overall approach to managing foreign currency exposures includes
identifying and quantifying its currency exposures and putting in
place the necessary financial instruments, when considered
appropriate, to manage the exposures. In managingthis risk, the
Company may use financial instruments including forwards, swaps,
and other derivative instruments. Company policy specifically
prohibits the use of derivatives for speculative purposes.
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Year to Date Average Foreign Exchange Rates
--------------------------------------- January 31, 2004 January
31, 2003 --------------------------------------- USD - CAD 1.3469
1.5577 NOK - CAD 0.1915 0.2084 GBP - CAD 2.2515 2.4109
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During the quarter, the Company de-designated its euro denominated
debt as a hedge of its net investment in self-sustaining Norwegian
operations as it was no longer an effective hedge. Instead, the
Company entered into a cross currency swap to convert the euro debt
into NOK debt, which has been designated as a hedge of the
Company's net investment in its self-sustaining Norwegian
operations. The Company continued its designation of its pound
sterling denominated debt as a hedge of its net investment in its
self-sustaining U.K. operations. As a result, revaluation gains and
losses on this debt and the net investments are offset in the
shareholders' equity section of the balance sheet in accordance
with Canadian generally accepted accounting principles. To minimize
foreign exchange risk, the Company has denominated its debt in
various currencies to match net operating cash flows with debt
service obligations. As at January 31, 2004, the Company's net debt
was denominated in the following currencies: (Unaudited)
------------------------------------------ Debt in Canadian
Original Currency Equivalent Currency (000's) (000's)
-------------------------------------------------------------------------
Euro euro 94,250 $155,701 Pound sterling pnds stlg 42,892 103,610
Norwegian kroner NOK 128,000 24,218 Canadian dollar CDN 30,815
30,815 Cash (various currencies) (42,257)
-------------------------------------------------------------------------
Total Reported Net Debt $272,087 The euro debt above has been
converted into NOK via a cross currency swap. Fleet At January 31,
2004 the Company's fleet consisted of 112 owned aircraft and 55
aircraft utilized under operating leases. An additional 139
aircraft are employed in the Company's 43.5% owned Canadian onshore
helicopter operations, Canadian Helicopters Limited, for a total of
306. The Company employs 72 aircraft in Europe, (primarily in the
North Sea) and 95 in its other international markets.
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Fleet Summary
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Operating Heavy Medium Light Total Owned Leased ------- -------
------- ------- ------- ------- Fleet at October 31, 2003 70 80 14
164 117 47 Increases (decreases) during the period: Super Puma Mk11
2 2 (2) 4 AS365N (1) 1 AS365N2 (2) 2 S61N (1) (1) (1) S76C+ 2 2 2
AS365C1 (1) (1) (1) Bell 412EP (1) 1 Bell 212 1 1 1
-------------------------------------------------------------------------
1 2 - 3 (5) 8
-------------------------------------------------------------------------
Fleet at January 31, 2004 71 82 14 167 112 55
-------------------------------------------------------------------------
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The following aircraft transactions occurred during the third
quarter of the current fiscal year: - Four aircraft were involved
in "lease-out", "lease-in" transactions; one Super Puma MkII, one
AS365N and two AS365N2's. - Three aircraft were sold and leased
back; two Super Puma MkII's and one Bell 412EP. - Two S76C+
aircraft were purchased. - Two additional aircraft were leased, one
Super Puma MkII and one Bell 212. During the quarter, the Company
made aircraft operating lease payments of $9.6 million compared to
$11.2 million in the same period last year. As at January 31, 2004,
there were eleven additional leased aircraft compared to the same
period last year. Although there has been an increase in the number
of leased aircraft, this has been offset by lower payments on
existing leases due to lower floating interest rates and more
favourable foreign exchange rates. The Company has entered into
operating leases with third-party lessors in respect of 55 aircraft
included in the Company's fleet at January 31, 2004. These leases
are long-term with expiry dates ranging from 2003 to 2011. The
Company has an option to purchase the aircraft at market value or
agreed amounts at the end of most of the long-term leases, but has
no commitment to do so. The future minimum lease payments required
under these aircraft operating leases are as follows (based on
January 31, 2004 interest rates and exchange rates): Unaudited
---------------- 2004 $ 12.4 million 2005 43.0 million 2006 36.7
million 2007 28.9 million 2008 24.3 million and thereafter: 48.2
million ---------------- Total $193.5 million ----------------
---------------- In addition to aircraft leases, the Company has
approximately $4.8 million in annual lease commitments for land,
buildings and non-aircraft equipment. As at January 31, 2004, the
Company had outstanding depositsfor a variety of aircraft. As part
of the repair and overhaul contract with the German Ministry of
Interior the Company will modify and sell five of its own Super
Puma MkII aircraft from its European operations. Based on an
independent appraisal as atApril 30, 2003, and, in the case of
aircraft acquired during the current fiscal year, independent
appraisals as at the date of acquisition, the fair market value of
the Company's owned aircraft fleet at January 31, 2004 is U.S.
$365.1 million (CDN $484.3 million), exceeding its recorded net
book value by approximately CDN $141.2 million (October 31, 2003 -
$164.8 million). The change since October 31, 2003 is primarily
related to foreign exchange, with the sale of aircraft accounting
for $4.7 millionof the decline in surplus value. Defined Benefit
Employee Pension Plans At January 31, 2004 the Company had a
funding deficit of $54.9 million, as described in Note 6 to the
Consolidated Interim Financial Statements, related to its defined
benefit pension plans that require funding by the Company compared
to $64.2 million at October 31, 2003, representing an improvement
of $9.3 million. The improvement in the funding deficit was
primarily due to $13.6 million in actual returns on the plan
assets, employer and participant contributions of $3.2 million and
experience gains on the pension obligations of approximately $4.9
million, partially offset by unfavourable foreign exchange of $3.9
million and interest and current period service costs of $8.5
million. The actual return on the plan assets for the quarter
exceeded the expected return by approximately $8.4 million to give
$24.2 million in excess of expectations year-to-date. Investment
performance has been at or above the relevant benchmarks. Of the
$54.9 million funding deficit, $42.4 million and $12.5 million are
related to plans in the U.K. and Norway, respectively.
Additionally, the Company had an obligation of $36.2 million at
January 31, 2004 related to plans that do not require
fundingcompared to $36.4 million at October 31, 2003. Defined
benefit pension plan expense increased from $3.9 million in the
third quarter last year to $6.6 million in the same period this
year. This $2.7 million increase was comprised of a real increase
of$3.2 million offset by favourable foreign exchange of $0.5
million. Pension expense increased due to assumption changes and
increased amortization of net actuarial and experience losses
quarter over quarter. While the asset mix varies in each plan,
overall the asset mix at January 31, 2004 was 49.4% equities, 28.6%
fixed income, and 22.0% money market. Dividend During the second
quarter the Company's Board of Directors declared an annual 50 cent
dividend, to be paid quarterly at a rate of 12.5 cents per share on
each of the Class A Subordinate Voting shares and the Class B
Multiple Voting shares. The first quarterly payment was made
December 2, 2003 for $2.6 million with the second payment made
subsequent to the quarter end on February 4, 2004 for $2.7 million.
Safety Safety is a primary focus of all activities performed by the
Company. The Company believes it has one of the best safety records
in the industry, as evidenced by its low incident rate and
insurance premiums. Seasonality The Company's revenues and earnings
are primarily derived from oil and gas exploration and production
activities and are not subject to significant seasonal variations.
There are, however, seasonal variations in earnings from the
Company's 43.5% investment in the onshore operations of Canadian
Helicopters Limited. Non-GAAP Earnings Measures The Company's
continuous disclosure documents may provide discussion and analysis
of "EBITDA" and "Net earnings from operations". These earnings
measures do not have standard definitions prescribed by generally
accepted accounting principles in Canada and therefore may not be
comparable to similar measures disclosed by other companies. The
Company has included these Non-GAAP earnings measures because they
are used by management, investors, analysts and others as measures
of the Company's financial performance. The definitions of these
Non-GAAP earnings measures are set forth below: EBITDA is defined
as net earnings before financing charges, income taxes, non-cash
items, restructuring charges, debt settlement costs and material
non-recurring items. Net earnings from operations is defined as net
earnings before restructuring charges, debt settlement costs and
material non-recurring items. Net earning from operations per share
is defined as net earnings from operations divided by the weighted
average number of shares outstanding for the period. Cash flow from
operations is defined as cash flow from operations as prescribed by
Canadian generally accepted accounting principles, but excluding
the impact of changes in non-cash working capital. Related
Definitions Restructuring charges are defined as costs incurred to
implement a fundamental and material change to the operating and/or
management structure of the Company and/or a subsidiary and/or a
division thereof. Restructuring charges may include severance
costs, professional fees, travel costs and other incremental costs
directly associated with the restructuring activities. Debt
settlement costs are defined as costs incurred to retire all, or a
portion of, an existing debt facility before its scheduled maturity
date. Debt settlement costs may include penalties, premiums,
professional fees and other incremental costs directly associated
with the debt settlement activities. Non-recurring items are
defined as those items occurring in the period that have not
occurred within the previous two years and are not expected to
re-occur in the next two years. FIRST AND FINAL ADD - - TABULAR
MATERIAL AND NOTES - - TO FOLLOW DATASOURCE: CHC Helicopter
Corporation CONTACT: Jo Mark Zurel, Senior Vice-President &
Chief Financial Officer, (709) 570-0567; Derrick Sturge,
Vice-President, Finance & Corporate Secretary, (709) 570-0713;
Chris Flanagan, Director of Communications, (709) 570-0749
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