/FIRST AND FINAL ADD - TO045 - CHC first quarter results/ Quarterly
Information The table below provides a summary of the Company's
consolidated revenue, net earnings, total assets, total long-term
financial liabilities, cash dividends per share and net earnings
per share for each of the eight most recent quarters (unaudited).
Total Cash long-term divi- finan- dends cial per Net Total liabil-
share Net earnings Period Revenue earnings assets ities declared
per share
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(in millions of Canadian dollars) (basic) (diluted)
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Q2-F2003 $189.7 $18.5 $1,180.6 $613.8 $0.20 $0.89 $0.82 Q3-F2003
179.0 15.5 1,204.5 624.4 - 0.75 0.69 Q4-F2003 174.6 22.7 1,145.6
570.2 - 1.09 1.01 Q1-F2004 170.4 13.7 1,110.2 567.0 - 0.66 0.61
Q2-F2004 174.0 15.5 1,114.4 555.9 - 0.75 0.69 Q3-F2004 170.8 9.0
1,162.0 572.7 0.50 0.45 0.40 Q4-F2004 218.4 25.4 1,514.7 800.8 -
1.22 1.12 Q1-F2005 232.8 22.3 1,520.7 824.0 - 1.07 0.98
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There is some impact of seasonality in the quarterly results in the
foregoing table. The seasonal variations are due primarily to
variations in the activity levels of the Company's oil and gas
industry customers' exploration and development activities.
Generally, the third quarter is most negatively impacted by
seasonality. The second quarter, which includes a portion of the
peak summer period, has historically been the strongest. Typically,
the Company's net earnings also follow this pattern. Net earnings
consists of net earnings from operations in addition to asset
impairment charges, restructuring and debt settlement costs and
certain tax recoveries. Non-GAAP Financial Measures The Company's
continuous disclosure documents may provide discussion and analysis
of non-GAAP financial measures. These financial measures do not
have standard definitions prescribed by Canadian GAAP and therefore
may not be comparable to similar measures disclosed by other
companies. The Company utilizes these measures in making operating
decisions and assessing its performance. Certain investors,
analysts, and others, utilize these measures in assessing the
Company's financial performance and as an indicator of its ability
to service debt. These non-GAAP financial measures have not been
presented as an alternative to either (i) net income in accordance
with Canadian GAAP, as an indicator of operating performance, or
(ii) cash flows from operating, investing and financing activities
in accordance with Canadian GAAP. The following table provides a
reconciliation of (i) net earnings from operations to Canadian GAAP
net earnings, (ii) basic and diluted net earnings from operations
per share to Canadian GAAP basic and diluted net earnings per
share, (iii) cash flow to Canadian GAAP cash flow from operations
and (iv) total net debt to total debt. Reconciliation of Non-GAAP
Financial Measures (Unaudited) (in thousands of Canadian dollars,
except per share amounts)
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Three Months Ended ------------------------- July 31, July 31, 2004
2003 (Unaudited) (Unaudited)
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Revenue $ 232,845 $ 170,424 Operating expenses 188,984 142,325
----------------------- Earnings before undernoted items
(Consolidated Segment EBITDA) 43,861 28,099 -----------------------
Undernoted items: Amortization (8,252) (5,688) Gain on disposals of
assets 1,062 1,092 Financing charges (9,293) (6,882) Equity in
earnings of associated companies 3,092 1,330
----------------------- (13,391) (10,148) -----------------------
Net earnings from operations before income taxes 30,470 17,951
Income taxes provision thereon (6,734) (3,311)
----------------------- Net earnings from operations (1) 23,736
14,640 ----------------------- Restructuring and debt settlement
costs (2)(3) (2,176) (1,280) Income tax recovery thereon 783 371
----------------------- (1,393) (909) ----------------------- Net
earnings $ 22,343 $ 13,731 -----------------------
----------------------- Per share Basic Net earnings from
operations $ 23,736 $ 14,640 Weighted average number of shares
(000's) 20,952 20,871 Basic net earnings from operations per share
(4) $ 1.13 $ 0.70 ----------------------- -----------------------
Diluted Net earnings from operations $ 23,736 $ 14,640 Effect of
dilutive securities 96 119 ----------------------- $ 23,832 $
14,759 Weighted average number of shares (000's) 22,920 22,594
Diluted net earnings from operations per share (5) $ 1.04 $ 0.65
----------------------- ----------------------- Cash Flow (6) Cash
flow from operations $ 28,640 $ (4,992) Change in non-cash working
capital 14,509 41,890 -----------------------
----------------------- $ 43,149 $ 36,898 -----------------------
----------------------- Total net debt (7) Total debt $ 514,933 $
514,026 Cash and cash equivalents (37,552) (67,093)
----------------------- ----------------------- $ 477,381 $ 446,933
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Definitions of Non-GAAP Financial Measures (1) Net earnings from
operations is defined as net earnings before restructuring and debt
settlement costs and taxes thereon. (2) Restructuring costs are
defined as costs incurred to implement a fundamental and material
change to the operating and/or management structures of the
Company. Restructuring costs may include severance, termination,
relocation, consulting and other incremental costs directly
associated with the restructuring activities. (3) 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. (4) Basic net earnings from operations per
share is defined as net earnings from operations divided by the
weighted average number of shares outstanding for the period. (5)
Diluted net earnings from operations per share is defined as net
earnings from operations divided by the diluted weighted average
number of shares for the period. (6) Cash flow is defined as cash
flow from operations as prescribed by Canadian GAAP, but excluding
the impact of changes in non-cash working capital. (7) Total net
debt is defined as total debt less cash and cash equivalents.
Summary financial data - U.S. Dollars Certain summary financial
data from the July 31, 2004 unaudited consolidated interim
financial statements have been translated into U.S. dollars. This
translation is included solely as supplemental information for the
convenience of the reader. The data has been translated at the
exchange rate at July 31, 2004 of $1.3292 (equal sign) U.S. $1.00.
Financial Highlights (in millions of U.S. dollars, except per share
amounts)
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Three Months Ended Year Ended ------------------------------- July
31, April 30, 2004 2004 (Unaudited) (Unaudited)
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Revenue $ 175.1 $ 552.0 Consolidated Segment EBITDA(4) 33.0 92.8
Net earnings from operations(5) 17.8 62.2 Net earnings 16.8 47.9
Cash flow(5) 32.5 140.4 Per share information Net earnings from
operations(5): Basic $ 0.85 $ 3.01 Diluted 0.78 2.76 Net earnings:
Basic $ 0.80 $ 2.32 Diluted 0.74 2.13
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-------------------------------------- (4) See "Review of Segment
Revenue and Segment EBITDA" in Management's Discussion and
Analysis. (5) See definition under "Non-GAAP Financial Measures" in
Management's Discussion and Analysis. CHC HELICOPTER CORPORATION
CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands of Canadian
dollars) Incorporated under the laws of Canada As at
----------------------- ----------------------- July 31, April 30,
2004 2004
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Assets Current assets Cash and cash equivalents $ 37,552 $ 67,093
Receivables 210,301 193,728 Future income tax assets 18,955 18,955
Inventory (Note 4) 208,101 215,147 Prepaid expenses 13,274 12,123
----------------------- 488,183 507,046 Property and equipment, net
(Notes 3 and 4) 745,714 733,034 Investments 57,739 49,728 Other
assets (Note 8) 186,466 177,557 Future income tax assets 42,644
47,358 ----------------------- $1,520,746 $1,514,723
----------------------- -----------------------
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Liabilities and shareholders' equity Current liabilities Payables
and accruals $ 192,601 $ 193,185 Deferred revenue 7,977 7,219
Dividends payable 2,531 5,194 Income taxes payable 7,930 6,328
Future income tax liabilities 2,147 2,212 Current portion of debt
obligations 19,781 38,046 ----------------------- 232,967 252,184
Long-term debt 162,852 133,305 Senior subordinated notes 332,300
342,675 Other liabilities (Note 8) 151,641 143,951 Future income
tax liabilities 177,229 180,896 Shareholders' equity 463,757
461,712 ----------------------- $1,520,746 $1,514,723
----------------------- -----------------------
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See accompanying notes CHC HELICOPTER CORPORATION CONSOLIDATED
STATEMENTS OF EARNINGS (Unaudited) (in thousands of Canadian
dollars, except per share amounts) Three Months Ended
----------------------- July 31, July 31, 2004 2003
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Revenue $ 232,845 $ 170,424 Operating expenses 188,984 142,325
----------------------- Earnings before undernoted items 43,861
28,099 Amortization (8,252) (5,688) Gain on disposals of assets
1,062 1,092 Financing charges (Note 9) (9,293) (6,882) Equity in
earnings of associated companies 3,092 1,330 Restructuring and debt
settlement costs (Note 10) (2,176) (1,280) -----------------------
Earnings before income taxes 28,294 16,671 Income tax provision
(5,951) (2,940) ----------------------- Net earnings $ 22,343 $
13,731 ----------------------- -----------------------
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Earnings per share (Note 12) Basic $ 1.07 $ 0.66 Diluted $ 0.98 $
0.61
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See accompanying notes CHC HELICOPTER CORPORATION CONSOLIDATED
STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) (in thousands of
Canadian dollars, except per share amounts) Three Months Ended
----------------------- July 31, July 31, 2004 2003
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Retained earnings, beginning of period $ 229,866 $ 177,862 Net
earnings 22,343 13,731 ----------------------- Retained earnings,
end of period 252,209 191,593 Capital stock (Note 11) 239,161
237,024 Contributed surplus 3,291 3,432 Foreign currency
translation adjustment (30,904) (21,213) -----------------------
Total shareholders' equity $ 463,757 $ 410,836
----------------------- -----------------------
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Dividends declared per participating voting share $NIL $NIL ----
---- ---- ----
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See accompanying notes CHC HELICOPTER CORPORATION CONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited) (in thousands of Canadian
dollars) Three Months Ended -----------------------
----------------------- July 31, July 31, 2004 2003
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Operating activities Net earnings $ 22,343 $ 13,731 Non-operating
items and items not involving cash: Amortization expense 8,252
5,688 Amortization of major components recorded as operating
expense (Note 4) 19,383 19,036 Gain on disposals of assets (1,062)
(1,092) Equity in earnings of associated companies (3,092) (1,330)
Future income taxes 1,672 1,026 Non-cash financing charges 842 995
Debt settlement costs 1,360 - Defined benefit pension plans 4,452
4,554 Deferred revenue (1,049) (1,538) Advance aircraft rental
payments (8,038) (4,765) Pre-operating costs (433) (513) Other
(1,481) 1,106 ----------------------- 43,149 36,898 Change in
non-cash working capital (14,509) (41,890) -----------------------
Cash flow from operations 28,640 (4,992) -----------------------
Financing activities Long-term debt proceeds 36,458 3,202 Long-term
debt repayments (20,227) (1,060) Debt settlement (2,083) - Deferred
financing costs (176) - Dividends paid (2,663) - Capital stock
issued 733 61 ----------------------- 12,042 2,203
----------------------- Investing activities Additions to property
and equipment (86,865) (20,939) Helicopter major inspections
(4,028) (2,723) Helicopter components (Note 4) (21,300) (13,688)
Proceeds from disposal 59,935 2,098 Aircraft deposits (12,497)
1,508 Long-term receivables repaid (advanced) 1,068 (61) Other
(6,270) 3,458 ----------------------- (69,957) (30,347)
----------------------- Effect of exchange rate changes on cash and
cash equivalents (266) (985) ----------------------- Change in cash
and cash equivalents during the period (29,541) (34,121) Cash and
cash equivalents, beginning of period 67,093 58,104
----------------------- Cash and cash equivalents, end of period $
37,552 $ 23,983 ----------------------- -----------------------
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See accompanying notes
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CHC Helicopter Corporation Notes to the Unaudited Consolidated
Interim Financial Statements For the three months ended July 31,
2004 and 2003 (Unless otherwise indicated, tabular amounts in
thousands of Canadian dollars, except per except per share amounts)
1. Basis of presentation The unaudited consolidated interim
financial statements ("the Statements") include the accounts of CHC
Helicopter Corporation and its direct and indirectly controlled
subsidiaries (collectively, the "Company"). These Statements have
been prepared in accordance with Canadian generally accepted
accounting principles ("Canadian GAAP") and are in accordance with
generally accepted accounting principles in the United States
("U.S. GAAP") except as described in Note 17. Not all disclosures
required by Canadian GAAP and U.S. GAAP for annual financial
statements are presented and thus the Statements should be read in
conjunction with the Company's annual audited consolidated
financial statements. In the opinion of management, any adjustments
considered necessary for a fair presentation have been included.
The Statements follow the same accounting policies and methods of
application as the most recent annual audited consolidated
financial statements for the fiscal year ended April 30, 2004,
except as disclosed in Note 2 with respect to hedging relationships
and derivatives.
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2. Change in accounting policies Hedging relationships and
derivatives Effective May 1, 2004, the Company prospectively
adopted the new Canadian Accounting Guideline, AcG-13, with respect
to hedging relationships as it relates to the identification,
designation, documentation and effectiveness of hedging
relationships for the purpose of applying hedge accounting. The
Company also adopted at May 1, 2004, the Canadian Emerging Issues
Committee Abstract 128 ("EIC-128"). Under EIC-128, if a derivative
financial instrument is not part of a qualifying hedging
relationship, the Company is required to record such instrument on
the balance sheet at fair value, with changes in fair value
recognized in current earnings. As at May 1, 2004, upon application
of AcG-13 and EIC-128, the Company determined that a percentage of
the equity forward price agreement is not an effective hedge and as
such has been recognized at fair value with changes in that fair
value recognized in earnings immediately rather than upon
settlement. The impact on operating expenses during the three month
period ended July 31, 2004 was favourable by $0.9 million. The
Company has not adopted AcG-13 or EIC-128 retroactively.
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3. Change in accounting estimates Effective May 1, 2004, based on
the Company's review of its amortization policy with respect to
aircraft airframes, the percentage of aircraft cost attributable to
certain airframes has been decreased from 30% to 25% and the
estimated useful life of such airframes has been increased from 15
years to 25 years. The effect of these accounting estimate changes
has been accounted for prospectively in fiscal 2005 resulting in a
decrease in amortization for the three months ended July 31, 2004
of $0.8 million.
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4. Comparative figures Certain comparative figures have been
reclassified to conform to the current year's presentation. The
most significant changes include: (i) The reclassification of $52.4
million of inventory at April 30, 2004 to property and equipment.
This reclassification relates to certain inventory items on hand in
the Company's repair and overhaul segment that are intended to be
used and capitalized with respect to future inter-company major
repair and overhaul work; and (ii) The reclassification in the
consolidated statement of cash flows for the three months ended
July 31, 2003 of the $19.0 million non cash impact of the
amortization of major components recorded as operating expense from
'helicopter components' in investing activities to items not
involving cash in operating activities.
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5. Variable interest entities At July 31, 2004 the Company operated
21 aircraft under operating leases with eight entities that would
be considered variable interest entities ("VIEs") under U.S. GAAP.
These leases have terms and conditions similar to those of the
Company's other operating leases over periods ranging from 2005 to
2011. At April 30, 2003 U.S. GAAP (per FASB Interpretation No. 46
("FIN 46")), was effective for all VIEs created after January 31,
2003 and was effective for those VIEs created prior to January 31,
2003 for the Company's interim period which commenced November 1,
2003. The Canadian guidance applies to all annual and interim
periods beginning on or after November 1, 2004. Canadian guidance
on this issue (AcG-15) is essentially consistent with the
provisions contained in U.S. GAAP with regard to the disclosure and
consolidation requirements for VIEs. As at July 31, 2004, under FIN
46 and the revisions under FIN 46-R, the Company has concluded it
is not the primary beneficiary of any of the aforementioned VIEs
and that it is not required to consolidate any of these VIEs in its
consolidated financial statements. The application of FIN 46 and
FIN 46-R has not had any impact on the Company's consolidated
financial statements. Based on appraisals by independent helicopter
valuation companies as at April 30, 2004, the estimated fair market
value of the aircraft leased from VIEs is $211.3 million as at July
31, 2004. The Company has provided junior loans and advance rentals
in connection with operating leases with these VIEs. The Company's
maximum exposure to loss related to the junior loans as a result of
its involvement with the VIEs is $9.9 million as at July 31, 2004.
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6. Cash flow information Cash interest paid during the quarter was
$2.5 million (2004 - $9.7 million) while cash taxes paid was $2.7
million (2004 - $1.4 million).
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7. Segment information The Company's operations are segregated into
six reportable segments. The segments are European flying
operations, international flying operations, Schreiner, Astec
repair and overhaul operations, composites manufacturing and
corporate and other. Three Months Ended July 31, 2004
---------------------------------------------------------------
Astec repair Corporate European Int'l and Compo- and flying flying
Schreiner overhaul sites other (2) (3) (4) (5) (6) (7) Total
-------- -------- -------- -------- -------- -------- --------
Total revenue $121,891 $ 59,407 $ 46,827 $ 48,340 $ 2,064 $ 5,008
$283,537 Less: Inter- segment revenues (6,286) (3,961) - (35,437) -
(5,008) (50,692) -------- -------- -------- -------- --------
-------- -------- Revenue from external customers 115,605 55,446
46,827 12,903 2,064 - 232,845 Operating expenses 93,684 46,443
39,054 2,627 2,646 4,530 188,984 -------- -------- --------
-------- -------- -------- -------- Segment EBITDA (1) $ 21,921 $
9,003 $ 7,773 $ 10,276 $ (582) $(4,530) 43,861 -------- --------
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- Amorti- zation (8,252) Gain on disposals
of assets 1,062 Financing charges (9,293) Equity in earnings of
assoc- iated companies 3,092 Restruct- uring and debt settle- ment
costs (2,176) -------- Earnings before income taxes 28,294 Income
tax provision (5,951) -------- Net earnings $ 22,343 --------
--------
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Notes: (1) Segment EBITDA is defined as segment earnings before
amortization, gain (losses) on disposals of assets, financing
charges, equity in earnings (losses) of associated companies,
restructuring and debt settlement costs, and income taxes. (2)
Europe - includes flying operations in the U.K., Norway, Ireland
and Denmark. (3) International - includes operations in Australia,
Africa and Asia and offshore work in eastern Canada and in other
locations around the world. (4) Schreiner - includes flying
operations primarily in The Netherlands, Africa and Asia and
includes other ancillary businesses including aircraft parts sales
and fixed wing repair and overhaul. (5) Astec repair and overhaul -
includes helicopter repair and overhaul operations based in
Stavanger, Norway and Aberdeen, Scotland and survival suit and
safety equipment production businesses. (6) Composites - includes
composite and metal aviation component manufacturing operations in
Canada. (7) Corporate and other - includes corporate head office
activities and applicable consolidation eliminations. Three Months
Ended July 31, 2003
------------------------------------------------------ Astec repair
Corporate European Int'l and Compo- and flying flying overhaul
sites other Total -------- -------- -------- -------- --------
-------- Total revenue $115,377 $ 46,281 $ 42,960 $ 1,488 $ 3,151
$209,257 Less: Inter- segment revenues (3,378) (2,664) (29,640) -
(3,151) (38,833) -------- -------- -------- -------- --------
-------- Revenue from external customers 111,999 43,617 13,320
1,488 - 170,424 Operating expenses 92,577 37,225 5,129 2,217 5,177
142,325 -------- -------- -------- -------- -------- --------
Segment EBITDA $ 19,422 $ 6,392 $ 8,191 $ (729) $(5,177) 28,099
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- Amortization (5,688) Gain on disposals
of assets 1,092 Financing charges (6,882) Equity in earnings of
associated companies 1,330 Restructuring costs (1,280) --------
Earnings before income taxes 16,671 Income tax provision (2,940)
-------- Net earnings $ 13,731 -------- --------
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8. Employee pension plans The Company maintains either defined
benefit or defined contribution pension plans for substantially all
of its employees. Selected summary information about the Company's
defined benefit pension plans as at July 31, 2004 as compared to
April 30, 2004 is as follows: As at ----------------------- July
31, April 30, 2004 2004 ----------- ----------- Benefit obligations
$ 537,749 $ 543,906 ----------- ----------- ----------- -----------
Fair value of plan assets $ 424,716 $ 440,222 -----------
----------- ----------- ----------- Funded status Defined benefit
plans - funded (1) $ (75,923) $ (67,045) Defined benefit plans -
unfunded (2) (37,110) (36,639) ----------- ----------- Total
(113,033) (103,684) Unrecognized net actuarial and experience
losses, prior service costs and transition amounts 156,006 152,826
Pension guarantee deposits 2,562 2,696 ----------- ----------- Net
asset recognized on the balance sheet $ 45,535 $ 51,838 -----------
----------- ----------- ----------- (1) Funded plans require
contributions to be made by the Company. (2) Unfunded plans do not
require contributions from the Company. Of the net asset recognized
on the balance sheet at July 31, 2004, $84.5 million (April 30,
2004 - $90.1 million) related to the funded plans is recorded in
other assets and $39.0 million (April 30, 2004 - $38.3 million)
related to certain funded and the unfunded plans is recorded as an
accrued pension obligation in other liabilities. The Company's net
defined pension plan expense for the three months ended July 31 is
as follows: Three Months Ended ----------------------- July 31,
July 31, 2004 2003 ----------------------- Current service cost $
5,156 $ 3,798 Interest cost 7,622 5,914 Expected return on plan
assets (7,379) (5,272) Amortization of net actuarial and experience
losses 2,083 2,426 Amortization of prior service costs 153 153
Amortization of transition amounts 123 100 Participant
contributions (901) (667) ----------------------- Net defined
benefit pension plan expense $ 6,857 $ 6,452
----------------------- ----------------------- Employer
contributions expected to be paid to the defined benefit pension
plans during fiscal 2005 as required by funding regulations and law
is $29.5 million. While the asset mix varies in each plan, overall
the asset mix at July 31, 2004 was 42.0% equities, 33.0% fixed
income and 25.0% money market. The significant weighted average
actuarial assumptions adopted in measuring the Company's net
defined benefit pension plan expense year-to- date July 31 are as
follows: Three Months Ended ----------------------- July 31, July
31, 2004 2003 ----------------------- Discount rate 5.58% 5.90%
Expected long-term rate of return on plan assets 6.63% 6.92%
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9. Financing Charges Three Months Ended -----------------------
July 31, July 31, 2004 2003 ----------------------- Interest on
debt obligations $ 8,191 $ 7,701 Amortization of deferred financing
costs 738 786 Foreign exchange loss from operating activities and
working capital revaluation 193 94 Foreign exchange loss on debt
repayment - 630 Foreign exchange loss on revaluation of long-term
debt 37 - Foreign exchange gain on foreign currency agreement -
(2,251) Other 134 (78) ----------------------- Total $ 9,293 $
6,882 ----------------------- -----------------------
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10. Restructuring and debt settlement costs a) Restructuring costs
During the three months ended July 31, 2004, the Company incurred
restructuring costs of $0.8 million (after tax $0.5 million) in
connection with the examination and evaluation of its
organizational structure and operations outside of those examined
in the prior fiscal year. These restructuring costs relate to
general organization restructure planning and relocation of the
Company's head office to Vancouver, Canada. Restructuring costs
were comprised of severance, termination, relocation, consulting
and other associated incremental costs directly associated with
these activities. Of the $0.8 million incurred to date, $0.2
million relates to severance and termination. The total estimated
costs to be incurred related to general organization restructure
planning and relocation of Global Headquarters is approximately
$5.0 million and will be incurred over a number of future periods.
Additional restructuring costs that may be incurred in relation to
other operations and activities are not yet determinable because
specific plans, timing and approvals have not yet been determined
or obtained at this time. During the three months ended July 31,
2003 the Company incurred $1.3 million ($0.9 million after tax) in
costs in connection with the consolidation of its European
operations and other related activities. The composition of such
restructuring costs is similar to that incurred during the current
quarter in relation to other operations. The consolidation of
European operations was complete as of April 30, 2004 with no
additional costs incurred during the three months ended July 31,
2004. The following table provides a reconciliation of the
Company's restructuring cost accrual for the three month period
ended July 31, 2004: Restructuring accrued May 1, 2004 $1,833
Additional restructuring cost accrued during the period 409
Restructuring cost paid during the period (502) -------
Restructuring accrued July 31, 2004 $1,740 ------- ------- b) Debt
settlement costs During the quarter ended July 31, 2004, the
Company incurred $1.4 million (after tax, $0.9 million) of debt
settlement costs in connection with the redemption in May and July
2004 of (euro) 1.0 million or approximately $1.8 million and (euro)
5.9 million or approximately $9.7 million, respectively, of its
remaining 11 3/4% senior subordinated notes. Additionally, in June
2004, the Company redeemed the remaining $10.4 million of its 8%
subordinated debentures. The debt settlement costs during the
quarter were comprised of premiums, professional fees, write-off of
deferred financing costs and other incremental costs directly
associated with debt settlement activities.
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11. Capital stock Authorized: Unlimited number of each of the
following: First preferred shares, issuable in series Second
preferred shares, issuable in series Class A subordinate voting
shares, no par value Class B multiple voting shares, no par value
Ordinary shares, no par value Number of Shares 000's As at
----------------------------------- July 31, April 30, July 31,
2004 2004 2003 ----------- ----------- ----------- Issued: Class A
subordinate voting shares 18,399 18,378 17,921 Class B multiple
voting shares 2,940 2,940 2,955 Ordinary shares 11,000 11,000
11,000 Class A subordinate voting shares that would be issued upon
conversion of the following: Class B multiple voting shares 2,940
2,940 2,955 Share options 1,404 1,425 1,967 Convertible debt 690
690 690 Consideration 000's As at
----------------------------------- July 31, April 30, July 31,
2004 2004 2003 ----------- ----------- ----------- Class A
subordinate voting shares $ 222,130 $ 221,532 $ 218,209 Class B
multiple voting shares 18,719 18,719 18,815 Ordinary shares 33,000
33,000 33,000 Share loan (33,000) (33,000) (33,000) Class A
subordinate voting share employee purchase loans (1,688) (1,823) -
----------- ----------- ----------- $ 239,161 $ 238,428 $ 237,024
----------- ----------- ----------- ----------- -----------
----------- Contributed surplus $ 3,291 $ 3,291 $ 3,432
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12. Per share information Three Months Ended July 31, 2004
----------------------------------- Weighted average number of Net
Net shares earnings earnings (000's) per share
----------------------------------- $ 22,343 21,320 Shares as
security for Class A subordinate voting share employee purchase
loans - (368) ----------------------- Basic 22,343 20,952 $1.07
Effect of potential dilutive securities: Share options - 910
Convertible debt 96 690 Shares as security for Class A subordinate
voting share employee purchase loans - 368 -----------------------
Diluted $ 22,439 22,920 $0.98
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Three Months Ended July 31, 2003
----------------------------------- Weighted average number of Net
Net shares earnings earnings (000's) per share
----------------------------------- Basic $ 13,731 20,871 $0.66
Effect of potential dilutive securities: Share options - 936
Convertible debt 119 690 ----------------------- 13,850 22,497
Anti-dilutive impact Share options - 97 -----------------------
Diluted $ 13,850 22,594 $0.61
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Per share amounts are calculated using the treasury stock method.
Under this method, the proceeds from the exercise of options are
assumed to be used to repurchase the Company's shares on the open
market. The difference between the number of shares assumed
purchased and the number of options assumed exercised is added to
the actual number of shares outstanding to determine diluted shares
outstanding for purposes of calculating diluted earnings per share.
Therefore, the number of shares in the diluted earnings per share
calculation will increase as the average share price increases.
There were 11 million ordinary shares outstanding at July 31, 2004
and at April 30, 2004, all of which are owned by the Company's
majority shareholder (See Note 11). The payment of dividends on
these ordinary shares requires minority shareholder approval. The
shares also have no conversion rights in the hands of their holder.
Therefore, these ordinary shares have not been included in the
calculation of basic and diluted earnings per share.
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13. Share option plan Effective May 1, 2003, the Company began
expensing share-option awards using the fair value method. This
accounting change was applied prospectively in fiscal 2004 relating
to share options issued on or after May 1, 2003. There was no
impact on the financial results for the three months ended July 31,
2004 and July 31, 2003 as a result of adopting this accounting
policy change, as no new share options were granted during these
periods. The table below presents pro-forma net earnings, basic
earnings per share and diluted earnings per share had the fair
value method been used to account for share options. These
pro-forma disclosures pertain to certain share options granted in
fiscal 2003 upon adoption of the new stock-based compensation
standards May 1, 2002. There was no impact on the pro-forma
earnings for the three month period ended July 31, 2004 as all
share options granted in fiscal 2003 had vested as at April 30,
2004. Three Months Ended ----------------------- July 31, July 31,
2004 2003 ----------- ----------- Net earnings As reported $ 22,343
$ 13,731 Share-based employee compensation expense determined under
fair value based method - (60) ----------- ----------- Pro-forma $
22,343 $ 13,671 ----------- ----------- Basic earnings per share As
reported $1.07 $0.66 Pro-forma 1.07 0.66 Diluted earnings per share
As reported $0.98 $0.61 Pro-forma 0.98 0.61 The Black Scholes
option pricing model was used to fair value the options using the
following estimates and assumptions: Expected life 5 years Expected
dividend yield 0.6% Risk-free interest rate 5.0% Stock volatility
40.0% As at July 31, 2004 total outstanding options were 1,404,372
(July 31, 2003 - 1,967,040). At July 31, 2004 all of the share
options outstanding were exercisable (July 31, 2003 - 1,781,679).
The weighted average exercise price of the total outstanding
options at July 31, 2004 was $14.22 compared to $13.66 at July 31,
2003.
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14. Related party transactions a) During fiscal 2000, in connection
with securing tender credit facilities, the Company received an
unsecured, subordinated, convertible 12% loan from an affiliate of
the controlling shareholder in the amount of $5.0 million. This
loan is subordinated to the Company's senior credit facilities and
its senior subordinated notes. The loan is convertible into Class A
subordinated voting shares at $7.25 per share. The estimated value
of the loan proceeds attributable to the conversion feature of
$951,000 was allocated to contributed surplus. The equivalent
reduction in the carrying value of the loan is amortized to
earnings over the term of the loan. Interest expense of $180,000
(2003 - $175,000), including amortization of the above noted
discount, was recorded on the loan during the three month period
ended July 31, 2004. b) The Company uses properties owned by
companies affiliated with the controlling shareholder for customer
events, meetings, conferences and social functions. Rent and usage
fees of $143,000 (2003 - $159,000) were incurred with these
companies during the three month period ended July 31, 2004 and
2003. These transactions were recorded at their exchange amounts.
c) During the three month period ended July 31, 2004, $189,000
(2003 - $99,000) was paid to Canadian Helicopters Limited, in which
the Company has a 42.75% equity investment. These amounts related
to the provision of helicopter flying services to the Company and
were recorded at their exchange amounts. d) During fiscal 2004,
construction began on a new hangar facility in Vancouver, Canada.
The facility is being constructed by a subsidiary of a company
owned by a relative of the Company's controlling shareholder. As at
July 31, 2004, $2.7 million (2003 - $0.2 million) was paid to this
subsidiary with such amount being capitalized to fixed assets and
was recorded at its exchange amount. Such subsidiary will also
receive a fee of $500,000 for managing the construction of the
building. e) From May 1, 2004 to July 31, 2004 the Company recorded
$14.9 million in revenue from ACN, in which the Company has a 40%
equity investment. Such revenue was primarily associated with the
flying of aircraft and related activities, sale of aircraft parts
and amounts billed under PBH contracts. These transactions were
recorded at their exchange amounts.
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15. Guarantees The Company has given guarantees to certain lessors
in respect of operating leases. If the Company fails to meet the
senior credit facilities' financial ratios or breaches any of the
covenants of those facilities and, as a result, the senior lenders
accelerate debt repayment, the leases provide for a
cross-acceleration that could give the lessors and financial
institutions that are lenders to those lessors the right to
terminate the leases and require return of the aircraft and payment
of the present value of all future lease payments and certain other
amounts. If the realized value of the aircraft is insufficient to
discharge the indebtedness due to those lessors in respect of the
present value of the future lease payments, those lessors' lenders
could obtain payment of that deficiency from the Company under
these guarantees. The Company has provided limited guarantees to
third parties under some of its operating leases in connection with
a portion of the aircraft values at the termination of the leases.
The leasees have terms expiring between 2005 and 2012. The
Company's exposure under the asset value guarantees and junior
loans is approximately $27.0 million at July 31, 2004 compared to
$25.5 million at April 30, 2004. The resale market for the aircraft
type for which the Company has provided guarantees remains strong,
and as a result, the Company does not anticipate incurring any
liability or loss with respect to these guarantees.
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16. Subsequent event In August 2004, the Company announced that it
had acquired all outstanding shares of Multifabs Survival Ltd.
("Multifabs") an Aberdeen based company specializing in the
production of cold-water survival suits for military forces,
emergency services and offshore oil and gas transportation
companies around the world. Multifabs was acquired for a cash
payment of $17.0 million, including all outstanding debt.
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17. Reconciliation to accounting principles generally accepted in
the United States In certain respects, Canadian GAAP differs from
U.S. GAAP. If U.S. GAAP were employed, the consolidated statements
of earnings for the periods indicated would be adjusted as follows:
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Three Months Ended July 31, July 31, 2004 2003 (Unaudited)
(Unaudited)
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Net earnings according to Canadian GAAP $ 22,343 $ 13,731
Pre-operating expenses (301) 341 Gain on sale of
assets/amortization expense (14) (10) Ineffective portion of net
investment hedge - (6,902) Effect of foreign currency indemnity
agreements (138) (1,506) Effect of currency swaps (3,466) - Effect
of revaluation of U.S. debt 6,225 - Effect of equity forward price
agreement 707 - Internal-use software expenses (94) (52) Effect of
asset value guarantees (144) - (Increase) decrease in income tax
expense (203) 1,534 Other 30 - ----------------------- Net earnings
according to U.S. GAAP 24,945 7,136 Other comprehensive earnings,
net of income tax: Foreign currency translation adjustment (22,274)
(17,329) Ineffective portion of net investment hedge - 5,535
Minimum pension liability adjustment (19,860) 29,063 Interest rate
swap adjustment - 1,126 Foreign currency cash flow hedge adjustment
(902) - Fair value adjustment of available-for-sale securities 206
- ----------------------- Comprehensive (loss) earnings according
to U.S. GAAP $ (17,885) $ 25,531 -----------------------
----------------------- Earnings per share according to U.S. GAAP
----------------------- ----------------------- Basic $ 1.19 $ 0.34
----------------------- ----------------------- Diluted $ 1.09 $
0.32 ----------------------- ----------------------- The
consolidated balance sheet would vary in some respects when
restated for U.S. GAAP purposes. The most significant variances
pertaining to the July 31, 2004 balance sheet are listed below: -
Property and equipment would increase by $1.7 million to record
acquisition and amortization differences. - Long-term investments
would increase by $0.3 million to adjust available-for-sale
securities to fair market value. - Other assets would decrease by
$28.0 million to recognize the fair value impact of an aircraft
lease guarantee, deferred startup cost adjustment and minimum
pension liability adjustment on net earnings. - Future income tax
assets would decrease by $0.5 million to tax-effect adjustments to
net earnings and comprehensive earnings under U.S. GAAP. - Other
liabilities would increase by $12.9 million to recognize the
minimum pension liability, and foreign currency translation
adjustments related to currency swaps recorded in comprehensive
earnings as well as the fair value impact of forward foreign
currency contracts, lease guarantees, foreign currency indemnity
agreements, and equity forward price agreements on net earnings and
retained earnings. - Future tax liability would decrease by $16.8
million due to tax effect adjustments to net earnings and
comprehensive income under U.S. GAAP. - Accumulated other
comprehensive earnings would be recorded at $(53.0) million under
U.S. GAAP for foreign currency translation, minimum pension
liability, interest rate swap adjustments, currency swap
adjustments, the impact of the ineffective portion of the net
investment hedge, foreign currency cash flow hedge adjustments and
the fair-value adjustment of available-for-sale securities. -
Retained earnings would be decreased by $0.7 million to reflect the
cumulative net effect of Canadian and U.S. GAAP differences. END
FIRST AND FINAL ADD DATASOURCE: CHC Helicopter Corporation CONTACT:
PR Newswire -- Sept. 13
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