CHC Announces First Quarter Results.Business Editors ST. JOHN'S, Newfoundland Newfoundland, breed of dog Newfoundland, breed of massive, powerful working dog developed in Newfoundland, probably in the 17th cent., and later perfected in England. It stands from 25 to 28 in. (63.5–71. & LABRADOR Labrador: see Labrador-Ungava; Newfoundland and Labrador, Canada. Labrador Large peninsula, northeastern Canada. Divided between the provinces of Quebec and Newfoundland and Labrador, it occupies an area of about 625,000 sq mi (1,620,000 sq km). , Canada--(BUSINESS WIRE)--Sept. 8, 2003--CHC Helicopter helicopter, type of aircraft in which lift is obtained by means of one or more power-driven horizontal propellers called rotors. When the rotor of a helicopter turns it produces reaction torque which tends to make the craft spin also. Corporation ("the Company") (TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension : FLY.A and FLY.B; NYSE NYSE See: New York Stock Exchange : FLI FLI - Flash Lights Impressively. ) today announced financial results (unaudited) for the quarter ended July July: see month. 31, 2003.
Financial Highlights
(in millions of Canadian dollars, except per share amounts)
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Three Months Ended
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July 31, 2003 July 31, 2002
(Unaudited) (Unaudited)
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Revenue $171.4 $176.0
EBITDA (1) 28.1 33.5
Net earnings from operations (1) 14.6 16.8
Net earnings 13.7 8.9
Cash flow from operations 23.4 25.5
Per share information
Net earnings from operations: (1)
Basic $0.70 $0.81
Diluted 0.65 0.74
Net earnings:
Basic $0.66 $0.43
Diluted 0.61 0.40
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(1) See definitions under Non-GAAP Earnings Measures in Management's
Discussion and Analysis
Highlights -- Revenue for the quarter was $171.4 million compared to $176.0 million earned in the same quarter last year. Revenue growth was $1.2 million excluding the impact of foreign exchange. -- EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become for the quarter was $28.1 million compared to $33.5 million in the same quarter last year. The primary factors contributing to this decrease were foreign exchange, pension expense and pilots' disputes in Norway Norway, Nor. Norge, officially Kingdom of Norway, constitutional monarchy (2005 est. pop. 4,593,000), 125,181 sq mi (324,219 sq km), N Europe, occupying the western part of the Scandinavian peninsula. . A pilots' dispute in Norway during the period was settled subsequent to the quarter end subject to union ratification The confirmation or adoption of an act that has already been performed. A principal can, for example, ratify something that has been done on his or her behalf by another individual who assumed the authority to act in the capacity of an agent. . -- Net earnings for the quarter were $13.7 million, an increase of $4.8 million from the $8.9 million earned in the same quarter last year. Last year's results included after tax debt settlement costs of $7.9 million associated with the redemption The liberation of an estate in real property from a mortgage. Redemption is the process by which land that has been mortgaged or pledged is bought back or reclaimed. It is accomplished through a payment of the debt owed or a fulfillment of the other conditions. of 35% of the Company's senior subordinated Subordinated A claim ranked lower in priority than other claims. Common stock claims are always subordinated to debt. notes. -- The Company has recently been awarded contracts worth over $200 million over the contract terms. Approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 40% of this revenue is from new customers. Investor Conference Call The Company's 1st quarter conference call and webcast will take place Tuesday Tuesday: see week. , September September: see month. 9th at 10:30 a.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT . To listen to the conference call, dial 416-695-9753 for local and overseas calls, or toll-free 1-877-888-7019 for calls from within North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. . To hear a replay of the conference call, dial 416-252-1143, or toll-free 1-866-518-1010. The replay will be available until 5 p.m. EDT, September 12, 2003. The financial results and a webcast of the conference call will be available through the Company's website at www.chc.ca/fiscal.html. The webcast will also be broadcast by CCBN CCBN Central Coast Bancorp CCBN Charles County Business Network at: www.companyboardroom.com. CHC Helicopter CHC Helicopter Corporation (sometimes known as Canadian Helicopter Corporation, Canadian Helicopters or Hélicoptères Canadiens) (TSX: FLY.SV.A TSX: FLY.MV.B NYSE: FLI) is the world’s largest global commercial helicopter operator. Corporation is the world's leading provider of heavy and medium helicopter services to the global offshore oil and gas industry with aircraft operating in 23 countries and a team of approximately 2,500 professionals worldwide. This press release and management's discussion and analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial may contain projections and other forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of the "safe harbour" provision of the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and 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 ma·te·ri·al·ize v. ma·te·ri·al·ized, ma·te·ri·al·iz·ing, ma·te·ri·al·iz·es v.tr. 1. To cause to become real or actual: By building the house, we materialized a dream. , or should underlying assumptions prove incorrect Incorrect means to not be correct and may also refer to:
Management's Discussion and Analysis of Financial Condition and Results of Operations - Three months ended July 31, 2003 Overview Net earnings from operations during the quarter were $14.6 million ($0.65 per share, diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. ) on revenue of $171.4 million compared to net earnings from operations of $16.8 million ($0.74 per share, diluted) on revenue of $176.0 million. The primary factors impacting results for this quarter compared to the same quarter last year include: -- Unfavourable foreign exchange on EBITDA of approximately $2.6 million; -- Increased defined benefit pension plan expense of approximately $3.0 million; -- Real EBITDA(2) of approximately $3.4 million lost due to pilots' disputes in Norway; -- A reduction in corporate costs of $1.6 million; -- A reduction in operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. of $3.5 million related to a successful cost recovery claim by the Company's Norwegian Norwegian associated in some way with Norway. Norwegian buhund, Norwegian sheepdog a medium-sized (26-40 lb), spitz-type dog with a short, dense coat in wheaten, black, red or sable, sometimes with black markings on the face, ears subsidiary for costs incurred in connection with a helicopter crash in 1997; -- Gain on disposals of assets of $1.1 million; -- A net decrease in financing charges of $1.2 million due to a $2.3 million gain on the settlement of a forward foreign currency contract partially offset by unfavourable foreign exchange on operating activities, working capital revaluations and debt repayments; and -- A lower effective income tax rate on net earnings from operations before income taxes during this quarter of 18.4% compared to 24.7% experienced in the same quarter last year. Net earnings during the quarter were $13.7 million ($0.61 per share, diluted) compared to net earnings of $8.9 million ($0.40 per share, diluted) in the same quarter last year. Last year's results included realized after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. debt settlement costs of $7.9 million on the redemption of euro 50.8 million (35%) of the Company's 11.75% senior subordinated notes in May 2002. This year's results include an after-tax restructuring charge restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. of $0.9 million related to the consolidation of the Company's European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. operations. Real revenue(2) growth of $1.2 million offset by unfavourable foreign exchange of $5.8 million resulted in a net decrease in revenue of $4.6 million compared to the same period last year. EBITDA decreased from $33.5 million to $28.1 million due primarily to the factors described above. (2) Real revenue and real EBITDA refer to revenue and EBITDA excluding the impact of foreign exchange. Revenue Total revenue for the quarter was $171.4 compared to revenue of $176.0 million for the same quarter last year. The following factors account for the change: -- An increase in real revenue of $1.1 million in the Company's International helicopter flying segment primarily due to new oil and gas contracts and increased rates offset by a $2.8 million decrease in real revenue in the Company's European flying operations due primarily to reduced training revenue. While flying activity decreased in the European segment by 906 hours, of which approximately 500 hours was due to pilots' disputes in Norway, real flying revenue in the European segment remained unchanged quarter over quarter due to higher rates and fleet mix. -- An increase in real third-party repair and overhaul revenue of $2.6 million due to an increase in both "power-by-the-hour" and large maintenance projects; -- Increased revenue from the Company's composites manufacturing segment of $0.3 million; and -- A net revenue decrease of $2.3 million related to the translation of the foreign subsidiary financial results into Canadian dollars Noun 1. Canadian dollar - the basic unit of money in Canada; "the Canadian dollar has the image of loon on one side of the coin" loonie dollar - the basic monetary unit in many countries; equal to 100 cents as a result of the weakening weak·en tr. & intr.v. weak·ened, weak·en·ing, weak·ens To make or become weak or weaker. weak  en·er n. of the Norwegian
kroner and pound sterling partially offset by the strengthening of the Australian dollar Noun 1. Australian dollar - the basic unit of money in Australia and Nauru dollar - the basic monetary unit in many countries; equal to 100 cents and South African rand “ZAR” redirects here. For the former republic, see South African Republic. The rand is the currency of South Africa. It takes its name from the Witwatersrand (White-waters-ridge compared to the same quarter last year. Net unfavourable foreign exchange of approximately $3.5 million primarily related to the translation of U.S. dollar and euro denominated transactions into the reporting currencies Reporting Currency The currency used in published reports and financial documents. Notes: All annual and quarterly reports state the currency in which their results are listed. of the Company's operating divisions accounted for the remaining decrease, for a total unfavourable foreign exchange impact on revenue of $5.8 million.
Revenue Summary by Quarter
(in millions of Canadian dollars)
(Unaudited)
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Total Repair
Interna- Helicopter and
Period Europe tional Operations Overhaul Composites Total
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Q2-F2002 $107.8 $38.9 $146.7 $13.4 $- $160.1
Q3-F2002 95.6 44.9 140.5 11.1 - 151.6
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
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Flying Hours The Company derives its flying revenue from two primary types of contracts. Approximately 59% (2003 - 63%) of the Company's year-to- date flying revenue was derived de·rive v. de·rived, de·riv·ing, de·rives v.tr. 1. To obtain or receive from a source. 2. from hourly charges (including hourly charges on contracts that also have fixed charges), and the remaining 41% (2003 - 37%) 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 pro·por·tion·ate adj. Being in due proportion; proportional. tr.v. pro·por·tion·at·ed, pro·por·tion·at·ing, pro·por·tion·ates To make proportionate. change in revenue. While flying hours may not correlate directly with revenue, they remain a good measure of activity level and fleet utilization utilization, n 1. the extent to which a given group uses a particular service in a specified period. Although usually expressed as the number of services used per year per 100 or per 1000 persons eligible for the service, utilization rates may be . The following table provides a quarterly summary of the Company's flying hours and number of aircraft 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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Q2-F2002 24,773 10,663 35,436 76 85
Q3-F2002 21,781 11,276 33,057 75 88
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
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The following table shows flying revenue mix by segment and in total
by aircraft type 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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Three months ended
July 31, 2003
(Unaudited)
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Heavy Medium Light Total
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Europe $84,415 $21,276 $- $105,691
International 12,945 26,467 2,150 41,562
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Total Flying Revenue $97,360 $47,743 $2,150 $147,253
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Total % 66.1% 32.4% 1.5% 100%
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Three months ended
July 31, 2002
(Unaudited)
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Heavy Medium Light Total
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Europe $85,382 $22,472 $- $107,854
International 14,213 28,072 2,008 44,293
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Total Flying Revenue $99,595 $50,544 $2,008 $152,147
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Total % 65.5% 33.2% 1.3% 100%
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The following table shows total flying revenue by segment by hourly
versus fixed charges (including the impact of foreign exchange) for
year-to-date fiscal 2004 and 2003. The decrease in revenue from
hourly charges is the result of reduced flying activity in the
Company's markets.
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Flying Revenue - Hourly vs. Fixed
Three months ended July 31,
(in thousands of Canadian dollars)
(Unaudited)
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Hourly Fixed Total
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2003 2002 2003 2002 2003 2002
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Europe $72,415 $81,293 $33,276 $26,561 $105,691 $107,854
Inter-
national 13,916 15,103 27,646 29,190 41,562 44,293
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$86,331 $96,396 $60,922 $55,751 $147,253 $152,147
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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.
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Flying Revenue - By Industry Sector
Three months ended July 31,
(in thousands of Canadian dollars)
(Unaudited)
Europe International Total
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2003 2002 2003 2002 2003 2002
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Oil & Gas -
Production $87,627 $84,398 $21,927 $19,632 $109,554 $104,030
Oil & Gas -
Exploration 9,520 15,065 8,447 11,212 17,967 26,277
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Oil & Gas -
Total 97,147 99,463 30,374 30,844 127,521 130,307
EMS/SAR (1) 5,274 4,611 8,338 8,259 13,612 12,870
Other 3,270 3,780 2,850 5,190 6,120 8,970
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$105,691 $107,854 $41,562 $44,293 $147,253 $152,147
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(1) 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 2004.
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Aberdeen Airport - Helicopter Passengers
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 112,449 123,012 114,376 92,355
Q3 92,918 114,606 104,381 85,167
Q4 92,686 108,247 101,166 85,190
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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 continued to decline 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.
Review of Operations
Europe
European Flying Segment
(millions of CAD dollars)
(Unaudited)
----------------------------------------
Q1-04 Q1-03
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Revenue $113.0 $118.0
----------------------------------------
EBITDA 19.4 23.6
----------------------------------------
EBITDA % 17.2% 20.0%
----------------------------------------
Revenue from the Company's European flying segment was $113.0 million during the quarter compared to $118.0 million last year. Of the $5.0 million decrease, $2.2 million relates to unfavourable foreign exchange while $2.8 million relates to a decrease in training revenue in Norway due to the postponement of training by several international customers following the travel ban in connection with SARS. While flying activity was lower by 906 hours quarter over quarter, flying revenue, excluding the impact of foreign exchange, was unchanged from the same period last year. Approximately 500 hours, equating e·quate v. e·quat·ed, e·quat·ing, e·quates v.tr. 1. To make equal or equivalent. 2. To reduce to a standard or an average; equalize. 3. to $2.7 million in revenue, of the decrease in flying activity was due to pilots' disputes in Norway. The remaining was due to general decreased activity primarily by bp, Statoil Statoil ASA (OSE: STL, NYSE: STO) is a Norwegian petroleum company established in 1972. It is the largest petroleum company in the Nordic countries and Norway's largest company, employing over 25,000 people. and TotalFinaElf, the expiration EXPIRATION. Cessation; end. As, the expiration of, a lease, of a contract, or statute. 2. In general, the expiration of a contract puts an end to all the engagements of the parties, except to those which arise from the non- fulfillment of obligations created of a contract with the consortium Amerada, Statoil and Danish Oil 'Danish oil' or Polymerized Linseed oil is, in its unadulterated/pure state, a non-toxic, wood finishing oil, similar to Tung oil. However, like tung oil, it is often used in various finishes with the addition of solvents or other substances, that are often toxic. and Natural Gas during the third quarter last year somewhat offset by activity on new short and long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. contracts including Enterprise Oil and Norsk Hydro Norsk Hydro ASA (OSE: NHY, NYSE: NHY) is a Norwegian aluminium and renewable energy company, headquartered in Oslo. Hydro is the fourth largest integrated aluminium company worldwide. It has operations in some 40 countries around the world and is active on all continents. . A decrease in flying revenue due to decreased activity was equally offset by higher rates. EBITDA from the European flying segment was $19.4 million for the quarter compared to $23.6 million last year. Of the $4.2 million decrease, $1.8 million relates to unfavorable foreign exchange while $2.4 million represents a decrease in real EBITDA. This decrease in real EBITDA was due primarily to (i) increased defined benefit pension plan expense of approximately $2.5 million, (ii) lost EBITDA of approximately $3.4 million related to pilots' disputes in Norway, (iii) increased inter-company maintenance costs of approximately $1.2 million, and (iv) reduced training activities. Partially offsetting these negative factors was the settlement of a $3.5 million successful cost recovery claim. As a result of a pilots' dispute in the Company's Norwegian subsidiary during this quarter, the Company sub-contracted work to competitors COMPETITORS, French law. Persons who compete or aspire to the same office, rank or employment. As an English word in common use, it has a much wider application. Ferriere, Dict. de Dr. h.t. to support customer flying resulting in a negative impact on EBITDA of $2.1 million. In the first quarter of fiscal 2003, the Company flew 300 hours in support of customers of a competitor whose pilots were on strike, generating $1.3 million in EBITDA for a total change in EBITDA of $3.4 million quarter over quarter. Subject to union ratification, a three year agreement was reached with the Company's pilots' union. EBITDA as a percentage of revenue was 17.2% compared to 17.5% experienced last quarter and 20.0% experienced during the same quarter last year. EBITDA percentage declined due to the factors noted above. In order to offer quality service at competitive rates to customers and achieve a reasonable rate of return on assets Return on assets (ROA) Indicator of profitability. Determined by dividing net income for the past 12 months by total average assets. Result is shown as a percentage. ROA can be decomposed into return on sales (net income/sales) multiplied by asset utilization (sales/assets). , the Company launched an extensive review of costs in its European operations. Initially, in response to anticipated reductions in flying hours (that have now materialized), the U.K. took steps to cut costs by $10 million annually. This initiative is substantially complete, with annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. savings of $9 million achieved to date and the remainder expected in the next few months. In addition, the Company has been implementing new computer software throughout the European operation that on completion will facilitate a reduction in manual processes and duplication duplication /du·pli·ca·tion/ (doo-pli-ka´shun) 1. the act or process of doubling, or the state of being doubled. 2. . Implementation of the Flight Business System was delayed by the pilot unrest Unrest is a sociological phenomenon, for instance:
In August 2003, the Company was awarded a three-year contract (plus two one-year adj. 1. completing its life cycle within a year. Adj. 1. one-year - completing its life cycle within a year; "a border of annual flowering plants" annual phytology, botany - the branch of biology that studies plants options) with Apache Apache (əpăch`ē), Native North Americans of the Southwest composed of six culturally related groups. They speak a language that has various dialects and belongs to the Athabascan branch of the Nadene linguistic stock (see Native American North Sea Ltd. for the provision of offshore helicopter support services support services Psychology Non-health care-related ancillary services–eg, transportation, financial aid, support groups, homemaker services, respite services, and other services . Utilizing Super Puma AS332L aircraft from its pool of Super Puma helicopters based at Aberdeen Aberdeen, former county, Scotland Aberdeen, former county, Scotland: see Aberdeenshire. Aberdeen, city, Scotland Aberdeen, city (1991 pop. , Scotland Scotland, political division of Great Britain (1991 pop. 4,957,000), 30,414 sq mi (78,772 sq km), comprising the northern portion of the island of Great Britain and many surrounding islands. , the Company will provide crew transportation services for the Forties offshore oil and gas fields in the Central North Sea. The three-year contract commenced in August 2003, and replaces a contract formerly held with bp, which had been due to expire expire /ex·pire/ (ek-spi´er) 1. to exhale. 2. to die. ex·pire v. 1. To breathe one's last breath; die. 2. To exhale. in August 2004. bp announced the sale of its Forties asset to Apache January January: see month. 13, 2003.
International
International Flying Segment
(millions of CAD dollars)
(Unaudited)
-----------------------------------------
Q1-04 Q1-03
-----------------------------------------
Revenue $43.6 $45.8
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EBITDA 6.4 9.8
-----------------------------------------
EBITDA % 14.7% 21.3%
-----------------------------------------
Revenue from the Company's International flying segment was $43.6 million during the quarter compared to $45.8 million last year. Of the $2.2 million decrease, $3.3 million relates to unfavourable foreign exchange partially offset by real revenue growth of $1.1 million. Real revenue growth is attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to a net increase in flying revenue of $0.5 million and an increase in other revenue of $0.6 million. Flying revenue increased due to higher rates quarter over quarter despite a decline in flying activity of 108 hours. Flying activity from oil and gas customers increased by 652 hours while activity from SAR/EMS customers decreased by 202 hours and activity from other customers (including the United Nations) decreased by 558 hours quarter over quarter. EBITDA from the International flying segment was $6.4 million for the quarter compared to $9.8 million last year. Of the $3.4 million decrease, $1.4 million relates to unfavourable foreign exchange while $2.0 million relates to a decrease in real EBITDA. The decrease in real EBITDA is due primarily to (i) operating costs operating costs npl → gastos mpl operacionales associated with training new pilots and refurbishing aircraft in Australia Australia (ôstrāl`yə), smallest continent, between the Indian and Pacific oceans. With the island state of Tasmania to the south, the continent makes up the Commonwealth of Australia, a federal parliamentary state (2005 est. pop. for upcoming contracts, (ii) the inclusion in last year's first quarter of two short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. contracts in the Company's Africa division at favourable rates, (iii) lost revenue on leased aircraft in-between in-be·tween adj. Intermediate: Adolescence is an awkward, in-between age. n. An intermediate: conservatives, radicals, and in-betweens. Adj. 1. contract changeovers, and (iv) an unfavourable EBITDA margin experienced on a contract in the Africa division that has since been re-tendered at better rates. EBITDA as a percentage of revenue was 14.7% compared to 21.3% during the same quarter last year. EBITDA percentage decreased due to the factors discussed above. Subsequent to the quarter end the Company was awarded a five-year contract renewal with Total Exploration and Production Company in Southeast Asia Southeast Asia, region of Asia (1990 est. pop. 442,500,000), c.1,740,000 sq mi (4,506,600 sq km), bounded roughly by the Indian subcontinent on the west, China on the north, and the Pacific Ocean on the east. for the provision of one dedicated Sikorsky S76++ helicopter. The contract will generate anticipated revenues of $18.8 million over the five-year period. Additionally, the Company was awarded new work in Southeast Asia with anticipated revenues of $5.3 million over one year. The new work is comprised of a short-term contract with Daewoo
The Company has also recently completed negotiations for new long- long- Adverb (in combination) for or lasting a long time: long-established, long-lasting term agreements in Brazil Brazil (brəzĭl`), Port. Brasil, officially Federative Republic of Brazil, republic (2005 est. pop. 186,113,000), 3,286,470 sq mi (8,511,965 sq km), E South America. and Taiwan Taiwan (tī`wän`), Portuguese Formosa, officially Republic of China, island nation (2005 est. pop. 22,894,000), 13,885 sq mi (35,961 sq km), in the Pacific Ocean, separated from the mainland of S China by the 100-mi-wide (161-km) Taiwan with total anticipated revenues of approximately $44.0 million over five years. The Company will lease two Super Puma AS332L1 helicopters to a Brazilian helicopter operator for a five-year period commencing April 1, 2004. The aircraft, to be operated in support of Petrobras PETROBRAS Petróleo Brasileiro SA (Brazilian oil company) , Brazil's national oil company, will be redeployed from the Company's North Sea fleet. The Company's repair and overhaul division will provide maintenance services on a "power-by-the-hour" basis. In Taiwan, the Company will provide support to the Taiwanese Coast Guard with a newly acquired Bell 412HP helicopter. The Company also commenced a new contract in August 2003 with Western Australia Western Australia, state (1991 pop. 1,409,965), 975,920 sq mi (2,527,633 sq km), Australia, comprising the entire western part of the continent. It is bounded on the N, W, and S by the Indian Ocean. Perth is the capital. Ambulance am·bu·lance n. A specially equipped vehicle used to transport the sick or injured. ambulance Emergency medicine A vehicle for transporting a Pt to or from a hospital or medical center, which is equipped with supplies for emergency medical services An Emergency medical service (abbreviated to initialism "EMS" in many countries) is a service providing out-of-hospital acute care and transport to definitive care, to patients with illnesses and injuries which the patient believes constitutes a medical emergency. for a term of five years with options for periods up to a further five years. The contract is serviced by an existing Bell 412 to be replaced by a new Bell 412EP which was purchased subsequent to the quarter end and is being modified mod·i·fy v. mod·i·fied, mod·i·fy·ing, mod·i·fies v.tr. 1. To change in form or character; alter. 2. for the contract. In September 2003, the Company, through its business partner Thai Aviation Services ("TAS TAS abbr. 1. telephone answering system 2. true airspeed "), received notification from Unocal Thailand Thailand (tī`lănd, –lənd), Thai Prathet Thai [land of the free], officially Kingdom of Thailand, constitutional monarchy (2005 est. pop. 65,444,000), 198,455 sq mi (514,000 sq km), Southeast Asia. of its willingness to extend the existing contract for an additional five-year term. The contract extension is expected to generate revenues of approximately $92.3 million over the period from January 1, 2004 to December December: see month. 31, 2008. TAS and the Company will continue to provide two Sikorsky S76A++ helicopters and two Sikorsky S61N helicopters in support of Unocal Thailand's offshore gas production project in Thailand.
Repair and Overhaul
Repair and Overhaul
(millions of CAD dollars)
(Unaudited)
------------------------------------------------
Q1-04 Q1-03
------------------------------------------------
Total Revenue $43.0 $40.5
------------------------------------------------
Third-party Revenue 13.3 10.9
------------------------------------------------
EBITDA 8.2 7.9
------------------------------------------------
EBITDA % (i) 19.1% 19.6%
------------------------------------------------
(i) EBITDA% is calculated as a percentage of total revenue (including
both internal and external third-party revenue)
Astec Total revenue from the repair and overhaul business during the quarter was $43.0 million compared to $40.5 million for the same period last year. The increase in third-party revenue of $2.4 million is attributable to a $1.3 million increase in real revenue from large non "power-by-the-hour" maintenance projects and a $1.3 million increase in real "power-by-the-hour" revenue from new and existing customers quarter over quarter offset by $0.2 million in unfavourable foreign exchange. EBITDA for the quarter was $8.2 million compared to $7.9 million last year, for an increase of $0.3 million. Favourable foreign exchange of $0.6 million was partially offset by a reduction in real EBITDA of $0.3 million. EBITDA as a percentage of revenue at 19.1% was slightly below the EBITDA percentage of 19.6% experienced in the same quarter last year. Astec recently established a U.K. repair and overhaul facility to perform certain inter-company services. During the quarter some of the scheduled U.K. maintenance was delayed, negatively impacting margins. In June June: see month. 2003, the Company's repair and overhaul business in Norway was awarded a three-year contract to repair and overhaul a fleet of 11 Puma and Super Puma helicopters operated by the Swedish Defence Material Administration. The contract, valued at a minimum $4.0 million per annum Per annum Yearly. , runs from July 1, 2003 to June 30, 2006 and replaces an existing contract.
Composites
Composites Manufacturing
(millions of CAD dollars)
(Unaudited)
--------------------------------------------
Q1-04 Q1-03
--------------------------------------------
Revenue $1.5 $1.2
--------------------------------------------
EBITDA (0.7) (1.0)
--------------------------------------------
Composites Total revenue from the Company's composites manufacturing segment was $1.5 million compared to $1.2 million generated last year while EBITDA was ($0.7) million compared to ($1.0) million in the same period last year. Work continues on preparing for the start of production on the Aero Vodochody
Aero Vodochody (commonly referred to as Aero; Vodochody is a location) is a Czech (and Czechoslovak) aircraft company notable for producing the L-29 Delfin, L-39 contract for the manufacture of S76 components. Partial deliveries of components are scheduled for December 2003 with full- scale production deliveries scheduled for March 2004. The Company is still exploring strategic alternatives for Composites, including a sale of all or a portion of the business with the assistance of a financial advisor. Corporate and Other The Corporate and other segment recorded costs of $5.2 million compared to $6.8 million in the same quarter last year. The $1.6 million improvement quarter over quarter related primarily to reduced compensation costs. Financing Charges Interest costs on debt obligations during the quarter were $7.7 million compared to $8.0 million last year (See Note 7 to the Consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: Interim Financial Statements). The slight reduction in interest on debt obligations was primarily the result of lower interest rates and debt levels related to the Company's variable rate senior credit facilities credit facilities npl → facilidades fpl de crédito credit facilities npl → facilités fpl de paiement credit facilities . The average interest rate on the Company's variable-rate Variable-rate A varible-rate agreement, as distinguished from a fixed-rate agreement, calls for an interest rate that may fluctuate over the life of the loan. The rate is often tied to an index that reflects changes in market rates of interest. senior credit facilities for the current quarter was approximately 4.9% compared to 5.6% in the same period last year. During the quarter the Company recorded a $2.3 million foreign exchange gain on the maturity of a forward foreign currency contract. Income Taxes Total income tax expense recorded during the quarter was $2.9 million compared to total income tax expense of $1.0 million recorded in the same quarter last year. During the quarter the Company recorded an income tax recovery of $0.4 million on restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). costs related to the consolidation of the Company's European operations. During the same quarter last year the Company recorded an income tax recovery of $4.6 million related to the redemption of 35% of its senior subordinated notes. Income tax expense included in net earnings from operations was $3.3 million for the quarter. For the same quarter last year the Company reported income tax on earnings from operations of $5.5 million. The effective income tax rate on net earnings from operations before income taxes year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. July 31, 2003 was 18.4% compared to 24.7% in the prior 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 Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses for the quarter was $23.4 million, a $2.1 million decrease over last year. Non-cash working capital increased by $40.4 million during the quarter in comparison to an increase of $1.1 million in the same quarter last year. The primary factors contributing to the increase this quarter were (i) a $5.5 million accrual accrual, n continually recurring short-term liabilities. Examples are accrued wages, taxes, and interest. in accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying related to the settlement of two claims by the Company, (ii) a $7.7 million increase in inventory in the Company's repair and overhaul segment in support of higher volumes, (iii) a $5.3 million payment of accrued interest Accrued Interest The interest that has accumulated on a bond since the last interest payment up to but not including the settlement date. There are two methods for calculating accrued interest: 1) 360-day year method, used for corporate and municipal bonds. on the Company's euro denominated debt, (iv) a $3.9 million payment of accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. compensation, and (v) an $8.0 million repayment Repayment The act of paying back a debt. Notes: Everyone has to repay their debts eventually. See also: Debt, Defeasance, Loan of a grant related to 1998 asset dispositions. Financing Activities The Company's net debt (net of cash) increased by $31.4 million during the quarter from $263.2 million to $294.6 million. This increase consists of a real debt increase of $2.9 million and a real cash decline of $33.1 million offset by foreign exchange of $4.6 million. The real decrease in cash of $33.1 million was due primarily to the acquisition of three aircraft and the net use of cash from operating activities during the quarter. The foreign exchange impact was due primarily to the Company's pound sterling and Euro denominated debt. As at July 31, 2003 the Company had unused credit facilities of $44.7 million and cash of $24.0 million, for a total of $68.7 million.
Change in
Net Debt Position During Q1
(in millions of Canadian dollars)
(Unaudited)
--------------------------------------------------------------
Opening balance $263.2
Real decrease in debt 2.9
Real decrease in cash 33.1
Foreign exchange (4.6)
--------------------------------------------------------------
Ending balance $294.6
--------------------------------------------------------------
--------------------------------------------------------------
Investing Activities Capital expenditures of $20.9 million during the quarter included $16.3 million for the purchase of three aircraft, $0.9 million in aircraft modifications A change in the physical characteristics of aircraft, accomplished either by a change in production specifications or by alteration of items already produced. , $0.7 million in building additions, $1.5 million related to new information systems software and administrative equipment and $1.5 million in other equipment. In addition, the Company incurred expenditures of $2.7 million related to helicopter major inspections. The Company recorded accumulated ac·cu·mu·late v. ac·cu·mu·lat·ed, ac·cu·mu·lat·ing, ac·cu·mu·lates v.tr. To gather or pile up; amass. See Synonyms at gather. v.intr. To mount up; increase. amortization of helicopter component costs of $39.6 million during the quarter compared to component expenditures of $34.3 million for a net of $5.3 million. All major component repair and overhaul expenditures including major inspections are capitalized Capitalized Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives longer than one year. and expensed over their period of future benefit as described in note 1 to the Company's fiscal 2003 audited consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge . 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 An operating subsidiary is a business term frequently used within the United States railroad industry. In the case of a railroad, it refers to a company that is a subsidiary but operates with its own identity and rolling stock. . In addition, certain revenue and operating expenses are transacted in U.S. dollars and euros. Upon translation into Canadian dollars of the financial results of these foreign operations revenue was negatively impacted by $2.3 million as a result of the weakening of the Norwegian kroner and pound sterling somewhat offset by the strengthening of the Australian dollar and South Africa South Africa, Afrikaans Suid-Afrika, officially Republic of South Africa, republic (2005 est. pop. 44,344,000), 471,442 sq mi (1,221,037 sq km), S Africa. rand quarter over quarter. 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 $3.5 million, for a total unfavourable foreign exchange impact of $5.8 million. The impact of foreign exchange on EBITDA related to the translation of the foreign subsidiaries results into Canadian dollars was unfavourable by $0.6 million with the impact of the U.S. dollar and euro foreign exchange conversions also being unfavourable by $2.0 million for a total of $2.6 million. Since interest expense, 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 to manage the exposures. In managing this risk, the Company may use financial instruments including forwards, swaps, and other derivative instruments Derivative instruments Contracts such as options and futures whose price is derived from the price of an underlying financial asset. . Company policy specifically prohibits the use of derivatives derivatives In finance, contracts whose value is derived from another asset, which can include stocks, bonds, currencies, interest rates, commodities, and related indexes. Purchasers of derivatives are essentially wagering on the future performance of that asset. for speculative Speculative Securities that involve a high level of risk. speculative Of or relating to an asset or a group of assets with uncertain returns. The greater the degree of uncertainty the more speculative the asset. purposes. The Company has designated its pound sterling and euro denominated debt as hedges in its investment in its self-sustaining self-sus·tain·ing adj. Able to sustain oneself or itself independently. self  -sus·tain European
subsidiaries. As a result, revaluation RevaluationA calculated adjustment to a country's official exchange rate relative to a chosen baseline. The baseline can be anything from wage rates to the price of gold to a foreign currency. In a fixed exchange rate regime, only a decision by a country's government (i.e. gains and losses on this debt and the net investments are offset in the shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. section on the balance sheet in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). . To minimize In a graphical environment, to hide an application that is currently displayed on screen. For example, in Windows and Mac, the application's window is removed from the screen and represented by an icon on the Windows Taskbar. In the Mac, the icon is placed in the Dock. See Win Minimize windows. foreign exchange risk, the Company has denominated its debt in various currencies to match net operating cash flows Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. with debt service obligations. As at July 31, 2003, the Company's net debt was denominated in the following currencies:
(Unaudited)
---------------------------------------------------------------------
Debt in Canadian
Original Currency Equivalent
Currency (000's) (000's)
---------------------------------------------------------------------
Pound sterling pounds sterling 45,367 $102,955
U.S. dollar $15,000 21,137
Euro euros 95,386 151,063
Canadian dollar CDN 17,764 17,764
Norwegian kroner NOK 132,500 25,639
Cash (various currencies) (23,983)
---------------------------------------------------------------------
Total Reported Net Debt $294,575
Fleet At July 31, 2003 the Company's fleet consisted of 116 owned and 46 operating leased Operating Lease A lease contract that allows the use of an asset, but does not convey rights similar to ownership of the asset. Notes: An operating lease is not capitalized it is accounted for as a rental expense. aircraft. An additional 139 aircraft are employed in the Company's 43.5% owned Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. onshore on·shore adj. 1. Moving or directed toward the shore: an onshore wind. 2. Located on the shore: an onshore beacon; an onshore patrol. adv. helicopter operations, Canadian Helicopters Limited, for a total of 301. The Company employs 72 aircraft in Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). , (primarily in the North Sea) and
90 in its other international markets.
---------------------------------------------------------------------
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Fleet Summary
---------------------------------------------------------------------
Operating
Heavy Medium Light Total Owned Leased
---------------------------------------------------------------------
Fleet at
April 30, 2003 69 76 14 159 114 45
Increases (decreases)
during the period:
Twin Otter 1 1 1
S76+ and S76++ 2 2 2
Total loss due to
accident - S76A (1) (1) (1)
Super Puma Mkll 1 1 1
Purchase of
previously leased
Super Puma 1 (1)
---------------------------------------------------------------------
Fleet at
July 31, 2003 70 77 15 162 116 46
---------------------------------------------------------------------
---------------------------------------------------------------------
During the quarter an S76A aircraft owned by the Company's Africa division, but leased to a Brazilian helicopter operator, crashed in Brazil. Insurance proceeds of $2.1 million was accrued during the quarter resulting in a net gain on disposal of the aircraft of $1.2 million. The Company also purchased a Super Puma aircraft for $10.2 million that was previously leased. The Company intends to sell and lease-back this aircraft through another operating lease subsequent to the quarter end. Two S76 aircraft were purchased in July by the Company's international operations Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. for $6.1 million. The aircraft are intended to service anticipated growth in our international operations. During the quarter the Company made aircraft operating lease payments of $10.2 million compared to $11.2 million in the same period last year. As at July 31, 2003, there were seven 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 partially 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 46 aircraft included in the Company's fleet at July 31, 2003. Forty-four of these leases are long-term with expiry dates expiry date expire n → date f d'expiration; (on label) → à utiliser avant ... expiry date expire n → Ablauftermin m ranging from 2003 to 2010 while the other two are leased on a monthly basis. 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 minimum lease payments Rental payments over the lease term including the amount of any bargain purchase option, premium and any guaranteed residual value and excluding any rental relating to costs to be met by the lessor and any contingent rentals. required under these aircraft operating leases are as follows (based on July 31, 2003 exchange rates):
Unaudited
------------------------------------------------------
2004 $42.2 million
2005 35.8 million
2006 31.0 million
2007 22.6 million
2008 17.8 million
and thereafter: 26.1 million
------------------------------------------------------
Total $175.5 million
------------------------------------------------------
------------------------------------------------------
In addition to aircraft leases, the Company has approximately $4.8 million in annual lease commitments for land, buildings and non- non- word element [L.]not . non- pref. Not: noninvasive. aircraft equipment. As at July 31, 2003, the Company had deposits with Eurocopter The Eurocopter Group is a global helicopter manufacturing and support company formed in 1992 from the merger of the helicopter divisions of French Aérospatiale and German DaimlerChrysler Aerospace AG (DASA). to secure delivery positions on up to four new Super Puma MkII aircraft and two EC225 helicopters through fiscal 2005. The Company has some flexibility built into the delivery schedule for these aircraft in order to match acquisitions with new demand. The Company took delivery of a new Super Puma Mkll during the first quarter. The Company acquired this aircraft through a purchase sale-lease back transaction. The Company also has ordered four new medium helicopters for its international operations for delivery in December 2003. These aircraft will be used in Southeast Asia and in Africa to meet increased demand by customers for newer medium aircraft with existing helicopters being re-deployed to other projects in international operations. Based on an independent appraisal as at April 30, 2003, the fair market value of the Company's owned aircraft fleet at July 31, 2003 was U.S. $381.2 million (CDN (Content Delivery Network) A system of distributed content on a large intranet or the public Internet in which copies of content are replicated and cached throughout the network. $537.1 million), exceeding its recorded net book value by approximately CDN $188.9 million (April 30, 2003 - $185.1 million). Defined Benefit Employee Pension Plans At July 31, 2003 the Company had a funding deficit of $68.4 million related to its defined benefit pension plans that require funding by the Company compared to $72.8 million at April 30, 2003, representing an improvement of $4.4 million. The improvement in the funding deficit was primarily due to $15.4 million in actual returns on the plan assets, employer and participant Participant A party of a funding. It usually refers to the lowest rank or smallest level of funding. contributions of $1.6 million and favourable foreign exchange of $1.6 million partially offset by experience losses on the pension obligations of approximately $5.5 million and interest and current period service costs of $8.7 million. The actual return on the plan assets for the quarter exceeded the expected return Expected Return The average of a probability distribution of possible returns, calculated by using the following formula: on plan assets by approximately $10.0 million. Investment performance has been at or above the relevant benchmarks. Of the $68.4 million funding deficit, $50.0 and $18.4 million are related to plans in the U.K. and Norway, respectively. Additionally, the Company had a deficit of $33.5 million at July 31, 2003 related to plans that do not require funding compared to $34.4 million at April 30, 2003. Pension expense related to the defined benefit plans Defined benefit plan A pension plan obliging the sponsor to make specified dollar payments to qualifying employees at retirement. The pension obligations are effectively the debt obligation of the plan sponsor. Related: Defined contribution plan for the quarter ended July 31, 2003 was $6.5 million compared to $3.7 million in the same quarter last year for an increase of $2.8 million, net of favourable foreign exchange of $0.2 million. Pension expense increased due to assumption changes and increased amortization of net actuarial ac·tu·ar·y n. pl. ac·tu·ar·ies A statistician who computes insurance risks and premiums. [Latin and experience losses quarter over quarter. While the asset mix varies in each plan, overall the asset mix at July 31, 2003 was 42.2% equities (April 30, 2003 - 38.4%), 34.2% fixed income (April 30, 2003 - 20.1%), and 23.6% money market (April 30, 2003 - 41.5%). Commodity Prices Year-to-date July 31, 2003, the Company derived approximately 87% of its flying revenue from the oil and gas industry. Approximately 86% of revenue from this industry was derived from the relatively stable production sector which tends to be substantially unaffected by short-term fluctuations in oil and gas prices. Approximately 10% of the Company's year-to-date flying revenue in the North Sea is derived from exploration activity. 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 pre·scribe v. pre·scribed, pre·scrib·ing, pre·scribes v.tr. 1. To set down as a rule or guide; enjoin. See Synonyms at dictate. 2. To order the use of (a medicine or other treatment). by generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting in Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of and therefore may not be comparable to similar measures disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). 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 earnings before financing charges, income taxes, large non-recurring items and non-cash items. Net earnings from operations is defined as net earnings before large non-recurring items.
---------------------------------------------------------------------
---------------------------------------------------------------------
Reconciliation of Non-GAAP Earnings Measures
to GAAP Net Earnings
(in thousands of Canadian dollars)
Three Months Ended
July 31, July 31,
2003 2002
(Unaudited) (Unaudited)
---------------------------------------------------------------------
Revenue $171,434 $175,979
Operating expenses 143,335 142,447
---------------------------------------------------------------------
EBITDA 28,099 33,532
---------------------------------------------------------------------
Recurring items:
Amortization (5,688) (5,131)
Gain on disposals of assets 1,092 179
Financing charges (6,882) (8,042)
Equity in earnings of associated company 1,330 1,785
---------------------------------------------------------------------
(10,148) (11,209)
---------------------------------------------------------------------
Net earnings from operations
before income taxes 17,951 22,323
Income taxes thereon (3,311) (5,514)
---------------------------------------------------------------------
Net earnings from operations 14,640 16,809
---------------------------------------------------------------------
Non-recurring items
Restructuring and debt settlement costs (1,280) (12,464)
Income tax recovery thereon 371 4,548
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(909) (7,916)
---------------------------------------------------------------------
Net earnings $13,731 $8,893
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---------------------------------------------------------------------
Reconciliation of Non-GAAP Earnings Measures
to GAAP Net Earnings (cont'd)
(in thousands of Canadian dollars, except per share amounts)
Three Months Ended
July 31, July 31,
2003 2002
(Unaudited) (Unaudited)
---------------------------------------------------------------------
Net earnings from operations
per share information:
Net earnings from operations $14,640 $16,809
Weighted average number of shares (000's) 20,871 20,677
Basic net earnings from operations per share $0.70 $0.81
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Net earnings from operations $14,640 $16,809
Effect of diluted securities 119 114
---------------------------------------------------------------------
$14,759 $16,923
Weighted average number of shares (000's) 22,594 22,725
Diluted net earnings
from operations per share $0.65 $0.74
---------------------------------------------------------------------
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Summary financial data - U.S. Dollars Certain summary financial data from the July 31, 2003 consolidated interim financial statements and the April 30, 2003 consolidated annual financial statements, as detailed below, 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, 2003 of $1.4091 equals U.S. $1.00.
Financial Highlights
(in millions of U.S. dollars, except per share amounts)
---------------------------------------------------------------------
---------------------------------------------------------------------
Three Months
Ended Year Ended
July 31, April 30,
2003 2003
---------------------------------------------------------------------
Revenue $121.6 $512.7
EBITDA 19.9 100.9
Net earnings from operations 10.4 49.7
Net earnings 9.7 46.9
Cash flow from operations 16.6 60.8
Per Share Information
Net earnings from operations:
Basic $0.50 $2.40
Diluted 0.46 2.21
Net earnings:
Basic $0.47 $2.26
Diluted 0.43 2.09
---------------------------------------------------------------------
---------------------------------------------------------------------
CHC Helicopter Corporation
Consolidated Statements of Earnings
(in thousands of Canadian dollars, except per share amounts)
---------------------------------------------------------------------
---------------------------------------------------------------------
Three Months Ended
July 31, July 31,
2003 2002
(Unaudited) (Unaudited)
---------------------------------------------------------------------
Revenue $171,434 $175,979
Operating expenses 143,335 142,447
---------------------------------------------------------------------
Earnings before undernoted items 28,099 33,532
Amortization (5,688) (5,131)
Gain on disposals of assets 1,092 179
Financing charges (Note 7) (6,882) (8,042)
Equity in earnings of associated company 1,330 1,785
Restructuring and debt
settlement costs (Note 8) (1,280) (12,464)
---------------------------------------------------------------------
Earnings before income taxes 16,671 9,859
Income taxes provision 2,940 966
---------------------------------------------------------------------
Net earnings $13,731 $8,893
---------------------------------------------------------------------
---------------------------------------------------------------------
Earnings per share (Note 10)
Basic $0.66 $0.43
Diluted 0.61 0.40
---------------------------------------------------------------------
---------------------------------------------------------------------
See accompanying notes
CHC Helicopter Corporation
Consolidated Statements of Shareholders' Equity
(in thousands of Canadian dollars)
---------------------------------------------------------------------
Three Months Ended
July 31, 2003 July 31, 2002
(Unaudited) (Unaudited)
---------------------------------------------------------------------
Retained earnings, beginning of
period as originally stated $177,862 $117,280
Retroactive application of change
in accounting policy with
restatement of prior periods (Note 2) - 180
Retroactive application of change
in accounting policy without
restatement of prior periods (Note 2) - (1,715)
---------------------------------------------------------------------
Retained earnings, beginning
of period as restated 177,862 115,745
Net earnings 13,731 8,893
---------------------------------------------------------------------
Retained earnings, end of period 191,593 124,638
Capital stock (Note 9) 237,024 236,049
Contributed surplus 3,432 3,291
Foreign currency translation adjustment (21,213) (1,546)
---------------------------------------------------------------------
Total shareholders' equity $410,836 $362,432
---------------------------------------------------------------------
---------------------------------------------------------------------
See accompanying notes
CHC Helicopter Corporation
Consolidated Balance Sheets
(in thousands of Canadian dollars)
As at
---------------------------------------------------------------------
July 31, April 30,
2003 2003
(Unaudited) (Audited)
---------------------------------------------------------------------
Assets
Current assets
Cash and cash equivalents $23,983 $58,104
Receivables 140,481 139,587
Future income tax assets 11,001 11,001
Inventory 213,844 214,656
Prepaid expenses 22,498 18,449
---------------------------------------------------------------------
411,807 441,797
Property and equipment, net 537,046 537,318
Investments 22,366 21,043
Other assets 122,181 127,535
Future income tax assets 16,759 17,877
---------------------------------------------------------------------
$1,110,159 $1,145,570
---------------------------------------------------------------------
---------------------------------------------------------------------
Liabilities and shareholders' equity
Current liabilities
Payables and accruals $111,084 $136,743
Income taxes payable 3,656 3,993
Current portion of debt obligations 17,555 20,369
---------------------------------------------------------------------
132,295 161,105
Long-term debt 141,325 139,374
Senior subordinated notes 149,264 151,111
Subordinated debentures 10,414 10,414
Other liabilities 59,733 59,299
Future income tax liabilities 206,292 210,036
Shareholders' equity 410,836 414,231
---------------------------------------------------------------------
$1,110,159 $1,145,570
---------------------------------------------------------------------
---------------------------------------------------------------------
See accompanying notes
CHC Helicopter Corporation
Consolidated Statements of Cash Flows
(in thousands of Canadian dollars)
---------------------------------------------------------------------
---------------------------------------------------------------------
Three Months Ended
July 31, July 31,
2003 2002
(Unaudited) (Unaudited)
---------------------------------------------------------------------
Operating activities
Net earnings $13,731 $8,893
Non-operating items and
items not involving cash:
Amortization 5,688 5,131
Gain on disposals of assets (1,092) (179)
Equity in earnings of associated company (1,330) (1,785)
Income taxes 1,026 (613)
Non-cash financing charges 995 481
Debt settlement - 12,464
Defined benefit pension plans 4,554 2,150
Other (204) (997)
---------------------------------------------------------------------
Cash flow from operations 23,368 25,545
Change in non-cash working capital (40,382) (1,075)
---------------------------------------------------------------------
(17,014) 24,470
---------------------------------------------------------------------
Financing activities
Long-term debt proceeds 95,194 6,973
Long-term debt repayments (92,375) (83,169)
Debt settlement - (9,136)
Realized foreign exchange
loss on hedged debt (677) -
Capital stock issue 61 41
---------------------------------------------------------------------
2,203 (85,291)
---------------------------------------------------------------------
Investing activities
Property and equipment
Additions (20,939) (9,353)
Helicopter major inspections (2,723) (3,242)
Helicopter components, net 5,348 1,210
Proceeds from disposals 2,098 2,358
Pre-operating expenses (513) (530)
Other (1,596) (997)
---------------------------------------------------------------------
(18,325) (10,554)
---------------------------------------------------------------------
Effect of exchange rate changes
on cash and cash equivalents (985) 1,927
---------------------------------------------------------------------
Change in cash and cash
equivalents during the period (34,121) (69,448)
Cash and cash equivalents,
beginning of period 58,104 112,838
---------------------------------------------------------------------
Cash and cash equivalents, end of period $23,983 $43,390
---------------------------------------------------------------------
---------------------------------------------------------------------
See accompanying notes
CHC Helicopter Corporation Notes to the Consolidated Interim Financial Statements For the periods ended July 31, 2003 and 2002 (Unaudited) (Unless otherwise indicated, tabular tab·u·lar adj. 1. Having a plane surface; flat. 2. Organized as a table or list. 3. Calculated by means of a table. tabular resembling a table. amounts in thousands of Canadian dollars, except per share amounts) 1. Basis of presentation The consolidated interim financial statements (the "Statements") have been prepared in accordance with Canadian generally accepted accounting principles ("Canadian GAAP"). Not all disclosures required by Canadian GAAP for annual financial statements are presented and thus the Statements should be read in conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with the annual audited consolidated financial statements. Certain amounts on the Statements for the periods ended July 31, 2002 and April 30, 2003 have been reclassified to conform to Verb 1. conform to - satisfy a condition or restriction; "Does this paper meet the requirements for the degree?" fit, meet coordinate - be co-ordinated; "These activities coordinate well" the presentation in the current period. These Statements follow the same accounting policies and methods of application as the most recent annual audited consolidated financial statements of April 30, 2003, except as disclosed in Note 2 with respect to stock-based compensation plans. 2. Accounting policy changes Translation of foreign currencies Effective May 1, 2002 the Company retroactively ret·ro·ac·tive adj. Influencing or applying to a period prior to enactment: a retroactive pay increase. [French rétroactif, from Latin adopted, with restatement Restatement A revision in a company's earlier financial statements. Notes: The need for restating financial figures can result from fraud, misrepresentation, or a simple clerical error. of individual prior periods, the new Canadian New Canadian Noun Canad a recent immigrant to Canada accounting recommendations with respect to foreign currency translation which conform substantially to United States generally accepted accounting principles ("U.S. GAAP"). These recommendations require that unrealized exchange gains and losses on the translation of long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. that has not been designated as a hedge of the Company's net investment in self-sustaining foreign operations be included in earnings immediately. The impact of adopting these new recommendations in fiscal 2003 was an increase in May 1, 2002 opening retained earnings Retained Earnings The percentage of net earnings not paid out in dividends, but retained by the company to be reinvested in its core business or to pay debt. It is recorded under shareholders equity on the balance sheet. by $0.2 million and an increase in fiscal 2003 pre- pre- word element [L.], before (in time or space). pre- pref. 1. Earlier; before; prior to: prenatal. 2. tax earnings of approximately $0.8 million. Stock-based compensation plans Effective May 1, 2002 the Company retroactively adopted, without restatement of prior periods, the new Canadian accounting recommendations with respect to stock-based compensation. The recommendations require the use of a fair value based approach to account for specified spec·i·fy tr.v. spec·i·fied, spec·i·fy·ing, spec·i·fies 1. To state explicitly or in detail: specified the amount needed. 2. To include in a specification. 3. stock-based compensation awards which include the Company's Stock Appreciation Rights Plan and Long-term Incentive Plan ("SARs"). The impact of adopting the new recommendations in fiscal 2003 related to the Company's SARs granted prior to May 1, 2002 was a charge against May 1, 2002 opening retained earnings of $1.7 million. These recommendations also encouraged but did not require that compensation expense related to share options be calculated under the fair value method. Where the fair value method is not used, pro- pro- word element [L., Gr.], before; in front of; favoring. pro- pref. 1. Earlier; before; prior to: progenitor. 2. forma forma, adj/n minor elements between the members of a botanical species. disclosures of net earnings and earnings per share had the fair value method been used is required. In fiscal 2003 the Company accounted for share options based on their intrinsic value Intrinsic Value 1. The value of a company or an asset based on an underlying perception of the value. 2. For call options, this is the difference between the underlying stock's price and the strike price. at the date of grant for options issued on or after May 1, 2002 and accordingly did not recognize compensation cost for share options, but alternatively provided pro-forma disclosures. Effective May 1, 2003, the Company began expensing stock-option awards using the fair value method. This accounting change was applied prospectively in fiscal 2004 relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc stock options issued on or after May 1, 2003. There was no impact on the financial results for the quarter as a result of adopting this accounting policy change as no new stock options were granted during the first quarter. 3. Variable interest entities At July 31, 2003 the Company operated sixteen aircraft under operating leases with seven entities that would be considered VIEs under U.S. GAAP. These leases are at terms and conditions similar to the Company's other operating leases over periods maturing from 2005 to 2010. Canadian guidance on accounting for VIEs (Accounting Guideline guideline Medtalk A series of recommendations by a body of experts in a particular discipline. See Cancer screening guidelines, Cardiac profile guidelines, Gatekeeper guidelines, Harvard guidelines, Transfusion guidelines. 15) is essentially consistent with the provisions contained under U.S. GAAP with regard to disclosure and consolidation requirements. U.S. GAAP (FASB FASB See: Financial Accounting Standards Board FASB See Financial Accounting Standards Board (FASB). Interpretation No. 46 ("FIN fin, organ of locomotion characteristic of fish and consisting of thin tissue supported by cartilaginous or bony rays. In some fish, e.g., the eel, a single fin extends from the back, around the tail, and along the ventral surface. 46")) was effective for all VIEs created after January 31, 2003 and effective for those VIEs created prior to January 31, 2003 for the Company's interim period commencing August 1, 2003. The Canadian guidance applies to all annual and interim periods beginning on or after January 1, 2004. Included in the sixteen aircraft leased from VIEs at July 31, 2003 are four aircraft leased from a VIE that was created subsequent to January 31, 2003. The Company is not required to consolidate Consolidate To combine the assets, liabilities, and other financial items of two or more entities into one. Notes: This term is generally used in the context of consolidated financial statements. this VIE in its consolidated financial statements under the relevant accounting standards based on the underlying facts and conditions. The remaining twelve aircraft are leased from six VIEs created on or before January 31, 2003. The application of GAAP in effect for these VIEs had no impact on the Company's financial statements. The Company will complete an analysis of the effects of FIN 46 on these VIEs during the quarter ending October October: see month. 31, 2003 based on the terms and conditions then in effect and account for them accordingly. Based on the analysis completed to date, the Company does not anticipate that the application of FIN 46 and Accounting Guideline 15 to these VIEs will have any significant impact on the Company's consolidated financial statements. The fair market value of the sixteen aircraft leased from the VIEs at July 31, 2003, based on an independent appraisal at April 30, 2003, was $220.7 million (April 30, 2003 - $241.1 million). The Company has provided junior loans, advance rentals and asset value guarantees in connection with operating leases with these VIEs. The Company's maximum exposure to loss related to the junior loans, advance rentals and asset value guarantees as a result of its involvement with the VIEs is $17.5 million (April 30, 2003, $19.4 million). 4. Cash flow information Cash interest paid during the quarter was $9.7 million (2003 - $13.6 million) while cash taxes paid were $1.4 million (2003 - $0.9 million). 5. Segment information The Company's operations are segregated into five reportable segments. The segments are European flying operations, International flying operations, Repair and overhaul operations, Composites manufacturing and Corporate and other.
---------------------------------------------------------------------
---------------------------------------------------------------------
Three Months Ended
---------------------------------------------------------------------
July 31, July 31,
2003 2002
(Unaudited) (Unaudited)
---------------------------------------------------------------------
Revenue - external
Europe (1) $113,009 $118,028
International (2) 43,617 45,806
Repair and overhaul (3) 13,320 10,929
Composites (4) 1,488 1,216
---------------------------------------------------------------------
171,434 175,979
---------------------------------------------------------------------
Inter-segment revenues
Europe 3,378 4,267
International 2,664 3,214
Repair and overhaul 29,640 29,527
Corporate and other (5) 3,151 3,463
---------------------------------------------------------------------
38,833 40,471
---------------------------------------------------------------------
EBITDA (6)
Europe 19,422 23,606
International 6,392 9,777
Repair and overhaul 8,191 7,933
Composites (729) (1,009)
Corporate and other (5,177) (6,775)
---------------------------------------------------------------------
28,099 33,532
---------------------------------------------------------------------
Notes:
1. Europe - includes flying operations in the U.K., Norway, Ireland
and Denmark.
2. International - includes operations in Australia, Africa and Asia
and offshore work in eastern Canada and in other locations around
the world.
3. Repair and overhaul - includes helicopter repair and overhaul
operations based in Stavanger, Norway and Aberdeen, Scotland.
4. Composites - includes composite and metal parts manufacturing
operations in Canada.
5. Corporate and other - includes corporate head office activities
and applicable consolidation eliminations.
6. EBITDA represents "Earnings before undernoted items" on the
Consolidated Statements of Earnings.
---------------------------------------------------------------------
---------------------------------------------------------------------
-0-
6. Employee pension plans The Company maintains defined benefit and 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, 2003, as compared to April 30, 2003, is as follows:
As at
---------------------------------------------------------------------
July 31, April 30,
2003 2003
(Unaudited) (Audited)
---------------------------------------------------------------------
Benefit obligations $420,087 $423,902
---------------------------------------------------------------------
---------------------------------------------------------------------
Fair value of plan assets $318,207 $316,674
---------------------------------------------------------------------
---------------------------------------------------------------------
Funded status
Defined benefit plans - funded (1) $(68,417) $(72,829)
Defined benefit plans - unfunded (2) (33,463) (34,399)
---------------------------------------------------------------------
Total (101,880) (107,228)
Unrecognized net actuarial and
experience losses, prior service
costs and transition amounts 158,838 172,272
Pension guarantee deposits 2,612 2,767
---------------------------------------------------------------------
Net asset recognized on the balance sheet $59,570 $67,811
---------------------------------------------------------------------
---------------------------------------------------------------------
(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, 2003, $76.7 million (April 30, 2003 - $84.0 million) related to the funded plans is recorded in other assets other assets Assets of relatively small value. For financial reporting purposes, firms frequently combine small assets into a single category rather than listing each item separately. and $17.2 million (April 30, 2003 - $16.2 million) related to the unfunded plans is recorded as an accrued pension obligation in other liabilities other liabilities Small and relatively insignificant liabilities. For financial reporting purposes, firms often combine small liabilities into this single category rather than listing each liability separately. . The significant weighted average actuarial assumptions adopted in measuring the Company's net defined benefit pension plan expense year-to-date July 31, 2003 compared to fiscal 2003 are as follows:
Three Months Ended Year Ended
July 31, 2003 April 30, 2003
(Unaudited) (Audited)
---------------------------------------------------------------------
Discount rate 5.78% 6.59%
Expected long-term rate
of return on plan assets 6.92% 7.27%
---------------------------------------------------------------------
---------------------------------------------------------------------
7. Financing Charges
Three Months Ended
July 31, July 31,
2003 2002
(Unaudited) (Unaudited)
---------------------------------------------------------------------
Interest on debt obligations $7,701 $7,993
Amortization of deferred financing costs 786 797
Foreign exchange loss (gain) from operating
activities and working capital revaluation 94 (1,397)
Foreign exchange loss (gain) on
debt repayment 630 (361)
Foreign exchange gain on
revaluation of long-term debt - (123)
Foreign exchange gain on
foreign currency agreement (2,251) -
Other (78) 1,133
---------------------------------------------------------------------
Total $6,882 $8,042
---------------------------------------------------------------------
---------------------------------------------------------------------
8. Restructuring and debt settlement costs During the quarter the Company incurred $1.3 million in costs primarily related to compensation upon the termination The point where a line, channel or circuit ends. See SCSI termination and hybrid. of employees as a result of the consolidation of the Company's European operations. During the same period last year the Company incurred $12.5 million of debt settlement costs related to the redemption in May 2002 of 35% of its 11.75% senior subordinated notes.
9. 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
Class B multiple voting shares
Ordinary shares
Number of Shares
000's
---------------------------------------------------------------------
---------------------------------------------------------------------
July 31, April 30,
2003 2003
(Unaudited) (Audited)
---------------------------------------------------------------------
Issued:
Class A subordinate voting shares 17,921 17,918
Class B multiple voting shares 2,955 2,955
Ordinary shares 11,000 11,000
Class A subordinate voting shares
that would be issued upon
conversion of the following:
Class B multiple voting shares 2,955 2,955
Share options 1,967 1,996
Convertible debt 690 690
---------------------------------------------------------------------
---------------------------------------------------------------------
10. Per share information
---------------------------------------------------------------------
---------------------------------------------------------------------
Three Months Ended July 31, 2003
(Unaudited)
---------------------------------------------------------------------
---------------------------------------------------------------------
Weighted
average
number of Net
Net shares earnings per
earnings (000's) 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 - 97
---------------------------------------------------------------------
Diluted $13,850 22,594 $0.61
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
Three Months Ended July 31, 2002
(Unaudited)
---------------------------------------------------------------------
---------------------------------------------------------------------
Weighted
average
number of Net
Net shares earnings
earnings (000's) per share
---------------------------------------------------------------------
Basic $8,893 20,677 $0.43
Effect of potential
dilutive securities:
Share options - 1,253
Convertible debt 114 795
---------------------------------------------------------------------
Diluted $9,007 22,725 $0.40
---------------------------------------------------------------------
---------------------------------------------------------------------
Per share amounts are calculated under the treasury stock method. Under this method, the proceeds from the exercise of options are assumed to be used to repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. the Company's stock on the open market. The difference between the number of shares assumed purchased and the number of options assumed exercised is added to the number of basic shares outstanding to determine diluted shares outstanding for purposes of calculating diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of . Therefore, the number of shares in the diluted earnings per share calculation will increase as the share price increases. 11. Share option plan 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 pertain to verb relate to, concern, refer to, regard, be part of, belong to, apply to, bear on, befit, be relevant to, be appropriate to, appertain to stock options granted in fiscal 2003 upon adoption of the new stock-based compensation standards May 1, 2002. These pro-forma disclosures exclude any options granted in fiscal 2004 for which compensation expense is recorded using the fair value method as described in Note 2.
Three Months Ended
July 31, July 31,
2003 2002
(Unaudited) (Unaudited)
---------------------------------------------------------------------
Net earnings
As reported $13,731 $8,893
Pro-forma 13,671 5,007
Basic earnings per share
As reported $0.66 $0.43
Pro-forma 0.66 0.24
Diluted earnings per share
As reported $0.61 $0.40
Pro-forma 0.61 0.23
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, 2003 total outstanding options were 1,967,040 (July 31, 2002 - 2,075,706). At July 31, 2003 1,781,679 of the share options were exercisable (July 31, 2002 - 1,693,873). The weighted average exercise price of the total outstanding options at July 31, 2003 was $13.66 compared to $12.41 at July 31, 2002. 12. 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 their debt, the leases provide for a cross-acceleration that could give the lessors and financial institutions the right to terminate Terminate (terminat.exe) was a shareware modem terminal and host program for MS-DOS and compatible operating systems developed from the early to the late 1990s by the Dane Bo Bendtsen. The last release (5. 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 in·suf·fi·cient adj. 1. Not sufficient. 2. Incapable of proper functioning. to discharge To liberate or free; to terminate or extinguish. A discharge is the act or instrument by which a contract or agreement is ended. A mortgage is discharged if it has been carried out to the full extent originally contemplated or terminated prior to total execution. the indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. due to those lessors in respect of the present value of the future lease payments, the financial institution could obtain payment of that deficiency A shortage or insufficiency. The amount by which federal Income Tax due exceeds the amount reported by the taxpayer on his or her return; also, the amount owed by a taxpayer who has not filed a return. 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 leases have terms expiring ex·pire v. ex·pired, ex·pir·ing, ex·pires v.intr. 1. To come to an end; terminate: My membership in the club has expired. 2. between 2004 and 2010. The Company's exposure under the asset value guarantees including guarantees in the form of junior loans, deferred payments and advanced rentals is approximately $37.9 million. The resale resale n. selling again, particularly at retail. In many states a "resale license" or "resale number" is required so that the state can monitor the collection of sales tax on retail sales. 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 in·cur tr.v. in·curred, in·cur·ring, in·curs 1. To acquire or come into (something usually undesirable); sustain: incurred substantial losses during the stock market crash. 2. any liability or loss with respect to these residual value Residual value Usually refers to the value of a lessor's property at the time the lease expires. residual value The price at which a fixed asset is expected to be sold at the end of its useful life. guarantees. The Company has performance guarantees with two customers of a third- party lessee One who rents real property or Personal Property from another. A lessee of land is a tenant. Cross-references Landlord and Tenant. lessee n. the person renting property under a written lease from the owner (lessor). . These guarantees have been in effect since August 1995 and November November: see month. 1998 and relate to the provision of helicopter transportation services involving three heavy aircraft leased to the third-party. In the event of non-performance by the third-party lessee, the guarantee may require the Company to continue the provision of services under the contract as it is the lessor One who rents real property or Personal Property to another. A lessor of land is a landlord. Cross-references Landlord and Tenant. lessor n. the owner of real property who rents it to a lessee pursuant to a written lease. to the third-party lessee of the three helicopters. The guarantees are currently being contested, however, as the Company maintains that the contract renewals with the two customers by the third-party lessee were not made in accordance with the express terms of the contracts guaranteed by the Company. No loss is anticipated as a result of these guarantees. 13. 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:
Three Months Ended
July 31, July 31,
2003 2002
(Unaudited) (Unaudited)
---------------------------------------------------------------------
Net earnings according to Canadian GAAP $13,731 $8,893
Pre-operating expenses 341 (83)
Gain on sale of assets/amortization expense (10) (10)
Ineffective portion of net investment hedge (6,902) -
Effect of foreign currency contracts (1,506) -
Internal-use software expenses (52) -
Decrease in income tax expense 1,534 1,018
Other - (2,715)
---------------------------------------------------------------------
Net earnings according to U.S. GAAP 7,136 7,103
Other comprehensive earnings,
net of income tax
Foreign currency translation adjustment (17,329) 22,460
Ineffective portion of
net investment hedge 5,535 -
Minimum pension liability adjustment 29,063 (220)
Interest rate swap adjustment 1,126 (1,774)
---------------------------------------------------------------------
Comprehensive earnings
according to U.S. GAAP $25,531 $27,569
---------------------------------------------------------------------
---------------------------------------------------------------------
Basic net earnings per share
according to U.S. GAAP $0.34 $0.34
---------------------------------------------------------------------
---------------------------------------------------------------------
Diluted net earnings per share
according to U.S. GAAP $0.32 $0.32
---------------------------------------------------------------------
---------------------------------------------------------------------
The consolidated balance sheet consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. would vary in some respects when restated for U.S. GAAP purposes. The most significant variances pertaining per·tain intr.v. per·tained, per·tain·ing, per·tains 1. To have reference; relate: evidence that pertains to the accident. 2. to the July 31, 2003 balance sheet are listed below: -- Current assets Current Assets Appearing on a company's balance sheet, it represents cash, accounts receivable, inventory, marketable securities, prepaid expenses, and other assets that can be converted to cash within one year. would be increased by $7.6 million to recognize the fair value impact of the forward foreign currency contracts on net earnings. -- Future income tax liabilities would be decreased by $6.5 million to tax-effect adjustments to net earnings and comprehensive earnings under U.S. GAAP. -- Other liabilities would increase by $16.8 million to recognize the minimum pension liability and interest rate swap Interest Rate Swap A deal between banks or companies where borrowers switch floating-rate loans for fixed rate loans in another country. These can be either the same or different currencies. adjustments recorded in comprehensive earnings as well as the fair value impact of forward foreign currency contracts on net earnings. -- Accumulated other comprehensive earnings would be recorded at ($30.3) million under U.S. GAAP for foreign currency translation, minimum pension liability and interest rate swap adjustments in addition to the impact of the ineffective portion of the net investment hedge. -- Retained earnings would be increased by $8.0 million to reflect the cumulative effect of Canadian and U.S. GAAP differences. If you wish to be removed or included on the Company's distribution list, please call (709) 570-0749 or email communications@stjohns.chc.ca. |
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