CHC Announces Record Third Quarter Earnings.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)--March 3, 2003-- 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 ("CHC CHC Chicago Cubs CHC Community Health Center CHC Chestnut Hill College (Philadelphia, Pennsylvania) CHC Congressional Hispanic Caucus CHC Community Health Council (UK National Health Service) ") (TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension :FLY.A) (TSX:FLY.B) (NYSE NYSE See: New York Stock Exchange :FLI FLI - Flash Lights Impressively. ) today announced financial results for the quarter ended January January: see month. 31, 2003.
Financial Highlights
(in millions of Canadian dollars except per share amounts)
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Three Months Ended Nine Months Ended
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(Restated) (Restated)
(1) (1)
January January January January
31, 31, 31, 31,
2003 2002 2003 2002
(Un- (Un- (Un- (Un-
audited) audited) audited) audited)
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Revenue $180.0 $151.6 $546.7 $458.1
EBITDA (2) 34.9 31.6 105.8 90.0
Net earnings from operations (2) 15.6 11.2 51.2 34.3
Net earnings 15.6 11.2 43.2 34.3
Cash flow from operations 21.9 25.1 77.3 56.3
Per Share Information
Net earnings from operations: (2)
Basic 0.76 0.68 2.47 2.10
Diluted 0.70 0.62 2.28 1.91
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1) See Note 2 to the Unaudited Consolidated Interim Financial
Statements
2) See definitions under Non-GAAP Earnings Measures in Management's
Discussion and Analysis
Highlights -- Other assets would be reduced by $49.4 million due to a portion of the minimum pension liability offsetting prepaid pension costs and the removal of pre-operating expenses, which are charged to earnings as incurred under U.S. GAAP. -- Future tax liabilities would be decreased by $17.8 million to tax-effect adjustments to net earnings and comprehensive income under U.S. GAAP. -- Other credits would increase by $30.2 million to recognize the minimum pension liability and interest rate swap adjustments recorded in comprehensive income. -- Accumulated other comprehensive earnings would be recorded at $(40.0) million under U.S. GAAP for foreign currency translation adjustments, derivative instruments and minimum pension liability adjustments. -- Retained earnings would be reduced by $8.1 million to adjust for the current and prior period cumulative effects of conversion to net earnings under U.S. GAAP. Investor Conference Call A quarterly investor conference call will take place at 10:30 a.m. (Eastern Standard Time) on March 4, 2003. To listen to the conference call interested parties should dial 1-877-461-2816 (1-416-695-6120 International) and request CHC Helicopter Corporation. A telephone replay service will be available following the conference call until 5 p.m. (Eastern Standard Time) March 7, 2003 with reservation A clause in a deed of real property whereby the grantor, one who transfers property, creates and retains for the grantor some right or interest in the estate granted, such as rent or an Easement ,a right of use over the land of another. number T398223C. The financial results and a webcast of the conference call will be available through CHC's website at http://www.chc.ca/fiscal.html. The webcast will also be broadcast by CCBN CCBN Central Coast Bancorp CCBN Charles County Business Network at: http://www.companyboardroom.com. CHC Helicopter Corporation is the world's leading provider of heavy and medium 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. services to the global offshore oil and gas industry, with aircraft operating in 23 countries and a team of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 2,500 professionals worldwide. If you wish to be removed or included on the Company's distribution list, please contact Paula PAULA Possession of Alcohol Under the Legal Age Kieley at 709-570-0594 or at pkieley@stjohns.chc.ca. 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 that could cause actual results to vary. These statements may involve risks and uncertainties including, but not limited to, factors detailed in CHC's Annual Report on Form 20-F and in other filings 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 January 31, 2003 Overview The following information 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 Unaudited 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 and related notes included in this interim report and in conjunction with the Company's 2002 Annual Audited Financial Statements, related notes and Management's Discussion and Analysis. The Company continued to produce strong financial results despite a reduction in activity levels in the Company's European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. segment during the quarter. Net earnings during the quarter were $15.6 million ($0.70 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 ) on revenue of $180.0 million, compared to net earnings of $11.2 million ($0.62 diluted earnings per share) on revenue of $151.6 million in the same quarter last year. Total net earnings improved quarter over quarter in part due to higher contract rates and lower interest costs. Revenue increased by $28.4 million (18.7%) in the third quarter compared to last year and 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 improved 10.4% from $31.6 million to $34.9 million. Revenue Total revenue for the quarter was $180.0 million compared to revenue of $151.6 million for the same quarter last year. The following factors account for the change: -- Increased revenue of $9.6 million (6.3%) primarily as a result of new contracts and higher rates in all of the Company's markets despite a 4.7% decrease in activity quarter over quarter. -- Increased third-party repair and overhaul revenue of $2.1 million primarily from large airframe projects for new and existing customers. -- A net revenue increase of $16.7 million related to foreign currency translation.
Revenue Summary by Quarter
(in millions of Canadian dollars)
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Total Repair Corpo-
Helicopter and rate
Inter- Opera- Over- and
Period Europe national tions haul Other Total
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Q4-F2001 $89.8 $37.3 $127.1 $9.2 $- $136.3
Q1-F2002 101.3 36.9 138.2 8.2 - 146.4
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
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Flying Hours The Company derives its helicopter operations revenue from two primary types of contracts. Approximately 61% of the Company's year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. flying revenue is 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 39% is 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 for the past eight quarters.
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Flying Hours - Helicopter Operations
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Flying Hours Number of Aircraft
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Period Europe Int'l Total Europe Int'l
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Q4-F2001 21,465 10,833 32,298 77 87
Q1-F2002 24,452 10,330 34,782 77 90
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 74 89
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The following table shows the year-to-date flying revenue mix by
segment and in total by aircraft type for fiscal 2003 and 2002.
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Year-to-Date Flying Revenue Mix
(in thousands of Canadian Dollars)
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January 31, 2003
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Heavy Medium Light Total
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Europe $258,498 $69,094 $- $327,592
International 39,809 85,774 6,254 131,837
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Total Flying Revenue $298,307 $154,868 $6,254 $459,429
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Total % 64.9% 33.7% 1.4% 100%
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January 31, 2002
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Heavy Medium Light Total
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Europe $224,302 $57,072 $- $281,374
International 33,360 79,212 5,501 118,073
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Total Flying Revenue $257,662 $136,284 $5,501 $399,447
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Total % 64.5% 34.1% 1.4% 100%
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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 2003.
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Aberdeen Airport - Helicopter Passengers
Year ended April 30,
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2003 2002 2001 2000
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Q1 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 108,247 101,166 85,190
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467,733 423,797 363,785
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Source: Aberdeen Airport Ltd.
The data in this table shows that, during the current quarter, helicopter passenger activity declined to a level last experienced in fiscal 2000. Although helicopter passenger activity decreased 17.4% from the second quarter of fiscal 2003, CHC's European flying activity only reduced 11.6%. This is in part due to fewer passengers per flight experienced in recent months. In addition, the data demonstrates the modest level of seasonality in activity from quarter to quarter. Review of Operations Earnings before interest, taxes, depreciation and amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability.
EUROPE
European Flying Segment
(millions of CAD dollars)
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Q3-03 Q3-02 YTD-03 YTD-02
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Revenue $116.2 $95.6 $359.6 $304.7
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EBITDA 20.9 17.1 70.5 56.1
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EBITDA % 18.0% 17.9% 19.6% 18.4%
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Revenue from helicopter operations 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). was $116.2 million for
the quarter compared to $95.6 million last year, an increase of 21.5%
despite a 6.7% decrease (1,465 hours) in flying hours. The $20.6 million
increase from the same quarter last year can be attributed to
strengthening foreign exchange rates for the Norwegian Norwegianassociated 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 kroner and pound sterling totaling $13.7 million upon translation of revenue to 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 . The $6.9 million in revenue growth is attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to a net increase in revenue due to new contracts, increased rates on existing contracts and 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. for external customers partially offset by general decreased activity and reduced revenue resulting from 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 three contracts in the first half of fiscal 2003. Activity levels continued to decrease in the third quarter particularly by bp who has announced significant cost cuts and has sold certain fields. It is anticipated that the new owners will recommence Re`com`mence´ v. i. 1. To commence or begin again. 2. To begin anew to be; to act again as. He seems desirous enough of recommencing courtier. - Johnson. v. t. 1. To commence again or anew. investment in these oil and gas fields. The $3.8 million increase in EBITDA includes $2.2 million attributable to strengthening foreign exchange rates for the Norwegian kroner and pound sterling upon translation of EBITDA to Canadian dollars. The slight increase in EBITDA percentage for the quarter reflects the impact of rate increases, reduced maintenance expense and profit on aircraft modifications partially offset by costs related to staffing at levels higher than necessary to support reduced activity. During the quarter, the Company was advised that its U.K. operating subsidiary 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. , CHC Scotia Scotia (skō`shə), originally the Latin name for Ireland. In the Middle Ages, it was used to refer to Scotland, to which the Scots had migrated from Ireland. Today it is used poetically. , was unsuccessful in its efforts to renew a contract to supply helicopter services to bp in the Northern North Sea. The current contract with bp, which produced revenues of $51.5 million in fiscal 2002, expires on July July: see month. 31, 2004. This contract represents approximately 8% of the Company's revenues but less than 4% of EBITDA. The Company currently utilizes six Super Puma aircraft to service the bp contract (including three Super Puma MkII's). The demand for these aircraft remains strong globally and the Company is confident it will be able to re-deploy these aircraft at market rates. During and subsequent to the quarter, bp sold certain oil and gas fields to new North Sea operators. The Company intends to offer its services to the new operators. Subsequent to the quarter, the Company was awarded a seven year contract renewal in support of bp's operations in the southern portion of the North Sea. The contract renewal will be serviced through the use of the Company's fleet of Sikorsky S76 aircraft based at North Denes and Humberside Humberside, former county, NE England. Created in the 1974 local government reorganization, the county was dissolved in 1996 and replaced by four unitary authorities: the East Riding of Yorkshire, Kingston upon Hull, North Lincolnshire, and North East Lincolnshire. in eastern England England, the largest and most populous portion of the United Kingdom of Great Britain and Northern Ireland (1991 pop. 46,382,050), 50,334 sq mi (130,365 sq km). It is bounded by Wales and the Irish Sea on the west and Scotland on the north. . The Company has embarked on an internal cost review of its European operations. This cost reduction exercise is being implemented against the backdrop Backdrop may refer to:
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 $10 million can be realized over the next twelve months.
INTERNATIONAL
International Flying Segment
(millions of CAD dollars)
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Q3-03 Q3-02 YTD-03 YTD-02
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Revenue $46.4 $44.9 $136.8 $120.8
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EBITDA 9.0 12.2 27.5 27.1
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EBITDA % 19.4% 27.2% 20.1% 22.4%
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Revenue for the quarter from 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. was $46.4 million compared to $44.9 million last year. Revenue increased $1.2 million due to new contracts and higher rates on existing contracts partially offset by revenue lost on the completion of the U.N. contract in East Timor East Timor (tē`môr) or Timor-Leste (–lĕsht), Tetum Timor Lorosae, republic, officially Democratic Republic of Timor-Leste (2002 est. pop. and decreased activity on the Philippines Philippines officially Republic of the Philippines Island country, western Pacific Ocean, on an archipelago off the southeast coast of Asia. Area: 122,121 sq mi (316,294 sq km). Population (2005 est.): 84,191,000. contract. The remaining increase is the result of foreign exchange. EBITDA decreased from $12.2 million to $9.0 million quarter over quarter. Of the $3.2 million decrease, $1.1 million is the result of foreign exchange. While EBITDA and EBITDA as a percentage of revenue were lower than the same quarter last year, they were in line with that experienced in the immediately preceding quarter at $8.8 million and 19.7% respectively. Last year lower than normal non-major maintenance expense was experienced. During the quarter the Company was awarded a contract to provide air transportation services to the U.N. Monitoring, Verification See verify. verification - The process of determining whether or not the products of a given phase in the life-cycle fulfil a set of established requirements. and Inspection Commission in Iraq Iraq or Irak (both: ēräk`, ĭrăk`), officially Republic of Iraq, republic (2005 est. pop. 26,075,000), 167,924 sq mi (434,924 sq km), SW Asia. for a total of four Bell 212 helicopters. These helicopters were deployed late in December December: see month. 2002 and provide primarily daytime Daytime may refer to:
flights to U.N. weapons inspectors between Baghdad Baghdad or Bagdad (both: băg`dăd, bägdäd`), city (1987 pop. 3,841,268), capital of Iraq, central Iraq, on both banks of the Tigris River. The city's principal economic activity is oil refining. and locations within Iraq. The basic term of the contract is one year plus one option year. The total value of this contract is estimated at $14 million per year. The contract includes a standard termination The point where a line, channel or circuit ends. See SCSI termination and hybrid. option in the event the U.N. mission is completed before the contract expires. During the quarter the Company was also awarded a contract renewal, at improved margins, in support of DeBeers Marine Namibia Namibia (nämĭb`ēə), officially Republic of Namibia, republic (2005 est. pop. 2,031,000), c.318,000 sq mi (823,620 sq km), SW Africa. diamond mining operations off the coast of Namibia. The contract will provide DeBeers with two Sikorsky S76 A++ aircraft, based at Oranjemund Oranjemund (Afrikaans: "Orange mouth") is a town situated in the extreme southwest of Namibia, on the northern bank of the Orange River mouth. It exists purely to service the diamond industry and has a population of approximately 11,000 . , Namibia, plus fixed-wing crew change transport from Cape Town Cape Town or Capetown, city (1991 pop. 854,616), legislative capital of South Africa and capital of Western Cape, a port on the Atlantic Ocean. It was the capital of Cape Province before that province's subdivision in 1994. , 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. . This contract is for three years and is expected to generate revenue of $18.5 million over the period.
REPAIR AND OVERHAUL
Repair and Overhaul
(millions of CAD dollars)
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Q3-03 Q3-02 YTD-03 YTD-02
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Total revenue $54.1 $37.2 $154.8 $114.6
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Third-party revenue 15.9 11.1 46.4 32.7
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EBITDA 9.3 7.2 27.9 21.6
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EBITDA % (a) 17.2% 19.4% 18.0% 18.8%
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(a) EBITDA% is calculated as a percentage of total revenue
(including both internal and external third-party sales)
Total revenue from the repair and overhaul business during the quarter was $54.1 million, compared to $37.2 million for the same period last year. Third party revenue growth of $4.8 million is attributable to a $2.1 million increase in large airframe projects for new and existing customers including major inspections and a slight increase in "power by the hour" revenue quarter over quarter and $2.7 million related to the strengthening of the Norwegian kroner upon translation of revenue to Canadian dollars. EBITDA increased $2.1 million from the same period last year with the strengthening of the Norwegian kroner upon translation of EBITDA into Canadian dollars accounting for $1.6 million of the increase. EBITDA percentage decreased quarter over quarter from 19.4% to 17.2% due primarily to a higher percentage of internal work at lower margins compared to external work. Composites At the end of the second quarter, the Company indicated that it was considering its strategic alternatives for Composites, including a sale of all or a portion of the business. During the current quarter the Company secured the services of a financial advisor to identify potential purchasers or partners for the business. Several potential buyers have been identified and are reviewing information about the business. The Company is continuing to work with existing and potential customers to secure additional business. Corporate and Other The Corporate and other segment recorded costs of $3.5 million compared to $4.9 million in the same quarter last year. The improvement was the result of a reduction in various cost items, none of which were individually significant.
Financing Charges
Financing Charges
(in thousands of Canadian Dollars)
Three Months Ended
(Restated)
January 31, 2003 January 31, 2002
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Interest $7,254 $10,674
Amortization of deferred
financing costs 804 1,172
Foreign exchange loss from
operating activities
and working capital
revaluation 1,417 57
Foreign exchange (gain)
loss on debt repayment (798) 1,640
Foreign exchange loss
(gain) on revaluation
of long-term debt (Note 2
to the Unaudited
Consolidated Interim
Financial Statements) 29 (1,242)
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Total $8,706 $12,301
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Interest costs during the quarter were $7.3 million compared to $10.7 million last year. The reduction of $3.4 million is primarily the result of lower interest rates and lower debt levels related to 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 credit facilities npl → facilidades fpl de crédito credit facilities npl → facilités fpl de paiement credit facilities and a 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 its 11.75% senior subordinated Subordinated A claim ranked lower in priority than other claims. Common stock claims are always subordinated to debt. notes during the first quarter of 2003. The average interest rate for the current quarter on the Company's variable-rate senior credit facilities was 5.4% compared to 6.0% in the previous year. Equity in earnings of associated companies associated company associate n → Partnerfirma f associated company n → società collegata During the quarter losses from the Company's 45% equity investment in 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. Helicopters Limited were $0.5 million compared to losses of $1.3 million last year. The improvement quarter over quarter was primarily the result of increased rates for the air ambulance air ambulance Emergency medicine A helicopter or, less commonly, a fixed wing aircraft, used to evacuate a person who requires immediate medical attention that cannot be provided at his/her current location business, fleet reduction (including the return of certain leased aircraft), and lower financing costs. The Canadian 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. business is seasonal and generally incurs losses during the winter months. Income Taxes Income tax expense of $4.2 million for the quarter was comprised solely of income tax on earnings from operations. For the same quarter last year the Company reported income tax expense on earnings from operations of $2.6 million. The effective income tax rate on year-to-date earnings from operations was 21.7% compared to 16.7% in the prior year. The higher rate this year is the result of increased earnings in jurisdictions with higher tax rates. In addition, debt reduction has resulted in reduced interest costs 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 , the Company's highest tax jurisdiction. 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 $21.9 million, a $3.2 million (12.7%) decrease over last year. Last year, the Company had a net income tax receipt of $5.7 million in comparison to a net income tax paid of $1.8 million this year, a difference of $7.5 million. Excluding a tax refund Tax refund Money back from the government when too much tax has been paid or withheld from a salary. of $8.1 million received last year, taxes paid have reduced from the same quarter last year by $0.6 million. Interest expense has dropped from $12.6 million in the third quarter last year to $8.2 million in the third quarter this year, a reduction of $4.4 million. The primary reason for this was the Euro denominated senior subordinated note repayment Repayment The act of paying back a debt. Notes: Everyone has to repay their debts eventually. See also: Debt, Defeasance, Loan in the first quarter of this fiscal year, combined with other reduced debt levels and lower interest rates, in comparison to the same period last year. Non-cash working capital increased by $7.2 million during the quarter in comparison to an increase of $13.6 million in the same quarter last year. In this quarter receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed were reduced by $12.0 million, excluding the impact of foreign exchange rates, as a result of strong collection efforts. Inventory increased by $9.3 million in the quarter, excluding the impact of exchange rate changes. This increase was primarily at Astec, in support of the flying divisions as well as external customers. Accounts payable decreased by $7.2 million during the quarter, excluding the impact of exchange rate changes. This reduction was primarily due to the semi-annual interest payment on the senior subordinated notes in January 2003 and slightly reduced trade payable levels at all the operating divisions. Financing Activities The Company's net debt (net of cash) decreased during the quarter from $329.9 million to $304.6 million. The reduction of $25.3 million consists of net debt reductions of $37.4 million, partially offset by the impact of foreign exchange on the translation of the Company's foreign denominated debt to Canadian dollars of $12.1 million. The foreign exchange impact was primarily related to the Company's pound sterling and Euro denominated debt that is a hedge of the Company's investment in its European subsidiaries. As a result, revaluation Revaluation A 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 the 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 of 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). . As at January 31, 2003 the Company had unused credit facilities of $77.1 million, and cash of $52.9 million, for a total of $130.0 million.
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Change in Net Debt Position During Q3
(in thousands of Canadian dollars)
----------------------------------------------------------------------
Advances Foreign Exchange Ending
Opening Balance (Repayments) Revaluation Balance
----------------------------------------------------------------------
$329,928 (37,368) 12,083 $304,643
----------------------------------------------------------------------
----------------------------------------------------------------------
To minimize foreign exchange risk, the Company has denominated its
debt in various currencies to match net operating cash flows with debt
service obligations. As at January 31, 2003, the Company's net debt
was denominated in the following currencies:
Debt in Canadian
Currency Original Currency Equivalent
(000's) (000's)
----------------------------------------------------------------------
Pound sterling Pounds sterling 62,271 $156,051
Euro Euro 94,250 154,052
Canadian dollar CDN 17,524 17,524
Norwegian kroner NOK 137,000 29,948
Cash (various currencies) (52,932)
----------------------------------------------------------------------
Total Reported Net Debt $304,643
Investing Activities Capital expenditures of $8.8 million during the quarter included $3.1 million in building additions, $2.2 million in helicopter spare components and $3.5 million in other equipment. In addition, the Company spent $5.1 million related to helicopter major inspections. The Company also recorded amortization of helicopter component costs of $28.5 million compared to component expenditures of $28.4 million for a net of $0.1 million. All component repair and overhaul expenditures 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 2002 Annual 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 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. is the Canadian dollar. However, the majority of revenue and 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. are denominated in pound sterling and Norwegian kroner, the reporting currencies of the principal operating subsidiaries in the U.K. and 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. . During the quarter revenue was favourably Adv. 1. favourably - showing approval; "he reviewed the play favorably" favorably favourably U.S. favorably adverb 1. impacted by $16.7 million primarily due to the strengthening of the European currencies relative to the Canadian dollar. The impact of foreign exchange on EBITDA for the quarter was favourable by $2.7 million. Since interest expense, depreciation, 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 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. . The Company's 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. Fleet At January 31, 2003 the Company's fleet consisted of 119 owned and 44 leased aircraft. An additional 145 aircraft are employed in the Company's 45% owned Canadian onshore helicopter operations for a total of 308. The Company employs 74 aircraft in Europe, (primarily in the North Sea) and 89 in its other international markets.
----------------------------------------------------------------------
Fleet Summary
----------------------------------------------------------------------
Heavy Medium Light Total Owned Leased
----------------------------------------------------------------------
Fleet at October 31,
2002 70 76 14 160 121 39
Increases (decreases)
during the period:
Sale-leaseback -
AS332Ls (2) 2
Super Puma MkII 1 1 1
B212 2 2 2
----------------------------------------------------------------------
Fleet at January 31, 2003 71 78 14 163 119 44
----------------------------------------------------------------------
At the end of January 2003, the Company entered into a sale-leaseback sale-lease·back n. See leaseback. transaction involving two AS332L aircraft operating in Europe. The net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). of $22.1 million were used to pay down senior credit facilities. In addition, in December 2002, one new Super Puma MkII aircraft was acquired on an operating lease 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. to service a 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. contract with Phillip's Petroleum in Norway. During the quarter the Company made aircraft operating lease payments of $11.2 million compared to $11.1 million in the same period last year. As at January 31, 2003, there were three 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 44 aircraft included in the Company's fleet at January 31, 2003. Forty-two 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 August 2003 to June June: see month. 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 some 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 January 31, 2003 exchange rates):
2003 $42.7 million
2004 36.9 million
2005 34.1 million
2006 28.9 million
2007 21.1 million
and thereafter: 25.8 million
----------------------------------------------------------------------
Total $189.5. million
----------------------------------------------------------------------
----------------------------------------------------------------------
As at January 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 five new Super Puma MkII aircraft and two EC225 helicopters through to fiscal 2005. A new Super Puma MkII was delivered to the Company's Norwegian operations in December 2002 to commence service on a long-term contract with Phillip's Petroleum in Norway. The Company has some flexibility built into the delivery schedule for future aircraft in order to match acquisitions with new demand. The Company has operating leases with a number of different banks and leasing companies. During the quarter, the Financial Accounting Standards Board Financial Accounting Standards Board (FASB) Board composed of independent members who create and interpret Generally Accepted Accounting Principles (GAAP). (FASB FASB See: Financial Accounting Standards Board FASB See Financial Accounting Standards Board (FASB). ) in the United States, issued its final interpretation on the consolidation of Variable Interest Entities (VIEs). The interpretation requires that VIEs be consolidated in the financial statements of the primary beneficiary beneficiary Person or entity (e.g., a charity or estate) that receives a benefit from something (e.g., a trust, life-insurance policy, or contract). A primary beneficiary receives proceeds from a trust or insurance policy before any other. . The interpretation is effective immediately for VIEs created after January 31, 2003 and effective for fiscal or interim periods beginning after June 15, 2003 for those VIEs that existed at January 31, 2003. At January 31, 2003, the Company was leasing 13 aircraft under operating leases from seven VIEs. The operating leases with these VIEs contain terms and conditions similar to the Company's other aircraft operating leases. The Company reviewed its variable interests with regard to each of these VIEs and concluded that it is not the primary beneficiary (as defined by FASB) with respect to any of these entities. As a result, the company will not be 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. these entities, but will provide additional disclosures in connection with the VIEs (see Note 3 to the Unaudited Consolidated Interim Financial Statements). The Canadian Accounting Standards Board The role of the Accounting Standards Board (ASB) is to issue accounting standards in the United Kingdom. It is recognised for that purpose under the Companies Act 1985. It took over the task of setting accounting standards from the Accounting Standards Committee (ASC) in 1990. is working on a parallel project that is expected to result in recommendations that are consistent with the FASB interpretation. Based on an April 30, 2002 appraisal by an independent helicopter valuation company, the fair market value of the Company's owned aircraft fleet was U.S. $400.7 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. $610.3 million), exceeding its recorded net book value by approximately CDN$223.3 million. Employee Pension Plans The Company has approximately 1,850 active and retired employees covered by defined benefit pension plans. The plans in the U.K. are closed to new members. All new U.K. employees after March 1998 are participants in a defined contribution pension plan. At January 31, 2003 the Company had an unfunded deficit of $59.3 million relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc defined benefit pension plans that are required to be funded compared to $57.4 million at October October: see month. 31, 2002, an increase of $1.9 million. Of the $59.3 million unfunded deficit, $50.4 million and $8.9 million related to plans in the U.K. and Norway respectively. The remaining deficit of $27.9 million, an increase of $1.0 million from October 31, 2002, is related to plans that do not require funding. The increase in the unfunded position of $57.0 million during fiscal 2003 related to the funded plans has been the result of weak performance in the world's financial markets. Plan performance has been in line with the relevant benchmarks. The increase in the unfunded position resulted in an increase in the Company's net actuarial ac·tu·ar·y n. pl. ac·tu·ar·ies A statistician who computes insurance risks and premiums. [Latin losses that are amortized over the estimated average remaining service lives (EARSL) of employees in the plan. The Company's aggregate EARSL is presently 13 years. The estimated pension expense for fiscal 2003 is $14.6 million, compared to $14.1 million for fiscal 2002. At April 30th, the Company will undertake a complete review of the performance of the pension plans in 2003 and the appropriate assumptions, including discount rates and the expected long-term rates of return on plan assets. This review, with the assistance of the Company's actuaries, will determine the pension expense for fiscal 2004. Assuming no change in the plans' assumptions, based on the status of the pension plans at January 31, 2003, the pension expense for fiscal 2004 is estimated to be $21.8 million. The estimated increase of $7.2 million relates primarily to a $4.9 million increase in the amortization of the net actuarial losses, with the remainder due primarily to lower anticipated returns due to lower plan assets. While the asset mix varies in each plan, overall the asset mix is 37.5% equities, 31.5% fixed income, and 31% money market. Commodity Prices Year-to-date January 31, 2003, the Company derived 80% of its flying revenue from the oil and gas industry. Approximately 82% of revenue from this industry was derived from the relatively stable production sector which tends to be substantially unaffected by 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. fluctuations in oil and gas prices. Approximately 12% of the Company's flying revenue in the North Sea is derived from exploration activity. During the past year a number of North Sea customers started implementing cost reduction measures affecting exploration spending. 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. There were no significant safety incidents during the quarter. Effective November November: see month. 2002, the Company's main hull and liability insurance policy was renewed re·new v. re·newed, re·new·ing, re·news v.tr. 1. To make new or as if new again; restore: renewed the antique chair. 2. at rate increases which were lower than the industry generally, reflecting the Company's excellent safety record and reduced incident experience. Market intelligence supports our continued belief that the Company has the lowest, or among the lowest, insurance rates in the industry for its medium and heavy fleet. 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 45% investment in the onshore operations of Canadian Helicopters Limited. Non-GAAP Earnings Measures The Company uses certain earnings measures that 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 . The Company has included these measures because it believes they are used by certain investors as measures of the Company's financial performance. These measures as used by CHC are defined as follows: EBITDA is defined as earnings before interest, taxes, depreciation, and amortization Earnings before interest, taxes, depreciation, and amortization (EBITDA) A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. . Net earnings from operations are defined as net earnings excluding large non-recurring items including gains (losses) on the sale of operations and debt settlement costs, net of applicable income tax.
Reconciliation of Non-GAAP Earnings Measures to GAAP Net Earnings
(In thousands of Canadian Dollars)
Three Months Ended Nine Months Ended
----------------------------------------------------------------------
(Restated) (Restated)
(1) (1)
January January January January
31, 31, 31, 31,
2003 2002 2003 2002
(Un- (Un- (Un- (Un-
audited) audited) audited) audited)
----------------------------------------------------------------------
Earnings from operations
before taxes and debt
settlement costs (from
statement of earnings) $19,840 $13,728 $65,311 $41,154
Applicable income taxes
on operations (4,194) (2,557) (14,154) (6,855)
----------------------------------------------------------------------
Net earnings from operations 15,646 11,171 51,157 34,299
After-tax debt-settlement costs - - (7,916) -
----------------------------------------------------------------------
Net earnings $15,646 $11,171 $43,241 $34,299
----------------------------------------------------------------------
1. See Note 2 to the Unaudited Consolidated Interim Financial
Statements
Summary financial data - U.S. Dollars
Certain summary financial data from the Unaudited Consolidated Interim
Financial Statements, as detailed below, has 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 average month-end exchange rate for the three months
ended January 31, 2003 and January 31, 2002 of CAD$1.5556 = U.S.$1.00
and CAD$1.5883 = U.S.$1.00 respectively.
Three Months Ended
(in millions of U.S. dollars except per share amounts)
----------------------------------------------------------------------
(Restated)(1)
January 31, January 31,
2003 2002
(Unaudited) (Unaudited)
----------------------------------------------------------------------
Revenue $115.7 $95.4
EBITDA (2) 22.4 19.9
Net earnings 10.0 7.1
Cash flow from operations 14.1 15.8
Per Share Information
Net earnings:
Basic 0.49 0.43
Diluted 0.45 0.39
----------------------------------------------------------------------
----------------------------------------------------------------------
1. See Note 2 to the Unaudited Consolidated Interim Financial
Statements
2. See definition under Non-GAAP Earnings Measures in Management's
Discussion and Analysis.
CHC Helicopter Corporation
Consolidated Statements of Earnings
(in thousands of Canadian dollars except per share amounts)
----------------------------------------------------------------------
Three Months Ended Nine Months Ended
(Restated) (Restated)
(Note 2) (Note 2)
January January January January
31, 31, 31, 31,
2003 2002 2003 2002
(Un- (Un- (Un- (Un-
audited) audited) audited) audited)
----------------------------------------------------------------------
Revenue $179,999 $151,621 $546,717 $458,117
Operating expenses 145,089 119,996 440,940 368,123
----------------------------------------------------------------------
Earnings before undernoted
items 34,910 31,625 105,777 89,994
Depreciation and amortization (5,866) (4,745) (16,575) (13,466)
Gain (loss) on disposal of assets 26 491 (428) 1,611
----------------------------------------------------------------------
Earnings from operations 29,070 27,371 88,774 78,139
Financing charges (8,706) (12,301) (26,414) (37,734)
Equity in (losses) earnings of
associated companies (524) (1,342) 2,951 749
----------------------------------------------------------------------
Earnings from operations
before undernoted items and
income tax provision 19,840 13,728 65,311 41,154
Debt settlement costs - - (12,464) -
----------------------------------------------------------------------
Earnings before income
tax provision 19,840 13,728 52,847 41,154
Income tax provision (4,194) (2,557) (9,606) (6,855)
----------------------------------------------------------------------
Net earnings $15,646 $11,171 $43,241 $34,299
----------------------------------------------------------------------
----------------------------------------------------------------------
Basic earnings per share (Note 7)
Net earnings from operations $0.76 $0.68 $2.47 $2.10
Net earnings 0.76 0.68 2.09 2.10
Diluted earnings per share (Note 7)
Net earnings from operations 0.70 0.62 2.28 1.91
Net earnings 0.70 0.62 1.93 1.91
----------------------------------------------------------------------
----------------------------------------------------------------------
See accompanying notes
CHC Helicopter Corporation
Consolidated Statements of Shareholders' Equity
(in thousands of Canadian dollars, except per share amounts)
----------------------------------------------------------------------
(Restated)
(Note 2)
Nine Months Ended Nine Months Ended
January 31, 2003 January 31, 2002
(Unaudited) (Unaudited)
----------------------------------------------------------------------
Retained earnings, beginning
of period as originally stated $117,280 $70,704
Retroactive application of
change in accounting policy
with restatement of prior
periods (Note 2) 180 (536)
Retroactive application of
change in accounting policy
without restatement of
prior periods (Note 2) (1,715) -
----------------------------------------------------------------------
Retained earnings, beginning
of period as restated 115,745 70,168
Net earnings 43,241 34,299
Dividends paid (4,016) -
----------------------------------------------------------------------
Retained earnings, end of
period 154,970 104,467
Capital stock (Note 6) 236,705 119,191
Contributed surplus 3,291 3,291
Foreign currency
translation adjustment 11,510 (37,501)
----------------------------------------------------------------------
Total shareholders' equity $406,476 $189,448
----------------------------------------------------------------------
Dividends paid per
participating voting share $0.20 $-
----------------------------------------------------------------------
----------------------------------------------------------------------
See accompanying notes
CHC Helicopter Corporation
Consolidated Balance Sheets
(in thousands of Canadian dollars)
As at
----------------------------------------------------------------------
(Restated)
(Note 2)
January 31, 2003 April 30, 2002
(Unaudited) (Audited)
----------------------------------------------------------------------
Assets
Current assets
Cash and cash equivalents $52,932 $112,838
Receivables 152,214 146,972
Future tax assets 10,189 9,206
Inventory 206,683 174,150
Prepaid expenses 20,306 15,323
----------------------------------------------------------------------
442,324 458,489
Property and equipment, net 600,920 544,169
Long-term investments 21,631 18,717
Other assets 131,468 133,143
Long-term future tax assets 8,114 9,733
----------------------------------------------------------------------
$1,204,457 $1,164,251
----------------------------------------------------------------------
----------------------------------------------------------------------
Liabilities
Current liabilities
Payables and accruals $139,908 $140,403
Income taxes payable 9,807 4,985
Current portion of debt
obligations 23,844 113,387
----------------------------------------------------------------------
173,559 258,775
Long-term debt 169,265 167,202
Senior subordinated notes 154,052 133,034
Subordinated debentures 10,414 11,157
Other credits 64,829 51,398
Future tax liabilities 225,862 209,933
Shareholders' equity 406,476 332,752
----------------------------------------------------------------------
$1,204,457 $1,164,251
----------------------------------------------------------------------
----------------------------------------------------------------------
See accompanying notes
CHC Helicopter Corporation
Consolidated Statements of Cash Flows
(in thousands of Canadian dollars except per share amounts)
----------------------------------------------------------------------
Three Months Ended Nine Months Ended
(Restated) (Restated)
(Note 2) (Note 2)
January January January January
31, 31, 31, 31,
2003 2002 2003 2002
(Un- (Un- (Un- (Un-
audited) audited) audited) audited)
----------------------------------------------------------------------
Operating activities
Earnings from operations $29,070 $27,371 $88,774 $78,139
Items not involving cash:
Depreciation and amortization 5,866 4,745 16,575 13,466
(Gain) loss on disposal of assets (26) (491) 428 (1,611)
Other (2,908) 344 2,485 3,229
----------------------------------------------------------------------
Cash flow from operations before
interest and income taxes 32,002 31,969 108,262 93,223
Interest expense, net of
amortization of deferred
financing costs (8,223) (12,602) (24,752) (34,896)
Net current income taxes
(paid) received (1,844) 5,745 (6,172) (1,987)
----------------------------------------------------------------------
Cash flow from operations 21,935 25,112 77,338 56,340
Change in non-cash working capital (7,201) (13,639) (16,019) (14,475)
----------------------------------------------------------------------
14,734 11,473 61,319 41,865
----------------------------------------------------------------------
Financing activities
Long-term debt advances 17,019 27,891 36,903 53,720
Long-term debt repayments (43,183) (59,505) (142,209) (91,493)
Debt settlement - - (9,136) -
Dividends paid - - (4,016) -
Capital stock issue 233 157 328 379
----------------------------------------------------------------------
(25,931) (31,457) (118,130) (37,394)
----------------------------------------------------------------------
Investing activities
Property and equipment
Additions (8,785) (5,082) (30,650) (25,047)
Helicopter major inspections (5,059) (1,965) (11,052) (6,970)
Helicopter components, net 99 (4,661) 1,635 (8,091)
Proceeds from disposal 27,199 31,274 29,423 44,010
Long-term receivables repaid
(advanced) 6,404 (1,833) 7,195 (2,923)
Pre-operating expenses (1,176) (2,035) (1,754) (5,488)
Other 3,343 (1,464) (1,159) (759)
----------------------------------------------------------------------
22,025 14,234 (6,362) (5,268)
----------------------------------------------------------------------
Effect of exchange rate changes
on cash and cash equivalents 1,157 (1,245) 3,267 (1,156)
----------------------------------------------------------------------
Change in cash and cash
equivalents during the period 11,985 (6,995) (59,906) (1,953)
Cash and cash equivalents,
beginning of period 40,947 28,592 112,838 23,550
----------------------------------------------------------------------
Cash and cash equivalents,
end of period $52,932 $21,597 $52,932 $21,597
----------------------------------------------------------------------
----------------------------------------------------------------------
See accompanying notes
CHC Helicopter Corporation
Notes to the Consolidated Interim Financial Statements
for the periods ended January 31, 2003 and 2002 (Unaudited)
(Tabular amounts in thousands of Canadian dollars
except per share amounts)
1. Basis of presentation The unaudited consolidated interim financial statements ("Statements") have been prepared in accordance with Canadian Generally Accepted Accounting Principles ("GAAP"). Not all disclosures required by GAAP for annual financial statements are presented and thus the Statements should be read in conjunction with the annual audited financial statements. Certain amounts on the financial statements for the period ended January 31, 2002 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 interim financial statements follow the same accounting policies and methods of application as the most recent annual audited financial statements of April 30, 2002 except as described in Note 2 below. 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 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 self-sus·tain·ing adj. Able to sustain oneself or itself independently. self  -sus·tain foreign operations be included in earnings immediately.
The adoption of the new recommendations had an insignificant impact on
financing charges for the quarter ended January 31, 2003 and a $1.2
million decrease in financing charges for the same quarter last year.Stock-based compensation plans Effective May 1, 2002 the Company retroactively adopted the new Canadian accounting recommendations with respect to stock-based compensation which now conforms substantially to U.S. GAAP. The recommendations require the use of a fair value based approach to accounting 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 including the Company's Stock Appreciation Rights Plan and Long-term Incentive Plan (SARs SARS or severe acute respiratory syndrome, communicable viral disease that can progress to a potentially fatal pneumonia. The first symptoms of SARS are usually a high fever, headache and body aches, sore throat, and mild respiratory symptoms; ). The impact of adopting the new recommendations related to the Company's SARs granted prior to May 1, 2002 was a charge against 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. of $1.7 million, the recording of a long-term future tax asset of $1.0 million and an increase of $2.7 million in payables Payables Related: Accounts payable and accruals Accruals Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These accounts include, among many others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense. . The recommendations require that compensation expense related to share options be calculated under the fair value method or the 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. method with pro-forma disclosure on net earnings and earnings per share had the fair value method been used. The Company applies the intrinsic value method to account for share options and accordingly has not recognized compensation cost for the share option plan. 3. Variable interest entities At January 31, 2003, the Company was leasing 13 aircraft from seven Variable Interest Entities ("VIEs") under operating leases at terms and conditions similar to its other operating leases over periods ranging from fiscal 2004 to 2010. Year-to-date, the Company has made operating lease payments of $12.3 million to these VIEs. Unrelated third-party financial institutions provide the ownership, management and administration of these entities. The Company has no ownership position in these entities. While the Company retains a variable interest in these entities, it is not the primary beneficiary (as defined by FASB) and as a result is not required to consolidate the VIE's in its consolidated financial statements. The fair market value of the related aircraft at January 31, 2003, based on an April 30, 2002 appraisal performed by an independent helicopter valuation company, was $167.5 million. The Company has provided junior loans and advance rentals of $15.2 million in connection with operating leases with these VIEs. The Company has also entered into remarketing agreements for the aircraft leased from the VIEs. Under these agreements, if the Company procures a buyer for the aircraft it will receive proceeds from the sales in excess of the residual values 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. at the termination of the leases. The Company's maximum exposure to loss as a result of its involvement with these VIEs is $13.8 million. 4. 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 Nine Months Ended
----------------------------------------------------------------------
January January January January
31, 31, 31, 31,
2003 2002 2003 2002
(Un- (Un- (Un- (Un-
audited) audited) audited) audited)
----------------------------------------------------------------------
Revenue - external
Europe (1) $116,163 $95,584 $359,564 $304,655
International (2) 46,438 44,953 136,766 120,786
Repair and overhaul (3) 15,892 11,084 46,380 32,676
Composites (4) 1,506 - 4,007 -
----------------------------------------------------------------------
179,999 151,621 546,717 458,117
----------------------------------------------------------------------
Inter-segment revenues
Europe 4,576 3,844 12,759 10,729
Repair and overhaul 38,214 26,123 108,450 81,850
Corporate and other (5) - - - 2,559
----------------------------------------------------------------------
42,790 29,967 121,209 95,138
----------------------------------------------------------------------
Earnings before interest, taxes,
depreciation and amortization
("EBITDA")
Europe 20,918 17,092 70,542 56,149
International 8,997 12,214 27,547 27,051
Repair and overhaul 9,272 7,220 27,928 21,639
Composites (737) - (3,332) -
Corporate and other (3,540) (4,901) (16,908) (14,845)
----------------------------------------------------------------------
34,910 31,625 105,777 89,994
----------------------------------------------------------------------
Earnings from operations
Europe 17,562 14,500 61,521 48,638
International 7,946 11,293 24,668 24,380
Repair and overhaul 9,132 6,978 27,307 20,982
Composites (1,265) - (4,905) -
Corporate and other (4,305) (5,400) (19,817) (15,861)
----------------------------------------------------------------------
29,070 27,371 88,774 78,139
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Notes:
1. Europe - includes the flying divisions based in Aberdeen,
Scotland and Stavanger, Norway.
2. International - includes operations in Australia, Africa, Asia,
offshore work in Eastern Canada, and 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.
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5. 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, in aggregate, as compared to April 30, 2002 is as follows:
As at
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January 31, October 31, April 30,
2003 2002 2002
(Unaudited)(Unaudited) (Audited)
----------------------------------------------------------------------
Benefit obligation $396,597 $385,241 $344,102
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Fair value of plan assets $309,353 $300,793 $312,484
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Funded status
Defined benefit plans - funded (1) $(59,280) $(57,441) $(2,323)
Defined benefit plans - unfunded (2) (27,964) (27,007) (29,295)
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Total (87,244) (84,448) (31,618)
Unrecognized net actuarial losses,
prior service costs and
transition amounts 145,447 138,588 85,869
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Net asset recognized on
balance sheet $58,203 $54,140 $54,251
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----------------------------------------------------------------------
(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 January 31, 2003, $73.6 million (April 30, 2002 - $66.6 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 $15.4 million (April 30, 2002 - $12.4 million) related to the unfunded plans is recorded as an 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. pension obligation in other credits. The significant weighted average actuarial assumptions adopted in measuring the Company's defined benefit pension plans' obligations as at January 31, 2003 are as follows:
Discount rate 6.52%
Expected long-term rate of return on plan assets 7.27%
Rate of compensation increase 2.72%
The assumptions used by each plan were unchanged from April 30, 2002.
6. 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
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Number of Shares
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January 31, April 30, January 31,
2003 2002 2002
(Unaudited) (Audited) (Unaudited)
----------------------------------------------------------------------
Issued:
Class A subordinate voting
shares 17,871 17,689 13,445
Class B multiple voting shares 2,957 2,978 2,975
Ordinary shares 11,000 11,000 11,000
Securities convertible into
Class A subordinate voting
shares:
Class B multiple voting
shares 2,957 2,978 2,975
Share options 2,046 1,427 1,456
Convertible debt 690 795 795
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7. Per share information
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Three Months Ended January 31, 2003 (Unaudited)
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Weighted
average Net
number earnings
Net earnings of shares per share
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Basic $15,646 20,721 $0.76
Effect of dilutive
securities:
Share options - 1,135
Convertible debt 120 768
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Diluted $15,766 22,624 $0.70
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Three Months Ended January 31, 2002 (Unaudited)
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Weighted
average Net
number earnings
Net earnings of shares per share
----------------------------------------------------------------------
Basic $11,171 16,361 $0.68
Effect of dilutive
securities:
Share options - 969
Convertible debt 127 795
Shares as security for
non-recourse loans - 36
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Diluted $11,298 18,161 $0.62
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Under the treasury stock method, the proceeds from the exercise of options and warrants 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 and warrants assumed exercised is added to the number of basic shares outstanding to determine 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. shares outstanding for purposes of calculating diluted earnings per share. Therefore, the number of shares in the diluted earnings per share calculation will increase as the share price increases. 8. Share option plan The Company uses the intrinsic value based method to account for share options. If the fair value method had been used to account for share options issued during the nine months ended January 31, 2003, the pro-forma impact on net earnings and earnings per share would have been as follows:
Three Months Nine Months
Ended Ended
January 31, 2003 January 31, 2003
(Unaudited) (Unaudited)
----------------------------------------------------------------------
Net earnings
As reported $15,646 $43,241
Pro-forma 14,966 38,722
Basic earnings per share
As reported 0.76 2.47
Pro-forma 0.72 1.87
Diluted earnings per share
As reported 0.70 2.28
Pro-forma 0.67 1.73
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 January 31, 2003 total outstanding options were 2,045,706 (2002 - 1,456,427). At January 31, 2003 1,599,080 of the share options were exercisable (2002 - 1,456,427). The weighted average exercise price of the total outstanding options at January 31, 2003 was $13.74 compared to $5.86 at January 31, 2002. 9. Reconciliation to accounting principles generally accepted in the United States ("U.S. GAAP") In certain respects, Canadian GAAP differs from U.S. GAAP. If U.S. GAAP were employed, the consolidated statements of earnings would be adjusted as follows:
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Three Months Ended Nine Months Ended
(Restated) (Restated)
(Note 2) (Note 2)
January January January January
31, 31, 31, 31,
2003 2002 2003 2002
(Un- (Un- (Un- (Un-
audited) audited) audited) audited)
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Net earnings according to
Canadian GAAP $15,646 $11,171 $43,241 $34,299
Reclassification of loss on
debt settlement, after taxes
of $4,548 - - 7,916 -
Pre-operating expenses (626) (2,482) 164 (5,567)
Gain on sale of
assets/depreciation expense (10) (10) (30) (30)
Decrease (increase) in income
tax expense (1) 140 377 (27) 11,233
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Net earnings before extraordinary
item and change in accounting
policy according to U.S. GAAP 15,150 9,056 51,264 39,935
Extraordinary loss on debt
settlement, net of taxes - - (7,916) -
Change in accounting policy,
net of taxes - - (1,715) -
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Net earnings according
to U.S. GAAP 15,150 9,056 41,633 39,935
Other comprehensive earnings
Foreign currency translation
adjustment 10,596 (157) 35,516 24
Minimum pension liability
adjustment (37,205) 214 (37,890) (9,879)
Interest rate swap adjustment (3,441) - (5,508) -
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Comprehensive earnings
according to U.S. GAAP $(14,900) $9,113 $33,751 $30,080
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Basic earnings per share
according to U.S. GAAP
Earnings before extraordinary
item and change in
accounting policy $0.73 $0.55 $2.48 $2.44
Extraordinary item - - (0.38) -
Change in accounting policy - - (0.08) -
----------------------------------------------------------------------
Net earnings $0.73 $0.55 $2.02 $2.44
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Diluted earnings per share
according to U.S. GAAP
Earnings before extraordinary
item and change in
accounting policy $0.67 $0.51 $2.28 $2.22
Extraordinary item - - (0.35) -
Change in accounting policy - - (0.08) -
----------------------------------------------------------------------
Net earnings $0.67 $0.51 $1.85 $2.22
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(1) Under Canadian GAAP for fiscal 2001, the Company recorded an
income tax recovery of $9.5 million related to future income tax
rate reductions that were substantially enacted during the year.
Under U.S. GAAP, the $9.5 million impact was reflected in earnings
in the first quarter of 2002 as the income tax rate reductions
became fully enacted during that period.
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 of which are listed below: -- Other assets would be reduced by $49.4 million due to a portion of the minimum pension liability offsetting prepaid pension costs and the removal of pre-operating expenses, which are charged to earnings as incurred under U.S. GAAP. -- Future tax liabilities would be decreased by $17.8 million to tax-effect adjustments to net earnings and comprehensive income under U.S. GAAP. -- Other credits would increase by $30.2 million to recognize the minimum pension liability and interest rate swap adjustments recorded in comprehensive income. -- Accumulated other comprehensive earnings would be recorded at $(40.0) million under U.S. GAAP for foreign currency translation adjustments, derivative instruments and minimum pension liability adjustments. -- Retained earnings would be reduced by $8.1 million to adjust for the current and prior period cumulative effects of conversion to net earnings under U.S. GAAP. Guarantees In November 2002, FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of 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. of Others" effective for disclosures of guarantees in financial statements of interim or annual periods ending after December 15, 2002 and prospectively for initial recognition and measurement of guarantees issued or 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. after December 31, 2002. The Company has provided guarantees to third parties in respect of the following items as at January 31, 2003: 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 2003 and 2010. The Company's exposure under the asset value guarantees is approximately $32.0 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 guarantees. The Company has performance guarantees with two customers of a third-party partner. These guarantees have been in effect since August 1995 and November 1998 and relate to the provision of helicopter transportation services involving three heavy aircraft. In the event of non-performance by the partner, the Company will continue the provision of services under the contract as it leases to the partner the three helicopters. The guarantees are currently in litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. , however, as the Company contests that the contract renewals with the two customers by the partner were not made in accordance with the express terms of the contracts guaranteed by the Company. |
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