CHC announces third quarter results

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

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FLI Flight Centre Travel Group Limited