Flight Centre Travel (TG:FLI)
Historical Stock Chart
From Jul 2019 to Jul 2024
![Click Here for more Flight Centre Travel Charts. Click Here for more Flight Centre Travel Charts.](/p.php?pid=staticchart&s=TG%5EFLI&p=8&t=15)
Seasonality
In addition to the impact of seasonality on the Company's revenue and net earnings as discussed under "Quarterly Information", there are seasonal variations in earnings related to the Company's 41.75% investment in Canadian Helicopters Limited and from the Company's 38% investment in Inaer. Both companies have significant revenue from onshore operations that is more seasonal than offshore operations.
Share Data
The number of issued and outstanding shares and stock options as at August 31, 2005 was as follows:
(000's)
------------------------------
Class A subordinate voting shares 36,837
Class B multiple voting shares 5,866
Ordinary shares 22,000
Stock Options 1,913
The number of Class A subordinated voting shares that would be issued upon conversion of Class B multiple voting shares, share options and convertible debt as at August 31, 2005 remained unchanged from July 31, 2005 as detailed in Note 7 to the unaudited consolidated interim financial statements to which this MD&A relates.
Critical Accounting Estimates
The preparation of the Company's consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent liabilities as at and during the reported dates. By their nature these estimates are subject to measurement uncertainty. The effect on the financial statements of changes in such estimates in future periods could be material and would be accounted for in the period a change occurs. The Company's critical accounting estimates outlined in the MD&A included in the Company's 2005 Annual Filings remain unchanged at July 31, 2005.
Change in Accounting Policies
There have been no changes in accounting policies and methods of their application from the 2005 audited annual financial statements of the Company.
Related Party Transactions
1. In the course of its regular business activities, the Company enters
into routine transactions with parties subject to significant
influence by the Company (most significantly Aero Contractors of
Nigeria) and, as well, parties affiliated with the controlling
shareholder. These transactions are measured at the amounts
exchanged, which is the amount of consideration determined and agreed
to by the related parties. Transactions with related parties for the
three month periods ended July 31, 2005 and 2004 are summarized as
follows:
Three Months Ended
---------------------------
July 31, July 31,
2005 2004
-------------------------------------------------------------------------
Revenues $ 14,198 $ 15,118
-------------------------------------------------------------------------
Direct costs $ 38 $ 349
-------------------------------------------------------------------------
Capital asset additions $ 1,434 $ 2,670
-------------------------------------------------------------------------
-------------------------------------------------------------------------
July 31, April 30,
2005 2005
-------------------------------------------------------------------------
Net amounts receivable in respect of such
revenues, direct costs and capital
asset additions $ 17,115 $ 15,044
-------------------------------------------------------------------------
-------------------------------------------------------------------------
2. During fiscal 2000, in connection with securing tender credit
facilities, the Company received an unsecured, subordinated,
convertible 12% loan from an affiliate of the controlling shareholder
in the amount of $5.0 million. This loan is subordinated to the
Company's senior credit facilities and its senior subordinated notes.
The loan is convertible into Class A subordinate voting shares at
$3.63 per share. The estimated value of the loan proceeds
attributable to the conversion feature of $1.0 million was allocated
to contributed surplus. The equivalent reduction in the carrying
value of the loan is amortized to earnings over the term of the loan.
Interest expense of $0.2 million (2005 - $0.2 million), including
amortization of the above noted discount, was recorded on the loan
during the three month period ended July 31, 2005.
Contingent Liability
The Company was not able to deploy certain heavy aircraft in Norway, as specified by contract, in the fourth quarter of the previous fiscal year and in the first quarter of the current fiscal year due to the late delivery of aircraft by the manufacturer.
The customer believes it is entitled to compensation for the late deployment of these aircraft. The Company's interpretation of the contract is that no compensation is payable. The customer and the Company continue with discussions to resolve this issue however, the eventual outcome of these discussions is currently unknown.
Quarterly Information
The table below provides a summary of the Company's revenue, net earnings from continuing operations, net earnings (loss), total assets, total long term financial liabilities, cash dividends per share, net earnings per share from continuing operations and net earnings per share for each of the eight most recent quarters.
Net
earnings
from Net Total
continuing earnings Total long-term
Period Revenue(1) operations (loss) assets liabilities
-------------------------------------------------------------------------
(in millions of Canadian dollars)
-------------------------------------------------------------------------
Q2-2004 $172.6 16.0 15.5 1,114.4 555.9
Q3-2004 $169.0 10.0 9.0 1,162.0 572.7
Q4-2004 $209.4 25.8 25.4 1,534.9 814.3
Q1-2005 $225.5 23.3 22.3 1,520.7 824.0
Q2-2005 $225.3 16.0 (1.3) 1,534.2 846.7
Q3-2005 $226.1 17.3 22.8 1,644.7 915.0
Q4-2005 $226.4 17.0 18.8 1,743.2 942.0
Q1-2006 $231.3 18.7 18.3 1,702.8 972.8
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash
dividends Net earnings
per share per share Net earnings
Period declared Continuing Operations (loss) per share
-------------------------------------------------------------------------
Basic Diluted Basic Diluted
-------------------------------------------------------------------------
Q2-2004 - 0.38 0.35 0.37 0.34
Q3-2004 0.25 0.24 0.22 0.23 0.20
Q4-2004 - 0.62 0.57 0.61 0.56
Q1-2005 - 0.56 0.51 0.53 0.49
Q2-2005 0.30 0.38 0.35 (0.03) (0.03)
Q3-2005 - 0.41 0.38 0.55 0.50
Q4-2005 - 0.40 0.37 0.44 0.41
Q1-2006 - 0.45 0.41 0.44 0.40
-------------------------------------------------------------------------
-------------------------------------------------------------------------
There is some impact of seasonality in the quarterly results in the foregoing table. The seasonal variations are due primarily to variations in the activity levels of the Company's oil and gas industry customers' exploration and development activities and the Company's equity accounted investments.
Foreign exchange has had significant impact on quarterly revenue levels on a year over year basis. Quarterly revenues in fiscal 2006 and 2005, in comparison to quarterly revenues for fiscal 2005 and 2004, have been impacted by foreign exchange in the following amounts: Q1 - $19.4 million, Q2 - $1.3 million, Q3 - $(3.4) million and Q4 - $(3.8) million.
Quarterly revenue net earnings from continuing operations and net earnings in the table above were impacted by the following items that affect their comparability:
1. In Q2 of fiscal 2005, the Company incurred a tax asset reduction of
$4.2 million relating to a tax rate change in the Netherlands which
increased income tax expense by the same amount in the period.
2. In Q2 of fiscal 2005, the Company recorded a fair value adjustment
for Composites of $14.3 million.
3. In Q3 of fiscal 2005, the Company incurred net-of-tax gain on the
sale of SAMCO and Schreiner Canada of $7.5 million included in
discontinued operations. The remaining $1.1 million net-of-tax gain
on the sale of SAMCO and Schreiner Canada was incurred in Q4 of
fiscal 2005.
Summary financial data - U.S. Dollars
Certain summary financial data from the July 31, 2005 unaudited consolidated interim financial statements have been translated into U.S. dollars. This translation is included solely as supplemental information for the convenience of the reader. The data has been translated at the exchange rate at July 31, 2005 of $1.2259 (equal sign) U.S. $1.00.
Financial Highlights
(in millions of U.S. dollars, except per share amounts)
-------------------------------------------------------------------------
Three Months Ended Year Ended
July 31, April 30,
2005 2005
-------------------------------------------------------------------------
Revenue $ 188.7 $ 736.9
Operating income 27.2 107.1
Net earnings from continuing operations 15.2 60.0
Net loss from discontinued operations (0.3) (9.0)
Net earnings 14.9 51.0
Per Share Information
Basic
Net earnings from continuing operations $ 0.37 $ 1.43
Net loss from discontinued operations (0.01) (0.21)
Net earnings 0.36 1.22
Diluted
Net earnings from continuing operations $ 0.33 $ 1.31
Net loss from discontinued operations (0.01) (0.20)
Net earnings 0.32 1.11
-------------------------------------------------------------------------
-------------------------------------------------------------------------
CHC Helicopter Corporation
Consolidated Balance Sheets
Unaudited
(in thousands of Canadian dollars)
Incorporated under the laws of Canada
As at
---------------------------
July 31, April 30,
2005 2005
-------------------------------------------------------------------------
Assets
Current assets
Cash and cash equivalents $ 33,805 $ 51,391
Receivables 233,673 216,810
Future income tax assets 21,423 23,802
Inventory 203,891 216,513
Prepaid expenses 10,663 7,991
Assets of discontinued operations (Note 2) 13,889 12,657
---------------------------
517,344 529,164
Property and equipment, net 816,608 851,210
Investments (Note 14) 59,892 58,806
Intangible assets 6,113 6,499
Goodwill 7,550 8,861
Other assets 247,034 235,016
Future income tax assets 44,847 50,184
Assets of discontinued operations (Note 2) 3,402 3,495
---------------------------
$ 1,702,790 $ 1,743,235
---------------------------
---------------------------
Liabilities and shareholders' equity
Current liabilities
Payables and accruals $ 167,308 $ 212,965
Deferred revenue and redelivery obligations 11,888 22,574
Dividends payable 3,201 6,404
Income taxes payable 28,616 23,628
Future income tax liabilities 215 705
Current portion of debt obligations 23,358 26,812
Liabilities of discontinued operations
(Note 2) 2,186 2,153
---------------------------
236,772 295,241
Long-term debt 168,672 97,543
Senior subordinated notes 490,360 502,760
Other liabilities 128,815 142,507
Future income tax liabilities 181,656 195,692
Liabilities of discontinued operations
(Note 2) 3,325 3,493
Shareholders' equity 493,190 505,999
---------------------------
$ 1,702,790 $ 1,743,235
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes
CHC Helicopter Corporation
Consolidated Statements of Earnings
Unaudited
(in thousands of Canadian dollars, except per share amounts)
Three Months Ended
---------------------------
July 31, July 31,
2005 2004
-------------------------------------------------------------------------
Revenue $ 231,345 $ 225,471
Direct costs (179,609) (172,313)
General and administration costs (6,176) (8,759)
Amortization (8,617) (7,800)
Restructuring costs (Note 6) (3,735) (816)
Gain on disposals of assets 169 1,062
---------------------------
Operating income 33,377 36,845
Debt settlement costs - (1,360)
Financing charges (Note 5) (12,041) (8,999)
---------------------------
Earnings from continuing operations before
income taxes and undernoted items 21,336 26,486
Non-controlling interest (3) -
Equity earnings of associated companies
(Note 14) 3,179 3,092
Income tax provision (5,831) (6,312)
---------------------------
Net earnings from continuing operations 18,681 23,266
Net loss from discontinued operations (Note 2) (428) (923)
---------------------------
Net earnings $ 18,253 $ 22,343
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings (loss) per share (Note 8)
Net earnings from continuing operations $ 0.45 $ 0.56
Net loss from discontinued operations (0.01) (0.03)
Net earnings 0.44 0.53
Diluted
Net earnings from continuing operations $ 0.41 $ 0.51
Net loss from discontinued operations (0.01) (0.02)
Net earnings 0.40 0.49
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes
CHC Helicopter Corporation
Consolidated Statements of Shareholders' Equity
Unaudited
(in thousands of Canadian dollars, except per share amounts)
Three Months Ended
---------------------------
July 31, July 31,
2005 2004
-------------------------------------------------------------------------
Retained earnings, beginning of period $ 279,620 $ 229,866
Net earnings 18,253 22,343
---------------------------
Retained earnings, end of period 297,873 252,209
Capital stock (Note 7) 239,525 239,161
Contributed surplus 3,446 3,291
Foreign currency translation adjustment (47,654) (30,904)
---------------------------
Total shareholders' equity $ 493,190 $ 463,757
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes
CHC Helicopter Corporation
Consolidated Statements of Cash Flows
Unaudited
(in thousands of Canadian dollars)
Three Months Ended
---------------------------
July 31, July 31,
2005 2004
-------------------------------------------------------------------------
Operating activities
Net earnings from continuing operations $ 18,681 $ 23,266
Non-operating items and items not
involving cash:
Amortization 8,617 7,800
Amortization of major components recorded as
operating expense 15,961 16,991
Gain on disposals of assets (169) (1,062)
Equity in earnings of associated companies (3,179) (3,092)
Future income taxes (541) 1,672
Defined benefit pension plans 4,486 4,452
Amortization of contract credits and
deferred gains (3,099) (2,800)
Non-cash financing charges 559 842
Advance aircraft rental payments 388 (8,038)
Other 4,551 503
---------------------------
46,255 40,534
Change in non-cash working capital (56,073) (14,509)
---------------------------
Cash flow from operations (9,818) 26,025
---------------------------
Financing Activities
Long-term debt proceeds 85,431 36,458
Long-term debt repayments (6,719) (20,227)
Dividends paid (3,203) (2,663)
Capital stock issued 55 733
Deferred financing costs 174 (176)
Other - (2,083)
---------------------------
75,738 12,042
---------------------------
Investing activities
Property and equipment additions (24,182) (86,865)
Helicopter major inspections (1,028) (4,028)
Helicopter components (12,749) (18,908)
Proceeds from disposal of assets 17 59,935
Aircraft deposits (41,227) (12,497)
Restricted cash (1,336) 6,014
Other 1,248 (5,202)
---------------------------
(79,257) (61,551)
---------------------------
Effect of exchange rate changes on cash and
cash equivalents (2,280) (266)
---------------------------
Cash used in continuing operations (15,617) (23,750)
Cash provided by (used in)
discontinued operations (Note 2) (1,969) 223
---------------------------
Change in cash and cash equivalents
during the period (17,586) (23,527)
Cash and cash equivalents, beginning of period 51,391 61,079
---------------------------
Cash and cash equivalents, end of period $ 33,805 $ 37,552
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes
CHC Helicopter Corporation
Notes to the Unaudited Consolidated Interim Financial Statements
(Unaudited)
For the periods ended July 31, 2005 and 2004
(Unless otherwise indicated, tabular amounts in thousands of Canadian
dollars, except per share amounts)
1. Basis of presentation
These unaudited, interim, consolidated financial statements include the
accounts of CHC Helicopter Corporation and its directly and indirectly
controlled subsidiaries (collectively, the "Company"). These statements
have been prepared in accordance with Canadian generally accepted
accounting principles ("GAAP") applicable to interim consolidated
financial statements and are in accordance with generally accepted
accounting principles in the United States ("U.S. GAAP") except as
described in Note 13. The disclosures in these interim financial
statements do not meet all disclosure requirements of generally accepted
accounting principles for annual financial statements and should be read
in conjunction with the Company's 2005 audited annual consolidated
financial statements.
These interim financial statements follow the same accounting policies
and methods of application as the annual financial statements of the
Company.
In the opinion of Management, all adjustments necessary for a fair
presentation are reflected in the interim consolidated financial
statements. Such adjustments are of a normal and recurring nature.
Financial results for the three months ended July 31, 2005 are not
necessarily indicative of financial results for the full year.
Certain prior period amounts have been reclassified to conform to the
current period's presentation. The most significant changes are to the
Company's segmented reporting due to the current restructuring (Note 3)
and discontinued operations (Note 2).
-------------------------------------------------------------------------
2. Discontinued operations
During the third quarter of fiscal 2005 the Company sold two non-core
components of the Schreiner group of companies legally operating as
Schreiner Canada Ltd. ("Schreiner Canada") and Schreiner Aircraft
Maintenance B.V. ("SAMCO") and realized a net gain on sale of
$8.6 million.
The potential sale of the remaining business held for sale, CHC
Composites Inc. ("Composites"), to any potential acquirer will be
contingent on the acceptance of certain terms and conditions by the
Government of Newfoundland and Labrador. The sale of Composites has not
yet been consummated and therefore the disposal has not been reflected in
these statements nor have the long-term assets and liabilities of this
business been reclassified as current at July 31, 2005. The assets and
liabilities of this business were measured using discounted future cash
flows at the lower of their carrying amounts and their estimated fair
value less costs to sell. As a result, a fair value adjustment of
$14.3 million was recorded in Q2 of the prior fiscal year and allocated
to property and equipment ($11.4 million) and other long-term assets
($2.9 million) of this business. This fair value estimate is subject to
adjustment as the sale of this remaining business is consummated or as
assumptions used in the valuation change.
The operating results from these discontinued businesses have been
recorded in earnings from discontinued operations, up to the date of
disposition. Operating results from discontinued businesses include
imputed interest on debt assumed by the buyer or required to be repaid as
a result of the proposed disposal transaction.
The following tables present the consolidated balance sheets and
consolidated statements of earnings of discontinued operations included
in the consolidated financial statements:
As at
---------------------------
July 31, April 30,
2005 2005
-------------------------------------------------------------------------
Assets
Receivables $ 6,121 $ 5,455
Inventory 7,371 6,804
Prepaid expenses 397 398
---------------------------
13,889 12,657
Property and equipment, net 3,402 3,495
---------------------------
17,291 16,152
---------------------------
Liabilities
Payables and accruals 2,186 2,153
Other liabilities 3,325 3,493
---------------------------
5,511 5,646
---------------------------
Net assets of discontinued operations $ 11,780 $ 10,506
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three Months Ended
---------------------------
July 31, July 31,
2005 2004
-------------------------------------------------------------------------
Revenue from discontinued operations $ 3,009 $ 7,373
---------------------------
Operating loss from discontinued operations $ (428) $ (1,290)
---------------------------
Net loss from discontinued operations $ (428) $ (923)
---------------------------
-------------------------------------------------------------------------
3. Segment information
On May 1, 2005, as a result of a restructuring, the Company's operating
segments were revised to reflect the current operating and management
structure. The Company now operates under the following segments:
- Global Operations,
- European Operations,
- Heli-One, and
- Corporate and Other.
This new segment classification is representative of the Company's
current business strategy and reflects the Company's revised internal
reporting practices. The Company has provided segment revenues, segment
EBITDAR and operating income because these are the financial measures
used by the Company's key decision makers in making operating decisions
and assessing performance. Transactions between operating segments are at
standard industry rates.
Three Months Ended July 31, 2005
------------------------------------------------------------
Inter-
Global European Corporate segment
Operations Operations Heli-One and Other elimi- Consoli-
(4) (5) (6) (7) nations dated
--------- --------- --------- --------- --------- ----------
Revenue from
external
customers $ 76,824 $120,915 $ 33,552 $ 54 $ - $ 231,345
Inter-segment
revenues 319 2,102 90,258 91 (92,770) -
--------- --------- --------- --------- --------- ----------
Total revenue 77,143 123,017 123,810 145 (92,770) 231,345
Direct
costs(1) (55,358) (96,105) (68,439) - 55,692 (164,210)
General and
administration
costs - - - (6,176) - (6,176)
--------- --------- --------- --------- --------- ----------
Segment
EBITDAR(2) 21,785 26,912 55,371 (6,031) (37,078) 60,959
Aircraft lease
and associated
costs(1)
- Internal (18,026) (18,322) (608) (122) 37,078 -
- External (1,817) (239) (13,343) - - (15,399)
--------- --------- --------- --------- --------- ----------
Segment
EBITDA(3) 1,942 8,351 41,420 (6,153) - 45,560
Amortization (931) (1,345) (6,048) (293) - (8,617)
Restructuring
costs (443) (345) (990) (1,957) - (3,735)
Gain (loss)
on disposal
of assets (11) 1 189 (10) - 169
--------- --------- --------- --------- --------- ----------
Operating
income
(loss) $ 557 $ 6,662 $ 34,571 $ (8,413) $ - 33,377
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Financing
charges (12,041)
----------
Earnings from continuing operations
before income taxes and undernoted items 21,336
Non-controlling interest (3)
Equity earnings of associated companies 3,179
Income tax provision (5,831)
----------
Net earnings from continuing operations 18,681
Net loss from discontinued operations (428)
----------
Net earnings $ 18,253
----------
----------
Three Months Ended July 31, 2004(8)
------------------------------------------------------------
Inter-
Global European Corporate segment
Operations Operations Heli-One and Other elimi- Consoli-
(4) (5) (6) (7) nations dated
--------- --------- --------- --------- --------- ----------
Revenue from
external
customers $ 71,161 $125,029 $ 29,213 $ 68 $ - $ 225,471
Inter-segment
revenues - 3,213 90,080 638 (93,931) -
--------- --------- --------- --------- --------- ----------
Total revenue 71,161 128,242 119,293 706 (93,931) 225,471
Direct
costs(1) (51,608) (99,406) (63,840) - 57,113 (157,741)
General and
administration
costs - - - (8,759) - (8,759)
--------- --------- --------- --------- --------- ----------
Segment
EBITDAR(2) 19,553 28,836 55,453 (8,053) (36,818) 58,971
Aircraft lease
and associated
costs(1)
- Internal (15,174) (21,644) - - 36,818 -
- External (1,910) - (12,662) - - (14,572)
--------- --------- --------- --------- --------- ----------
Segment
EBITDA(3) 2,469 7,192 42,791 (8,053) - 44,399
Amortization (963) (1,386) (5,153) (298) - (7,800)
Restructuring
costs - - - (816) - (816)
Gain on
disposal
of assets - - 1,062 - - 1,062
--------- --------- --------- --------- --------- ----------
Operating
income
(loss) $ 1,506 $ 5,806 $ 38,700 $ (9,167) $ - 36,845
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Debt settlement costs (1,360)
Financing charges (8,999)
----------
Earnings from continuing operations
before income taxes and undernoted items 26,486
Equity earnings of associated companies 3,092
Income tax provision (6,312)
----------
Net earnings from continuing operations 23,266
Net loss from discontinued operations (923)
----------
Net earnings $ 22,343
----------
----------
Notes:
1. Direct costs in this note exclude aircraft lease and associated
costs. In the consolidated income statement these costs are combined.
2. Segment EBITDAR is defined as segment EBITDA before lease and
aircraft lease and associated costs.
3. Segment EBITDA is defined as segment earnings before amortization,
restructuring costs, gain (loss) on disposals of assets, debt
settlement costs, financing charges, non-controlling interest, equity
in earnings of associated companies, and income tax provision.
4. Global Operations - includes flying operations in Australia, Africa,
the Middle East, the Americas and Asia.
5. European Operations - includes flying operations in the U.K.,
Netherlands, Norway, Ireland and Denmark, as well as emergency
medical services and search and rescue services throughout Europe.
6. Heli-one - includes helicopter lease and repair and overhaul
operations based in Norway, the U.K., and Canada and the survival
suit and safety equipment production businesses.
7. Corporate and other - includes corporate offices costs in various
jurisdictions.
8. Comparative information has been reclassified to reflect the results
of discontinued operations (Note 2) and the change in the Company's
operating segments. Comparative figures have also been restated to
reflect segment results as if certain lease, Power-by-the-hour
("PBH") and associated transactions between the Company's segments
had occurred for the comparative period as well. The restatement is
based on management's best estimate of how these transactions would
have been recorded if the operational and management restructuring
had been effective on May 1, 2004. After giving effect to this
restatement the Company's consolidated results remain unchanged as
the restatement relates only to internal and eliminated transactions.
-------------------------------------------------------------------------
4. Employee pension plans
The Company's net defined benefit pension plan expense was as follows:
Three Months Ended
---------------------------
July 31, July 31,
2005 2004
---------------------------
Current service cost $ 4,784 $ 5,156
Interest cost 7,473 7,622
Expected return on plan assets (7,209) (7,379)
Amortization of net actuarial and
experience losses 2,512 2,083
Amortization of prior service costs (6) 153
Amortization of transition amounts 12 123
Participation contributions (667) (901)
---------------------------
Total $ 6,899 $ 6,857
---------------------------
-------------------------------------------------------------------------
5. Financing charges
Three Months Ended
---------------------------
July 31, July 31,
2005 2004
---------------------------
Interest on debt obligations $ 10,825 $ 8,191
Amortization of deferred financing costs 617 738
Foreign exchange loss from operating
activities and working capital revaluations 1,359 193
Foreign exchange loss (gain)
on revaluation of long-term debt (775) 37
Other interest and expenses 15 (160)
---------------------------
Total $ 12,041 $ 8,999
---------------------------
-------------------------------------------------------------------------
6. Restructuring costs
During the three months ended July 31, 2005, the Company expensed
restructuring costs of $3.7 million (2005 - $0.8 million) in connection
with restructuring activities. Restructuring costs were comprised of
voluntary retirement and involuntary severance costs, professional and
consulting fees, and costs associated with the relocation of a Heli-One
repair and overhaul shop from Port Alberni to Vancouver, British
Columbia. Of the $3.7 million expensed in the three-month period,
$1.5 million relates to severance and termination costs.
Additional costs are expected to be expensed in relation to these
restructuring initiatives with the majority of future costs relating to
termination, severance, consulting, foreign exchange losses and
derivative cancellation costs. The timing and final amount of these
additional costs are dependent on a number of factors that are not yet
fully known or determinable and will be expensed in future periods.
The following table provides a reconciliation of the Company's
restructuring cost accrual for the three months ended July 31, 2005:
Restructuring Costs
-------------------------------------------------------------------------
Accrual at April 30, 2005 $ 7,678
Expensed during the three months ended July 31, 2005 3,735
Paid during the three months ended July 31, 2005 (5,125)
-------------
Accrual at July 31, 2005 $ 6,288
-------------
-------------
-------------------------------------------------------------------------
7. Capital stock
Authorized:
Unlimited number of each of the following:
First preferred shares, issuable in series
Second preferred shares, issuable in series
Class A subordinate voting shares, no par value
Class B multiple voting shares, no par value
Ordinary shares, no par value
Number of Shares
000's
As at Consideration
------------------------- -------------------------
July 31, April 30, July 31, April 30,
2005 2005 2005 2005
------------------------- -------------------------
Issued:
Class A subordinate
voting shares 36,837 36,833 $ 222,727 $ 222,727
Class B multiple
voting shares 5,866 5,866 18,431 18,431
Ordinary shares 22,000 22,000 33,000 33,000
Ordinary share loan - - (33,000) (33,000)
Class A subordinate
voting shares
Employee purchase loans (1,633) (1,689)
-------------------------
$ 239,525 $ 239,469
-------------------------
Contributed surplus $ 3,446 $ 3,291
-------------------------
-------------------------
Class A subordinate
voting shares that
would be issued upon
conversion of the
following:
Class B multiple voting
shares 5,866 5,866
Share options 3,825 2,815
Convertible debt 1,379 1,379
------------------------------------------------------------------------
8. Per share information
Three Months Ended July 31, 2005
--------------------------------------------------------
Weighted
average Net earnings
Net earnings number per share
----------------------- of ------------------------
Cont. Disc. shares Cont. Disc.
ops. ops. Total (000's) ops. ops. Total
--------------------------------------------------------
$18,681 $ (428) $18,253 42,701
Shares as security
for Class A
subordinate
voting share
employee
purchase loans (729)
-------------------------------
Basic 18,681 (428) 18,253 41,972 $ 0.45 $(0.01) $ 0.44
Effect of
potential
dilutive
securities:
Share options 2,042
Convertible debt 97 - 97 1,379
Shares as security
for Class A
subordinate
voting share
employee
purchase loans 729
--------------------------------------------------------
Diluted $18,778 $ (428) $18,350 46,122 $ 0.41 $(0.01) $ 0.40
--------------------------------------------------------
--------------------------------------------------------
Three Months Ended July 31, 2004(1)
--------------------------------------------------------
Weighted
average Net earnings
Net earnings number per share
----------------------- of ------------------------
Cont. Disc. shares Cont. Disc.
ops. ops. Total (000's) ops. ops. Total
--------------------------------------------------------
$23,266 $ (923) $22,343 42,640
Shares as security
for Class A
subordinate
voting share
employee
purchase loans (736)
-------------------------------
Basic 23,266 (923) 22,343 41,904 $ 0.56 $(0.03) $ 0.53
Effect of
potential
dilutive
securities:
Share options 1,820
Convertible debt 97 - 97 1,379
Shares as security
for Class A
subordinate
voting share
employee
purchase loans 736
--------------------------------------------------------
Diluted $23,363 $ (923) $22,440 45,839 $ 0.51 $(0.02) $ 0.49
--------------------------------------------------------
--------------------------------------------------------
(1) Comparative share information has been adjusted to reflect the April
2005 2-for-1 stock split.
There were 22 million ordinary shares outstanding at July 31, 2005 and at
April 30, 2005, all of which are owned by the Company's majority
shareholder. The payment of dividends on these ordinary shares requires
minority shareholder approval which has never been requested or granted.
The shares also have no conversion rights in the hands of their holder.
Therefore, these ordinary shares have not been included in the
calculation of basic and diluted earnings per share.
-------------------------------------------------------------------------
9. Related party transactions
a) In the course of its regular business activities, the Company enters
into routine transactions with parties subject to significant
influence by the Company (most significantly Aero Contractors of
Nigeria) and, as well, parties affiliated with the controlling
shareholder. These transactions are measured at the amounts
exchanged, which is the amount of consideration determined and agreed
to by the related parties. Transactions with related parties for the
three-month periods ended July 31, 2005 and 2004 are summarized as
follows:
Three Months Ended
---------------------------
July 31, July 31,
2005 2004
---------------------------------------------------------------------
Revenues $ 14,198 $ 15,118
---------------------------------------------------------------------
Direct costs $ 38 $ 349
---------------------------------------------------------------------
Capital asset additions $ 1,434 $ 2,670
---------------------------------------------------------------------
---------------------------------------------------------------------
July 31, April 30,
2005 2005
---------------------------------------------------------------------
Net amounts receivable in respect of
such revenues, direct costs and capital
asset additions $ 17,115 $ 15,044
---------------------------------------------------------------------
---------------------------------------------------------------------
b) During fiscal 2000, in connection with securing tender credit
facilities, the Company received an unsecured, subordinated,
convertible 12% loan from an affiliate of the controlling shareholder
in the amount of $5.0 million. This loan is subordinated to the
Company's senior credit facilities and its senior subordinated notes.
The loan is convertible into Class A subordinate voting shares at
$3.63 per share. The estimated value of the loan proceeds
attributable to the conversion feature of $1.0 million was allocated
to contributed surplus. The equivalent reduction in the carrying
value of the loan is amortized to earnings over the term of the loan.
Interest expense of $0.2 million (2005 - $0.2 million), including
amortization of the above noted discount, was recorded on the loan
during the three month period ended July 31, 2005.
-------------------------------------------------------------------------
10. Supplementary cash flow information
Cash interest paid during the quarter was $14.7 million (2005 -
$2.5 million) and cash taxes paid was $1.9 million (2005 - $2.7 million).
-------------------------------------------------------------------------
11. Guarantees
The Company has given guarantees to certain lessors in respect of
operating leases. If the Company fails to meet the senior credit
facilities' financial ratios or breaches any of the covenants of those
facilities and, as a result, the senior lenders accelerate debt
repayment, the leases provide for a cross-acceleration that could give
the lessors and financial institutions that are lenders to those lessors
the right to terminate the leases and require return of the aircraft and
payment of the present value of all future lease payments and certain
other amounts. If the realized value of the aircraft is insufficient to
discharge the obligations due to those lessors in respect of the present
value of the future lease payments, those lessors' lenders could obtain
payment of that deficiency from the Company under these guarantees.
The Company has provided limited guarantees to third parties under some
of its operating leases relating to a portion of the aircraft values at
the termination of the leases. The leases have terms expiring between
2006 and 2013. The Company's exposure under the asset value guarantees
including guarantees in the form of junior loans, loans receivable and
deferred payments is approximately $50.1 million at July 31, 2005
compared to $51.9 million at April 30, 2005. The resale market for the
aircraft type for which the Company has provided guarantees remains
strong and, as a result, the Company does not anticipate incurring any
liability or loss with respect to these guarantees.
-------------------------------------------------------------------------
12. Contingent liability
The Company entered into a contract that required the deployment of new
aircraft during the fourth quarter of the prior fiscal year. This
contract commitment was not met due to the late delivery of the aircraft
by the manufacturer. The Company was able to substitute aircraft to meet
the customer's flying needs. However, the customer believes it is
entitled to compensation for the delay. The Company's interpretation of
the contract is that no compensation is payable. The customer and the
Company continue with discussions to resolve this issue however, the
potential outcome and amount of any settlement are presently unknown. As
a result, no amounts have been accrued in relation to this issue as at
July 31, 2005.
-------------------------------------------------------------------------
13. Reconciliation to accounting principles generally accepted in the
United States
In certain respects, Canadian GAAP differs from U.S. GAAP. If U.S. GAAP
were employed, the consolidated statements of earnings for the periods
indicated would be adjusted as follows:
Three Months Ended
---------------------------
July 31, July 31,
2005 2004
-------------------------------------------------------------------------
Net earnings according to Canadian GAAP $ 18,253 $ 22,343
Pre-operating expenses 1,187 (433)
Tax impact of pre-operating expenses (398) 257
Gain on derivative instruments
and hedging activities 23,378 3,327
Tax impact of gain on derivative instruments
and hedging activities (4,063) (444)
Internal use software expenses 80 (94)
Tax impact of internal use software expenses (25) 43
Amortization of guarantees recognized (202) (144)
Tax impact of amortization of
guarantees recognized 55 75
Other, net of tax 11 16
---------------------------
Net earnings according to U.S. GAAP 38,276 24,946
Other comprehensive earnings, net of income tax
Foreign currency translation adjustment (50,770) (22,274)
Minimum pension liability adjustment 18,798 (28,318)
Tax impact of minimum
pension liability adjustment (5,744) 8,458
Foreign currency cash flow hedge adjustment 3,151 (1,241)
Tax impact of foreign currency
cash flow hedge adjustment (1,151) 339
Other, net of tax 381 206
---------------------------
Comprehensive earnings (loss)
according to U.S. GAAP $ 2,941 $ (17,884)
---------------------------
---------------------------
Net earnings per share according to U.S. GAAP
Basic $ 0.91 $ 0.60
---------------------------
---------------------------
Diluted $ 0.83 $ 0.55
---------------------------
---------------------------
The consolidated balance sheet would vary in some respects when restated
for U.S. GAAP purposes. The most significant variances pertaining to the
July 31, 2005 balance sheet are listed below:
- Current assets would decrease by $7.3 million to record the current
prepaid portion of asset value guarantees and the fair value impact of
forward foreign currency contracts.
- Property and equipment would increase by $1.1 million to record
acquisition and amortization differences.
- Long-term investments would increase by $2.1 million to adjust
available-for-sale securities to fair market value.
- Other assets would decrease by $27.9 million to recognize minimum
pension liability adjustment and the pre-operating costs adjustment,
offset by the prepaid portion of asset value guarantees.
- Future income tax assets would increase by $15.3 million to tax-effect
adjustments to net earnings and comprehensive earnings under U.S.
GAAP.
- Current liabilities would decrease by $5.9 million to recognize the
fair value impact of the foreign currency contracts.
- Other liabilities would increase by $47.3 million to recognize the
minimum pension liability adjustment, foreign currency translation
adjustments related to hedged long-term debt and currency swaps
recorded in comprehensive earnings, asset value guarantees, and
foreign currency indemnity agreements.
- Future income tax liabilities would decrease by $8.3 million to tax-
effect adjustments to net earnings and comprehensive income under
U.S. GAAP.
- Long-term debt would increase by $0.4 million to record the full
proceeds received from the issuance of convertible debt, and
contributed surplus would decrease by $1.0 million.
- Foreign currency translation adjustment would be eliminated and
accumulated other comprehensive losses would be recorded at
$109.9 million under U.S. GAAP for foreign currency translation,
minimum pension liability, foreign currency cash flow hedges and other
adjustments.
-------------------------------------------------------------------------
14. Subsequent event
On September 9, 2005 the Company sold its remaining interest in Canadian
Helicopters Limited ("CHL") and realized net proceeds of approximately
$48.3 million. The Company will record a combined pre-tax gain and
dividend income of approximately $20 million on this divestiture. The
final gain on sale is subject to adjustments of closing costs and
expenses and equity accruals from July 31, 2005 to the date of sale.
Equity earnings of CHL were $1.7 million for the first quarter of the
current fiscal year and the carrying value of the investment in CHL was
$28.3 million at July 31, 2005.
-------------------------------------------------------------------------
END FIRST AND FINAL ADD
DATASOURCE: CHC Helicopter Corporation
CONTACT: PR Newswire -- Sept. 13