/FIRST AND FINAL ADD - TO143 - CHC Helicopter Corporation Earnings
CHC Helicopter Corporation Consolidated Balance Sheets Unaudited
(in thousands of Canadian dollars) Incorporated under the laws of
Canada As at -------------------------- April 30, January 31, 2004
2005 (Note 4)
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Assets Current assets Cash and cash equivalents $ 65,075 $ 67,093
Receivables 206,276 183,590 Future income tax assets 12,511 12,816
Inventory (Note 4) 198,448 203,365 Prepaid expenses 7,808 11,245
Assets of discontinued operations (Note 8) 12,283 28,937
-------------------------- $ 502,401 $ 507,046 Property and
equipment, net (Notes 3 and 4) 810,041 714,245 Investments 60,564
49,728 Intangible assets (Note 7) 7,268 - Goodwill (Note 7) 8,210 -
Other assets 209,788 172,879 Future income tax assets 42,101 44,312
Assets of discontinued operations (Note 8) 4,318 26,513
-------------------------- $ 1,644,691 $ 1,514,723
-------------------------- -------------------------- Liabilities
and shareholders' equity Current liabilities Payables and accruals
$ 162,662 $ 169,329 Deferred revenue 9,046 7,219 Dividend payable
9,606 5,194 Income taxes payable 18,148 6,328 Future income tax
liabilities 2,356 2,212 Current portion of debt obligations 46,457
38,046 Liabilities of discontinued operations (Note 8) 3,940 23,856
-------------------------- $ 252,215 $ 252,184 Long-term debt (Note
11b) 262,190 133,305 Senior subordinated notes 309,500 342,675
Other liabilities 159,878 139,779 Future income tax liabilities
179,734 179,188 Liabilities of discontinued operations (Note 8)
3,681 5,880 Shareholders' equity 477,493 461,712
-------------------------- $ 1,644,691 $ 1,514,723
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See accompanying notes CHC Helicopter Corporation Consolidated
Statements of Earnings Unaudited (in thousands of Canadian dollars,
except per share amounts) Three Months Ended Nine Months Ended
------------------------------------------------ January 31,
January 31, January 31, 2004 January 31, 2004 2005 (Note 4) 2005
(Note 4)
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Revenue $ 226,127 $ 168,941 $ 676,898 $ 510,574 Operating expenses
(183,746) (138,998) (547,250) (421,676)
----------------------------------------------- Earnings before
undernoted items 42,381 29,943 129,648 88,898 Amortization (8,147)
(6,080) (22,549) (17,733) Gain on disposals of assets 2,536 1,393
3,589 1,991 Financing charges (Note 11a) (10,227) (10,499) (28,442)
(21,405) Equity in earnings of associated companies 262 80 6,129
3,856 Restructuring and debt settlement costs (Note 12) (4,533)
(5,889) (10,847) (9,705)
----------------------------------------------- Earnings before
income taxes from continuing operations 22,272 8,948 77,528 45,902
Non-controlling interest (185) (167) Income tax (provision)
recovery (4,750) 1,074 (20,740) (5,465)
----------------------------------------------- Net earnings from
continuing operations 17,337 10,022 56,621 40,437 Net earnings
(loss) from discontinued operations (Note 8) 5,451 (992) (12,828)
(2,185) ----------------------------------------------- Net
earnings $ 22,788 $ 9,030 $ 43,793 $ 38,252
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Earnings (loss) per share (Note 14) Basic Net earnings from
continuing operations $ 0.83 $ 0.47 $ 2.70 $ 1.92 Net earnings
(loss) from discontinued operations 0.26 (0.04) (0.61) (0.10) Net
earnings 1.09 0.43 2.09 1.82 Diluted Net earnings from continuing
operations $ 0.76 $ 0.44 $ 2.48 $ 1.80 Net earnings (loss) from
discontinued operations 0.24 (0.04) (0.56) (0.09) Net earnings 1.00
0.40 1.92 1.71
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See accompanying notes CHC Helicopter Corporation Consolidated
Statements of Shareholders' Equity Unaudited (in thousands of
Canadian dollars, except per share amounts) Nine Months Ended
-------------------------- January 31, January 31, 2005 2004
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Retained earnings, beginning of period $ 229,866 $ 177,862 Net
earnings 43,793 38,252 Dividends (12,805) (10,486)
-------------------------- Retained earnings, end of period 260,854
205,628 Capital stock (Note 13) 239,360 239,361 Contributed surplus
(Note 13) 3,291 3,291 Foreign currency translation adjustment
(26,012) (20,858) -------------------------- Total shareholders'
equity $ 477,493 $ 427,422
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Dividends declared per participating voting share $ 0.60 $ 0.50
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See accompanying notes CHC Helicopter Corporation Consolidated
Statements of Cash Flows - Unaudited (in thousands of Canadian
dollars) Three Months Ended Nine Months Ended
----------------------------------------------- January 31, January
31, January 31, January 31, 2005 2004 2005 2004
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Operating activities Net earnings from continuing operations $
17,337 $ 10,022 $ 56,621 $ 40,437 Non-operating items and items not
involving cash: Amortization 8,147 6,080 22,549 17,733 Amortization
of major components recorded as operating expense (Note 4) 16,175
13,752 53,633 47,448 Gain on disposals of assets (2,536) (1,393)
(3,589) (1,991) Equity in earnings of associated companies (262)
(80) (6,129) (3,856) Future income taxes 3,666 (4,744) 14,946
(6,514) Defined benefit pension plans 3,298 4,301 10,088 15,282
Amortization of contract credits and deferred gains (3,355) (757)
(10,918) (2,422) Non-cash financing charges 2,717 1,020 3,126 2,699
Advance aircraft rental payments 820 (5,378) (5,815) (9,755) Other
322 1,153 (976) 35 ---------------------------------------------
46,329 23,976 133,536 99,096 Change in non-cash working capital
(20,281) 477 (24,377) (27,098)
--------------------------------------------- Cash flow from
operations 26,048 24,453 109,159 71,998
--------------------------------------------- Financing activities
Long-term debt proceeds (Note 11b) 100,369 - 184,822 8,722
Long-term debt repayments (13,231) (16,881) (46,462) (22,506)
Dividends paid (3,199) (2,635) (8,394) (2,635) Capital stock issued
100 1,995 984 2,398 Deferred financing costs (2,142) - (2,706) -
Other 98 - (1,765) (723)
--------------------------------------------- 81,995 (17,521)
126,479 (14,744) ---------------------------------------------
Investing activities Property and equipment additions (48,318)
(53,338) (168,122) (100,800) Helicopter major inspections (4,627)
(952) (11,928) (5,469) Helicopter components (Note 4) (15,724)
(15,548) (52,576) (39,771) Proceeds from disposal of assets 6,806
70,579 77,974 89,780 Aircraft deposits (23,747) 5,300 (57,438)
(9,700) Investments in subsidiaries, net (Note 7) (3,011) -
(17,984) - Restricted cash (3,881) (2,995) (3,849) (2,995) Other 61
(6,126) (5,027) (2,888)
--------------------------------------------- (92,441) (3,080)
(238,950) (71,843) ---------------------------------------------
Effect of exchange rate changes on cash and cash equivalents (196)
2,508 (3,292) 1,196 ---------------------------------------------
Change provided by (used in) continuing operations 15,406 6,360
(6,604) (13,393) Change provided by (used in) discontinued
operations 5,951 (1,781) 4,586 (2,454)
--------------------------------------------- Change in cash and
cash equivalents during the period 21,357 4,579 (2,018) (15,847)
Cash and cash equivalents, beginning of period 43,718 37,678 67,093
58,104 --------------------------------------------- Cash and cash
equivalents, end of period $ 65,075 $ 42,257 $ 65,075 $ 42,257
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See accompanying notes CHC Helicopter Corporation Notes to the
Unaudited Consolidated Interim Financial Statements For the periods
ended January 31, 2005 and 2004 (Unless otherwise indicated,
tabular amounts in thousands of Canadian dollars, except per share
amounts) 1. Basis of presentation These unaudited consolidated
interim financial statements (the 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 ("Canadian GAAP") and are in
accordance with generally accepted accounting principles in the
United States ("U.S. GAAP") except as described in Note 18. Not all
disclosures required by Canadian GAAP and U.S. GAAP for annual
financial statements are presented and thus the Statements should
be read in conjunction with the Company's annual audited
consolidated financial statements. In the opinion of management,
any adjustments considered necessary for a fair presentation have
been included. The Statements follow the same accounting policies
and methods of application as the most recent annual audited
consolidated financial statements for the fiscal year ended April
30, 2004, except as disclosed in Note 2 with respect to hedging
relationships and derivatives. Financial results for the three and
nine months ended January 31, 2005 are not necessarily indicative
of financial results for the full year. In addition to the impact
of seasonality on the Company's revenue and net earnings, there are
seasonal variations in earnings related to the Company's 42.75%
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.
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2. Change in accounting policies Hedging relationships and
derivatives Effective May 1, 2004, the Company prospectively
adopted Canadian Accounting Guideline 13 (AcG 13), with respect to
hedging relationships as it relates to the identification,
designation, documentation and effectiveness of hedging
relationships for the purpose of applying hedge accounting. The
Company also adopted at May 1, 2004, the Canadian Emerging Issues
Committee Abstract 128 ("EIC 128"). Under EIC 128, if a derivative
financial instrument is not part of a qualifying hedging
relationship, the Company is required to record such instrument on
the balance sheet at fair value, with changes in fair value
recognized in current earnings. The Company has not applied AcG 13
or EIC 128 retroactively.
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3. Change in accounting estimates Effective May 1, 2004, based on
the Company's review of its amortization policy with respect to
aircraft airframes, the percentage of aircraft cost attributable to
certain airframes has been decreased from 30% to 25% and the
estimated useful life of such airframes has been increased from 15
years to 25 years. The effect of these accounting estimate changes
has been accounted for prospectively in fiscal 2005 resulting in a
decrease in amortization for the three and nine months ended
January 31, 2005 of $0.9 million and $2.6 million respectively.
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4. Comparative figures Certain comparative figures have been
reclassified to conform to the current period's presentation. The
most significant changes include: a) The reclassification of $52.4
million of inventory at April 30, 2004 to property and equipment.
This reclassification relates to certain inventory items on hand in
the Company's repair and overhaul segment that are intended to be
used and capitalized with respect to future internal major repair
and overhaul work; b) The reclassification in the consolidated
statements of cash flows for the three and nine months ended
January 31, 2004 of the $13.8 million and $47.4 million
respectively for the non cash impact of the amortization of major
components recorded as operating expense from 'helicopter
components' in investing activities to items not involving cash in
operating activities; and c) The comparative consolidated balance
sheet, statements of earnings and cash flows have been reclassified
to reflect the results of businesses held for sale (discontinued
operations) consistent with the current years presentation (Note
8).
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5. Variable interest entities At January 31, 2005 the Company
operated 21 aircraft under operating leases with eight entities
that would be considered variable interest entities ("VIEs") under
Canadian and U.S. GAAP. These leases have terms and conditions
similar to those of the Company's other operating leases over
periods ranging from 2005 to 2011. At April 30, 2003 U.S. GAAP (per
FASB Interpretation No. 46 ("FIN 46")), was effective for all VIEs
created after January 31, 2003 and was effective for those VIEs
created prior to January 31, 2003 for the Company's interim period
which commenced November 1, 2003. The Canadian guidance ("AcG 15")
applies to all annual and interim periods beginning on or after
November 1, 2004 and is essentially consistent with the provisions
contained in U.S. GAAP with regard to the disclosure and
consolidation requirements for VIEs. As at January 31, 2005, under
FIN 46, the revisions under FIN 46 R and AcG 15, the Company has
concluded it is not the primary beneficiary of any of the
aforementioned VIEs and that it is not required to consolidate any
of these VIEs in its consolidated financial statements. The
application of FIN 46, FIN 46 R and AcG 15 has not had any impact
on the Company's consolidated financial statements. Based on
appraisals by independent helicopter valuation companies as at
April 30, 2004, the estimated fair market value of the aircraft
leased from VIEs is $210.5 million as at January 31, 2005. The
Company has provided junior loans, advance rentals and asset value
guarantees in connection with operating leases with these VIEs. The
Company's maximum exposure to loss related to the junior loans and
asset value guarantees as a result of its involvement with the VIEs
was $9.2 million as at January 31, 2005.
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6. Cash flow information Cash interest paid and cash taxes paid
were as follows: Three Months Ended Nine Months Ended
----------------------------------------------- January 31, January
31, January 31, January 31, 2005 2004 2005 2004
----------------------------------------------- Cash interest paid
$ 14,676 $ 11,689 $ 20,350 $ 25,297 Cash taxes paid $ 3,920 $ 2,027
$ 9,290 $ 6,283
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7. Acquisitions On January 13th, 2005 the Company acquired the
assets and capabilities of Coulson Aero Technologies Ltd.
("Coulson"), a British Columbia based helicopter component and
turbine engine maintenance repair and overhaul ("MRO") provider. On
August 17, 2004, the Company also acquired 100% of the shares of
Multifabs Survival Ltd. ("Multifabs"), an Aberdeen based company
specializing in the production of cold water survival suits for
military forces, emergency services and offshore oil and gas
companies around the world, and on September 23, 2004, a majority
of the shares of Aero Turbine Support Ltd. ("ATSL"). ATSL is an
independent aircraft engine repair and overhaul company servicing
General Electric CT58/T58 and Pratt & Whitney Canada, PT6T
turboshaft engines. The total purchase price to acquire these
companies, assets, capabilities and associated contracts was $21.3
million, including the assumption of debt. These acquisitions were
financed through existing operating facilities. These acquisitions
were accounted for using the purchase method with results of
operations included in the consolidated financial statements from
the acquisition dates. Under the purchase method of accounting, the
total estimated purchase price is allocated to the assets acquired
and liabilities assumed based on their estimated fair market values
as of the date of the completion of the acquisition. The following
purchase price allocations are preliminary and have been allocated
based on an estimate of the fair market values of the assets
acquired and the liabilities assumed. The purchase price will
remain preliminary until (i) a third party valuation of property
and equipment, investments and significant intangible assets
acquired is completed, (ii) a detailed review of the future income
tax assets and liabilities is conducted, and (iii) the fair value
of other assets and liabilities acquired is evaluated. The final
determination of the purchase price allocation may differ
significantly from the preliminary amounts presented. Based on the
preliminary valuation, the purchase price was allocated based on
the fair value of the net identifiable assets acquired as at the
date of acquisition as follows: ATSL & Coulson Multifabs Total
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Cash $ 860 $ 4 $ 864 Other current assets 1,780 4,730 6,510
Intangible assets(1) 1,577 5,691 7,268 Goodwill(2) 542 7,668 8,210
Property and equipment 2,612 1,810 4,422 Current liabilities
(1,083) (2,108) (3,191) Long-term debt - (2,498) (2,498) Other
liabilities - (670) (670) Non-controlling interest (240) - (240)
Future income tax liabilities (337) (1,490) (1,827)
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$ 5,711 $ 13,137 $ 18,848
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(1) Of the $7.3 million of acquired intangible assets, $3.8 million
was assigned to customer contracts and relationships, $2.2 million
for patents and registered designs and $1.3 million to other
intangibles. The intangible assets will be amortized on a straight
line basis over their estimated useful lives ranging from 4 15
years. (2) Goodwill of $8.2 million is not expected to be
deductible for tax purposes and is related to businesses included
in the Repair and overhaul segment.
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8. Businesses held for sale (discontinued operations) In the three
months ended January 31, 2005 the Company sold two non-core
components of the Schreiner business segment legally operating as
Schreiner Target Services Canada Ltd. ("Schreiner Canada") and
Schreiner Aircraft Maintenance B.V. ("SAMCO") and realized a net
gain on sale of $7.5 million. The potential sale of the remaining
business held for sale, CHC Composites Inc. ("Composites"), is
contingent on the acceptance of certain terms and conditions by the
Government of Newfoundland and Labrador. Proceeds and any resulting
gain or loss on the potential sale of Composites will be impacted
by closing date working capital, net total debt and other
adjustments. 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 January 31, 2005. The
assets and liabilities of this business were measured at the lower
of their carrying amounts and their estimated fair value less costs
to sell which have been benchmarked against sale proceeds estimated
from the current proposed sale transaction. As a result, a fair
value adjustment in the second quarter of the current fiscal year
was recorded and allocated to long term assets 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 changes. The second quarter fair value adjustment on
Composites and the gain on sale of Schreiner Canada and SAMCO have
been recorded in earnings from discontinued operations along with
operating results from these discontinued businesses. 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 the businesses held for sale (discontinued operations) included
in the consolidated financial statements: As at
----------------------- January 31, April 30, 2005 2004
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Assets Receivables $ 5,374 $ 10,138 Future income tax assets -
6,139 Inventory 6,499 11,782 Prepaid expenses 410 878
----------------------- 12,283 28,937 Property and equipment, net
4,318 18,789 Intangible assets - 4,678 Future income tax assets -
3,046 ----------------------- Total assets of discontinued
operations 16,601 55,450 ----------------------- Liabilities
Payables and accruals 3,940 23,856 Other liabilities 3,681 4,172
Future income tax liabilities - 1,708 ----------------------- Total
liabilities of discontinued operations 7,621 29,736
----------------------- Net assets of discontinued operations $
8,980 $ 25,714
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Three Months Ended Nine Months Ended
----------------------------------------------- January 31, January
31, January 31, January 31, 2005 2004 2005 2004
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Revenue $ 4,765 $ 1,848 $ 19,359 $ 4,689
--------------------------------------------- Net earnings (loss)
from discontinued operations(1) $ 5,451 $ (992) $(12,828) $ (2,185)
--------------------------------------------- (1) Includes a net
gain on disposal of $7.5 million for the current fiscal year
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9. Segment information The Company's operations are segregated into
five reportable segments. The segments are European flying,
International flying, Schreiner, Repair and overhaul and Corporate
and other. Three Months Ended January 31, 2004
----------------------------------------------------------- Repair
Corporate European Int'l and and flying flying Schreiner overhaul
other (2) (3) (4) (5) (6) Total --------- --------- ---------
--------- --------- --------- Total revenue $ 114,103 $ 61,442 $
37,303 $ 59,117 $ 4,245 $ 276,210 Less: Inter- segment revenues
5,990 1,995 - 37,853 4,245 50,083 --------- --------- ---------
--------- --------- --------- Revenue from external customers
108,113 59,447 37,303 21,264 - 226,127 Operating expenses 91,511
47,165 30,097 9,846 5,127 183,746 --------- --------- ---------
--------- --------- --------- Segment EBITDA(1) $ 16,602 $ 12,282 $
7,206 $ 11,418 $ (5,127) 42,381 --------- --------- ---------
--------- ---------- --------- --------- --------- ---------
---------- Amortization (8,147) Gain on disposals of assets 2,536
Financing charges (10,227) Equity in earnings of associated
companies 262 Restructuring and debt settlement costs (4,533)
---------- Earnings before income taxes from continuing operations
22,272 Non-controlling interest (185) Income tax recovery
(provision) (4,750) ---------- Net earnings from continuing
operations $ 17,337 ---------- Three Months Ended January 31,
2004(7)
------------------------------------------------------------ Repair
Corporate European Int'l and and flying flying Schreiner overhaul
other (2) (3) (4) (5) (6) Total --------- --------- ---------
--------- --------- ---------- Total revenue $ 108,877 $ 51,716 $ -
$ 50,805 $ 3,319 $ 214,717 Less: Inter- segment revenues 4,181
2,732 - 35,544 3,319 45,776 --------- --------- --------- ---------
--------- ---------- Revenue from external customers 104,696 48,984
- 15,261 - 168,941 Operating expenses 90,208 41,501 - 3,965 3,324
138,998 --------- --------- --------- --------- ---------
---------- Segment EBITDA(1) $ 14,488 $ 7,483 $ - $ 11,296 $
(3,324) 29,943 --------- --------- --------- --------- ----------
--------- --------- --------- --------- ---------- Amortization
(6,080) Gain on disposals of assets 1,393 Financing charges
(10,499) Equity in earnings of associated companies 80
Restructuring and debt settlement costs (5,889) ---------- Earnings
before income taxes from continuing operations 8,948 Income tax
recovery (provision) 1,074 ---------- Net earnings from continuing
operations $ 10,022 ---------- Nine Months Ended January 31, 2005
------------------------------------------------------------ Repair
Corporate European Int'l and and flying flying Schreiner overhaul
other (2) (3) (4) (5) (6) Total --------- --------- ---------
--------- --------- ---------- Total revenue $ 351,276 $ 181,012 $
118,235 $ 160,563 $ 13,378 $ 824,464 Less: Inter- segment revenues
17,464 9,053 - 107,671 13,378 147,566 --------- --------- ---------
--------- --------- ---------- Revenue from external customers
333,812 171,959 118,235 52,892 - 676,898 Operating expenses 275,111
139,273 93,964 21,518 17,384 547,250 --------- --------- ---------
--------- --------- ---------- Segment EBITDA(1) $ 58,701 $ 32,686
$ 24,271 $ 31,374 $ (17,384) 129,648 --------- --------- ---------
--------- ---------- --------- --------- --------- ---------
---------- Amortization (22,549) Gain on disposals of assets 3,589
Financing charges (28,442) Equity in earnings of associated
companies 6,129 Restructuring and debt settlement costs (10,847)
---------- Earnings before income taxes from continuing operations
77,528 Non-controlling interest (167) Income tax recovery
(provision) (20,740) ---------- Net earnings from continuing
operations $ 56,621 ---------- Nine Months Ended January 31,
2004(7)
------------------------------------------------------------ Repair
Corporate European Int'l and and flying flying Schreiner overhaul
other (2) (3) (4) (5) (6) Total --------- --------- ---------
--------- --------- ---------- Total revenue $ 340,073 $ 147,537 $
- $ 140,075 $ 9,884 $ 637,569 Less: Inter- segment revenues 11,809
8,226 - 97,076 9,884 126,995 --------- --------- ---------
--------- --------- ---------- Revenue from external customers
328,264 139,311 - 42,999 - 510,574 Operating expenses 275,276
118,671 - 11,960 15,769 421,676 --------- --------- ---------
--------- --------- ---------- Segment EBITDA(1) $ 52,988 $ 20,640
$ - $ 31,039 $ (15,769) 88,898 --------- --------- ---------
--------- ---------- --------- --------- --------- ---------
---------- Amortization (17,733) Gain on disposals of assets 1,991
Financing charges (21,405) Equity in earnings of associated
companies 3,856 Restructuring and debt settlement costs (9,705)
---------- Earnings before income taxes from continuing operations
45,902 Income tax recovery (provision) (5,465) ---------- Net
earnings from continuing operations $ 40,437 ---------- Notes: 1.
Segment EBITDA is defined as segment earnings before amortization,
gain (losses) on disposals of assets, financing charges, equity in
earnings (losses) of associated companies, restructuring and debt
settlement costs, and income taxes. 2. European flying includes
flying operations in the U.K., Norway, Ireland and Denmark. 3.
International flying includes operations in Australia, Africa and
Asia and offshore work in eastern Canada and in other locations
around the world. 4. Schreiner includes flying operations primarily
in the Netherlands, Africa and Asia and includes other ancillary
businesses including aircraft parts sales. 5. Repair and overhaul
includes helicopter repair and overhaul operations based in Norway,
Scotland, and Canada and the survival suit and safety equipment
production businesses. 6. Corporate and other includes corporate
head office activities and applicable consolidation eliminations.
7. Comparative information has been reclassified to reflect the
results of businesses held for sale (discontinued operations) (Note
8).
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10. Employee pension plans The Company maintains either defined
benefit or defined contribution pension plans for substantially all
of its employees. Selected summary information about the Company's
defined benefit pension plans as at January 31, 2005 and April 30,
2004, was as follows: As at ------------------------ January 31,
April 31, 2005 2004 ------------------------ Benefit obligations $
542,276 $ 543,906 ------------------------ Fair value of plan
assets 455,799 $ 440,222 ------------------------ Funded status
Defined benefit plans - funded(1) $ (43,199) $ (67,045) Defined
benefit plans - unfunded(2) (43,278) (36,639)
------------------------ Total (86,477) (103,684) Unrecognized net
actuarial and experience losses, prior service costs and transition
amounts 123,951 152,826 Pension guarantee deposits 2,630 2,696
------------------------ Net asset recognized on the balance sheet
$ 40,104 $ 51,838 ------------------------ ------------------------
(1) Funded plans require contributions to be made by the Company.
(2) Unfunded plans do not require contributions from the Company Of
the net asset recognized on the balance sheet at January 31, 2005,
$80.0 million (April 30, 2004 - $90.1 million) related to the
funded plans was recorded in other assets, and $39.9 million (April
30, 2004 - $38.3 million) related to the funded and unfunded plans
was recorded as an accrued pension obligation in other liabilities.
The Company's net defined benefit pension plan expense for the
periods ended January 31, 2005 was as follows: Three months ended
Nine Months Ended -----------------------------------------------
January January January January 31, 2005 31, 2004 31, 2005 31, 2004
----------------------------------------------- Current service
cost $ 5,053 $ 3,571 $ 14,654 $ 10,610 Interest costs 7,186 5,860
21,776 17,517 Expected return on plan assets (7,137) (5,228)
(21,649) (15,597) Amortization of net actuarial and experience
losses 1,955 1,130 6,009 3,378 Participation contributions (915)
(298) (2,787) (762) -----------------------------------------------
Total $ 6,033 $ 6,594 $ 17,880 $ 19,755
-----------------------------------------------
----------------------------------------------- Employer
contributions expected to be paid to the defined benefit pension
plans during fiscal 2005 as required by funding regulations and law
is $33.6 million. While the asset mix varies in each plan, overall
the asset mix at January 31, 2005 was 42.5% equities, 32.1% fixed
income and 25.4% money market. The significant weighted average
actuarial assumptions adopted in measuring the Company's net
defined benefit pension plan expense year to date January 31, 2005
compared to fiscal 2004 was as follows: Nine Months Ended January
31, 2005 January 31, 2004
--------------------------------------------- Discount rate 5.73%
5.78% Expected long-term rate of return on plan assets 6.74% 6.95%
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11. Financing Charges a) Three Months Ended Nine Months Ended
----------------------------------------------- January January
January 31, 2004 January 31, 2004 31, 2005 (Note 4) 31, 2005 (Note
4) ----------------------------------------------- Interest on debt
obligations $ 8,392 $ 8,058 $ 24,165 $ 22,736 Amortization of
deferred financing costs 780 786 2,347 2,358 Foreign exchange
(gain) loss from operating activities and working capital
revaluation (76) 5,725 1,123 7,978 Foreign exchange loss (gain) on
debt repayment - 71 - (1,436) Foreign exchange loss (gain) on
revaluation of long-term debt 732 (5) 354 (5) Foreign exchange gain
on foreign currency agreement - (3,745) - (9,781) Other 399 (391)
453 (445) ----------------------------------------------- Total $
10,227 $ 10,499 $ 28,442 $ 21,405
----------------------------------------------- b) During the
quarter the Company agreed to the terms of revised senior credit
facilities to replace the existing facilities that were due to
mature in July 2005. The terms of the revised senior credit
facilities provide for increased flexibility in both financial and
non-financial covenants, extensions of the maturity dates for
periods of three to five years, lower interest rates and increased
borrowing limits.
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12. Restructuring and debt settlement costs a) Restructuring costs
During the three and nine month periods ended January 31, 2005, the
Company incurred restructuring costs of $3.9 million (after tax
$2.8 million) and $8.9 million (after tax $6.1 million)
respectively in connection with restructuring activities outside of
those incurred the prior fiscal year. These restructuring costs
relate to general organization restructure planning, relocation of
the Company's head office to Vancouver, Canada and additional costs
associated with related restructuring initiatives incurred
primarily in the Corporate and other, European flying and Schreiner
segments. Restructuring costs were comprised of severance,
termination, relocation, consulting and other associated
incremental costs directly associated with these activities. Of the
$8.9 million incurred to date, $3.6 million relates to severance
and termination costs. Additional costs are expected to be incurred
in relation to these restructuring initiatives with the majority of
future costs relating to termination and severance costs in the
Netherlands, Norway and other jurisdictions. The timing and final
amount of these additional costs are dependent on a number of
factors that are not yet known or determinable and will be expensed
as incurred. During the three and nine months ended January 31,
2004 the Company incurred $5.9 million (after tax $4.2 million) and
$9.7 million (after- tax $6.8 million) in costs in connection with
the consolidation of its European operations and other related
activities. The following table provides a reconciliation of the
Company's restructuring cost accrual for the three month period
ended January 31, 2005: Restructuring accrued October 31, 2004 $
4,026 Additional restructuring cost accrued during the period 3,912
Restructuring cost paid during the period (4,650) -----------
Restructuring accrued January 31, 2005 $ 3,288 ----------- b) Debt
settlement costs During the three months ended January 31, 2005,
the Company incurred $0.6 million (after-tax, $0.4 million) of debt
settlement costs in connection with the revision of its senior
credit facilities. For the nine months ended January 31, 2005 the
Company incurred $1.9 million (after-tax $1.3 million) of debt
settlement costs in connection with the senior credit facility
revision and the redemption of its remaining 11 3/4% senior
subordinated notes and the remaining 8% subordinated debentures.
The debt settlement costs incurred in the current fiscal year were
comprised of premiums, professional fees, write-off of deferred
financing costs and other incremental costs directly associated
with debt settlement activities.
-------------------------------------------------------------------------
13. 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,
----------------------------------- January April January 31, 2005
30, 2004 31, 2004 ----------------------------------- Issued: Class
A subordinate voting shares 18,414 18,378 18,337 Class B multiple
voting shares 2,933 2,940 2,940 Ordinary shares 11,000 11,000
11,000 Class A subordinate voting shares that would be issued upon
Class B multiple voting shares 2,933 2,940 2,940 Share options
1,400 1,425 1,464 Convertible debt 690 690 690 Consideration 000's
As at ----------------------------------- January April January 31,
2005 30, 2004 31, 2004 ----------------------------------- Class A
subordinate voting shares $ 222,329 $ 221,532 $ 220,546 Class B
multiple voting shares 18,719 18,719 18,815 Ordinary shares 33,000
33,000 33,000 Share loan (33,000) (33,000) (33,000) Class A
subordinate voting shares Employee purchase loans (1,688) (1,823) -
----------------------------------- $ 239,360 $ 238,428 $ 239,361
----------------------------------- Contributed surplus $ 3,291 $
3,291 $ 3,291
-------------------------------------------------------------------------
-------------------------------------------------------------------------
14. Per share information Three Months Ended January 31, 2005
----------------------------------------------------------------
Weighted Net earnings Net earnings average per share
------------------------------- number of ----------------------
Cont. Disc. shares Cont. Disc. ops. ops. Total (000's) ops. ops.
Total
---------------------------------------------------------------- $
17,337 $ 5,451 $ 22,788 21,344 Shares as security for Class A
subordinate voting share employee purchase loans - - - (368)
---------------------------------------- Basic 17,337 5,451 22,788
20,976 $ 0.83 $ 0.26 $ 1.09 Effect of potential dilutive
securities: Share options 971 Convertible debt 96 - 96 690 Shares
as security for Class A subordinate voting share employee purchase
loans 368
----------------------------------------------------------------
Diluted $ 17,433 $ 5,451 $ 22,884 23,005 $ 0.76 $ 0.24 $ 1.00
----------------------------------------------------------------
----------------------------------------------------------------
Three Months Ended January 31, 2004
----------------------------------------------------------------
Weighted Net earnings Net earnings (loss) average (loss) per share
------------------------------- number of ----------------------
Cont. Disc. shares Cont. Disc. ops. ops. Total (000's) ops. ops.
Total
----------------------------------------------------------------
Basic $ 10,022 $ (992) $ 9,030 21,168 $ 0.47 $(0.04) $ 0.43 Effect
of potential dilutive securities: Share options 844 Convertible
debt 123 - 123 690 Anti- dilutive impact 10
----------------------------------------------------------------
Diluted $ 10,145 $ (992) $ 9,153 22,712 $ 0.44 $(0.04) $ 0.40
----------------------------------------------------------------
----------------------------------------------------------------
Nine Months Ended January 31, 2005
----------------------------------------------------------------
Weighted Net earnings Net earnings (loss) average (loss) per share
------------------------------- number of ----------------------
Cont. Disc. shares Cont. Disc. ops. ops. Total (000's) ops. ops.
Total
---------------------------------------------------------------- $
56,621 $ (12,828) $ 43,793 21,334 Shares as security for Class A
subordinate voting share employee purchase loans - - - (368)
--------------------------------------- Basic 56,621 (12,828)
43,793 20,966 $ 2.70 $(0.61) $ 2.09 Effect of potential dilutive
securities: Share options 952 Convertible debt 287 - 287 690 Shares
as security for Class A subordinate voting share employee purchase
loans 368
----------------------------------------------------------------
Diluted $ 56,908 $(12,828) $ 44,080 22,976 $ 2.48 $(0.56) $ 1.92
----------------------------------------------------------------
----------------------------------------------------------------
Nine Months Ended January 31, 2004
----------------------------------------------------------------
Weighted Net earnings Net earnings (loss) average (loss) per share
------------------------------- number of ----------------------
Cont. Disc. shares Cont. Disc. ops. ops. Total (000's) ops. ops.
Total
----------------------------------------------------------------
Basic $ 40,437 $ (2,185) $ 38,252 20,983 $ 1.92 $(0.10) $ 1.82
Effect of potential dilutive securities: Share options 908
Convertible debt 368 - 368 690 Anti- dilutive impact 55
----------------------------------------------------------------
Diluted $ 40,805 $ (2,185) $ 38,620 22,636 $ 1.80 $(0.09) $ 1.71
----------------------------------------------------------------
----------------------------------------------------------------
Per share amounts are calculated using the treasury stock method.
Under this method, the proceeds from the exercise of options are
assumed to be used to repurchase the Company's shares on the open
market. The difference between the number of shares assumed
purchased and the number of options assumed exercised is added to
the actual number of shares outstanding to determine diluted shares
outstanding for purposes of calculating diluted earnings per share.
Therefore, the number of shares in the diluted earnings per share
calculation will increase as the average share price increases.
There were 11 million ordinary shares outstanding at January 31,
2005 and at April 30, 2004, all of which are owned by the Company's
majority shareholder (See Note 13). 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.
-------------------------------------------------------------------------
15. Share option plan Effective May 1, 2003, the Company began
expensing share option awards using the fair value method. This
accounting change was applied prospectively in fiscal 2004 relating
to share options issued on or after May 1, 2003. There was no
impact on the financial results for the three and nine months ended
January 31, 2005 and January 31, 2004 as a result of adopting this
accounting policy change, as no new share options were granted
during these periods. The table below presents pro-forma net
earnings, basic earnings per share and diluted earnings per share
had the fair value method been used to account for share options.
These pro forma disclosures pertain to certain share options
granted in fiscal 2003 upon adoption of the new stock based
compensation standards May 1, 2002. There was no impact on the pro
forma earnings for the three and nine month period ended January
31, 2005 as all share options granted in fiscal 2003 had vested as
at April 30, 2004. Three Months Ended Nine months Ended
----------------------------------------------- January January
January January 31, 2005 31, 2004 31, 2005 31, 2004
----------------------------------------------- Net earnings As
reported $ 22,788 $ 9,030 $ 43,793 $ 38,252 Pro-forma 22,788 8,862
43,793 37,943 Basic earnings per share As reported $ 1.09 $ 0.43 $
2.09 $ 1.82 Pro-forma 1.09 0.42 2.09 1.81 Diluted earnings per
share As reported $ 1.00 $ 0.40 $ 1.92 $ 1.71 Pro-forma 1.00 0.39
1.92 1.68 The Black Scholes option pricing model was used to
estimate the fair value of options using the following estimates
and assumptions: Expected life 5 years Expected dividend yield 0.6%
Risk-free interest rate 5.0% Stock volatility 40.0% As at January
31, 2005 total outstanding options were 1,397,672 (January 31, 2004
- 1,463,972). At January 31, 2005 all of the share options
outstanding were exercisable (January 31, 2004 - 1,266,389). The
weighted average exercise price of the total outstanding options at
January 31, 2005 was $14.16 compared to $14.59 at January 31, 2004.
-------------------------------------------------------------------------
16. Related party transactions a) During fiscal 2000, as a
condition of securing tender credit facilities, the Company
received an unsecured, subordinated, convertible 12% loan from an
affiliate of the controlling shareholder in the amount of $5.0
million. This loan is subordinated to the Company's senior credit
facilities and its senior subordinated notes. The loan is
convertible into Class A subordinated voting shares at $7.25 per
share. The estimated value of the loan proceeds attributable to the
conversion feature of $951,000 was allocated to contributed
surplus. The equivalent reduction in the carrying value of the loan
is amortized to earnings over the term of the loan. Interest
expense of $180,000 (2004 - $176,000) and $540,000 (2004 -
$527,000) including amortization of the above noted discount, was
recorded on the loan during the three and nine month periods ended
January 31, 2005 and 2004 respectively. b) The Company uses
properties owned by companies affiliated with the controlling
shareholder for customer events, meetings, conferences and social
functions. Rent and usage fees of $132,000 (2004 - $135,000) and
$520,000 (2004 - $437,000) were incurred with these companies
during the three and nine month periods ended January 31, 2005 and
2004 respectively. These transactions were recorded at their
exchange amounts. c) During the three and nine month periods ended
January 31, 2005, $189,000 (2004 - $184,000) and $522,000 (2004 -
$885,000) respectively was paid to Canadian Helicopters Limited, in
which the Company has a 42.75% equity investment. These amounts
related to the provision of helicopter flying services to the
Company and were recorded at their exchange amounts. d) During
fiscal 2004, construction began on a new hangar and office building
in Vancouver, Canada. The construction project is being managed by
a subsidiary of a company owned by a relative of the Company's
controlling shareholder. Such subsidiary will receive a fee of 7%
of the building value to manage construction and cover certain
costs. During the three and nine months ended January 31, 2005,
$1.1 million (2004 - nil) and $6.6 million (2004 $1.1 million)
respectively, was paid for construction costs with such amount
being capitalized to fixed assets and recorded at its exchange
amount. e) The Company recorded for the three and nine months ended
January 31, 2005 $11.2 million and $37.7 million respectively in
revenue from ACN, in which the Company has a 40% equity investment.
Such revenue was primarily associated with the flying of aircraft
and related activities, sale of aircraft parts and amounts billed
under PBH contracts. These transactions were recorded at their
exchange amounts.
-------------------------------------------------------------------------
17. Guarantees The Company has provided limited guarantees to third
parties under some of its operating leases in connection with a
portion of the aircraft values at the termination of the leases.
The leases have terms expiring between 2005 and 2012. The Company's
exposure under the asset value guarantees including guarantees in
the form of junior loans and deferred payments was approximately
$25.9 million at January 31, 2005 compared to $25.5 million at
April 30, 2004. The resale market for the aircraft type for which
the Company has provided guarantees remains strong, and, as a
result, the Company does not anticipate incurring any liability or
loss with respect to these guarantees.
-------------------------------------------------------------------------
18. 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 Nine Months Ended
---------------------------------------------- January January
January January 31, 2005 31, 2004 31, 2005 31, 2004
-------------------------------------------------------------------------
Net earnings according to Canadian GAAP $ 22,788 $ 9,030 $ 43,793 $
38,252 Pre-operating expenses (1,127) (137) (1,828) 676 Loss (gain)
on sale of assets/amortization expense (14) (81) (42) 438
Ineffective portion of net investment hedge (10,871) (18,378)
Effect of foreign currency indemnity agreements 160 (2,859) (118)
(8,143) Effect of revaluation of US $ debt (2,595) 19,905 Effect of
asset value guarantees (23) 99 Effect of currency swaps (6,223)
(16,876) Internal-use software expenses 51 (51) 7 (103) Decrease in
income tax expense (2,676) 2,741 (230) 5,182 Other 66 109
----------------------------------------------- Net earnings (loss)
according to U.S. GAAP 10,407 (2,228) 44,819 17,924 Other
comprehensive earnings, net of income tax: Foreign currency
translation adjustment 22,703 8,087 (16,236) (16,974) Ineffective
portion of net investment hedge 6,020 Minimum pension liability
adjustment 180 951 5,980 30,022 Interest rate swap adjustment 4
1,957 Foreign currency cashflow hedge adjustment (2,178) 4,985 Fair
value adjustment of available-for-sale securities 2,227 1,178
Effect of equity forward price agreement 234 925
----------------------------------------------- Comprehensive
earnings according to U.S. GAAP $ 33,573 $ 6,814 $ 41,651 $ 38,949
-----------------------------------------------
----------------------------------------------- Basic net earnings
per share according to U.S. GAAP $ 0.50 ($0.11) $ 2.12 $ 0.85
-----------------------------------------------
----------------------------------------------- Diluted net
earnings per share according to U.S. GAAP 0.45 (0.09) 1.97 0.81
-----------------------------------------------
----------------------------------------------- The consolidated
balance sheet would vary in some respects when restated for U.S.
GAAP purposes. The most significant variances pertaining to the
January 31, 2005 balance sheet are listed below: - Current assets
would increase by $4.0 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 $1.7 million to record acquisition and amortization
differences. - Long-term investments would increase by $1.5 million
to adjust available-for-sale securities to fair market value. -
Other assets would decrease by $1.0 million to recognize the fair
value impact of asset value guarantees, pre-operating costs
adjustment, minimum pension liability adjustment, and the fair
value impact of forward foreign currency contracts. - Future income
tax assets would increase by $1.5 million to tax-effect adjustments
to net earnings and comprehensive earnings under U.S. GAAP and to
reverse tax changes not yet enacted. - Other liabilities would
increase by $0.2 million to recognize the minimum pension liability
adjustment, foreign currency translation adjustments related to
currency swaps recorded in comprehensive earnings, asset value
guarantees, and foreign currency indemnity agreements. - Future
income tax liabilities would decrease by $2.9 million to tax-
effect adjustments to net earnings and comprehensive income under
U.S. GAAP. - Long term debt would increase by $0.5 million to
record the full proceeds received from the issuance of convertible
debt. - Accumulated other comprehensive earnings would be recorded
at $(13.4) million under U.S. GAAP for foreign currency
translation, minimum pension liability, interest rate swap
adjustments, currency swap adjustments, the impact of the
ineffective portion of the net investment hedge, foreign currency
cash flow adjustment of available-for-sale securities.
-------------------------------------------------------------------------
END FIRST AND FINAL ADD DATASOURCE: CHC Helicopter Corporation
CONTACT: PR Newswire -- March 14
Copyright