MONTREAL, November 15, 2010 – Canadian Helicopters Income Fund (TSX: CHL.UN) (â€œthe Fundâ€), the largest helicopter transportation services company operating in Canada, today announced its financial and operating results for the third quarter ended September 30, 2010.
The Fund generated revenue of $54.8 million, stable in comparison with revenue of $54.9 million in the third quarter of 2009. Visual Flight Rules (VFR) revenue increased $6.3 million primarily due to revenues from aircraft contracted in Afghanistan, including the additional heavy aircraft contracted as part of supplemental work awarded in March 2010, as well as an increase in domestic operations due to greater activities in the utility and mining sectors. Instrument Flight Rules (IFR) revenue decreased by $7.7 million primarily resulting from the loss of the United States Transportation Command North Warning System operation and maintenance contract. Ancillary revenue, including the CFTS contract, grew $1.3 million primarily due to the consolidation of maintenance revenues from Heli-Welders and Nampa Valley Helicopters. Revenueflying hours decreased 3.6% to 21,572 hours.
EBITDA reached $20.3 million compared with $23.1 million a year earlier. The reduction reflects higher maintenance costs, including costs associated with ancillary revenues, such as repair and maintenance contracts and the maintenance businesses acquired earlier this year. Crew costs also increased due to the need to hire additional crew for the increased activities in Afghanistan. As a result, earnings before non-controlling interest were $14.4 million, or $1.10 per unit, versus $16.5 million, or $1.26 per unit, in the third quarter of 2009.
As a result of lower net earnings, cash flows related to operating activities before net changes in non-cash working capital balances decreased to $15.7 million, from $17.4 million a year earlier. Distributable cash amounted to $15.6 million, or $1.20 per unit, compared with $17.3 million, or $1.32 per unit, last year.
â€œThe continuing success of Canadian Helicopters’ contracted work in Afghanistan partially offset the loss of the North Warning System operation and maintenance contract but was not sufficient to offset it as well as some CFTS contract adjustments and higher maintenance expenses incurred during the quarter. The loss negatively affected profitability, but will no longer be a factor in comparing year-over-year results. Reflecting its solid position in the domestic marketplace and the flexibility of its operations, Canadian Helicopters was also able to respond to greater activity in the mining sector, mainly in Eastern Canada,â€ said Don Wall, President and Chief Executive Officer of Canadian Helicopters.
Once again, the Fund ended the quarter in a strong financial position with cash and cash equivalents of $31.2 million, up from $19.2 million at the end of the previous quarter, and unused debt facilities. As at September 30, 2010, the Fund had $15.0 million and $40.0 million available under its operating and term credit facilities, respectively, while combined cash and credit facilities amounted to $86.2 million.
For the first nine months of 2010, revenue reached $127.7 million, up 4.0% from $122.8 million in the corresponding period in 2009. VFR revenue increased $17.9 million primarily due to contracted work in Afghanistan. IFR revenue declined by $15.6 million as a result of the loss of the North Warning System operation and maintenance contract, and ancillary revenue increased $2.6 million primarily due to the consolidation of Heli-Welders and Nampa Valley Helicopters maintenance revenues since June 4, 2010. Revenue-flying hours decreased 3.3% to 45,685 hours.
EBITDA amounted to $32.1 million, up from $30.9 million a year earlier, while earnings before non-controlling interest totalled $23.6 million, or $1.81 per unit, versus $24.2 million, or $1.84 per unit, last year. Cash flows related to operating activities before net changes in non-cash working capital balances reached $27.7 million, up 10.8% from $25.0 million a year ago. Distributable cash stood at $27.6 million, or $2.11 per unit, compared with $26.1 million, or $1.99 per unit, last year.
â€œAs we look to year-end, we expect a relatively strong fourth quarter. The full ramp-up of the March 2010 contract award in Afghanistan will play a very significant role in our financial results. In addition, the third and most recent contract related to Afghanistan from the United States Transportation Command, awarded on October 1, 2010, is also scheduled to phase in during the coming quarter. This award, representing Canadian Helicoptersâ€™ largest contract since its initial public offering should all options be exercised and expected hours flown, promises to further augment our revenues during the first quarter of 2011, when full ramp up is scheduled. In addition, we are highly optimistic about the potential exercise of Option Year 2 of our initial contract in Afghanistan as well as the one-year renewal option of the additional work awarded last March. These options are both set to begin on December 1, 2010. In summary, we expect greater corporate revenue and EBITDA from Afghanistan than in previous periods with a larger impact on the more adverse seasonal Q4 and Q1 periods. Finally, we remain well positioned to sustain long-term growth by aggressively pursuing market opportunities given our strong balance sheet, solid reputation, as well as high-quality assets and personnel,â€ concluded Mr. Wall.
Canadian Helicopters will hold a conference call to discuss these results on November 12, 2010 at 11:00 AM (ET). Interested parties can join the call by dialing 647-427-7450 (Toronto) or 1-888-231-8191 (toll free). If you are unable to call at this time, you may access a tape recording of the meeting by calling 416-849-0833 (local) or 1-800-642-1687 (toll free) followed by access code 22709956 followed by #. This tape recording will be available until November 22, 2010.
ABOUT CANADIAN HELICOPTERS INCOME FUND
Through Canadian Helicopters Limited, Canadian Helicopters Income Fund is the largest helicopter transportation services company operating in Canada and one of the largest in the world based on the size of its fleet. With over 35 base locations across Canada, Canadian Helicopters provides helicopter services to a broad range of sectors, including emergency medical services, infrastructure maintenance, utilities, oil and gas, mining, forestry and construction. In addition to helicopter transportation services, Canadian Helicopters operates two flight schools, provides third party repair and maintenance services in Canada and provides military support in Afghanistan. With over 60 years of experience, Canadian Helicopters is an industry leader in establishing safety standards and operating procedures.
This press release contains forward-looking statements relating to the future performance of the Fund. Forward-looking statements, specifically those concerning future performance, are subject to certain risks and uncertainties, and actual results may differ materially. Consequently, readers should not place any undue reliance on such forward-looking statements. In addition, these forward-looking statements relate to the date on which they were made. The Fund disclaims any intention or obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise unless being required by applicable laws.
DEFINITION OF NON-GAAP MEASURES: EBITDA, STANDARDIZED DISTRIBUTABLE CASH AND DISTRIBUTABLE CASH
References to â€œEBITDAâ€ are to earnings (loss) before interest, income taxes, depreciation and amortization, gain or loss on disposal of property, plant and equipment and non-controlling interest, as disclosed in the Summary of Selected Consolidated Financial Information. Since EBITDA is a metric used by many investors to compare issuers on the basis of the ability to generate cash from operations, management believes that in addition to net earnings or loss, EBITDA is a useful supplementary measure.
Standardized Distributable Cash is a non-GAAP measure recommended by the Canadian Institute of Chartered Accountants (â€œCICAâ€) in order to provide a consistent and comparable measurement of distributable cash across entities. Standardized Distributable Cash represents cash flows from operating activities, less adjustments for net maintenance capital expenditures as reported in accordance with GAAP.
Management views Distributable Cash as an operating performance measure, as it is a measure generally used by Canadian income funds as an indicator of financial performance. Distributable Cash is defined as Standardized Distributable Cash plus the net change in non-cash working capital balances and less the consideration paid by the Fund for the purchase of Units under the employee Unit purchase plan. Distributable Cash is important as it summarizes the funds available for distribution to Unitholders.
EBITDA, Standardized Distributable Cash and Distributable Cash are not earnings measures recognized under GAAP and do not have standardized meanings prescribed by GAAP. Therefore, EBITDA, Standardized Distributable Cash and Distributable Cash may not be comparable with similar measures presented by other entities. Investors are cautioned that EBITDA, Standardized Distributable Cash and Distributable Cash should not be construed as an alternative to net earnings (loss) determined in accordance with GAAP as indicators of the Fundâ€™s performance, or to cash flows from operating, investing and financing activities as measures of liquidity and cash flows.
Note to readers: Complete consolidated unaudited interim financial statements and Managementâ€™s Discussion & Analysis of Operating Results and Financial Position are available on Canadian Helicoptersâ€™ website at www.canadianhelicopters.com and on SEDAR at www.sedar.com.
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