Discovery Air Inc. (TSX: DA.A) announces strong results for its second quarter ended July 31, 2011.

YELLOWKNIFE, Sept. 13, 2011 /CNW/ -

Second Quarter Highlights

  • Revenues were $70.7 million in the quarter ended July 31, 2011 compared to $57.7 million in the same quarter last year;
  • EBITDA* for the quarter was $30.1 million compared to $26.4 million in the same quarter last year;
  • Net earnings for the quarter were $18.0 million or $0.12 per share ($0.10 diluted) compared to $11.3 million or $0.08 per share ($0.08 diluted) in the same quarter last year;
  • The Corporation realized a pre-tax gain of $5.9 million from a $13.2 million debt extinguishment during the quarter.  Net earnings adjusted for the tax-effected gain of approximately $4.2 million were $13.8 million;
  • Trailing twelve month EBITDA for July 31, 2011 was approximately $49.0 million.

"These strong results could only have been achieved through the tireless dedication of our crews during a very busy quarter, and I'm extremely proud of our entire team. Whether in fire services, servicing the resource sector or helping train the men and women of the Canadian Forces, our people are to be commended for their professionalism and commitment to safety throughout this busy period," said Dave Jennings, CEO of Discovery Air.

"Our consistent growth, coupled with our ongoing business developments efforts and the significant progress we've made in restructuring our balance sheet, position us well to achieve our aggressive growth objectives," said Jennings.

Expanded Financial Highlights

  • Revenues were $70.7 million for the quarter ended July 31, 2011 ("Q2/12") compared to $57.7 million for the quarter ended July 31, 2010 ("Q2/11"), a 23% increase.  Year-to-date ("YTD/12") revenues were $107.9 million compared to $83.5 million for the same period last year ("YTD/11"), a 29% increase.  The increase in consolidated revenues reflects continuing strong demand for flight services from the Northern Services segment's resource-based customers in both northern Canada and Peru as well as increased forest fire suppression activity in northern Ontario in Q2/12.  The Government Services segment's year-over-year revenue growth was attributable to an increased contribution from Discovery Air Technical Services, which began operations in late fiscal 2011, increased forest fire suppression activity in northern Ontario, and continued strong demand for airborne training and special mission services from the Canadian military.
  • EBITDA* for Q2/12 was $30.1 million compared to $26.4 million for Q2/11.  YTD/12 EBITDA was $34.8 million compared to YTD/11 EBITDA of $28.8 million.  The year over year increase in EBITDA was attributable to higher revenues.
  • Net earnings for Q2/12 were $18.0 million or $0.12 per share ($0.10 diluted) compared to net earnings of $11.3 million or $0.08 per share ($0.08 diluted) for Q2/11.  Net earnings for YTD/12 were $15.4 million or $0.11 per share ($0.10 diluted) compared to $7.4 million or $0.05 per share ($0.05 diluted) for YTD/11.  The extinguishment of a $13.2 related party debt during the second quarter resulted in a pre-tax gain of $5.9 million.  Adjusting for this one-time tax effected gain of approximately $4.2 million brings Q2/12 earnings to $13.8 million, a 22% increase over Q2/11, and YTD/12 earnings to $11.2 million, a 51% increase over YTD/11.
  • In May 2011, the Corporation settled a $13.4 million related party debt, including accrued interest, through a cash payment of $3.1 million and the issuance of 10,352,000 Class A common shares.  The extinguishment of this debt resulted in a pre-tax gain of approximately $5.9 million.
  • In May 2011, the Corporation issued $34.5 million of new 8.375% convertible unsecured subordinated debentures (the "New Debentures") at a price of $1,000 per debenture.  The New Debentures will mature on June 30, 2016, with interest payable semi-annually. At the holders' option, the New Debentures may be converted into the Corporation's Class A common voting shares or Class B variable voting shares at any time prior to maturity at a conversion price of $0.73 for each common share, subject to standard anti-dilution provisions.  The New Debentures will not be redeemable before June 30, 2014.  From June 30, 2014 to the maturity date, the Corporation may, at its option and subject to notice period requirements, redeem the New Debentures, in whole or in part, at par plus accrued and unpaid interest, provided that the weighted average trading price of the Corporation's common shares on the Toronto Stock Exchange during a specified period prior to redemption is not less than 125% of the conversion price.
  • In June, 2011, the Corporation used the net proceeds of the New Debentures to fully repay the Corporation's $28.8 million 8.75% subordinated unsecured convertible debentures due December 31, 2011 together with accrued interest thereon. The balance of net proceeds was contributed to working capital.
  • On July 21, 2011, the Corporation entered into an agreement to complete a private placement of $70.0 million senior secured convertible debentures.  These debentures will have a 5 ½ year term from issuance, subject to earlier redemption rights in favour of the Corporation relating to certain milestone events. The Corporation may also redeem the debentures three years after issuance providing the Corporation's common share weighted average trading price exceeds 116% of the then-applicable conversion price over a specified trading period prior to issuance of the redemption notice. Interest on the debentures will accrue at a rate of 10% per annum and will be payable annually commencing 12 months after closing on an "in kind" basis through the issuance of additional debentures.  The original conversion price of the debentures, $0.75 per common share, will also increase at 10% per annum, and as a result, the face amount of the debentures plus all paid-in-kind interest will continue to be convertible into 93,333,333 common shares (subject to customary anti-dilution adjustments).  The debentures will have a first-lien security interest in all assets of the Corporation except with respect to accounts receivable and certain inventory, and except with respect to certain assets already pledged to existing senior lenders to the Corporation.  The Corporation will have the right to require full subordination of the debentures' security interest in favour of new indebtedness upon the achievement of certain milestone events by the Corporation.  Prior to any of the milestone events being achieved, the Corporation can require subordination of the debentures' security interest in new assets in an amount up to $50 million.  The issue of the debentures is expected to be completed in September 2011 and net proceeds of the transaction will be used to repay debt owed to certain of the Corporation's existing lenders.

Selected Financial Information

On February 1, 2011, the Corporation adopted International Financial Reporting Standards ("IFRS") for financial reporting purposes using a transition date of February 1, 2010. The interim condensed consolidated financial statements for Q2/12 and YTD/12, including required comparative information, have been prepared in accordance with IFRS 1, First-time Adoption of International Financial Reporting Standards, and with International Accounting Standard 34, Interim Financial Reporting as issued by the International Accounting Standards Board.

The table below summarizes selected financial information for the current and comparative periods:

                           
(thousands of Canadian dollars, except per share amounts)     Q2/12   Q2/11   YTD/12   YTD/11
              (unaudited)   (unaudited)   (unaudited)   (unaudited)
Results of operations                      
  Revenue            $ 70,657    $ 57,658    $ 107,906    $ 83,473
  Expenses            $ 41,208    $ 31,803    $ 73,668    $ 55,259
  Depreciation of property and equipment and intangible assets    $ 6,184    $ 5,973    $ 10,688    $ 10,355
  Earnings before undernoted items        $ 23,265    $ 19,882    $ 23,550    $ 17,859
                           
  Finance costs          $ 4,719    $ 4,306    $ 8,470    $ 7,851
                           
  Gain on extinguishment of related party debt      $ 5,900    $ -    $ 5,900    $ -
                           
  Earnings and comprehensive earning        $ 17,979    $ 11,324    $ 15,393    $ 7,397
  Basic earnings per common share:        $ 0.12    $ 0.08    $ 0.11    $ 0.05
  Diluted earnings per common share:        $ 0.10    $ 0.08    $ 0.10    $ 0.05
 
                         
Financial position and liquidity                    
  Total assets            $ 284,776    $ 271,817    $ 284,776    $ 271,817
  Total long term loans and borrowings        $ 121,204    $ 141,000    $ 121,204    $ 141,000
  Cash from (used) in operations        $ 6,768    $ 2,265    $ (3,628)    $ (7,273)
  Working capital          $ 28,725    $ 23,377    $ 28,725    $ 23,377
                           
Key non-IFRS performance measures*                  
  EBITDAR            $ 34,459    $ 30,099    $ 41,228    $ 34,134
  EBITDA            $ 30,063    $ 26,386    $ 34,827    $ 28,820
  EBITDA Margin         43%   46%   32%   35%

 

* References to "EBITDA" are to net earnings (loss) before finance costs, income taxes and depreciation of property and equipment and intangible assets.  "EBITDAR" is EBITDA before aircraft lease cost.  The EBITDA margin is EBITDA as a percentage of revenue.  Management believes EBITDA and EBITDAR to be important measures as they exclude the effects of items which primarily reflect the impact of long-term investment decisions from the results of the Corporation's day-to-day operations.  Management believes these measurements are useful to measure the Corporation's ability to service debt and to meet other payment obligations and as a basis for valuation.

FORWARD-LOOKING STATEMENTS
Forward-looking information and statements are included in this earnings release. Please refer to the statement regarding forward-looking statements contained in the Corporation's Management's Discussion and Analysis for Fiscal 2011 and for Q2/12 which are incorporated herein by reference. Those statements provide an explanation as to what forward-looking statements are, and the specific factors, uncertainties and potential events that the Corporation has identified for the attention of readers. When relying on forward-looking information and statements to make decisions, investors and others should carefully consider these factors and other uncertainties and potential events.

The Corporation's interim condensed consolidated financial statements and Management's Discussion and Analysis for Q2/12 have been filed concurrently and are available on the Corporation's website at www.discoveryair.com and on SEDAR at www.sedar.com. The reader is encouraged to review the audited financial statements and Management's Discussion and Analysis for the year ended January 31, 2011 for more complete disclosure on the Corporation's financial condition and results of operations.

The Corporation's Class A common shares and the New Debentures trade on the Toronto Stock Exchange under the symbols DA.A and DA.DB.A, respectively.

SOURCE Discovery Air Inc.

For further information:

Sheila Venman, Investor Relations
Sheila.venman@discoveryair.com 
1-866-903-3247

Rolf S. Dawson, Vice President Corporate Finance and Administration
Rolf.Dawson@discoveryair.com 
(867) 873-5350, Extension 304


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