YELLOWKNIFE, April 29 /CNW/ -
President and CEO's Comments
During calendar 2009, our management team worked hard to stabilize Discovery Air both operationally and financially in the midst of a particularly challenging economic environment. Our adjusted EBITDA performance strengthened both in dollar terms and as a percentage of revenues, reflecting a continued focus on operating efficiencies and cost control. For fiscal 2010, we recorded a net loss of $286,000 compared to the $130 million net loss in fiscal 2009, which included significant goodwill and asset impairment charges. This improvement was achieved despite a reduction in revenues to $123 million, down from $152 million in fiscal 2009. While returns even at these improved levels are below target and not acceptable over the long haul, we emerged from a tough year as a better-managed and more resilient business, well-positioned for improved results in fiscal 2011.
Financial results by themselves do not tell the entire story of any company, of course, and this is true of Discovery Air. The past year marked an important turning point, as we made progress on several fronts:
- safety continued as an overriding consideration across all of our
operations; we flew in excess of 44,000 flight hours during the year,
without a single accident;
- we are now executing a new, Board-approved five-year strategic plan
designed to grow Discovery Air substantially and greatly enhance its
- our Executive Team has been further strengthened with additions from
both inside and outside the Corporation, positioning us to achieve
the objectives of our five-year plan;
- we identified a number of additional operating efficiencies, and we
continue to optimize and "lean out" our business;
- we are working to strengthen existing relationships and to forge new
ones, including several new strategic aboriginal partnerships within
our Northern Services segment;
- we are pursuing opportunities outside our traditional markets, as
well as the provision of additional services to our existing
- in February 2009, we successfully closed a major refinancing with the
Northwest Territories Opportunities Fund, and now have no significant
long-term debt maturities prior to December 31, 2011; and
- we ended fiscal 2010 with $9.2 million in unrestricted cash on our
balance sheet and approximately $8.3 million in undrawn working
capital credit availability.
Subsequent to year-end, we announced that our Top Aces unit secured two important contract extensions. Its Interim Contracted Airborne Training Services Type 1 contract was extended for a further one-year term, and its Interim Contracted Airborne Training Services Type 2 Standing Offers were extended for a further one-year term. Hicks & Lawrence signed a new five-year contract with the Ontario Ministry of Natural Resources to provide 20 aircraft in support of forest fire management and air transport/utility requirements. And finally, we relocated our corporate head office to Yellowknife in March, and closed our London facility at the end of April 2010.
Discovery Air was tested by a number of challenges in fiscal 2010. Having successfully met and overcome those challenges, our Board, Executive Team and employees are confident that we are a stronger, better-positioned company, ready to drive hard toward our five-year objectives.
- The Corporation saw a dramatic decline in the demand for its services
in the resource-related sectors, including forest fire suppression
services. Conversely, revenues from the Corporation's non-resource
based sectors saw a year over year increase, most notably from our
Top Aces subsidiary which benefited from increased flight capacity
with additional Alpha jets brought on line this past year. The net
result yielded a 19% year over year decline in consolidated revenues
reflecting the severity of the drop in demand for services in the
resource sectors this year.
- The Corporation's EBITDA reflects a 5% year over year decline.
Included in current year EBITDA is a nonrecurring charge of
$1.7 million for severance and other related costs incurred in
relocating the Corporation's head office to Yellowknife, Northwest
Territories. Adjusting for this cost, the Adjusted EBITDA was
marginally higher year over year, a significant achievement given the
notable decline in corresponding consolidated revenues. The increased
Adjusted EBITDA is attributable to the operating units' ability to
scale costs to match the lower demand for services. Also contributing
to the favourable variance in Adjusted EBITDA was the increase in
revenues from the Corporation's higher margin businesses.
- In conjunction with cost control measures, working capital and the
level of capital investments were closely managed resulting in
balance sheet liquidity being maintained at a sufficient level to
fund operations and capital expenditures.
- The Corporation successfully refinanced $33 million term debt that
matured in the first quarter. In the same quarter the Corporation
also secured a new $15 million operating line of credit which
increases to $25 million during the Corporation's peak season.
- The Corporation was successful in renewing Hicks' forest fire
management services contract for a further 5 year period and Top
Aces' airborne combat training services agreements for a further
1 year period.
The table below summarizes selected financial information for these periods as well as the comparative periods:
------------------------------------- ----------- ----------- -----------
3 months 3 months 12 months 12 months
(thousands of dollars, ended ended ended ended
except per share January 31 January 31 January 31 January 31
amounts) 2010 2009 2010 2009
------------------------------------- ----------- ----------- -----------
Results of operations
Revenue $ 17,749 $ 19,590 $ 123,173 $ 151,930
Operating expenses $ 19,978 $ 23,578 $ 94,362 $ 123,488
Earnings (loss) before
undernoted items $ (2,229) $ (3,988) $ 28,811 $ 28,442
Interest expense $ 3,560 $ 2,944 $ 14,343 $ 12,306
Amortization $ 3,774 $ 3,325 $ 14,078 $ 12,965
Goodwill & intangible
charge $ - $ 133,579 $ - $ 133,579
corporate office $ 67 $ - $ 1,678 $ -
costs $ 112 $ - $ 1,067 $ -
Loss $ (4,837) $ (139,139) $ (286) $ (130,325)
Basic and diluted
loss per share $ (0.04) $ (1.03) $ (0.00) $ (0.96)
Financial position and
Total assets $ 256,310 $ 260,026
Total long-term debt $ 146,107 $ 145,726
Cash provided by
operations $ 1,795 $ 10,535 $ 21,438 $ 25,536
Working capital $ 15,314 $ 16,906
Key non-GAAP performance
(loss) $ (4,790) $ (5,942) $ 899 $ 2,872
EBITDAR $ (1,762) $ (3,049) $ 33,610 $ 40,049
Adjusted EBITDAR $ (1,695) $ (3,049) $ 35,288 $ 40,049
EBITDA $ (2,296) $ (3,988) $ 27,133 $ 28,442
Adjusted EBITDA $ (2,229) $ (3,988) $ 28,811 $ 28,442
Adjusted EBITDA margin -13% -20% 23% 19%
cash flow $ (1,989) $ (1,178) $ 17,421 $ 23,319
cash flow per share $ (0.01) $ (0.01) $ 0.13 $ 0.17
* See Non-GAAP measures
* References to "EBITDA" are to net earnings before interest, financing
transaction costs, income taxes, depreciation and amortization
(except for amortization of ratable and overhauled components which
are treated as operating expenses), goodwill and intangible asset
impairment charge, and non-controlling interest. "EBITDAR" is EBITDA
before aircraft lease cost. "Adjusted EBITDA" is EBITDA adjusted for
relocation of corporate office charge. "Adjusted EBITDAR" is EBITDAR
adjusted for relocation of corporate office charge. "Adjusted
earnings (loss)" is net earnings (loss) adjusted to exclude charges
arising from impairment of goodwill and intangible assets, relocation
of corporate office and related income tax recovery. "Adjusted EBITDA
margin" is Adjusted EBITDA expressed as a percentage of revenues.
"After-tax operating cash flow" is net earnings (loss) adjusted for
amortization, future income tax and other non-cash charges but not
adjusted for changes in non-cash working capital.
The Corporation's financial statements and Management's Discussion and Analysis for the year ended January 31, 2010 have been filed concurrently and are available on Discovery Air's website at www.discoveryair.com and on SEDAR at www.sedar.com. The reader is encouraged to review the annual financial statements and Management's Discussion and Analysis for more complete disclosure on Discovery Air's financial condition and results of operations.
Discovery Air's Class A common shares trade on the Toronto Stock Exchange under the symbol DA.A.
Discovery Air's Debentures trade on the Toronto Stock Exchange under the symbol DA.DB.
SOURCE Discovery Air Inc.
For further information: For further information: Rolf S. Dawson, Vice President Corporate Finance and Administration, Rolf.Dawson@discoveryair.com, (867) 873-5350, Extension 304; Sheila Venman, Investor Relations, email@example.com, (613) 839-0570