Aeroquest International Limited
TSX : AQL

Aeroquest International Limited

February 10, 2011 19:55 ET

Aeroquest International Limited (TSX:AQL) Announces Financial Results for the Three Months Ended December 31, 2010

- Revenue of $12.4 Million Up $2.1 Million, or 20% from the Last Quarter

- EBITDA of $0.4 Million Compared to Negative $1.1 Million in the Last Quarter

- Cash Improves to $6.0 Million from $4.8 Million on September 30, 2010

TORONTO, ONTARIO--(Marketwire - Feb. 10, 2011) -

Attention: Business/financial editors and reporters

Aeroquest International Limited ("Aeroquest", or "the Company") (TSX:AQL) today reported financial results for its first quarter of fiscal 2011, the three months ended December 31, 2010 ("Q1-F2011"). These results reflect improved growth and margins in both fixed wing and helicopter services in the airborne geophysical survey segment, but stagnation in growth and margin improvement in the aerial geomatics segment.

"We are pleased to see the improved results in our Airborne Geophysics operations and remain cautiously optimistic that mineral exploration activity, the primary driver of our business success, will continue to improve throughout 2011," said Roy Graydon, President and CEO of Aeroquest; "While the Aerial Geomatics segment lags at this point, we expect an improvement over the coming quarters as some much needed capital expenditures are deployed into the market and as we integrate our latest acquisition, Mapcon Mapping."

Consolidated revenue for Q1-F2011 was $12.4 million, an increase of $4.9 million or 65% over the first quarter last year ("Q1-F2010"). Revenue from Airborne Geophysics was $10.4 million, an increase of $4.8 million from Q1-F2010 of last year. Fixed wing revenue improved to $6.1 million from $3.6 million in Q1-F2010, while helicopter services revenue improved to $2.8 million from $2.2 million in Q1-F2010. Aeroquest also sold outright one AeroTEM™ IV system in the quarter. The unit sold was built specifically for this transaction and did not come out of the units currently in the field and available for survey.

Revenue from Aerial Geomatics was $1.6 million, while revenue from the Instruments and Sensors segment was $0.3 million. Both are roughly in line with most recent quarters.

Overall gross profit margin was 30% compared with 17% in the same period last year and 23% in the last quarter. EBITDA1 in the quarter was $0.4 million, an increase of $1.7 million over the negative $1.3 million reported in Q1-F2010 and an increase of $1.1 million from the fourth quarter of last year.

Profit margins in Airborne Geophysics have improved when compared to prior quarters but still lag behind the levels realized in 2007 and 2008. Fixed wing margins were 30% of revenue compared to 17% of revenue in Q1-F2010. Helicopter margins were 22% compared to 15% in Q1-F2010. Helicopter margins were particularly impacted by survey difficulties in a small number of surveys in some of the more challenging geographic areas of the world, including Papua New Guinea and Yemen. Management expects that these margins will continue to improve as the Company fields more and more helicopter systems throughout the year, reducing the Company's risk to any individual survey and any given geography.

Aerial Geomatics gross profit margins were 7% of revenue, again below management's expectations. The Company embarked on a cost rationalization program in the last fiscal year and will continue to rationalize costs where possible. Aeroquest expects to see an improvement in this business though the balance of the year. Some much needed capital has gone into this segment to begin to bring it back to the forefront of technology in its markets, and the acquisition of the Mapcon business unit (see below) will provide both additional revenue and another avenue to realize savings through the greater use of third party offshore processing facilities as the business grows.

Consolidated net loss in the quarter was $1.0 million or $0.03 per share compared to net loss of $2.3 million, or $0.06 per share in the first quarter last year.

Cash flow from operating activities was $1.7 million, or $0.05 per share for the period, as compared to negative $1.4 million, or $0.05 per share in the first quarter last year. Capital expenditures totaled $0.4 million in Q1-F2011, an increase of $0.2 million from Q1-F2010. Management expects capital expenditures to be higher than in fiscal 2010 to reflect ongoing or expected improvements to the market for its systems in all segments.

Mapcon Acquisition

On January 31, 2011, subsequent to quarter end Aeroquest announced that it had acquired Mapcon Mapping from OSI Geospatial Inc. for total consideration of $1.15 million, including approximately $0.88 million of net working capital. Mapcon provides photogrammetry and related geomatics services to customers in the North American marketplace. Mapcon consists of two entities: a Canadian sales and project management team located in Burnaby, BC; and a United States sales team located in Salt Lake City, Utah. Mapcon generated approximately $4 million of revenue in its last fiscal year with OSI Geospatial. Aeroquest will report the Mapcon operations as part of the Aerial Geomatics segment.

Outlook – Q2 - 2011

Contract backlog, while declining by $3.5 million from September 30, 2010, is still at a healthy level of $11.2 million at quarter end. Backlog is composed of $7.4 million in Airborne Geophysics survey backlog ($1.5 million in helicopter and $5.9 million in fixed wing), $3.5 million in Aerial Geomatics backlog, and $0.3 million in backlog in our instruments and sensors group.

The current situation in several countries in West and North Africa is particularly troubling to the Company. In addition to the obvious distress created to the peoples of these countries, over the past several months, Aeroquest Airborne, the Company's Airborne Geophysics subsidiary, has been forced to demobilize from and postpone indefinitely several contracts in countries such as The Ivory Coast and Niger. In addition, the Company's ongoing efforts in North Africa could be severely compromised by the recent uncertainty in Tunisia and Egypt. While the amount of contract backlog related to these regions is less than $500,000 as of December 31, 2010, it may impact our future revenue prospects in this high growth area.

Corporate Presentation

An updated Corporate Presentation is available on the Investor Relations area of the Aeroquest website (www.aeroquest.ca). This presentation provides additional insights into our quarterly results.

About Aeroquest International

Aeroquest collects and interprets data that reveals what is at and beneath the earth's surface. Aeroquest applies the best available technology in its world-wide search for economic concentrations of mineral and petroleum resources and in the precision-mapping of the earth's surface and objects upon it. Aeroquest offers airborne geophysics surveys through Aeroquest Airborne, aerial geomatics surveys through Aeroquest Optimal, and the custom design and construction of geophysical sensors and instruments through Aeroquest Sensortech.

With over 150 employees and contractors, and a fleet of over two dozen helicopter and fixed wing survey systems worldwide, Aeroquest is surveying on every continent in the world where exploration activity is underway, and over its history has logged over 10 million line kilometers of fixed wing surveys and over 1 million line kilometers of helicopter surveys – enough to circle the globe over 300 times. More information about Aeroquest International can be found at www.aeroquest.ca.

For Investors

This news release may include statements about expected future events and/or financial results that are forward-looking in nature and subject to risks and uncertainties. The Company cautions that actual performance will be affected by a number of factors, many of which are beyond its control. Future events and results may vary substantially from what the Company currently foresees. Discussion of the various factors that may affect future results is contained in the Company's recent filings, available on SEDAR.

1 EBITDA stands for earnings before interest, taxes, depreciation and amortization. It is a financial metric used to analyze operating results. The Company defines EBITDA as revenue less cost of sales, cash operating costs (general and administrative expenses as well as foreign currency gains/losses) and stock-based compensation expense. It is not a standard measure under Generally Accepted Accounting Principles and as such EBITDA as calculated may not be comparable to similarly titled amounts reported by other companies.

AEROQUEST INTERNATIONAL LIMITED
CONSOLIDATED BALANCE SHEET
 
    Dec. 31, 2010     Sep. 30, 2010
Assets            
 Current            
     Cash and cash equivalents $ 5,994,574 $ 4,757,216
     Accounts receivable   3,211,475       4,527,942
     Income tax recoverable   183,539       231,136
     Unbilled contracts in progress   1,958,847       1,529,146
     Inventory   143,922       699,935
     Prepaid expenses and deposits   1,776,464       1,465,629
Total current assets $ 13,268,821     $ 13,211,004
 Long term            
     Long term investments $ 180,338 $ 171,828
     Capital assets   9,566,493       9,766,989
     Intangible assets   12,597,776       13,277,339
     Goodwill   11,988,780       11,821,304
     Future income taxes   2,414,723       2,314,545
Total long term assets $ 36,748,111     $ 37,352,005
Total Assets $ 50,016,932     $ 50,563,009
 
Liabilities and Shareholders' Equity            
 Current            
     Accounts payable and accrued            
liabilities $ 4,572,150 $ 4,697,656
     Deferred revenue   2,746,333       2,240,687
     Capital lease obligations   123,893       200,964
Total current liabilities $ 7,442,376     $ 7,139,307
 Long term            
     Capital lease obligations   4,811       9,264
     Future income taxes   4,250,422       4,603,674
Total Liabilities $ 11,697,609     $ 11,752,245
 
Shareholders' equity            
     Share capital $ 48,801,933 $ 48,527,057
     Contributed surplus   2,109,391       2,355,274
     Accumulated other comprehensive            
income   2,860,505       2,404,764
     Retained earnings   (15,452,506)       (14,476,331)
Total shareholders' equity   38,319,323       38,810,764
Total Liabilities and Shareholders'            
Equity   $ 50,016,932   $ 50,563,009

 

AEROQUEST INTERNATIONAL LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
    Three months ended  
                 Dec 31, 2010       Dec 31, 2009
 
Sales $ 12,352,172       $ 7,497,866
 Cost of sales   8,632,751         6,211,253
Gross profit $ 3,719,421       $ 1,286,613
 
Expenses and other items              
 General and administrative $ 3,080,122       $ 2,396,811
 Foreign exchange (gain)/loss   215,416         81,087
 Stock based compensation expense   27,733         84,809
 Amortization of intangible assets   850,405         874,568
 Depreciation of capital assets   690,023         880,148
Total operating expenses $ 4,863,699       $ 4,317,423
 
Operating profit $ (1,144,278)       $ (3,030,810)
 Other costs (income)   -         (118,326)
 Interest Expense   -         15,223
Loss before income taxes and discontinued              
operations $ (1,144,278)       $ (2,927,707)
Loss from discontinued operations   -       $ (162,709)
Loss before income taxes $ (1,144,278)       $ (3,090,416)
Income taxes              
 Current $ 311,557       $ (438,291)
 Future   (479,660)         (385,725)
Total Income taxes $ (168,102)       $ (824,016)
Net income for the period $ (976,175)       $ (2,266,400)
 
Earnings per share              
 Basic   -$0.03         -$0.06
 Diluted   -$0.03         -$0.06

Note: Prior period revenue and expenses have been restated to reflect the disclosure of part of the operations as discontinued. Net income does not change. See note 16 to the financial statements.

AEROQUEST INTERNATIONAL LIMITED
CONSOLIDATED STATEMENTS OFRETAINED EARNINGS
           
    Three months ended
    Dec 31, 10     Dec. 31, 09
           
Retained earnings (deficit), beginning of period $ (14,476,331)   $ (5,889,147)
Net loss   (976,175)     (2,266,400)
Retained earnings, end of period $ (15,452,506)   $ (8,155,547)
 
AEROQUEST INTERNATIONAL LIMITED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
    Three months ended  
                   Dec. 31, 10    Dec. 31, 09
 
Net loss for the period $ (976,175)     $ (2,266,400)
 
Revaluation of long term investments            
to fair market value   2,540       (52,177)
Unrealized gain/(loss) on translation of self-            
sustaining foreign operations   453,201       (114,953)
Total Other Comprehensive Income (loss) $ 455,741     $ (167,130)
Total comprehensive income (loss),
for the period
$ (520,434)     $ (2,433,530)
 
AEROQUEST INTERNATIONAL LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOW
 
 
    Three months ended  
                   Dec. 31,10    Dec. 31, 09
Cash provided by (used in)            
Operating activities            
     Net income for the period $ (976,175)     $ (2,266,400)
     Operating items not requiring cash            
     Depreciation of capital assets   690,023       880,148
     Amortization of intangible assets   850,405       874,568
     Future income taxes   (479,660)       (385,725)
     Stock based compensation   27,733       84,809
       Loss on disposal of capital assets   5,955       -
Operating cash flow before changes in non-            
cash working capital $ 118,281     $ (812,600)
     Changes in non cash working capital   1,557,313       (601,468)
Total cash flow from operating activities $ 1,675,594     $ (1,414,068)
 
Investing activities            
     Capital asset purchases $ (387,021)     $ (163,423)
     Proceeds from sale of equipment   -       330,400
     Long term investments acquired   -       (90,000)
Total cash flow from investing activities $ (387,021)     $ 76,977
 
Financing activities            
     Capital lease payments $ (52,475)     $ (141,856)
     Proceeds from issuance of common shares            
on exercise of employee stock options   1,260       4,450
Total cash flow from financing activities $ (51,215)     $ (137,406)

 

Net change in cash / cash equivalents            
for the period $ 1,237,358 $ (1,474,497)
Cash and cash equivalents, beginning of            
period   4,757,216       6,145,784
Cash and cash equivalents, end of period   $ 5,994,574   $ 4,671,287

Contact Information

  • Aeroquest International Limited
    Roy Graydon
    President & Chief Executive Officer
    416-204-1500
    rgraydon@aeroquest.ca