Aeroquest International Limited
TSX : AQL

Aeroquest International Limited

May 04, 2009 07:00 ET

Aeroquest International Limited (TSX:AQL) Announces Financial Results for the Three and Six Months Ended March 31, 2009

- Revenue of $8.0 million, at the mid-point of guidance - Contract backlog at quarter-end of $8.0 million. - Net income of ($1.0) million in the quarter, or ($0.03) per share - Operating cash flow before changes in non-cash working capital of $0.7 million in the period, or $0.02 per share

MISSISSAUGA, ONTARIO--(Marketwire - May 4, 2009) -

Attention business/financial editors and reporters:

Aeroquest International Limited (TSX:AQL) today reported financial results for its second quarter of fiscal 2009, the three and six months ended March 31, 2009. The interim results reflect the unprecedented economic slowdown in the global economy in general and the mineral and petroleum exploration sectors in particular.

"The extraordinary market conditions in our target markets continue to impact our business," said Roy Graydon, President & CEO of Aeroquest. "In response, we continued to rationalize our workforce, completing a second downsizing in late March and are focusing on overall cost reduction in our organizations with the goal of maximizing our working capital until we return to a period of sustained economic recovery."

Consolidated revenue for the three months ended March 31, 2009 was $8.0 million, a decrease of $5.3 million or 40 percent from the second quarter last year. Revenue from helicopter operations contributed $1.6 million in the quarter, a decline of $5.8 million or 78 percent from the second quarter last year. Revenue from fixed wing operations was $5.9 million, an increase of $0.2 million or 4 percent over the second quarter of last year. Other revenue was $0.4 million. Helicopter revenue, and backlog, decreased as helicopter surveys, being generally more expensive on a per line kilometer basis, are normally the first type of surveys to be negatively affected in a downturn such as the one that currently exists.

Contract backlog decreased as expected in the second quarter and sits at $8.0 million at March 31. Backlog is composed of $1.0 million in helicopter backlog, $5.6 million in fixed wing backlog and $1.4 million in other backlog.

Helicopter gross profit declined to negative 3 percent from 42 percent of revenue in the second quarter last year due to fixed costs in cost of sales impacting against the reduced revenue. The Company has taken steps to reduce the fixed cost component of this business line, but expects that below average gross margin profitability will persist until business volumes return to normal in this area. Fixed wing gross profit improved to 52 percent from 49 percent of revenue in the second quarter last year. The improvement in fixed wing profit is attributable to the full roll-out in the quarter of the first of the Company's new total field gravity systems, which can generate a higher gross profit margin than other fixed wing survey technologies.

Overall Company gross profit in the period was $3.3 million, or 41 percent of revenue compared to $6.1 million or 46 percent of revenue in the second quarter last year. This number is within management's expectations given the reduced business volumes.

EBITDA in the quarter was a $0.1 million compared with EBITDA of $3.4 million in the second quarter last year and included restructuring costs of $0.2 million related to two downsizings in the quarter. The Company estimates that the ongoing cost savings associated with these downsizings will be approximately $3.0 million annually.

Net loss in the quarter was $1.0 million, or $0.03 per share, compared to net earnings of $0.8 million or $0.03 per share in the first quarter last year.

Operating cash flow before changes in working capital was $0.7 million or $0.02 per share compared with $2.8 million or $0.09 in the second quarter last year. Changes in non-cash working capital, however, consumed $2.4 million in the quarter, the result of a reduction in deferred revenue tied to the decline in contracted backlog, some significant one-time payments, including, statutory income tax payments in Australia, and severance costs associated with its downsizing, combined with continued challenges in the collection of accounts receivable as customers slow payments to conserve cash.

"We have been working closely with our customers to understand their needs and constraints and to provide what flexibility we can in these difficult times", said Bob Motz, the Company's Chief Financial Officer, "This has resulted in us coming to agreements with several customers to accept extended payment terms on accounts receivable related to work performed in calendar 2008. We believe that this situation is temporary and that it will afford us the best opportunity to recover these receivables in full over the next several months."

Capital expenditures totaled $2.1 million in the quarter, representing 26 percent of revenue, most of which related to the delivery of a second airborne gravity meter that the Company had committed to purchase in early 2008 (the other gravity meter was purchased in the previous quarter). Management does not anticipate any further significant capital expenditures for the balance of the 2009 fiscal year.

Outlook - Q3

Given the ongoing global recession and its impact on worldwide exploration in the mining and petroleum industries, the Company believes that it is difficult to provide revenue guidance with a high degree of certainty. Regardless, the Company does expect third quarter 2009 revenue to be comparable to the second quarter - in the range of $6 to $10 million.

Management has taken aggressive action to reduce operating expenses in line with reduced revenue expectations, with overall headcount reductions totaling approximately 45 percent of the Company's workforce in the quarter. Management is also taking aggressive action to reduce non-headcount based overhead and other costs wherever possible until such time that business conditions improve in the Company's target markets.

Management does not expect there to be significant non-operating cash flows for the remainder of the year; that changes in non-cash working capital and capital expenditures will be modest compared to the previous two quarters.

Analyst Conference Call

Aeroquest International will hold a Q2 2009 conference call at 11:00 a.m. ET on Tuesday, May 5, 2009. On the conference call management will review Aeroquest's results for the quarter ended March 31, 2009. The scheduled speakers for the Company on the conference call are: Roy Graydon, President and Chief Executive Officer, and Bob Motz, Chief Financial Officer.

Interested parties can access the conference call in North America by dialing 888-789-0089. The international or local dial-in number is 416-695-9701. Please dial in approximately 5-10 minutes prior to 11:00 a.m. Eastern Standard Time. A replay service will be available two hours following the conference call until midnight on May 18, 2009. To access this recording, dial 800-408-3053 or 416-695-5800 and enter passcode 3281385.

About Aeroquest International

Aeroquest International is a global information and technology services company and a leader in the development and operation of innovative and proprietary geophysical surveying platforms for the mineral and petroleum exploration, and environmental services industries. Through its subsidiary companies Aeroquest Surveys, UTS Geophysics and Geophex, Aeroquest International fields a fleet of over two dozen helicopter and fixed wing survey systems and is active around the world. 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.



Consolidated Balance Sheets (Unaudited - Prepared by Management)

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As at Mar. 31, 09 Sep. 30, 08
Assets (Unaudited) (Audited)
Current
Cash and cash equivalents $10,437,041 $ 15,373,132
Accounts receivable 5,674,732 8,640,293
Income taxes recoverable 1,289,617 -
Unbilled contracts in progress 640,365 2,169,861
Inventory 167,273 132,853
Prepaid expenses and deposits 695,466 640,875
------------------------------------
Total current assets 18,904,494 26,957,014
Long term
Long term investments 198,864 30,501
Capital assets 13,348,118 10,890,000
Intangible assets 19,228,050 19,847,842
Goodwill 12,468,900 11,662,115
Future income taxes 476,309 152,584
------------------------------------
Total long term assets 45,720,241 42,583,042
------------------------------------
Total Assets $64,624,735 $ 69,540,056
------------------------------------
------------------------------------

Liabilities and Shareholders' Equity
Current
Accounts payable and
accrued liabilities $5,052,291 $ 5,946,706
Income taxes payable - 1,083,701
Deferred revenue 873,031 3,274,382
Capital lease obligations 332,552 321,426
------------------------------------
Total current liabilities 6,257,874 10,626,215
Long term
Capital lease obligations 315,743 469,575
Future income taxes 6,549,085 6,640,227
------------------------------------
Total liabilities 13,122,702 17,736,017
------------------------------------

Shareholders' equity
Share capital 46,770,708 46,506,445
Contributed surplus 2,277,777 2,411,281
Accumulated other
comprehensive income (loss) 187,159 (1,794,758)
Retained earnings 2,266,389 4,681,071
------------------------------------
Total shareholders' equity 51,502,033 51,804,039
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Total Liabilities and
Shareholders' Equity $64,624,735 $ 69,540,056
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The accompanying summary of significant accounting policies and notes are
an integral part of these financial statements.



Consolidated Statements of Operations (Unaudited - Prepared by Management)

---------------------------------------------------------------------------
For the period Three months ended Six months ended
---------------------------------------------------------------------------

Mar. 31, 09 Mar. 31, 08 Mar. 31, 09 Mar. 31, 08


Sales $ 7,963,236 $ 13,294,277 $ 19,260,930 $ 24,490,818
Cost of sales 4,709,921 7,221,337 13,079,855 14,500,556
-----------------------------------------------------
Gross profit 3,253,315 6,072,940 6,181,075 9,990,262
-----------------------------------------------------

Expenses and other
items
General and
administrative 3,082,872 2,429,026 7,433,434 4,420,756
Foreign exchange
(gain)/loss (25,065) 24,313 (1,230,651) (32,151)
Stock based
compensation
expense 135,269 173,208 239,660 555,963
Amortization of
intangible
assets 747,478 1,178,301 1,632,528 2,070,888
Depreciation of
capital assets 1,010,900 654,838 1,812,464 1,166,471
-----------------------------------------------------
Total operating
expenses 4,951,454 4,459,686 9,887,435 8,181,927

Operating profit
(loss) (1,698,139) 1,613,254 (3,706,360) 1,808,335
Interest income (103,973) (209,514) (174,744) 291,204
Interest expense 18,519 186,399 33,105 279,678
-----------------------------------------------------
Income (loss) before
income taxes (1,612,685) 1,636,369 (3,564,721) 1,819,861
Income taxes
Current (420,252) 1,161,718 (567,319) 1,598,918
Future (recovery) (239,234) (340,930) (530,634) (715,300)
-----------------------------------------------------
Total income tax (659,486) 820,788 (1,097,953) 883,618
-----------------------------------------------------
Net income (loss)
for the period $ (953,198) $ 815,581 $ (2,466,768) $ 936,243

Earnings (loss) per
share
Basic $ (0.03) $ 0.03 $ (0.07) $ 0.03
Fully diluted $ (0.03) $ 0.02 $ (0.07) $ 0.03
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Consolidated Statements of Retained Earnings (Unaudited - Prepared by
Management)

---------------------------------------------------------------------------
For the period Three months ended Six months ended
---------------------------------------------------------------------------

Mar. 31, 09 Mar. 31, 08 Mar. 31, 09 Mar. 31, 08


Retained earnings,
beginning of
period $ 3,219,587 $ 2,674,783 $ 4,681,071 $ 2,758,967
Excess of purchase
price over cost
on redemption of
shares - (209,370) 52,087 (414,216)
Net income (loss) (953,198) 815,581 (2,466,768) 936,243
-----------------------------------------------------

Retained earnings,
end of period $ 2,266,389 $ 3,280,994 $ 2,266,389 $ 3,280,994
-----------------------------------------------------

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Consolidated Statements of Comprehensive Income

---------------------------------------------------------------------------

For the period Three months ended Six months ended
---------------------------------------------------------------------------

Mar. 31, 09 Mar. 31, 08 Mar. 31, 09 Mar. 31, 08


Net Income (loss)
for the period $ (953,198) $ 815,581 $ (2,466,768) $ 936,243

Revaluation of long term
investments to fair
market value (Net of
tax $10,370, 2008 -
$ (9,000)) 30,500 (23,000) 27,860 (25,000)
Unrealized gain (loss)
on translation of
self-sustaining
foreign operations 1,361,193 2,369,432 1,954,057 1,959,167
--------------------------------------------------
Total Other
Comprehensive Income
(loss) 1,391,693 2,346,432 1,981,917 1,934,167
--------------------------------------------------
Total Comprehensive
Income (loss) $ 438,495 $ 3,162,013 $ (484,851) $ 2,870,410
--------------------------------------------------

Accumulated Other
Comprehensive
Income (loss):
Revaluation of long
term investments to
fair market value $ 36,780 $ 47,000 $36,780 $ 47,000
Unrealized gain (loss)
on translation
of self-sustaining
foreign operations 150,379 1,374,892 150,379 1,374,892
--------------------------------------------------
Total Accumulated
Other Comprehensive
Income (loss) $ 187,159 $ 1,421,892 $ 187,159 $ 1,421,892
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Consolidated Statements of Cash Flow (Unaudited - Prepared by
Management)

---------------------------------------------------------------------------
For the period Three months ended Six months ended
---------------------------------------------------------------------------

Mar. 31, 09 Mar. 31, 08 Mar. 31, 09 Mar. 31, 08

Cash provided by (used
in)
Operating activities
Net income (loss) for
the period $ (953,198) $ 815,581 $ (2,466,768) $ 936,243
Operating items not
requiring cash
Amortization of
intangible assets 747,478 1,178,301 1,632,528 2,070,888
Depreciation of
capital assets 1,010,900 654,838 1,812,464 1,161,471
Future income taxes
(recovery) (236,458) (340,930) (527,858) (715,300)
Interest accretion on
promissory notes - 142,868 - 221,313
Stock based
compensation 135,269 173,208 239,660 555,963
Loss/(gain) on
disposal of
capital assets - (45,739) - (49,476)
---------------------------------------------------
Operating cash flow
before changes in
non-cash working
capital 703,991 2,578,127 690,026 4,181,102
Changes in non cash
working capital (2,373,479) (4,811,952) (1,262,732) (1,228,734)
---------------------------------------------------
Total cash flow from
operating activities (1,669,488) (2,233,825) (572,706) 2,952,368
---------------------------------------------------
---------------------------------------------------
Investing activities
Capital asset
purchases (2,088,204) (1,708,993) (4,127,906) (2,940,662)
Mineral rights
sold/(acquired) 50,042 - (35,958) -
Cash cost of
acquisition - (95,170) - (2,116,616)
---------------------------------------------------
Total cash flow from
investing activities (2,038,162) (1,804,163) (4,163,864) (3,253,115)
---------------------------------------------------
---------------------------------------------------
Financing activities
Promissory note
payments - (5,337,600) - (5,337,600)
Capital lease payments (57,576) (70,604) (142,706) (229,059)
Aeroquest shares
redeemed - (440,031) (56,814) (815,368)
Proceeds: issuance of
common shares - 18,677,574 - 19,313,532
---------------------------------------------------
Total cash flow from
financing activities (57,576) 12,829,339 (199,520) 12,931,505
---------------------------------------------------
---------------------------------------------------

Net change in cash and
cash equivalents
for the period $ (3,765,227) $ 8,791,351 $ (4,936,091)$ 10,826,595
Cash and cash
equivalents, beginning
of period 14,202,268 7,434,021 15,373,132 5,398,777
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Cash and cash
equivalents, end of
period $ 10,437,041 $ 16,225,372 $ 10,437,041 $ 16,225,372
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Contact Information

  • Aeroquest International Limited
    Roy Graydon
    President & Chief Executive Officer
    905-672-9129
    rgraydon@aeroquest.ca