Aeroquest riding out challenging times
Aug. 12, 2011, Toronto - Aeroquest International Limited today reported financial results for its third quarter of fiscal 2011, the three and nine months ended June 30, 2011.
August 12, 2011 By Carey Fredericks
These results reflect a challenging quarter in Airborne Geophysics as a combination of market conditions, unscheduled and extended scheduled aircraft maintenance, weather, permitting and other logistical issues significantly impacted the Company's performance.
"We posted a difficult and disappointing quarter," said Bob Motz, Interim CEO and CFO of Aeroquest. "We faced further difficult weather conditions in our fixed-wing operations as well as delays due to aircraft and technical maintenance issues. We were also slowed down internationally due to delays in
permitting. Helicopter services experienced weakness as a result of market conditions."
Consolidated revenue for Q3-F2011 was $9.2 million, an increase of $0.5 million or 6% over the third quarter last year ("Q3-F2010"). Revenue from Airborne Geophysics was $6.7 million, an increase of $0.9 million from Q3-F2010 of last year. Fixed-wing revenue improved to $4.2 million from $3.6 million in Q3-F2010, while helicopter services revenue improved to $2.5 million from $2.2
million in Q3-F2010.
Hampered by significant scheduled and unscheduled maintenance and permitting delays, fixed- wing production showed a decrease of 5% over the previous quarter. Helicopter margins at 9 % are significantly below Management's expectations as a result of lower sales having to absorb the fixed cost component of cost of sales.
Revenue from Aerial Geomatics was $2.3 million, consistent from Q3-F2010 while revenue from the Instruments and Sensors segment was $0.2 million, a decline of $0.4 million from Q3-F2010.
Year to date 2011 revenue is $31.3 million, an increase of $8.9 million, or 40% from the third quarter of 2010.
Overall gross profit margin in Q3-F011 was 19% compared with 21% in Q3-F2010 and 23% in the Q2 of fiscal 2011. EBITDA(1)in the quarter was negative $2.4 million, an increase of the loss of $1.6 million over the negative $0.8 million reported in Q3-F2010 and an increase of loss of $0.9 million from the second quarter of fiscal 2011.
Profit margins in Airborne Geophysics were negatively impacted by fixed-wing services due to the reasons previously indicated. Q3-F2011 fixed-wing gross margins were 21% compared with 24% in Q3-F2010 but a significant improvement from the 11% margin reported in the second quarter of 2011. Management expects that fixed-wing margins will improve in future quarters as weather improves and proactive steps are taken to manage logistical issues. Helicopter margins decreased slightly to 9% Q3-F2011 from 10% in Q3-F2010 but significantly down from 38% reported in the second quarter of fiscal 2011.
Year to date gross margins were 21% in fixed-wing and 24% in helicopter services compared to 18% and 14% respectively in the first nine months of fiscal 2010.
Aerial Geomatics gross profit margins were 24% of revenue, a slight increase of 1% from the second quarter and are still below management's expectations. The Company is well underway in the integration of the Aeroquest Optimal unit with the Mapcon unit that was acquired on January 31. As the business grows, the acquisition of Mapcon will allow the Company the means to realize savings
through the greater use of third party offshore processing facilities.
Selling, general and administrative ("SG&A) expenses increased by $1.3 million or 48 percent from Q3-F2010, reflecting increased activity in operations, as well as severance cost obligations in Q3-F2011 for several senior executives.
Consolidated net loss in Q3-F2011 was $3.7 million or $0.10 per share compared to net loss of $1.8 million, or $0.05 per share in Q3-F2010. Year to date fiscal 2011 consolidated net loss is $6.9 million or $0.18 per share compared with a consolidated net loss of $6.3 million or $0.17 per share in the first nine months of fiscal 2010.
Cash flow from operating activities was $1.0 million, or $0.03 per share in Q3-F2011, as compared to $2.6 million, or $0.07 per share in Q3-F2010. The $1 million increase in cash in Q3-F2011 was the result of an improvement in non-cash working capital of $2.9 million. Capital expenditures totaled $0.6 million in Q3-F2011, an increase of $0.2 million from Q3-F2010.
Contract backlog decreased by $1.2 million from $15.6 million at March 31, 2011 to $14.4 million at June 30, 2011. Backlog is composed of $11.7 million in Airborne Geophysics survey backlog ($2.9 million in helicopter and $8.8 million in fixed-wing), $2.7 million in Aerial Geomatics backlog. There is no backlog in our instruments and sensors group. However, subsequent to the quarter, in July the Instruments and Sensors Group received two contracts with a total value of $1.4 million.
Short Term Prospectus
During the quarter, the Company reported that it elected not to proceed with its previously announced best efforts offering of units (each comprised of a common share and a half-warrant) and withdrew the short form prospectus filed with regulatory authorities in Canada.