Geotech Ltd.

Aeroquest International Limited (TSX: AQL) Announces Financial Results for the Three Months Ended December 31, 2011


Source: Geotech Ltd.

- Revenue of $7.9 million down $2.9 million from the first quarter of fiscal 2011.
- EBITDA of $(0.4) million compared to $0.7 million in the first quarter of fiscal 2011.
- Cash at $1.2 million from $0.7 million on September 30, 2011.
- Strategic alternatives process update

TORONTO, ONTARIO -- (Marketwire) -- 03/07/12 -- Attention business/financial editors and reporters:

Aeroquest International Limited (TSX: AQL) ('Aeroquest', or 'the Company') today reported financial results for its first quarter of fiscal 2012, the three months ended December 31, 2011 ('Q1-F2012'). These results reflect increased competition and pricing pressure as well as logistical delays resulting in gross margin compression.

'We are disappointed that the gains we saw in the fourth quarter of fiscal 2011 were not reflected in the first quarter' said Bob Motz, President and CEO of Aeroquest; 'We continue to face problems mobilizing our aircraft to certain countries and this is impacting our ability to effectively utilize our fleet. Our cash position remains below where we want to be at $1.2 million as of December 31, 2011 and has continued to decline into the second quarter. We have scaled back our variable cost structure where possible but the ability to fund future improvements to our technology as well as grow our operations will be predicated on improving our cash balances either through generating cash from operations or finding alternative sources of capital.

A Special Committee established by the Board of Directors has been evaluating strategic alternatives for the Company for a period of time and is currently evaluating several proposals any of which if consummated would address the cash shortfall. However, there is no assurance that any of these transactions will come to fruition.'

Consolidated revenue for Q1-F2012 was $7.9 million, a decrease of $2.9 million or 26% over the first quarter last year ('Q1-F2011'). Revenue from Airborne Geophysics was $7.0 million, a decrease of $3.5 million from Q1-F2011 of last year. Fixed wing revenue declined to $4.5 million from $6.1 million in Q1-F2011, while helicopter services revenue declined to $2.5 million from $2.8 million in Q1-F2011. Also in Q1-F2011 revenues is the outright sale of one AeroTEM? IV system realizing revenue of $1.6 million.

Revenue from Aerial Geomatics was $0.4 million, all of which was from the Aeroquest Mapcon operations acquired on January 31, 2011. Revenue from the Aeroquest Optimal operations that were sold on December 1, 2011 has been excluded and the net results reported through results from discontinued operations.

Revenue from the Instruments and Sensors segment was $0.4 million compared with $0.3 million in Q1-F2011.

Q1-F0212 represents the first quarter that the company has transitioned to International Financial Reporting Standards ('IFRS'). One of the changes resulting from IFRS is that management has elected to report its operating expenses by function within the Statement of Income. This IFRS policy choice requires that depreciation related to assets used directly in providing services be included in cost of sales. This has the effect of reducing overall gross profit margins. Comparative quarters have been restated to reflect this change.

Overall gross profit margin was 16% compared with 28%. EBITDA(1) in the quarter was negative $0.4 million, a decrease of $1.1 million over the positive $0.7 million reported in Q1-F2011 and a decrease of $0.8 million from the $0.4 million reported in the fourth quarter of last year.

Profit margins in Airborne Geophysics declined to 11.6% compared to 27.1% in Q1-F2011. Fixed wing margins were 9.8% of revenue compared to 24.1% of revenue in Q1-F2011. Fixed wing margins were negatively impacted by logistical and permitting delays in mobilizing aircraft to several countries - including a delay of seven weeks in moving one aircraft to India to commence a survey. Helicopter margins improved to 14.9% compared to 12.7% in Q1-F2011. Q1-F2011 also included the sale of one AeroTEM system reflecting gross margin of 62.5% in that period.

Aerial Geomatics gross profit margins were 52.2% of revenue which is above management's expectations and reflects profitability on several contracts completed in the quarter. Management expects margins to decline from these levels to below 40% in future quarters.

On December 1, 2011, we announced that we had sold our Aeroquest Optimal operations to a third party for total proceeds of US$1.2 million. The Aeroquest Optimal operations for the period up to the sale generated a net loss of $0.1 million compared to $0.4 million in Q1-F2011.

General and administrative expenses (inclusive of depreciation & amortization related to these functions) declined by $0.5 million to $2.2 million from $2.7 million in Q1-F2011. This decline reflects management's efforts to reduce overall administrative costs to better align these businesses to the size and scale of the overall operations. These activities continued into the second quarter to rationalize overall costs.

Consolidated net loss in the quarter was $1.5 million or $0.04 per share compared to net loss of $1.0 million, or $0.03 per share in the first quarter last year.

Cash flow from operating activities was negative $0.3 million or $0.01 per share in Q1-F2012 compared to $1.7 million, or $0.05 per share for the period in Q1-F2011. Capital expenditures totaled $0.4 million in Q1-F2012, in line with the activity in Q1-F2011.

Outlook - Q2 - 2012

Contract backlog increased by $1.8 million, from September 30, 2011 to $11.2 million at December 31, 2011. Backlog is composed of $8.2 million in Airborne Geophysics survey backlog ($0.8 million in helicopter and $7.4 million in fixed wing), $1.4 million in Aerial Geomatics backlog, and $1.6 million in backlog in our instruments and sensors group.

Readers are encouraged to review the Interim Financial Statements or Management's Discussion & Analysis ('MD&A') either on our website ( or on SEDAR ( for further discussion on liquidity.

Recent Developments - Strategic Alternatives

As noted above, Aeroquest has formed a special committee to review strategic alternatives open to Aeroquest. Aeroquest has learned that there are rumours in the marketplace about the nature of a possible transaction involving Aeroquest. Aeroquest is concerned that these rumours may contribute to changes in its share price or level of trading activity. While our corporate policy is not to comment on rumours or speculation, in the interest of our shareholders, Aeroquest is confirming that over the past several weeks, it has been engaged in discussions with a number of parties concerning a possible transaction. At the present time, there can be no assurance that any transaction will be completed, and we will advise the market of material changes in respect of Aeroquest when they occur.

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 120 employees and contractors, and a fleet of over twenty 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

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.


                                Dec. 31, 2011  Sep. 30, 2011   Oct. 1, 2010
 Cash and cash equivalents      $   1,225,990  $     669,506  $   4,757,216
 Accounts receivable                2,686,926      3,866,484      4,527,942
 Income tax recoverable               222,647        401,724        231,136
 Unbilled contracts in progress     1,490,228      1,815,177      1,529,146
 Inventories                          186,450        185,627        699,935
 Prepaid expenses and deposits        773,323        649,179      1,465,629
 Assets held for sale                       0      3,027,456              0
Total current assets            $   6,585,564  $  10,615,153  $  13,211,004
 Long term investments          $           -  $           -  $     171,828
 Property, plant and equipment      8,237,709      8,407,878      9,766,989
 Intangible assets                  6,801,658      7,367,571     13,277,339
 Goodwill                           5,169,024      5,169,024     11,821,304
 Future income taxes                1,566,237      1,500,662      2,314,545
Total non-current assets        $  21,774,628  $  22,445,135  $  37,352,005
Total Assets                    $  28,360,192  $  33,060,288  $  50,563,009

Liabilities and Shareholders'
 Accounts payable and accrued
  liabilities                   $   4,051,879  $   4,996,223  $   4,697,656
 Deferred revenue                   1,665,472      2,067,192      2,240,687
 Finance lease obligations              4,905          9,430        200,964
 Liabilities held for sale                  0      1,555,477              0
Total current liabilities       $   5,722,256  $   8,628,322  $   7,139,307
 Finance lease obligations                  0              0          9,264
 Future income taxes                2,073,342      2,254,246      4,603,674
Total Liabilities               $   7,795,598  $  10,882,568  $  11,752,245

Shareholders' equity
 Share capital                  $  48,940,127  $  48,940,127  $  48,527,057
 Contributed surplus                2,351,851      2,339,510      2,355,274
 Accumulated other
  comprehensive income                453,292        538,709         (5,187)
 Deficit                          (31,180,676)   (29,640,626)   (12,066,380)
Total shareholders' equity         20,564,594     22,177,720     38,810,764
Total Liabilities and
 Shareholders' Equity           $  28,360,192  $  33,060,288  $  50,563,009


                                                   Three months ended
                                              Dec. 31, 2011   Dec. 31, 2010

Sales                                        $    7,928,813  $   10,779,170
  Cost of sales                                   6,676,430       7,766,434
Gross profit                                 $    1,252,383  $    3,012,737

Expenses and other items
  General and administrative                 $    2,208,592  $    2,724,163
  Other expenses                                    819,569       1,065,821
  Other operating income                           (103,498)           (107)
Total operating expenses                     $    2,924,663  $    3,789,877

Loss before income taxes and discontinued
 operations                                  $   (1,672,280) $     (777,140)
Income taxes
  Current (recovery)                         $        8,867  $      311,557
  Future (recovery)                                (223,602)       (479,660)
Total Income tax                             $     (214,735) $     (168,103)
Net loss before discontinued operations      $   (1,457,545) $     (609,037)
Loss from discontinued operations            $      (82,505) $     (353,967)
Net loss for the period                      $   (1,540,050) $     (963,004)

Earnings per share
  Basic                                              -$0.04          -$0.03
  Diluted                                            -$0.04          -$0.03


                                                 Three months ended
                                            Dec. 31, 2011     Dec. 31, 2010

Deficit, beginning of period             $    (29,640,626) $    (12,066,380)
Net loss for the period                        (1,540,050)         (963,004)
Deficit, end of period                   $    (31,180,676) $    (13,029,384)


                                                   Three months ended
                                              Dec. 31, 2011   Dec. 31, 2010

Net loss for the period                      $   (1,540,050) $     (963,004)
Revaluation of long term investments to fair
 market value                                             -           2,540
Unrealized gain/(loss) on translation of
 self-sustaining foreign operations                 (85,417)        285,725
Total other comprehensive income (loss)      $      (85,417) $      288,265
Total comprehensive loss for the period      $   (1,625,467) $     (674,739)


                                                   Three months ended
                                              Dec. 31, 2011   Dec. 31, 2010
Cash provided by (used in)
Operating activities
  Net loss for the period                    $   (1,540,050) $     (963,004)
  Operating items not requiring cash:
  Amortization of intangible assets                 670,598         850,405
  Depreciation of property, plant &
   equipment                                        630,526         625,784
  Gain on sale of business unit                    (121,734)              -
  Future income taxes                              (223,602)       (479,660)
  Stock based compensation                           12,341          14,562
  Loss on disposal of capital assets                      -           5,955
Operating cash flow before changes in non-
 cash working capital                        $     (571,921) $       54,042
  Changes in non-cash working capital               232,453       1,621,552
Total cash flow from operating activities    $     (339,468) $    1,675,594

Investing activities
  Property, plant & equipment purchases      $     (366,160) $     (387,021)
  Proceeds from sale of business unit             1,266,637               -
Total cash flow from investing activities    $      900,477  $     (387,021)

Financing activities
  Finance lease obligation payments                  (4,525) $      (52,475)
  Proceeds from issuance of common shares on
   exercise of employee stock options                     -           1,260
Total cash flow from financing activities    $       (4,525) $      (51,215)

Net change in cash and cash equivalents
for the period                               $      556,484  $    1,237,358
Cash and cash equivalents, beginning of
 period                                             669,506       4,757,216
Cash and cash equivalents, end of period     $    1,225,990  $    5,994,574



Aeroquest International Limited
Bob Motz
President & Chief Executive Officer


Customer comments

No comments were found for Aeroquest International Limited (TSX: AQL) Announces Financial Results for the Three Months Ended December 31, 2011. Be the first to comment!