Aeroplan Income Fund Reports 2007 Year-End and Fourth Quarter Results
MONTREAL, March 4 /CNW Telbec/ - Aeroplan Income Fund (Fund) (TSX:
AER.UN) today reported its 2007 consolidated year-end and fourth quarter
results.
2007 Financial Highlights (Aeroplan Limited Partnership)
- Gross billings of $952.2 million, a year over year increase of 11.8%
- Operating income $189.7 million, or a 35.1% annual increase
- Adjusted EBITDA(*) $252.1 million, an annual increase of 16.5%
- Distributable cash(*) $245.7 million, or a 23.2% annual increase
Fourth Quarter 2007 Financial Highlights (Aeroplan Limited Partnership)
- Gross billings of $248.4 million, up 9.6 % from the comparative period
- Operating income $46.3 million, or a 24.1 % increase
- Adjusted EBITDA(*) $64.1 million, up 12.5 % from the comparative period
- Distributable cash(*) $59.4 million, or a 12.1 % increase
(*) See section entitled Non-GAAP Measures
"2007 was the third consecutive year of solid double-digit financial
growth," said Rupert Duchesne, President and Chief Executive Officer. "We
launched new partners in different sectors and various promotions with
significant retailers. The year culminated with our strategic acquisition of
Loyalty Management Group paving the way to attaining a worldwide leadership
position in loyalty management."
Financial Performance (Aeroplan Limited Partnership)
Gross billings from the sale of Aeroplan Miles grew 11.8 % to
$952.2 million, compared to $851.9 million in 2006. Fourth quarter gross
billings went from $226.7 million in 2006 to $248.4 million in 2007, a 9.6 %
quarter over quarter increase as a result of general growth in consumer
spending experienced through credit and charge cards issued by Aeroplan's
accumulation partners and continued momentum in the travel industry.
For the full fiscal year, operating income amounted to $189.7 million in
2007 compared to $140.5 million in 2006 or a 35.1 % increase. For the fourth
quarter, operating income amounted to $46.3 million, compared to $37.3 million
for the corresponding quarter of 2006, a 24.1 % increase, mainly attributable
to higher reward redemption activity, a higher proportion of Aeroplan Miles
redeemed, offset in part by the slight increase in redemption costs.
At year end, the Fund had $456.0 million of cash and cash equivalents and
$123.4 million of short-term investments, for a total of $579.4 million
compared to $619.7 million held by the Aeroplan Limited Partnership at the end
of 2006. The Aeroplan Miles redemption reserve of $400.0 million is included
in this amount.
On a year over year basis, adjusted EBITDA and distributable cash amounted
to $252.1 million and $245.7 million, respectively, compared to $216.4 million
and $199.4 million in 2006, respectively. In the fourth quarter, adjusted
EBITDA amounted to $64.1 million compared to $57.0 million in the fourth
quarter of 2006 and distributable cash was $59.4 million compared to $53.0
million for the fourth quarter of 2006.
Fourth Quarter 2007 Key Operational Achievements
Acquisitions
Loyalty Management Group
------------------------
On December 20, 2007, the Fund acquired privately-held Loyalty Management
Group Limited (LMG) for a purchase price of (pnds stlg)355.1 million
($715.4 million). LMG is the leading loyalty marketing and customer-driven
insight and analysis company that owns and operates the Nectar loyalty program
in the United Kingdom.
LMG operates in three main areas: Nectar, Insight & Communication (I&C)
and Rewards Management Middle East (RMMEL). LMG also owns the worldwide
rights, trademarks and other intellectual property of the Air Miles brand and
receives royalty income from these assets. The Nectar Program is the United
Kingdom's largest loyalty program and only significant coalition loyalty
program. It was launched in September 2002 and enables its over 10 million
active members to earn points for making everyday household purchases at
leading retailers and service providers. The I&C business was established in
2007 to provide analytical services to retailers and their suppliers. RMMEL
manages loyalty programs under the Air Miles Trademark in Middle Eastern
markets, principally the United Arab Emirates, Bahrain and Qatar.
The acquisition of LMG provides the Fund with an unparalleled breadth of
retail, financial services, travel, as well as data analytics skills and
experience as well as a leading position in one of the most important and
active loyalty markets in the world.
The two loyalty programs, Nectar and Aeroplan, continue to be operated
separately. Members' participation in their respective program is unaffected.
Rewards Management Middle East Limited (RMMEL)
----------------------------------------------
On January 17, 2008, the Fund purchased an additional participation of 40%
in RMMEL for a purchase price of AED40 million ($11.2 million). As a result of
this transaction, the Fund now holds 60% of RMMEL.
The Fund will continue to pursue international expansion opportunities.
Carbon Offset Program
Aeroplan Limited Partnership (Aeroplan) launched its Carbon Offset Program
- another loyalty industry first during December 2007. Under this program,
Aeroplan members can use their miles to offset emissions generated by their
flights and everyday activities. Aeroplan matches all miles redeemed for
carbon offset credits by 20 per cent and transfers the total sum to the Carbon
Reduction Fund (www.carbonreductionfund.org), an independent, non-profit
organization with the mission of funding only the highest-quality offset
projects.
Aeroplan launched the Carbon Offset Program by contributing more than
2.5 million Aeroplan Miles to the Carbon Reduction Fund. Aeroplan's partners
American Express and CIBC have also generously contributed to the program's
launch, each donating 2 million Aeroplan Miles.
Partnerships
Air China and Shanghai Airlines
-------------------------------
Aeroplan welcomed Air China and Shanghai Airlines as travel partners,
bringing Aeroplan's roster of airline partners to 29.
Bell Canada
-----------
Aeroplan and Bell Canada announced the end of their agreement to offer
Aeroplan Miles to Bell Canada customers as of January 2008. In the same month,
Aeroplan and Primus, the largest alternative communications carrier in Canada,
announced a multi-year national partnership which allows Aeroplan Members to
accumulate Aeroplan Miles across Primus' entire range of consumer products and
services. Members may earn three Aeroplan Miles for every dollar spent on
Primus' suite of products and services, including home phone, long distance,
wireless, and internet services, as well as Primus' bundled offerings.
Aeroplan Members can also earn valuable bonus Aeroplan Miles when they sign up
for Primus services.
New Non-Flight Rewards
Aeroplan announced that Starwood Hotels will offer Aeroplan members a
totally web-based means to search for, book and confirm hotel stays using
Aeroplan Miles. The new seamless process eliminates the need for vouchers and
coupons and, because the process is immediate, there is no longer a need to
book days in advance or call the hotel chain to make a reservation. Aeroplan
is the only loyalty program in Canada to offer this level of self-service
options for booking travel, including flight, car and hotel rewards.
ACE Secondary Offering
On October 22, 2007, ACE Aviation Holdings Inc. (ACE) sold an aggregate of
22.0 million Fund units at a price of $21.90 per unit, for gross proceeds of
$481.8 million. The Fund did not receive any of the proceeds from this
secondary offering by ACE. ACE retains 40,292,088 Fund units, representing
20.1% of the 199,968,791 units issued and outstanding.
Corporate Structure
To ensure that the Fund's capital structure is efficient and that
unitholder value is being maximized, the Board of Trustees and the Board of
Directors have requested that management retain independent financial advisors
to conduct an in-depth analysis to consider a potential reorganization of the
Fund's income trust structure to a corporate structure. Although no final
decision has been made at this time, the review may lead to a recommendation
in the near future that unitholders approve a conversion to a corporation.
Non-GAAP Measures
In order to provide a better understanding of the results, the following
terms are used:
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization
("Adjusted EBITDA")
EBITDA adjusted for certain factors particular to the business, such as
changes in deferred revenue and future redemption costs ("Adjusted EBITDA") is
used by management to evaluate performance, and is used in measuring
compliance with debt covenants and in making decisions relating to
distributions to unitholders. Management believes Adjusted EBITDA assists
investors in comparing a company's performance on a consistent basis without
regard to depreciation and amortization, which are non-cash in nature and can
vary significantly depending on accounting methods and non-operating factors
such as historical cost.
Adjusted EBITDA is a non-GAAP measurement and may not be comparable with
similar measures reported by other entities, and is not considered an
alternative to operating income or net income in measuring performance. For
reconciliation with GAAP, please refer to the selected Annual Information and
reconciliation of Adjusted EBITDA and Distributable Cash. Adjusted EBITDA
should not be used as an exclusive measure of cash flow because it does not
account for the impact of working capital growth, capital expenditures, debt
repayment and other sources and uses of cash, which are disclosed in the
statements of cash flows.
Refer to the Selected Annual Information and Reconciliation of Adjusted
EBITDA and Distributable Cash for a summary of operating results and
reconciliation of Adjusted EBITDA and Distributable Cash.
Distributable Cash
Distributable cash is a non-GAAP measure generally used by Canadian
open-ended trusts as an indicator of financial performance, and it should not
be seen as a measurement of liquidity or a substitute for comparable metrics
prepared in accordance with GAAP. Distributable cash may differ from similar
calculations as reported by other entities and, accordingly, may not be
comparable to distributable cash as reported by such entities.
The Fund intends to make equal monthly distributions to its partners of
record on the last business day of each month. Management and the board of
directors will periodically review cash distributions in order to take into
account current and prospective performance.
Refer to the attached schedule for a reconciliation of Distributable Cash
to cash flows from operations.
The annual financial statements and the Investor Presentation, as well as
unaudited supplementary financial information will be accessible on the
investor relations website at aeroplan.com.
Quarterly Investor Conference Call / Audio Webcast
The Fund will hold an analyst call at 14:30 a.m. (Eastern Standard Time)
on Tuesday March 4, 2008 to discuss its fourth quarter and year-end results.
The call may be accessed by dialling 416-340-2217 within the Toronto area, or
1-866-696-5910 (toll free) outside of Toronto. The call will be simultaneously
audio webcast at http://events.startcast.com/events/20/B0058.
The conference call webcast and a presentation to investors and analysts
will be archived on the investor relations website at www.aeroplan.com. A
playback of the call can also be accessed until April 4, 2008 by dialling
416-695-5800, pass code 3238698#, from within the Toronto area, or
1-800-408-3053, pass code 3238698#, outside of Toronto.
About Aeroplan Income Fund
Aeroplan Income Fund is an unincorporated, open-ended trust established
under the laws of the Province of Ontario. Aeroplan Income Fund is the owner
of Aeroplan Limited Partnership, Canada's premier loyalty marketing company
and operator of the Aeroplan loyalty program and Loyalty Management Group
Limited, operator of Nectar, the United Kingdom's largest customer reward
program.
For more information about the Fund, please visit www.aeroplan.com
About Aeroplan
Aeroplan, Canada's premier loyalty marketing company and operator of the
Aeroplan loyalty program, is dedicated to developing and executing programs
designed to engage the loyalty of its prestigious membership. Aeroplan's
millions of members earn Aeroplan Miles with its network of more than 70
world-class partners, representing more than 150 brands in the financial,
retail, and travel sectors. Miles earned may be redeemed for Aeroplan's
industry-leading ClassicFlight Rewards, innovative ClassicPlus Flight Rewards,
and global Star Alliance Flight Rewards, offering travel to more than 850
destinations worldwide. In 2007 alone, more than 1.5 million round-trip flight
rewards were issued. Aeroplan's roster of non-flight rewards includes more
than 400 exciting specialty, merchandise, and experiential rewards, as well as
hotel and car rental rewards. Members are encouraged to stay engaged with
Aeroplan and avoid mileage expiration due to inactivity by earning or
redeeming Aeroplan Miles at least once in any consecutive twelve-month period.
For more information about Aeroplan, please visit www.aeroplan.com.
About LMG
LMG is based in the United Kingdom and develops, owns and manages large
retail-based customer reward programs and provides customer data driven
marketing services to retailers, CPGs and service providers worldwide. The
group owns and operates the Nectar brand, the United Kingdom's largest
customer reward program. It also majority owns the Air Miles programme in the
Middle East as well as owning the Air Miles trademark around the world. It
employs approximately 250 staff at its HQ in London and has operations in
Newcastle, England and Mumbai, India.
For more information about LMG, please visit www.loyalty.co.uk.
Caution Concerning Forward-Looking Statements
This news release should be read in conjunction with Fund's 2007 year-end
and fourth quarter MD&A dated March 3, 2008 filed with Canadian securities
regulatory authorities (available at www.sedar.com). Certain statements in
this news release may contain forward-looking statements. These
forward-looking statements are identified by the use of terms and phrases such
as "anticipate", "believe", "could", "estimate", "expect", "intend", "may",
"plan", "predict", "project", "will", "would", and similar terms and phrases,
including references to assumptions. Such statements may involve but are not
limited to comments with respect to strategies, expectations, planned
operations or future actions.
Forward-looking statements, by their nature, are based on assumptions and
are subject to important risks and uncertainties. Any forecasts or
forward-looking predictions or statements cannot be relied upon due to,
amongst other things, changing external events and general uncertainties of
the business and its corporate structure. Results indicated in forward-looking
statements may differ materially from actual results for a number of reasons,
including without limitation, dependency on top accumulation partners, Air
Canada or travel industry disruptions, reduction in activity, usage and
accumulation of Aeroplan Miles, greater than expected redemptions for rewards,
industry competition, supply and capacity costs, unfunded future redemption
costs, changes to the Aeroplan and Nectar Programs, seasonal nature of the
business, regulatory matters, VAT appeal, control of the Fund, restrictions on
certain unitholders and liquidity of units, future sales or distributions of
units by ACE Aviation Holdings Inc., income tax matters, conversion to
corporate structure, as well as the other factors identified throughout the
MD&A. The forward-looking statements contained in this discussion represent
the Fund's expectations as of March 3, 2008, and are subject to change after
such date. However, the Fund disclaims any intention or obligation to update
or revise any forward-looking statements whether as a result of new
information, future events or otherwise, except as required under applicable
securities regulations.
SELECTED ANNUAL INFORMATION AND RECONCILIATION OF ADJUSTED EBITDA
AND DISTRIBUTABLE CASH
-------------------------------------------------------------------------
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(in thousands, except
miles, unit and per Year over year
unit information) December 31, % change
2007 2006
2007(3) 2006(4) 2005(4) over over
------- ------- ------- 2006 2005
-------------------------------------------------------------------------
Number of Aeroplan
Miles issued
(in billions) 78.1 69.7 62.6 12.1 11.3
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Number of Total
Miles redeemed
(in billions) 66.0 57.8 52.2 14.2 10.7
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Number of Aeroplan
Miles redeemed
(in billions) 59.1 49.3 40.4 19.9 22.0
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Gross Billings from
the sale of
Aeroplan Miles $952,165 $851,851 $754,786 11.8 12.9
-------------------------------------------------------------------------
Aeroplan Miles
revenue 848,665 709,269 582,883 19.7 21.7
Tier management,
contact centre
management and
marketing fees
from Air Canada 9,371 10,121 12,666 (7.4) (20.1)
Other revenue 48,379 49,997 44,352 (3.2) 12.7
-------------------------------------------------------------------------
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Total revenue 906,415 769,387 639,901 17.8 20.2
Cost of rewards (540,061) (465,254) (397,042) 16.1 17.2
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-------------------------------------------------------------------------
Gross margin 366,354 304,133 242,859 20.5 25.2
Selling, general
and
administrative (164,841) (149,406) (132,459) 10.3 12.8
Depreciation and
amortization (11,804) (14,260) (8,491) (17.2) 67.9
-------------------------------------------------------------------------
Operating income
before
amortization of
accumulation
partners'
contracts and
technology $189,709 $140,467 $101,909 35.1 37.8
-------------------------------------------------------------------------
Depreciation and
amortization 11,804 14,260 8,491
Change in deferred
revenue
Gross Billings
from the sale
of Aeroplan
Miles 952,165 851,851 754,786
Aeroplan Miles
revenue (848,665) (709,269) (582,883)
Change in Future
Redemption
Costs(1)
(Change in Net
Aeroplan Miles
outstanding x
Average cost of
rewards per Mile
for the period) (52,916) (80,915) (114,165) (34.6) (29.1)
-------------------------------------------------------------------------
Adjusted EBITDA $252,097 $216,394 $168,138 16.5 28.7
-------------------------------------------------------------------------
Net Interest
Income (Expense) 9,889 4,941 (666) 100.1 841.9
Maintenance
Capital
Expenditures (16,325) (21,923) (15,284) (25.5) 43.4
-------------------------------------------------------------------------
Distributable
Cash $245,661 $199,412 $152,188 23.2 31.0
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Standardized
Distributable
Cash (6) $291,920 $299,054 $305,084 (2.4) (2.0)
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Weighted average
number of
units (Fund) 190,023,236 199,707,713(2) 187,739,727(2)
Distributable
Cash per unit $1.29 $1.00 $0.81 29.0 23.4
Standardized
Distributable
Cash per unit $1.54 $1.50 $1.63 2.7 (8.0)
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Adjusted net
earnings(5)
= Net
earnings, in
accordance with
GAAP + amortization
of accumulation
partners' contracts
and technology
+ income taxes 185,435 $143,529 $100,304 29.2 43.1
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-------------------------------------------------------------------------
Earnings per unit,
in accordance
with GAAP,
adjusted for
amortization of
accumulation
partners' contracts
and technology and
income taxes $0.98 $0.72 $0.53 36.1 35.8
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Total assets
(Fund) $6,118,340 $824,383 $674,221
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Total long-term
liabilities
(Fund) $1,579,297 $967,921 $944,183
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Total monthly
distributions
declared, post
offering
(Partnership) 168,000 $146,460 $70,740 14.7 107.0
Total monthly
distributions
declared per
unit, post
offering $0.84 $0.73 $0.38 15.1 92.1
Distributions
declared,
pre-offering - - $311,000
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(1) The per unit cost derived from this calculation is retroactively
applied to all prior periods with the effect of revaluing the
liability on the basis of the latest available average unit cost;
(2) Represents weighted average number of units outstanding for the
Partnership, as the YTD weighted average number of units for the Fund
is not comparative;
(3) Has been derived by adding the results of the Partnership prior to
March 14, 2007 to the results of the Fund for the year;
(4) 2006 and 2005 results presented for comparative purposes are those of
the Partnership;
(5) Adjusted net earnings is a non-GAAP measurement;
(6) Has been derived by adding the results of the Partnership prior to
March 14, 2007 to the results of the Fund for the year excluding the
effect of LMG.
RECONCILIATION OF CASH FLOWS FROM OPERATIONS TO STANDARDIZED
DISTRIBUTABLE CASH AND DISTRIBUTABLE CASH
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Years ended December 31,
------------------------
(in thousands) 2007(3) 2006(4)
------------ -----------
-------------------------------------------------------------------------
Cash flows from operations $ 308,245 $ 320,977
Maintenance Capital Expenditures (16,325) (21,923)
-------------------------------------------------------------------------
Standardized Distributable Cash 291,920 299,054
Changes in non-cash working capital items(1) 5,226 (17,579)
Stock Based compensation(1) (3,632) (3,621)
Funding of stock-based compensation plans(1) 5,063 (2,473)
Change in future redemption costs(2) (52,916) (80,915)
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Distributable Cash $ 245,661 $ 199,412
-------------------------------------------------------------------------
Distributions declared $ 168,000 $ 146,460
Payout ratio - Distributions declared /
Standardized Distributable Cash 58% 49%
Payout ratio - Distributions declared /
Distributable Cash 68% 73%
Standardized Cumulative Distributable Cash
since IPO (June 29, 2005) 768,578 476,658
Cumulative distributions declared since IPO 385,200 217,200
Cumulative payout ratio since inception 50% 46%
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-------------------------------------------------------------------------
(1) The impact of the respective items is considered in the calculation
of Standardized Distributable Cash but they are not part of the
Distributable Cash definition in accordance with the Limited
Partnership Agreement. This eliminates the potential impact of timing
distortions relating to the respective items;
(2) Changes in future redemption costs are included to reflect the
expected change in the future redemption liability on the basis of
the most recently experienced redemption costs;
(3) Represents cash flows from operations generated by the Partnership;
(4) 2006 results presented for comparative purposes are those of the
Partnership.
SUMMARY OF QUARTERLY RESULTS
This schedule includes sequential quarterly data for the eight quarters
ended December 31, 2007.
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(in thousands, except
per unit amounts) 2007
(unaudited) Q4 Q3 Q2(2) Q1(2)
$ $ $ $
-------------------------------------------------------------------------
Gross Billings 248,380 236,877 238,931 227,977
-------------------------------------------------------------------------
Total revenue 221,578 219,239 220,284 245,314
Cost of rewards 129,181 127,205 128,541 155,134
-------------------------------------------------------------------------
Gross margin 92,397 92,034 91,743 90,180
Selling, general and
administrative expenses 43,017 40,713 41,707 39,403
Depreciation and
amortization 3,059 3,230 2,811 2,704
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Operating income before
amortization of
accumulation partners'
contracts and technology 46,321 48,091 47,225 48,073
Amortization of
accumulation partners'
contracts and technology 18,112 18,112
-------------------------------------------------------------------------
Operating income 28,209 29,979 47,225 48,073
-------------------------------------------------------------------------
Adjusted net earnings(3)
= Net earnings,
in accordance with GAAP
+ amortization of
accumulation partners'
contracts and technology
+ income taxes 44,809 51,371 49,450 50,116
-------------------------------------------------------------------------
Net earnings 51,697 32,259 49,450 50,116
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Adjusted EBITDA 64,131 64,519 65,171 59,980
-------------------------------------------------------------------------
Standardized Distributable
Cash 47,894 89,667 68,163 70,856
Standardized Distributable
Cash per unit 0.24 0.45 0.34 0.36
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Distributable Cash 59,380 63,015 64,886 60,120
Distributable Cash
per unit 0.30 0.32 0.33 0.30
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Earnings per unit, in
accordance with
GAAP - Fund 0.26 0.16 (0.68) 0.16
Earnings per unit,
in accordance with
GAAP - Partnership 0.24 0.26 0.25 0.25
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(in thousands, except per unit amounts) 2006
(unaudited) Q4(2) Q3(2) Q2(2) Q1(2)
$ $ $ $
Gross Billings 226,728 211,245 212,376 201,502
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Total revenue 208,404 178,391 182,534 200,058
Cost of rewards 120,160 107,741 112,470 124,883
-------------------------------------------------------------------------
Gross margin 88,244 70,650 70,064 75,175
Selling, general and
administrative expenses 47,451 34,464 34,948 32,438
Depreciation and
amortization 3,479 3,155 3,884 3,742
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Operating income before
amortization of
accumulation partners'
contracts and technology 37,314 33,031 31,232 38,995
Amortization of
accumulation partners'
contracts and technology
-------------------------------------------------------------------------
Operating income 37,314 33,031 31,232 38,995
-------------------------------------------------------------------------
Adjusted net earnings(3)
= Net earnings,
in accordance with GAAP
+ amortization of
accumulation partners'
contracts and technology
+ income taxes 38,469 34,320 31,755 38,985
-------------------------------------------------------------------------
Net earnings 38,469 34,320 31,755 38,985
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Adjusted EBITDA 56,975 53,359 51,470 54,390
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Standardized Distributable
Cash 94,769 100,969 63,441(1) 39,875(1)
Standardized Distributable
Cash per unit 0.47 0.50 0.32 0.20
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Distributable Cash 52,996 50,664 47,073(1) 48,374(1)
Distributable Cash 0.27 0.25 0.24 0.24
per unit
-------------------------------------------------------------------------
Earnings per unit, in
accordance with 0.13 0.07 0.11 0.16
GAAP - Fund
Earnings per unit, in
accordance with
GAAP - Partnership 0.19 0.17 0.16 0.19
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(1) Maintenance capital expenditures included in Distributable Cash for
Q1 and Q2 2006 have been restated to reflect the actual amount of
maintenance capital expenditures incurred in each period. The amounts
previously reported were based upon a pro-ration of the estimated
yearly spend.
(2) Results presented for comparative purposes are those of the
Partnership.
(3) Adjusted net earnings is a non-GAAP measurement.
For further information: Media: Michèle Meier, (514) 205-7028, michele.meier@aeroplan.com; Analysts: Trish Moran, (416) 352-3728, trish.moran@aeroplan.com