Aeroplan reports 2007 third quarter results
MONTREAL, Nov. 8 /CNW Telbec/ - Aeroplan Income Fund ("Aeroplan")
(TSX: AER.UN) today reported its third quarter consolidated results.
Third Quarter 2007 Financial Highlights
- Gross billings $236.9 million, up 12.1% from the third quarter of 2006
- Adjusted EBITDA $64.5 million, compared to $53.4 million for the third
quarter of 2006
- Distributable cash $63.0 million, compared to $50.7 million for the
third quarter of 2006
"Aeroplan is pleased with our third quarter results and our performance
throughout 2007. Our solid growth continues to provide us with the operating
leverage and financial flexibility required to execute our business
strategies," said Rupert Duchesne, President and CEO, Aeroplan. "On the member
front, we continue to respond to demand for more innovative air and non-air
products and services. Our results clearly demonstrate that we're finding the
right rewards for our members."
Aeroplan's Financial Performance
Gross billings from the sale of Aeroplan Miles for the three months ended
September 30, 2007 amounted to $236.9 million compared to $211.2 million for
the three months ended September 30, 2006, representing an increase of
$25.7 million or 12.1%. This overall increase reflects growth in consumer
spending and credit and charge card usage, which translates into increased
volume from the related accumulation partners; as well as the positive
momentum experienced by the travel industry in general, which has positively
affected Aeroplan's air accumulation partners.
Total revenue for the quarter ended September 30, 2007 was $219.2 million,
up 22.9% from $178.4 million for the same quarter of 2006.
Cost of rewards amounted to $127.2 million for the third quarter of 2007,
compared to $107.7 million for the corresponding quarter of 2006, an increase
of 18.1%. This increase is mainly attributable to a higher proportion of
Aeroplan Miles (issued by Aeroplan on or after January 1, 2002), redeemed;
higher general redemption activity during the quarter as a result of program
growth and increased ClassicFlight and Star Alliance Rewards redemptions,
which were partially offset by a lower redemption cost per Aeroplan Mile
redeemed, primarily related to air travel rewards.
Operating income (before the effect of the amortization of accumulation
partners' contracts and technology) amounted to $48.1 million for the quarter
ended September 30, 2007, compared to $33.0 million for the corresponding
quarter of 2006, a 45.6% increase mainly attributable to higher reward
redemption activity, a higher proportion of Aeroplan Miles redeemed, as well
as reduced redemption costs.
At the end of the third quarter, Aeroplan had $717.6 million of cash, cash
equivalents and short-term investments, including the Aeroplan redemption
reserve of $400 million.
Adjusted EBITDA and distributable cash amounted to $64.5 million and $63.0
million, respectively, compared to $53.4 million and $50.7 million for the
third quarter of 2006.
By comparison, standardized distributable cash, a non-GAAP measure
recommended by the CICA in July 2007, amounted to $89.7 million for the
quarter, and to $101.0 million for the same quarter of 2006.
Recent Corporate Developments
Partnerships and Rewards
Blue Cross
----------
On August 13, 2007, Aeroplan announced that it signed an agreement with
Blue Cross offering Aeroplan members easy access to Blue Cross customized
travel insurance packages. Blue Cross offers the following products: trip
cancellation, interruption, medical, baggage and accidental death insurance
coverage; all plans include emergency travel assistance. Trip cancellation
coverage also covers the costs of Aeroplan's change or cancellation fees, as
well as any other eligible, non-refundable trip expenses, paid before
departure. An annual policy package is also available for Aeroplan members
taking more than one trip per year. What's more, Aeroplan members can purchase
Blue Cross services and coverage on all flights - even on trips booked without
using Aeroplan Miles.
Aeroplan Music Store
--------------------
On September 5, 2007, Aeroplan launched an innovative new reward, the
AEROPLAN MUSIC STORE, in partnership with Hip Digital Media, a full-service
digital media agency. Aeroplan's custom branded site,
www.aeroplanmusicstore.com, where members can create accounts and download
music by redeeming 6,000 Aeroplan Miles for a 50-song Music Code. The Aeroplan
Music Store allows members to participate in the increasingly popular world of
online digital music.
Bell Canada
-----------
On October 15, 2007, Aeroplan and Bell Canada announced that their
agreement to offer Aeroplan Miles to Bell Canada customers will not be renewed
upon its expiry on January 18, 2008.
ACE Secondary Offering
On October 22, 2007, ACE Aviation Holdings Inc. (ACE) completed a
secondary offering of 22.0 million units of Aeroplan at a price of $21.90 per
unit, for gross proceeds of $481.8 million. Aeroplan did not receive any of
the proceeds from this offering. ACE retains 40,292,088 units, representing
20.1% of the 199,999,854 units issued and outstanding with the public holding
the balance. ACE maintains the right to nominate a majority of the Board until
its interest in Aeroplan falls below 20%.
Non-GAAP Measures
In order to provide a better understanding of the results, Aeroplan uses
the following terms:
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization
-----------------------------------------------------------------------
("Adjusted EBITDA")
-------------------
EBITDA adjusted for certain factors particular to Aeroplan's 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 a
reconciliation with GAAP, please refer to the Summary of Operating results 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 attached schedule for a summary of operating results and
reconciliation of Adjusted EBITDA and Distributable Cash.
Standardized Distributable Cash
-------------------------------
Standardized Distributable cash is a non-GAAP measure recommended by the
CICA in order to provide a consistent and comparable measurement of
distributable cash across entities.
Standardized distributable cash is defined as cash flows from operating
activities, as reported in accordance with GAAP, less adjustments for:
(a) total capital expenditures as reported in accordance with GAAP; and
(b) restrictions on distributions arising from compliance with financial
covenants restrictive at the date of the calculation of standardized
distributable cash.
For a reconciliation to cash from operating activities to Standardized
distributable cash and Distributable cash, refer to the attached schedule.
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.
Aeroplan intends to make equal monthly distributions to its unitholders of
record on the last business day of each month. The board of directors will
periodically review cash distributions in order to take into account
Aeroplan's current and prospective performance.
Refer to the attached schedule for a reconciliation of Distributable cash
and Standardized distributable cash to cash flows from operations.
The unaudited interim financial statements, the Investor Presentation and
the unaudited supplementary information will be accessible on Aeroplan's
investor relations website at aeroplan.com.
Quarterly Investor Conference Call / Audio Webcast
Aeroplan will hold an analyst call at 10 a.m. (Eastern Time) on Thursday,
November 8, 2007 to discuss its third quarter results. The call may be
accessed by dialling 416-340-2217, pass code 3238697#, within the Toronto
area, or 1-866-696-5910 (toll free), pass code 3238697#, outside of Toronto.
The call will be simultaneously audio webcast at
http://events.startcast.com/events/20/B0053.
The conference call webcast and the Investor Presentation will be archived
on Aeroplan's investor relations website at aeroplan.com. A playback of the
call can also be accessed until midnight ET, December 8, 2007 by dialling
416-695-5800, pass code 3238697# from within the Toronto area, or
1-800-408-3053, pass code 3238697# outside of Toronto.
About Aeroplan
Aeroplan is an unincorporated, open-ended trust established under the laws
of the Province of Ontario.
Aeroplan is Canada's premier loyalty marketing company, 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 2006 alone, more than 1.4 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.
Caution Concerning Forward-Looking Statements
This news release should be read in conjunction with Aeroplan's 2007 third
quarter MD&A dated November 7, 2007 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 Aeroplan's top three 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, seasonal nature of the business, regulatory matters,
restrictions on certain unitholders and liquidity of units, as well as the
other factors identified in the "Risks and Uncertainties Affecting the
Business" section of the 2006 MD&A (available at www.sedar.com). The
forward-looking statements contained in this discussion represent Aeroplan's
expectations as of November 7, 2007, and are subject to change after such
date. However, Aeroplan 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.
SUMMARY OF OPERATING RESULTS AND RECONCILIATION OF ADJUSTED EBITDA
AND DISTRIBUTABLE CASH
unaudited
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(in thousands,
except miles,
unit and per
unit Three months ended Nine months ended
information) September 30, September 30, % change
-----------------------------------------------------------
2007 2006(4) 2007(3) 2006(4) Q3 YTD
---- ------- ------- ------- -- ---
-------------------------------------------------------------------------
Number of
Aeroplan
Miles
issued
(in
billions) 19.5 17.2 57.5 51.1 13.4 12.5
-------------------------------------------------------------------------
Number of
Total Miles
redeemed
(in
billions) 15.6 12.9 50.6 42.2 20.8 20.0
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Number of
Aeroplan
Miles
redeemed
(in
billions) 14.1 11.2 44.9 35.8 25.9 25.4
-------------------------------------------------------------------------
Gross
Billings
from the
sale of
Aeroplan
Miles $236,877 $211,245 $703,785 $625,123 12.1 12.6
-------------------------------------------------------------------------
Aeroplan
Miles
revenue 205,074 164,678 640,721 515,714 24.5 24.2
Tier
management,
contact
centre
management
and
marketing
fees from
Air Canada 1,539 1,647 6,719 6,599 (6.6) 1.8
Other
revenue 12,626 12,066 37,397 38,670 4.6 (3.3)
-------------------------------------------------------------------------
Total
revenue 219,239 178,391 684,837 560,983 22.9 22.1
Cost of
rewards (127,205) (107,741) (410,880) (345,094) 18.1 19.1
-------------------------------------------------------------------------
Gross
margin 92,034 70,650 273,957 215,889 30.3 26.9
Selling,
general
and
admin-
istrative
expenses (40,713) (34,464) (121,824) (101,955) 18.1 19.5
Depreciation
and
amorti-
zation (3,230) (3,155) (8,745) (10,781) 2.4 (18.9)
-------------------------------------------------------------------------
Operating
income
before
amorti-
zation of
accumulation
partners'
contracts
and
techno-
logy $48,091 $33,031 $143,388 $103,153 45.6 39.0
Depreciation
and
amorti-
zation 3,230 3,155 8,745 10,781
Change in
deferred
revenue
Gross
billings
from the
sale of
Aeroplan
Miles 236,877 211,245 703,785 625,123
Aeroplan
Miles
revenue (205,074) (164,678) (640,721) (515,714)
Change in
Future
Redemption
Costs (1) (18,605) (29,394) (26,754) (64,261) (36.7)(58.4)
(Change in
Net
Aeroplan
Miles
outstanding
x Average
Cost of
Rewards
per Mile
for the
period)
-------------------------------------------------------------------------
Adjusted
EBITDA $64,519 $53,359 $188,443 $159,082 20.9 18.5
-------------------------------------------------------------------------
Net
Interest
Income
(Expenses) 3,280 1,760 8,551 3,316
Maintenance
Capital
Expendi-
tures (4,784) (4,455) (10,136) (16,319)
-------------------------------------------------------------------------
Distri-
butable
Cash $63,015 $50,664 $186,858 $146,079 24.4 27.9
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Standardized
Distri-
butable
Cash $89,667 $100,969 $228,750 $204,285 (11.2) 12.0
-------------------------------------------------------------------------
Weighted
average
number
of
units 199,500,476 200,000,001 199,513,426(2) 200,000,001
Distri-
butable
Cash
per unit $0.32 $0.25 $0.94 $0.73 24.7 28.2
Standardized
Distri-
butable
Cash
per unit $0.45 $0.50 $1.15 $1.02 (11.0) 12.2
-------------------------------------------------------------------------
Adjusted
net
earnings =
Net
earnings,
in
accordance
with GAAP
+ amorti-
zation of
accumu-
lation
partners'
contracts
and techno-
logy +
income
taxes $51,371 $34,320 $150,937 $105,060 49.7 43.7
-------------------------------------------------------------------------
Earnings
per unit,
in
accordance
with GAAP,
adjusted
for amorti-
zation of
accumulation
partners'
contracts
and techno-
logy, and
income
taxes $0.26 $0.17 $0.76 $0.53 50.1 44.0
-------------------------------------------------------------------------
Distri-
butions
declared $42,000 $37,500 $126,000 $107,460 12.0 17.3
Distri-
butions
declared
per unit $0.21 $0.19 $0.63 $0.54 12.3 17.5
-------------------------------------------------------------------------
(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 Aeroplan
is not comparative;
(3) Has been derived by adding the year to date Q2 2007 information
presented for the Partnership and the Q3 2007 information presented
above for Aeroplan;
(4) 2006 results presented for comparative purposes are those of the
Partnership.
RECONCILIATION OF CASH FLOWS FROM OPERATIONS TO STANDARDIZED
DISTRIBUTABLE CASH AND DISTRIBUTABLE CASH
Unaudited
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(in thousands) Three months ended Nine months ended
September 30, September 30,
-------------------------------------------------------------------------
2007 2006(4) 2007(3) 2006(4)
--------- --------- --------- ---------
-------------------------------------------------------------------------
Cash flows from
operations $ 94,451 $ 105,424 $ 238,886 $ 220,604
Maintenance
Capital
Expenditures (4,784) (4,455) (10,136) (16,319)
-------------------------------------------------------------------------
Standardized
Distributable
Cash 89,667 100,969 228,750 204,285
-------------------------------------------------------------------------
Changes in
non-cash working
capital items(1) (7,337) (19,518) (14,427) 8,805
Stock Based
compensation(1) (710) (1,393) (2,240) (2,750)
Funding of
stock-based
compensation
plans(1) - - 1,529 -
Change in future
redemption
costs(2) (18,605) (29,394) (26,754) (64,261)
-------------------------------------------------------------------------
Distributable
Cash $ 63,015 $ 50,664 $ 186,858 $ 146,079
-------------------------------------------------------------------------
Distributions
declared $ 42,000 $ 37,500 $ 126,000 $ 107,460
-------------------------------------------------------------------------
Payout ratio -
Distributions
declared /
Standardized
Distributable
Cash 47% 37% 55% 53%
-------------------------------------------------------------------------
Payout ratio -
Distributions
declared /
Distributable
Cash 67% 74% 67% 74%
-------------------------------------------------------------------------
Standardized
Cumulative
Distributable
Cash since IPO
(June 29, 2005) $ 705,408
-------------------------------------------------------------------------
Cumulative
distributions
declared since
IPO $ 343,200
-------------------------------------------------------------------------
Cumulative
payout ratio
since inception 49%
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(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 is included to reflect the
expected change in the future redemption liability on the basis of
the most recently experienced redemption costs;
(3) Has been derived by adding the year to date Q2 2007 information
presented for the Partnership, to the Q3 2007 information of Aeroplan
(presented above) and $64 of interest earned by Aeroplan in Q1 and
Q2 2007.
(4) 2006 results presented for comparative purposes are those of the
Partnership.
For further information: Media: Gillian Hewitt, (416) 352-3706, gillian.hewitt@aeroplan.com; Analysts: Trish Moran, (416) 352-3728, trish.moran@aeroplan.com