NAV CANADA announces second quarter financial results
(Ottawa, April 8, 2016) – NAV CANADA (the “Company”) today released its financial results for the three and six months ended February 29, 2016. The results show continued success in controlling costs while maintaining safe and efficient air navigation services, as well as growth in air traffic volumes of 4.5 per cent for the second quarter of fiscal 2016 (3.4 per cent excluding the effect of an extra day for the leap year) compared to the same period in the prior fiscal year.
The Company’s fiscal year runs from September 1 to August 31. In the second quarter of fiscal 2016, the Company had negative free cash flow(1) of $19 million due to seasonally weak air traffic but strong financial performance as evidenced by its rate stabilization account, finishing with a positive(2) balance of $121 million. When adjusted for rate setting purposes, there is a positive(2) “notional” balance of $141 million in the rate stabilization account, which is above its target balance of $100 million.
“Given the current strength of the rate stabilization account and our positive financial outlook for fiscal 2016 and fiscal 2017, the Company is announcing today the details of a proposal to revise our service charges through a temporary one-year rate reduction in addition to revisions to our base rates to ensure that our service charges are set at the levels necessary to meet the financial requirements of providing civil air navigation services,” said Neil Wilson, President and CEO.
“If enacted, both of these proposals will be effective September 1, 2016. The temporary adjustment will provide a reduction to charges for all services during fiscal 2017 and will represent on average a 3.7 per cent reduction from current base rates. The Company is also proposing to revise its base rates in order to ensure they are aligned with costs. This proposed revision will result in an average reduction of 3.9 per cent from existing base rates, on an ongoing basis.”
Effective September 1, 2015, the Company began reporting its financial results in accordance with IFRS, including comparative figures for fiscal 2015.
The Company’s revenue for the second quarter of fiscal 2016 was $309 million, compared to $296 million over the same period in fiscal 2015, mainly due to the growth in air traffic volumes.
Operating expenses for the second quarter of fiscal 2016 were $307 million as compared to $300 million over the same period in fiscal 2015, mainly due to higher compensation levels and inflationary increases.
Lower foreign exchange gains partially offset by lower interest expense resulted in net other income and expenses of $25 million expense for the second quarter of fiscal 2016 as compared to an expense of $17 million over the same period in fiscal 2015.
The Company had a net loss (before net movement in regulatory deferral accounts including rate stabilization) of $24 million for the second quarter of fiscal 2016 as compared to a net loss of $22 million over the same period in fiscal 2015.
The Company is subject to legislation that regulates the level of its charges, and the timing of recognition of certain revenue and expenses is adjusted through movements in regulatory deferral accounts. The net movement in regulatory deferral accounts for the second quarter of fiscal 2016 was an expense of $15 million as compared to an expense of $11 million over the same period in fiscal 2015. The increase is mainly due to $19 million higher deferrals of favourable results through rate stabilization adjustments, partially offset by $15 million more of regulatory adjustments for certain transactions to adjust the accounting recognition to the period in which they will be considered for rate setting.
Based on the above, the Company had a net loss (after net movements in regulatory deferral accounts including rate stabilization) of $39 million for the second quarter of fiscal 2016 as compared to a net loss of $33 million over the same period in fiscal 2015. The Company’s second quarter normally has the lowest air traffic levels of the fiscal year and, given that the Company’s costs are predominantly fixed in nature, a net loss was expected for this quarter.
The Company’s Financial Statements and Management's Discussion and Analysis for the three and six months ended February 29, 2016 can be found at:
NAV CANADA is the country’s private sector civil air navigation services provider. With operations from coast to coast to coast, NAV CANADA provides air traffic control, flight information, weather briefings, aeronautical information services, airport advisory services and electronic aids to navigation.
(1) Free cash flow is a non-GAAP financial measure used by the Company to enhance the overall understanding of its financial and operating performance. Non-GAAP financial measures do not have any standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other issuers. The Company defines free cash flow as cash generated from operations, less capital expenditures and investments in Aireon LLC and other subsidiaries. Management places importance on this indicator as it assists in measuring the impact of its investment program on the Company’s financial resources.
(2) A positive balance in the rate stabilization account represents a regulatory credit balance on the Company’s statement of financial position, reflecting amounts returnable to customers through future customer service charges.
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This press release contains certain forward-looking statements that are subject to important risks and uncertainties. Actual results may differ materially from the results indicated in these statements for a number of reasons. NAV CANADA disclaims any intention to update any forward-looking statements.