NAV CANADA announces third quarter financial results
(Ottawa, July 11, 2014) – NAV CANADA (the “Company”) today released its financial results for the three and nine months ended May 31, 2014. 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 3.3 per cent for the third quarter compared to the same period in the prior fiscal year.
The Company’s fiscal year runs from September 1 to August 31. In the third quarter of fiscal 2014, the Company continued to achieve positive free cash flow(1) and strong financial performance as evidenced by an improvement in its rate stabilization account, finishing with a positive(2) balance of $71 million. When adjusted for rate setting purposes, there is a positive(2) “notional” balance of $93 million in the rate stabilization account, which is equal to its target balance.
“The third quarter saw the completion of several important initiatives and the commencement of others that will enhance safety and enable us to provide improved service to our customers”, said John Crichton, President & CEO. “In April, we completed the rollout of Controller Pilot Data Link Communications across the country when the Toronto Flight Information Region began offering CPDLC service in its airspace. In May, we implemented the Gander Oceanic Transition Area and commissioned multilateration in Fredericton. We continue to renew our infrastructure with new projects that will provide world-leading air navigation system technology to those operating in Canadian airspace.”
The Company’s revenues before rate stabilization for the third quarter of fiscal 2014 were $315 million, compared to $306 million in the third quarter of fiscal 2013, mainly due to the growth in air traffic volumes.
Operating expenses before rate stabilization for the third quarter of fiscal 2014 were $264 million as compared to $260 million over the same period in fiscal 2013, mainly due to higher compensation levels, higher pension expense and inflationary increases.
Interest, depreciation and amortization expense before rate stabilization totalling $61 million was in line with the comparable period in the previous fiscal year.
Positive fair value adjustments on investments in the third quarter of fiscal 2014 contributed $4 million to other income before rate stabilization. As at May 31, 2014, the fair value of the Company’s investments in ABCP restructured and non-restructured notes is $280 million on holdings with a face value of $307 million. Of the total fair value variances from face value of $27 million, $22 million is considered recoverable over the terms of the notes.
Based on the above, the Company had an excess of expenses over revenue and other income after rate stabilization of $9 million for the third quarter of fiscal 2014. Given the normal seasonal variation in traffic volumes and the fact that our costs are predominantly fixed in nature, an excess of expenses over revenues in the Company’s third quarter is expected. Excluding rate stabilization adjustments, expenses would have exceeded revenues and other income by $5 million for the quarter.
The Company’s Financial Statements and Management's Discussion and Analysis for the three and nine months ended May 31, 2014 can be found at:
• Financial Statements
• Management’s Discussion and Analysis
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 NAV CANADA to enhance the overall understanding of its financial and operating performance. Non-GAAP financial measures do not have any standardized meaning prescribed by Canadian GAAP and therefore may not be comparable to similar measures presented by other issuers. The Company defines free cash flow as cash generated through operations and investment activities. 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 liability on the Company’s balance sheet, 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.