Aeroquest International Limited (TSX: AQL) Announces Financial Results for the Three Months and Year Ended September 30, 2008

Revenue of $16.0 million in quarter and $55.0 million for yearboth records for the companyOperating cash flow of $2.2 million in the quarter, or $0.6 per shareContract backlog a healthy $18 million

• Press Release
• Source: Aeroquest International Limited
• On Friday December 5, 2008, 8:30 am EST

MISSISSAUGA, ONTARIO--(MARKET WIRE)--Dec 5, 2008 -- Attention business/financial editors and reporters:

Aeroquest International Limited (Toronto:AQL.TO - News) today reported financial results for the three months and year ended September 30, 2008.

On October 23, 2007 the Company announced its intention to change the financial year end to September 30th. As a result of this change in financial year end, comparative periods do not line up precisely. The comparative period used in this report is for the two and five month periods ending September 30, 2007 as well as the year ended April 30, 2007.

"The quarter was another record quarter from a revenue standpoint for Aeroquest International and capped off a record year." said Roy Graydon, President & CEO of Aeroquest; "Helicopter survey operations improved during the quarter, however they did not return to the levels we have been expecting. The situation continues to improve, and we expect a return to normal in the next quarter."

Consolidated revenue for the three months ended September 30, 2008 was $16.0 million, an increase of $1.5 million or 10% over the third quarter and $7.0 million or 61% over the most comparable period last year. Revenue from helicopter operations contributed $7.0 million in the quarter, while revenue from fixed wing operations totaled $8.3 million in the quarter. Other revenue was $0.7 million. For the year ended September 30, 2008, revenue was $55.0 million, up from $19.3 million in the five months ended September 30, 2007 and $20.2 million in the year ended April 30, 2007.

Gross profit in the period was $5.1 million, or 32% of revenue, compared with gross margin of 39% in the two months ended September 30, 2007. Gross margins in the helicopter segment continue to be affected by lower productivity as we mobilize helicopter based systems globally. Management continues to work with the helicopter group to improve operational productivity for fiscal 2009.

EBITDA in the quarter was $3.6 million, or 23% of revenue, an increase of $0.9 million over the third quarter and $1.3 million over the comparable two month period last year. EBITDA for fiscal 2008 was $11.3 million compared to $4.7 million for the five months ended September 30, 2007 and $4.5 million for the year ended September 30, 2007.

Net income in the quarter was $1.6 million, an increase of $0.6 million over the two months ended September 30, 2007. Earnings per share for the quarter are $0.05, equal to the $0.05 per share for the comparable period last year. For the year ended September 30, 2008, net income was $2.8 million or $0.09 per share compared with net income of $0.09 per share for the five months ended September 30, 2007 and $0.13 per share for the year ended April 30, 2007.

Operating cash flow before changes in working capital was $3.0 million, or $0.09 per share for the fourth quarter and $9.6 million or $0.28 for the year and reflects the underlying health of the Company's operations. Capital expenditures totaled $2.0 million for the quarter, representing 12.6% of revenue, which was in line with the Company's expectations. For the year, total capital expenditures were $7.1 million, representing 12.9% of revenue. Both quarterly and annual capital expenditures were in line with Company expectations.

Contract backlog showed an increase over the third quarter and sits at $18 million at year end. Backlog is composed of $6.9 million in helicopter backlog, and $9.3 million in fixed wing backlog, and $1.9 million of backlog with our Geophex operations.

As indicated in its recent press release dated October 30, 2008, the Company expects first quarter 2009 revenue to be in the range of $13 to $15 million, and that gross margins will lag behind historical annual averages due to the seasonal nature of the business.

Analyst Conference Call

Aeroquest International Limited will hold a Q4 and fiscal 2008 conference call at 11:00 a.m. ET on Monday December 8, 2008. The conference call will review Aeroquest's results for the quarter and year ended September 30, 2008. The scheduled speakers for the Company on the conference call are: Roy Graydon, President and Chief Executive Officer, and Robert Motz, Chief Financial Officer.

Interested parties can access the conference call in North America by dialing 1-888-789-0089. The international or local dial-in number is 416-695-9701. Please dial in approximately 5 minutes prior to the start time.

A replay service will be available approximately two hours following the end of the conference call until midnight on December 31, 2008. To access this recording, dial 1-800-408-3053 or 1-416-695-5800 and enter passcode 267913.

About Aeroquest International

Aeroquest International is a global information and technology services company and a leader in the development and operation of innovative and proprietary geophysical surveying platforms for the mineral and petroleum exploration, and environmental services industries. Directly, and through its sister companies UTS Geophysics and Geophex, Aeroquest fields a fleet of approximately two dozen helicopter and fixed wing systems and is active around the world. More information about Aeroquest can be found at www.aeroquest.ca. More information on UTS Geophysics can be found at www.uts.com.au. More information on Geophex can be found at www.geophex.com.

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.

 

                 AEROQUEST INTERNATIONAL LIMITED
                   CONSOLIDATED BALANCE SHEET


                                               Sep. 30, 08  Sept. 30, 2007
Assets                                           Unaudited         Audited
 Current
  Cash and cash equivalents                  $  15,373,132  $    5,398,777
  Accounts receivable                            8,640,293       8,014,717
  Unbilled contracts in progress                 2,169,861       2,312,098
  Inventory                                        132,853               -
  Prepaid expenses and deposits                    640,875         462,109
                                            --------------  --------------
Total current assets                         $  26,957,014  $   16,187,701
                                            --------------  --------------
                                            --------------  --------------
 Long term
  Long term investments                      $      30,501  $       90,001
  Capital assets                                10,890,000       7,618,873
  Intangible assets                             19,847,842      20,431,860
  Goodwill                                      11,662,115       9,199,108
  Future income taxes                              152,584         143,747
                                            --------------  --------------
Total long term assets                       $  42,583,042  $   37,483,589
                                            --------------  --------------
Total Assets                                 $  69,540,056  $   53,671,290
                                            --------------  --------------
                                            --------------  --------------

Liabilities and Shareholders' Equity
 Current
  Accounts payable and accrued liabilities   $   5,946,706  $    5,325,928
  Income taxes payable                           1,083,701       2,238,543
  Deferred revenue                               3,274,382       3,838,463
  Promissory notes                                       -         536,449
  Capital lease obligations                        321,426         292,466
                                            --------------  --------------
Total current liabilities                    $  10,626,215  $   12,231,849
                                            --------------  --------------
                                            --------------  --------------
 Long term
  Promissory notes                                       -  $    2,597,339
  Capital lease obligations                        469,575         720,230
  Future income taxes                            6,640,227       6,566,056
                                            --------------  --------------
Total Liabilities                            $  17,736,017  $   22,115,474
                                            --------------  --------------
                                            --------------  --------------

Shareholders' equity
  Share capital                              $  46,506,445  $   27,403,594
  Contributed surplus                            2,411,281       1,320,461
  Accumulated other comprehensive income        (1,794,758)         72,794
  Retained earnings                              4,681,071       2,758,967
Total shareholders' equity                      51,804,039      31,555,816
                                            --------------  --------------
                                            --------------  --------------
Total Liabilities and Shareholders' Equity   $  69,540,056  $   53,671,290
                                            --------------  --------------





                  AEROQUEST INTERNATIONAL LIMITED
           CONSOLIDATED STATEMENTS OF RETAINED EARNINGS


           Three months   Two months               Five months
                  ended        ended   Year ended        ended   Year ended
            Sep. 30, 08  Sep. 30, 07    30-Sep-08  Sep. 30, 07  Apr. 30, 07

Retained
 earnings
 (deficit),
 beginning
 of
 period    $  3,373,950  $ 1,713,132 $  2,758,967  $   530,561 $ (1,136,790)
 Cumulative
  effect of
  change in
  accounting
  policy                           -            -      245,029       97,768
           -----------------------------------------------------------------
           -----------------------------------------------------------------
Retained
 earnings
 (deficit),
 beginning
 of
 period, as
 restated  $  3,373,950  $ 1,713,132 $  2,758,967  $   775,590 $ (1,039,022)
           -----------------------------------------------------------------
           -----------------------------------------------------------------

Excess of
 purchase
 price over
 cost on
 redemption
 of shares $   (295,618)             $   (921,001)           - $   (225,666)
  Net income  1,602,739    1,045,835    2,843,105    1,983,377    2,040,278
           -----------------------------------------------------------------
           -----------------------------------------------------------------
Retained
 earnings,
 end of
 period    $  4,681,071  $ 2,758,967 $  4,681,071  $ 2,758,967 $    775,590
           -----------------------------------------------------------------
           -----------------------------------------------------------------





                    AEROQUEST INTERNATIONAL LIMITED
                 CONSOLIDATED STATEMENTS OF OPERATIONS


           Three months   Two months               Five months
                  ended        ended   Year ended        ended   Year ended
            Sep. 30, 08  Sep. 30, 07    30-Sep-08  Sep. 30, 07  Apr. 30, 07

Sales      $ 16,017,713  $ 9,944,268 $ 55,045,575 $ 19,299,618 $ 20,187,043
 Cost of
  sales      10,916,963    6,077,781   34,350,797   11,573,913   11,006,595
           -----------------------------------------------------------------
           -----------------------------------------------------------------
Gross
 profit     $  5,100,750 $ 3,866,487 $ 20,694,778 $  7,725,705 $  9,180,448
           -----------------------------------------------------------------

Expenses
 and other
 items
 General
  and
  administ-
  rative    $  2,706,556  $1,156,581 $  9,441,905 $  2,353,069  $ 3,764,145
 Develop-
  ment
  expense       (246,557)    115,128       80,080      287,554      530,515
 Foreign
  exchange
  (gain)
  /loss       (1,162,423)    240,518   (1,058,633)     384,363      119,635
 Stock
  based
  compens-
  ation
  expense        230,621       4,582      959,792      11,458       236,306
 Amortizati-
  on of
  intangible
  assets         808,858     534,499    4,035,412     892,587        93,757
 Depreci-
  ation of
  capital
  assets         739,343     371,074    2,813,564      694,808      942,666
           -----------------------------------------------------------------
Total
 operating
 expenses  $   3,076,398  $2,422,382 $ 16,272,120 $  4,623,839  $ 5,687,024
           -----------------------------------------------------------------
           -----------------------------------------------------------------

Operating
 profit    $  2,024,352  $ 1,444,105 $  4,422,658 $  3,101,866  $ 3,493,424
 Other
  costs
  (income)       38,082       38,346      (84,389)          20     (164,897)
 Interest
  Income       (453,756)           -     (453,756)     (94,799)    (102,057)
 Interest
  Expense       314,079            -      314,079       94,359       12,257
 Contract
  cancella-
  tions costs         -            -            -            -      270,000
           -----------------------------------------------------------------
Income
 before
 income
 taxes     $  2,125,947  $ 1,405,759 $  4,646,724 $  3,102,286  $ 3,478,121
           -----------------------------------------------------------------
           -----------------------------------------------------------------

Income
 taxes
  Current  $    822,696  $   649,933 $  3,173,394 $  1,408,701  $ 1,376,618
  Future       (299,488)    (290,009)  (1,369,775)    (289,792)      61,225
           -----------------------------------------------------------------
           -----------------------------------------------------------------
Total
 Income
 taxes     $    523,208  $   359,924 $  1,803,619 $  1,118,909  $ 1,437,843
           -----------------------------------------------------------------
Net income
 for the
 period    $  1,602,739  $ 1,045,835 $  2,843,105 $  1,983,377  $ 2,040,278
           -----------------------------------------------------------------
           -----------------------------------------------------------------

Earnings
 per share
  Basic    $       0.05  $      0.05 $       0.09 $       0.09  $      0.13
  Fully
  diluted  $       0.05  $      0.04 $       0.09 $       0.08  $      0.12





                   AEROQUEST INTERNATIONAL LIMITED
           CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

            Three months   Two months               Five months         Year
                   ended        ended                     ended        ended
                Sep. 30,     Sep. 30,   Year ended     Sep. 30,     Apr. 30,
                      08           07    30-Sep-08           07           07

Net income
 for the
 period      $ 1,602,739  $ 1,045,835 $  2,843,105  $ 1,983,377  $ 2,040,278

Revaluation
 of long term
 investments
 to fair
 market value    (10,080)     (1,000)     (38,080)       (1,000)           -

Unrealized
 gain on
 translation
 of
 self-sustain-
 ing foreign
 operations   (1,609,632)     23,990    (1,219,403)      25,794            -
           -----------------------------------------------------------------
Total Other
 Comprehen-
 sive Income
 (loss)      $(1,257,483)             $ (1,257,483) $    24,794           -
           -----------------------------------------------------------------
           -----------------------------------------------------------------
Total
 comprehen-
 sive Income
 for the
 period      $   (16,973) $ 1,068,825 $  1,585,622  $ 2,008,171  $ 2,040,278
           -----------------------------------------------------------------





                          AEROQUEST INTERNATIONAL LIMITED
                        CONSOLIDATED STATEMENTS OF CASH FLOW

            Three months   Two months              Five months         Year
                   ended        ended                    ended        ended
                Sep. 30,     Sep. 30,   Year ended    Sep. 30,     Apr. 30,
                      08           07    30-Sep-08          07           07

Cash
 provided by
 (used in)
Operating
 activities
 Net income
  for the
  period     $ 1,602,739  $ 1,045,835  $ 2,843,105 $ 1,983,377 $  2,040,278
 Operating
  items not
  requiring
  cash
 Depreciation
  of capital
  assets         808,858      371,074    4,035,412     892,587       93,757
 Amortization
  of
  intangible
  assets         739,343      534,499    2,813,564     694,808      942,666
 Translation
  of
  self-sustain-
  ing foreign
  operation     (262,764)      23,991            -      25,794            -
 Future
  income taxes  (299,488)    (290,009)  (1,369,775)   (289,792)      61,225
 Interest
  accretion on
  promissory
  notes                -       76,434      221,213      76,434            -
 Stock based
  compensation   230,621        4,582      959,792      11,458      236,306
 Write down
  of long term
  investment                                     -           -      110,000
  Loss on
   disposal of
   capital
    assets       186,390                    50,639           -        7,377
             ---------------------------------------------------------------

Operating
 cash flow
 before
 changes in
 non-cash
 working
 capital     $ 3,005,699  $ 1,766,406  $ 9,553,950 $ 3,394,666 $  3,491,609
 Changes in
  non cash
  working
  capital       (830,199)  (1,728,189)  (1,648,864)   (714,375)     825,815
             ---------------------------------------------------------------
Total cash
 flow from
 operating
 activities  $ 2,175,500  $    38,217  $ 7,905,086 $ 2,680,291 $  4,317,424
             ---------------------------------------------------------------
             ---------------------------------------------------------------

Investing
 activities
 Capital
  asset
  purchases  $(2,015,926) $  (573,571) $(7,073,194)$(1,553,809)$ (1,992,194)
 Proceeds
  from sale of
  equipment      167,930                   588,980           -            -
 Loan
  receivable           -                         -           -       60,528
 Cash cost of
  acquisition     (6,900)     (19,090)  (2,157,641) (7,321,077)           -
             ---------------------------------------------------------------
Total cash
 flow from
 investing
 activities  $(1,854,896) $  (592,661) $(8,641,855)$(8,874,886)$ (1,931,666)
             ---------------------------------------------------------------
             ---------------------------------------------------------------

Financing
 activities
 Promissory
  note
  payments   $         -               $(5,337,600)          -            -
 Capital
  lease
  payments       (27,549)     (86,920)    (301,448)   (110,743)           -
 Aeroquest
  shares
  redeemed    (1,871,325)               (3,297,975)          -     (330,402)
 Proceeds
  from
  issuance of
  common
  shares               -       66,000   19,648,147   6,998,080      140,000
             ---------------------------------------------------------------
Total cash
 flow from
 financing
 activities  $(1,898,874) $   (20,920) $10,711,124  $6,887,337  $  (190,402)
             ---------------------------------------------------------------
             ---------------------------------------------------------------

Net change
 in cash /
 cash
 equivalents
 for the
 period      $(1,578,270) $  (575,364) $ 9,974,355  $  692,742  $ 2,195,356
Cash and
 cash
 equivalents,
 beginning of
 period       16,951,402    5,974,141    5,398,777   4,706,035    2,510,679
             ---------------------------------------------------------------
             ---------------------------------------------------------------
Cash and
 cash
 equivalents,
 end of
 period      $15,373,132  $ 5,398,777  $15,373,132  $5,398,777  $ 4,706,035
             ---------------------------------------------------------------
             ---------------------------------------------------------------

     Contacts:
     Aeroquest International Limited
     Roy Graydon
     President & Chief Executive Officer
     (905) 672-9129
     Email: rgraydon@aeroquest.ca
     Website: http://www.aeroquest.ca