Feb 20th Earnings Surprise - Upside? To the respectable minds covering this stock - a question for you that has me a bit perplexed.
a) Chorus reports their financials in Canadian dollars.
b) If they hold any US cash balances - they will likely have an unrealized (but material) FX GAIN when converted back to Canadian dollars for reporting.
Case In Point #1 - this was an excerpt from the Q1 2013 results - Average FX Rate for Q1 - 2013 was approximately $1.00 CAD to $1.00 US
"The first quarter delivered solid results; however, two items negatively impacted the bottom line," said Joseph Randell, President and Chief Executive Officer, Chorus. "In our continued efforts to improve operational efficiency and to reduce costs, we enacted a voluntary separation program for our more senior pilots and maintenance employees. The severance cost of $5.7 million will provide a return within the next two years as ongoing operational costs are reduced. This expense, when factored with the unrealized foreign exchange loss of $5.6 million into the adjusted net income for the quarter, increases earnings per share to the current market consensus of $0.17 per basic share."
Case In Point #2 - August 13, 2013 - Average FX Rate approximately $.98 CAD to US
"We experienced positive operational and financial performance in the second quarter with an adjusted net income of $21.4 million or $0.17 per basic share," stated Joseph Randell, President and Chief Executive Officer, Chorus. "Net income was $7.9 million, and was impacted by $13.5 million in unrealized foreign exchange loss on long-term debt and finance leases which has no impact on our cash flows, and by $2.3 million in expenses related to our ongoing employee voluntary separation program that will reduce our costs as one of our many cost reduction initiatives."
c) It seems to me - when CAD/US rate was high - they experienced material unrealized losses.
Question - Is the inverse true? If CAD/US Rate is low - will they experience unrealized gains?
It would stand to reason - based on previous earnings releases - the answer is "yes" and implies they hold significant US Cash reserves that are converted to Canadian $ for reporting purposes - generating unrealized gains or losses....but I can't find any financial disclosures that discusses thier FX risk.
Welcome comments - as this will impact Q1 - 2014 results and future quarters assuming CAD/US falls even further to $.85 as some are forecasting.