8-Nov-2013 Source: Bristow Group
Bristow Group Inc. (NYSE: BRS) today reported net income for the September 2013 quarter of $110.6 million, or $3.01 per diluted share, compared to net income of $29.7 million, or $0.82 per diluted share, in the same period a year ago.
The results for both the quarter and six-month period include a significant gain on the sale of the FB Entities, an unconsolidated U.K. affiliate, of $103.9 million, or $1.85 per diluted share. Adjusted net income, which excludes special items and asset disposition effects, including this gain, increased 60% to $46.5 million, or $1.27 per diluted share, for the September 2013 quarter, compared to $29.2 million or $0.80 per diluted share, in the September 2012 quarter.
Adjusted earnings before interest, taxes, depreciation, amortization and rent (“adjusted EBITDAR”), which also excludes special items and asset disposition effects, was $108.5 million for the September 2013 quarter compared to $84.9 million in the same period a year ago, an increase of 28%. Net cash provided by operating activities totaled $96.1 million for the September 2013 quarter compared to $79.5 million in the September 2012 quarter.
The improvement in adjusted EBITDAR, adjusted net income and adjusted diluted earnings per share for the September 2013 quarter compared to the September 2012quarter was primarily driven by:
This improvement was partially offset by:
“Similar to our first quarter of fiscal 2014, the second quarter was a record quarter for Bristow, with continued excellent top-line growth and improved margins compared to last year. I am particularly proud of our team’s focus as these results were achieved during a quarter in which a number of industry challenges arose,” said William E. Chiles, President and Chief Executive Officer of Bristow Group.
“Our results in Europe now include operations from our search and rescue bases in Sumburgh and Stornoway in the U.K., where we’ve flown over 120 missions to date. Combined with the continued contribution from West Africa and Brazil, both sequential and year over year quarterly adjusted EBITDAR margins improved.”
“Our Cougar affiliate in Atlantic Canada notably improved our business in North America. When combined with actions we are taking to restructure the Gulf of Mexico for more medium and large aircraft operations, Bristow is poised to further capitalize on deepwater expansion.”
Mr. Chiles continued, “We saw five of our Eurocopter EC225s return to full revenue service in the September quarter, with the operational modifications progressing. The commercial re-entry of these aircraft continues and we expect our full EC225 fleet to be available for a return to revenue service over the second half of fiscal 2014. Our team’s excellent first half performance and our belief in a solid second half performance allow us to increase our adjusted EPS fiscal 2014 guidance range to $4.25 to $4.55.”
SECOND QUARTER FY2014 RESULTS
SECOND QUARTER FY2014 BUSINESS UNIT RESULTS
Europe Business Unit
The addition of new large aircraft, along with an overall increase in activity with existing clients and new contracts primarily in the U.K. Northern North Sea, resulted in increased revenue of $24.1 million and were the primary contributors to revenue growth in our Europe Business Unit. We increased our fleet in this region by executing operating leases for new large oil and gas aircraft beginning in late fiscal year 2012 and continuing through the September 2013 quarter, with the addition of the four search and rescue (“SAR”) aircraft. Adjusted EBITDAR increased almost 28% year-over-year; however, adjusted EBITDAR margin increased only slightly to 35.3% in the September 2013 quarter compared to 34.6% in the September 2012 quarter primarily due to maintenance and salary increases year over year. Sequential quarterly adjusted EBITDAR margins improved to 35.3% in the September 2013 quarter from 30.3% in theJune 2013 quarter due to a full quarter of contribution from SAR work.
West Africa Business Unit
Activity levels continued to be strong in our West Africa Business Unit, leading to a 16.2% increase in operating revenue for the September 2013 quarter compared to theSeptember 2012 quarter. The increase in revenue and a decrease in import duties, partially offset by an increase in base repairs and maintenance expense as well as aircraft maintenance expense resulted in a 33.4% improvement in adjusted EBITDAR compared with September 2012 quarter as well as an increase in adjusted EBITDAR margins to 30.4% for the September 2013 quarter compared to 26.5% for theSeptember 2012 quarter.
North America Business Unit
Our entry into the Atlantic Canada region through our investment in Cougar in October 2012 drove the improvement in revenue, adjusted EBITDAR and adjusted EBITDAR margin in North America. Aircraft operating for Cougar in Canada contributed $8.2 million in revenue in the September 2013 quarter. Driven primarily by the revenue generated from new aircraft operating in Canada and the lower level of bad debt expense in September 2013, North America’s adjusted EBITDAR and adjusted EBITDAR margin improved to $18.7 million and 31.0%, respectively, in the September 2013quarter compared to $11.8 million and 20.7%, respectively, in the September 2012quarter.
Offsetting this improvement was a decline in activity in our U.S. Gulf of Mexico business, primarily related to small aircraft. We recognize that the current operating environment in the North America business unit is challenging for our fleet mix and we are proactively restructuring our business by exiting the Alaska market and selling smaller aircraft with a long-term strategy of operating larger aircraft to service deepwater client contracts in the U.S. Gulf of Mexico.
Australia Business Unit
Operating revenue for Australia decreased 8.1% from $38.4 million in the September 2012 quarter to $35.3 million in the September 2013 due to the end of short-term contracts and the impact of foreign currency exchange rate changes. As a result of costs incurred in the September 2013 quarter in anticipation of client contracts that start in the fourth quarter of this current fiscal year, adjusted EBITDAR and adjusted EBITDAR margin decreased in the September 2013 quarter to $7.4 million and 21.0%, respectively, from $10.8 million and 28.0%, respectively, in the September 2012quarter. We continue to incur salaries and benefits, depreciation, insurance, training and lease costs in anticipation of the new contracts that start during the fourth quarter of fiscal year 2014.
Other International Business Unit
Operating revenue for our Other International Business Unit increased slightly due to an increase in activity in Trinidad and Brazil, partially offset by a decline in revenue resulting from the end of a short-term contract in Guyana, a decline in aircraft on contract in Mexico and Malaysia and a decline in activity in Russia. Adjusted EBITDAR and adjusted EBITDAR margin for the September 2013 quarter decreased to $12.6 million and 39.3%, respectively, compared to $14.2 million and 44.2%, respectively, in the September 2012 quarter, primarily due to a decline in aircraft on contract inMalaysia and a decline in activity and higher maintenance expense in Russia, partially offset by higher activity in Trinidad.
UPDATE ON EC225 OPERATIONS
Eurocopter, the manufacturer of the EC225 Super Puma aircraft, has indicated that they have determined the root causes of the gear shaft failure in the EC225 that occurred in 2012. This determination has been reviewed and verified by airworthiness authorities and independent third parties. The definitive solution to the problem will be a redesign of the gear shaft with earliest possible anticipated availability being in the middle of calendar year 2014. However, in July 2013 the European Aviation Safety Authority (the “EASA”) issued an airworthiness directive providing for interim solutions involving minor aircraft modifications and new maintenance/operating procedures for mitigating shaft failure and enhancing early detection.
The Civil Aviation Authorities in the U.K. and Norway have issued safety directives, which superseded and revoked the safety directive of October 2012 and now permit a return to service of the EC225 aircraft over harsh environments conditional upon compliance with the EASA airworthiness directive. We have commenced the required modifications and are carrying out the required inspections on our EC225 fleet in theU.K., Norway and Australia.
On August 23, 2013, an AS332L2, operated by another helicopter company in our industry, ditched near Sumburgh Airport in the U.K. resulting in the loss of four lives. To date, the investigation has not found any evidence of a technical fault and the ongoing work by the U.K. Air Accidents Investigation Branch continues to focus on the operational aspects of the flight.
Currently, no client contracts have been cancelled in connection with the suspension in operations of the EC225 aircraft or AS332L2 ditching and we believe we have the contractual right to continue to receive monthly standing charges billed to our clients. In certain instances, we have agreed to reduced monthly standing charge billings for the affected aircraft. We have been able to substantially replace the lost utilization from the EC225 aircraft with other aircraft, mitigating the impact on our results of operations during the September 2013 quarter.
The current situation will continue until the necessary modifications are made to the EC225 fleet and we are confident that the interim modifications will allow us to operate the aircraft safely. Some of our EC225 fleet have commenced returning to service inSeptember 2013 and the operational modification process is progressing. Until the fleet is again fully operational and under commercial arrangements similar to before the operational suspension, this situation could have a material adverse effect on our future business, financial condition and results of operations.
Following the August 2013 accident and in conjunction with two other helicopter operators in the U.K., we have embarked upon a Joint Operator’s Review of Safety to review current processes, procedures and equipment in order to identify best practice in the offshore helicopter industry, with a view to further enhancing safety for our clients and crew. Bristow Group will readily and actively participate in a United Kingdom Parliamentary Inquiry on helicopter safety which commenced November 6, 2013 with written submissions requested by December 20, 2013.
DIVIDEND AND SHARE REPURCHASE
On November 5, 2013, our Board of Directors approved our eleventh consecutive quarterly dividend. This dividend of $0.25 per share will be paid on December 13, 2013to shareholders of record on November 29, 2013 and is 67% higher than the first dividend paid in June 2011. Based on shares outstanding as of September 30, 2013, the total quarterly dividend payment will be approximately $9.2 million. Additionally, our Board of Directors extended the date to repurchase up to $100 million of shares of our Common Stock to November 5, 2014.
GUIDANCE
We are revising our adjusted diluted earnings per share guidance for the full fiscal year 2014 to $4.25 to $4.55, a $0.05 increase at each end of the range, reflecting our expectation for continued growth, and improving operational and capital efficiency.
“Our continued improvement in operating and commercial performance has delivered strong financial results, as seen in the over 28% growth in adjusted EBITDAR and 59% growth in adjusted EPS over the same period a year ago,” said Jonathan E. Baliff, Senior Vice President and Chief Financial Officer of Bristow Group.
“Combined with the proceeds from the recent sale of our interest in the FB Entities, we have increased our overall liquidity by 49% to $618.0 million for oil and gas and civilian SAR growth. This prudent balance sheet management commitment combined with our commitment to a growing quarterly dividend and potential share repurchases, provides our existing and future investors a unique, long term, and worthwhile path to invest in this industry.”
As a reminder, our earnings per share guidance does not include the effects of asset dispositions and special items because their timing and amounts are more variable and less predictable. This guidance is based on current foreign currency exchange rates. In providing this guidance, we have not included the impact of any changes in accounting standards and any impact from significant acquisitions or divestitures. Events or other circumstances that we do not currently anticipate or cannot predict including any issues involved with the return to full revenue service of the EC225 aircraft and changes in the market and industry, could result in earnings per share for fiscal year 2014 that are significantly above or below this guidance. Factors that could cause such changes are described below under the Forward-Looking Statements Disclosure and the Risk Factors in our quarterly report on Form 10-Q for the quarter ended September 30, 2013 and annual report on Form 10-K for the fiscal year endedMarch 31, 2013.
CONFERENCE CALL
Management will conduct a conference call starting at 10:00 a.m. ET (9:00 a.m. CT) onFriday, November 8, 2013 to review financial results for the fiscal year 2014 second quarter ended September 30, 2013. This release and the most recent investor slide presentation are available in the investor relations area of our web page atwww.bristowgroup.com. The conference call can be accessed as follows:
Via Webcast:
Via Telephone within the U.S.:
Via Telephone outside the U.S.:
ABOUT BRISTOW GROUP INC.
Bristow Group Inc. is the leading provider of helicopter services to the worldwide offshore energy industry based on the number of aircraft operated and one of two helicopter service providers to the offshore energy industry with global operations. The Company has major transportation operations in the North Sea, Nigeria and the U.S. Gulf of Mexico, and in most of the other major offshore oil and gas producing regions of the world, including Australia, Brazil, Canada, Russia and Trinidad. For more information, visit the Company’s website at www.bristowgroup.com.
Full financial statements can be seen here
