7-Feb-2014 Source: Bristow Group
Bristow Group Inc. (NYSE: BRS) today reported net income for the December 2013 quarter of $18.9 million, or $0.51 per diluted share, compared to net income of $36.4 million, or $1.00 per diluted share, in the same period a year ago.
Adjusted net income, which excludes special items and asset disposition effects, decreased 27% to $31.3 million, or $0.85 per diluted share, for the December 2013 quarter, compared to $42.6 million, or $1.17 per diluted share, in the December 2012 quarter.
Adjusted earnings before interest, taxes, depreciation, amortization and rent (“adjusted EBITDAR”), which also excludes special items and asset disposition effects, was $100.7 million for the December 2013 quarter compared to $109.2 million in the same period a year ago, a decrease of 8%. Net cash provided by operating activities totaled $137.3 million for the nine months ended December 31, 2013, compared to $202.7 million for the same period a year ago.
The decrease in adjusted EBITDAR, adjusted net income and adjusted diluted earnings per share for the December 2013 quarter compared to the December 2012 quarter was primarily driven by certain contract revenue being delayed from the December 2013quarter to the March 2014 quarter, leading to LACE rate declines while overall costs increased slightly on a sequential basis versus the September 2013 quarter; specifics include:
We also saw additional expenses in the December 2013 quarter including:
“Our fiscal third quarter saw margin declines as we experienced delays in some contract work that shifted into the next quarter, incurred costs as we commenced operations with new aircraft in new locations like Tanzania and incurred costs with the return to service of our EC225 fleet. However, we continue to see growth for our premier service offerings into the future,” said William E. Chiles, President and Chief Executive Officer of Bristow Group. “Our expectations for a strong fourth quarter allow us to reaffirm our adjusted EPS guidance for fiscal year 2014 at $4.25 – $4.55.”
THIRD QUARTER FY2014 RESULTS
THIRD QUARTER FY2014 BUSINESS UNIT RESULTS
Europe Business Unit
The net addition of eight 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 $22.3 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 December 2013 quarter, with the addition of the four search and rescue (“SAR”) aircraft. Adjusted EBITDAR increased almost 14% year-over-year; however, adjusted EBITDAR margin decreased to 35.3% in the December 2013 quarter compared to 39.5% in the December 2012 quarter primarily due to maintenance and salary increases year over year. Sequential quarterly adjusted EBITDAR margins remained flat at 35.3% in both the December and September 2013 quarters.
West Africa Business Unit
Pricing improvements drove revenue increases in our West Africa Business Unit, leading to a 3.8% increase in operating revenue for the December 2013 quarter compared to theDecember 2012 quarter. However, an increase in salaries and benefits resulted in a 0.8% decrease in adjusted EBITDAR compared with the December 2012 quarter as well as a decrease in adjusted EBITDAR margin to 33.5% for the December 2013 quarter compared to 35.0% for the December 2012 quarter. Sequentially, quarterly adjusted EBITDAR margin increased to 33.5% for the December 2013 quarter compared to 30.4% for the September 2013 quarter primarily due to lower training, travel and maintenance expense.
North America Business Unit
The decrease in small aircraft on contract in the U.S. Gulf of Mexico, partially offset by an increase in medium and large aircraft in this business unit, drove the reduction in our revenue in North America. However, North America’s adjusted EBITDAR and adjusted EBITDAR margin improved to $18.2 million and 33.1%, respectively, in the December 2013quarter compared to $17.3 million and 29.1%, respectively, in the December 2012 quarter, driven primarily by a lower level of bad debt expense in the December 2013 quarter, an increase in earnings from unconsolidated affiliates, net of losses, related to our Cougar investment and an increase in the number of large and medium aircraft on contract in the U.S. Gulf of Mexico. Sequentially, adjusted EBITDAR margin improved to 33.1% in theDecember 2013 quarter compared to 31.0% in the September 2013 quarter primarily due to higher equity earnings from our investment in Cougar.
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 our Australia Business Unit decreased 16.7% to $34.6 million in theDecember 2013 quarter from $41.6 million in the December 2012 quarter due to the end of short-term contracts and the impact of foreign currency exchange rate changes. Further, as a result of costs incurred in the December 2013 quarter in anticipation of client contracts that start in the fourth quarter of this current fiscal year and fiscal year 2015, adjusted EBITDAR and adjusted EBITDAR margin decreased in the December 2013quarter to $5.2 million and 15.0%, respectively, from $11.4 million and 27.3%, respectively, in the December 2012 quarter. 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 and fiscal year 2015.
Other International Business Unit
Operating revenue for our Other International Business Unit decreased slightly due to a decline in aircraft on contract in Malaysia partially offset by increased activity in Trinidadand Brazil. Adjusted EBITDAR and adjusted EBITDAR margin for the December 2013quarter decreased to $10.2 million and 33.2%, respectively, compared to $17.8 million and 55.7%, respectively, in the December 2012 quarter, primarily due to a decline in activity inMalaysia and an increase in mobilization costs in Tanzania for a new contract that began inJanuary 2014, partially offset by increased activity in Trinidad and Brazil.
On February 3, 2014, the Company announced that William E. Chiles will resign as President and Chief Executive Officer of the Company effective upon the conclusion of the 2014 annual meeting of the stockholders of the Company, and he has elected not to run for re-election and will not continue to serve as a director after that meeting. Following his resignation as an officer, Mr. Chiles will remain an employee of the Company and will provide consulting services to the Company.
Jonathan E. Baliff has been appointed President and Chief Executive Officer to succeed Mr. Chiles effective immediately following the annual meeting. The Company also expects to nominate Mr. Baliff as a member of the Board of Directors of the Company effective for the term beginning upon the conclusion of the 2014 annual meeting.
“After ten years at Bristow, I am excited about the time ahead for the Company and our industry as the organization transitions to new leadership. I know I will be leaving this organization in the capable hands of Jonathan Baliff, a world class senior management team and dedicated employees across the globe,” said William E. Chiles.
We are reaffirming our adjusted diluted earnings per share guidance for the full fiscal year 2014 of $4.25 to $4.55, reflecting our expectation of strong operating performance in our fiscal fourth quarter.
“Despite the impact of the timing of contract start-up and other costs during the third quarter of fiscal 2014, we expect our results for the full year to be within the guidance range provided in November 2013. This highlights our focus on long-term value as we manage our business with a focus on annual and not quarterly results. Our continued improvement in operating and commercial performance has delivered strong nine-month year-to-date financial results, as seen in the over 11% growth in adjusted EBITDAR and over 12% growth in adjusted EPS for the nine months ended December 31, 2013compared to the same period a year ago,” said Jonathan E. Baliff, Senior Vice President and Chief Financial Officer of Bristow Group.
“We continue to focus on safety, client service and top line growth, which we’ve seen across many of our business units, mostly in Europe in the third quarter. This growth, combined with increased overall liquidity of $202 million, has us well positioned for further growth in the oil and gas sector and for civilian SAR, while also providing funds for acquisitions and opportunistic share buybacks, both of which we executed on this quarter.”
As a reminder, our adjusted diluted earnings per share guidance excludes the effect of special items and asset dispositions because their timing and amounts are more variable and less predictable. Further, 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 or significant acquisitions and 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 ended March 31, 2013.
DIVIDEND AND SHARE REPURCHASE
On February 5, 2014, our Board of Directors approved our twelfth consecutive quarterly dividend. This dividend of $0.25 per share will be paid on March 14, 2014 to shareholders of record on February 28, 2014 and is 67% higher than the first dividend paid in June 2011. Based on shares outstanding as of December 31, 2013, the total quarterly dividend payment will be approximately $9.1 million. Additionally, during the December 2013quarter, we spent $16.5 million to repurchase 215,310 shares of our Common Stock. Subsequently, in January 2014, we spent an additional $16.9 million to repurchase another 230,490 shares of our Common Stock. On February 5, 2014, our Board of Directors approved an increase of the remaining repurchase amount of our Common Stock to up to$100 million through November 5, 2014.
EASTERN AIRWAYS TRANSACTION
On February 6, 2014, Bristow Helicopters Limited (“Bristow Helicopters”) acquired a 60% interest in the privately owned Eastern Airways International Limited (“Eastern Airways”) for cash of £27 million ($45 million) with possible earn out consideration of up to £6 million ($10 million) to be paid over a three year period based on the achievement of specified financial performance thresholds. In addition, Bristow Helicopters entered into agreements with the other stockholders of Eastern Airways that grant Bristow Helicopters the right to buy all of their Eastern Airways shares (and grant them the right after seven years to require Bristow Helicopters to buy all of their shares) and include transfer restrictions and other customary provisions. Eastern Airways is a regional fixed wing operator based atHumberside Airport located in North Lincolnshire, England with both charter and scheduled services targeting U.K. oil and gas industry transport. We believe this investment will strengthen Bristow Helicopters’ ability to provide a complete suite of point to point transportation services for existing European based passengers, expand helicopter services in certain areas like the Shetland Islands and create a more integrated logistics solution for global clients.
The acquisition of Eastern Airways will be accounted for under the purchase method and the results will be consolidated from the date of acquisition in the Europe business unit. The purchase price will be allocated based on the fair value of assets acquired and liabilities assumed as of the acquisition date.
We expect this acquisition will contribute approximately $160 million in operating revenue and $25 million of adjusted EBITDAR on an annual basis.
Management will conduct a conference call starting at 10:00 a.m. ET (9:00 a.m. CT) onFriday, February 7, 2014 to review financial results for the fiscal year 2014 third quarter ended December 31, 2013. This release and the most recent investor slide presentation are available in the investor relations area of our web page at www.bristowgroup.com. The conference call can be accessed as follows:
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 atwww.bristowgroup.com.
Full financial statements can be seen here