10-Nov-2014 Source: Bristow
Bristow Group Inc. (NYSE: BRS) today reported GAAP net income for the September 2014 quarter of $26.1 million, or $0.73 per diluted share, compared to net income of $110.6 million, or $3.01 per diluted share, in the same period a year ago.
Adjusted net income, which excludes special items and asset disposition effects, decreased 33% to $31.1 million, or $0.87 per diluted share, for the September 2014quarter, compared to $46.5 million, or $1.27 per diluted share, in the September 2013quarter.
Adjusted earnings before interest, taxes, depreciation, amortization and rent (“adjusted EBITDAR”), which also excludes special items and asset disposition effects, was $112.1 million for the September 2014 quarter, a 3% increase from $108.5 million in the same period a year ago.
Adjusted net income for the six months ended September 30, 2014 decreased 6% to$78.4 million, or $2.19 per diluted share, from $83.5 million, or $2.28 per diluted share, in the same six-month period a year ago. However, adjusted EBITDAR improved 13% to$239.7 million in the current year-to-date period from $211.8 million in the first six months of our last fiscal year.
“Bristow Group delivered another quarter of top line revenue growth, with a 16% increase over the same period last year,” said Jonathan E. Baliff, President and Chief Executive Officer of Bristow Group. “This revenue growth, and the continued delivery of significant positive gross cash flow from operations, combined with the sale and leaseback of 14 aircraft, drove an almost $30 million increase in Bristow Value Added (“BVA”), improved returns on capital, and $613 million of ending liquidity during the first six months of fiscal 2015. This BVA increase in the face of global macro-economic volatility demonstrates the strength of our underlying business and balance sheet, as we continue to deepen client relationships with differentiated services and reliable performance.”
“The recently announced award of new contracts and renewal of several existing contracts are proof of our ability to continue to expand client relationships through a complete and differentiated suite of point to point transportation services. In total, we have $4.3 billion of contracts being implemented on schedule and on budget starting in fiscal 2016. As we previously discussed, we manage our business on an annual basis and while our second quarter results were mainly impacted by non-operational items, we anticipate continued top line and earnings per share growth for the full fiscal year and a stronger second half of fiscal 2015.”
We continue to see top line strength in our operations driving improvements in adjusted EBITDAR year-over-year, with an increase in operating revenue of 16% for the September 2014 quarter and 19% for the first six months of the fiscal year over the prior year periods. The following items contributed significantly to an increase in adjusted EBITDAR, and to a continued growth in BVA, over the second quarter and year-to-date periods of last fiscal year:
Despite the increase in adjusted EBITDAR compared with the prior year periods, adjusted EBITDAR margin decreased from 28.7% in the September 2013 quarter to 25.4% in theSeptember 2014 quarter and decreased from 28.7% in the prior year-to-date period to 27.3% for the six months ended September 30, 2014. This margin decrease was primarily driven by:
On a sequential basis compared with the June 2014 quarter, adjusted EBITDAR and adjusted EBITDAR margin decreased resulting from the same non-cash foreign currency items impacting our results in the September 2014 quarter, accelerated maintenance costs and higher corporate overhead and information technology costs related to training and other costs associated with our ERP implementation that went live in October 2014. Many of these items were specific to the September 2014 quarter or involved the shifting of costs from future quarters into the September 2014 quarter; and we expect a recovery in adjusted EBITDAR and adjusted EBITDAR margin over the last half of the fiscal year. Additionally, results were impacted by delays in certain new aircraft entering our fleet.
Our net income and diluted earnings per share also were impacted by changes in our aircraft leasing and effective tax rate. Net income and diluted earnings per share, on an unadjusted and adjusted basis, were impacted by a pre-tax $12.1 million increase in rent expense over the September 2013 quarter and a pre-tax $2.3 million increase in rent expense over the June 2014 quarter, as we increased the number of leased aircraft. On a year-over-year basis, adjusted net income and adjusted diluted earnings per share were also impacted by a higher effective tax rate in the September 2014 quarter, on an adjusted basis, resulting primarily from the benefit of a UK tax rate change in the September 2013quarter resulting in an $0.08 lower adjusted diluted EPS than the prior year quarter.
In terms of cash generation from our business and management of our capital, net cash provided by operating activities was $101.2 million for the six months ended September 30, 2014 compared to $132.5 million for the same period a year ago. This year-over-year decrease was primarily driven by UK Search and Rescue (“SAR”) contract costs which were capitalized and our decision to accelerate payments to vendors in advance of our ERP start-up in October. This use of cash was more than offset by cash proceeds from the sale and leaseback of 14 aircraft in the September 2014 quarter, bringing in $380.7 million and resulting in an increase in cash to $263.9 million as of September 30, 2014 from $204.3 million as of March 31, 2014. Our total liquidity, including cash on hand and availability on our revolving credit facility, was $613.4 millionas of September 30, 2014 compared to $529.9 million as of March 31, 2014. This growth in liquidity available for investment in continued growth was possible despite our use of significant cash for capital expenditures of $302.1 million and net debt pay down of $63.5 million year to date.
BUSINESS UNIT RESULTS
Europe Business Unit
Our Europe Business Unit has continued to expand with the net addition of eight Large AirCraft Equivalent (“LACE”) aircraft since the September 2013 quarter. These additional aircraft, as well as an overall increase in activity with existing clients and under new contracts, resulted in $8.5 million of increased operating revenue in the September 2014quarter. Also, we acquired a 60% interest in Eastern Airways in February 2014, which contributed $39.5 million to the increase in operating revenue and $9.6 million in adjusted EBITDAR for the September 2014 quarter. Adjusted EBITDAR increased 26% year-over-year primarily due to a benefit from the recovery of $3.9 million in maintenance credits from an OEM during the September 2014 quarter. The improvement was partially offset by a decrease in earnings from unconsolidated affiliates of $0.5 million primarily due to the sale of the FB Entities in July 2013 and dilution from Eastern Airways margins that are lower than helicopter operation margins. Sequential quarterly adjusted EBITDAR increased to $69.5 million in the September 2014 from $68.7 million in the June 2014 quarter, while EBITDAR margins remained strong at 33.7% in September 2014 compared to 34.1% in the June 2014 quarter.
West Africa Business Unit
Improved contract terms drove revenue increases in our West Africa Business Unit, leading to a 5.5% increase in operating revenue for the September 2014 quarter compared to the September 2013 quarter. The increases in revenue and cost control measures are reflected in the 7.9% increase in adjusted EBITDAR to $24.9 million for theSeptember 2014 quarter compared to $23.1 million for the September 2013 quarter and sequential increase of 21.8% from $20.4 million for the June 2014 quarter.
North America Business Unit
The decrease in small aircraft on contract in the U.S. Gulf of Mexico and the planned closure of Alaska operations drove the decrease in revenue in North America year-over-year, partially offset by the increase in the number of large aircraft on contract. AlthoughNorth America’s adjusted EBITDAR decreased slightly to $18.1 million in the September 2014 quarter compared to $18.7 million in the September 2013 quarter, this change in the mix of fleet on contract in the U.S. Gulf of Mexico to larger aircraft resulted in an improvement in the adjusted EBITDAR margin to 32.4% in the September 2014 quarter compared to 31.0% in the September 2013 quarter.
Australia Business Unit
Operating revenue for our Australia Business Unit increased 33.6% to $47.2 million in theSeptember 2014 quarter from $35.3 million in the September 2013 quarter due to the ramp up of new contracts, including a significant contract with INPEX. As a result of the contracts and a benefit from the recovery of $1.9 million in maintenance credits from an OEM during the September 2014 quarter, adjusted EBITDAR and adjusted EBITDAR margin increased in the September 2014 quarter to $10.7 million and 22.6%, respectively, from $7.4 million and 21.0%, respectively, in the September 2013 quarter. Negatively impacting the results for the September 2014 quarter were aircraft serviceability issues, continuing costs for returning the EC225s to service and an increase in depreciation expense due to a decrease in salvage values for some older aircraft operating in this market.
Other International Business Unit
Operating revenue for our Other International Business Unit increased in the September 2014 quarter primarily due to a contract in Tanzania that started in the fourth quarter of fiscal year 2014 as well as increased activity in Trinidad, partially offset by a decline in revenue due to a contract ending in Malaysia. Adjusted EBITDAR and adjusted EBITDAR margin for the September 2014 quarter decreased to $6.6 million and 18.5%, respectively, compared to $12.6 million and 39.3%, respectively, in the September 2013 quarter, primarily due to a decrease in earnings from unconsolidated affiliates, net of losses, and the decline in activity in Malaysia, partially offset by the new contract in Tanzania and increased activity in Trinidad. The primary driver of the decrease in earnings from unconsolidated affiliates, net of losses, is a decrease in earnings from our investment in Líder in Brazil of $5.5 million in the September 2014 quarter resulting from unfavorable changes in foreign currency exchange rates compared to the September 2013 quarter.
We are reaffirming our adjusted diluted earnings per share guidance for the full fiscal year 2015 of $4.70 to $5.20, reflecting our expectation of strong operating performance to continue through our fiscal year.
“Our fiscal second quarter of 2015 was impacted by a number of costs and foreign exchange impacts, resulting in a decrease in earnings per share year over year and sequentially. Nevertheless, our management team continues to be focused on our annual performance, and we currently expect a stronger second half of the year,” said John H. Briscoe, Senior Vice President and Chief Financial Officer of Bristow Group. “Our global business continues to deliver robust increases in gross cash flow returns and BVA, while growing our business and creating a balanced return to our shareholders. Our global team is raising the bar with significant optimization and transformational efforts underway including a new global ERP system, the first phase of which went live in October. Our dedicated employees have stepped up to the challenge, while remaining focused on safety and our clients.”
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 changes in the market and industry, could result in earnings per share for fiscal year 2015 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, 2014 and annual report on Form 10-K for the fiscal year ended March 31, 2014.