10-Dec-2014 Source: CHC
CHC reported revenue of $458 million for the quarter ended Oct. 31, up 3 percent. The company had a net loss of $177 million. Adjusted EBITDAR (earnings before interest, taxes, depreciation, amortization and helicopter lease and other costs), excluding special items, rose 14 percent to $125 million. All references to EBITDAR in this release represent adjusted EBITDAR excluding special items. Unless otherwise noted, all comparisons are year-over-year.
In the quarter, the company took a non-cash impairment charge of $146 million for certain helicopter and related assets. This impairment is excluded from CHC’s adjusted net loss. The company said the impairment reflects two broad industry factors:
First, customers increasingly prefer – and are willing to pay higher rates for – newer-technology helicopters, accelerating CHC’s fleet migration to fewer and newer aircraft types, and
Second, that market demand for older-technology aircraft is not as strong as it has been in the past.
The impairment charge does not affect CHC’s operations or cash flow.
CHC is now in the final stage of a private placement of preferred shares with Clayton, Dubilier & Rice (CD&R), a transaction that was first announced during CHC’s second quarter. CHC has already received $500 million from CD&R for 500,000 preferred shares – $116 million of that in the second quarter. The final closing on an additional $100 million worth of preferred shares is expected to occur by Dec. 15. CHC estimates that net proceeds from the private placement will be about $572 million, excluding anticipated expenses.
The company began deploying proceeds from CD&R’s investment to redeem $105 million in senior unsecured notes after the end of Q2, and will retire some senior secured notes in the next few months. In addition, the company used proceeds to increase the number of company owned aircraft. Driven by lower fixed costs related to interest and lease expense, the company expects an improvement in annual cash-flow of $50 million to $60 million once the equity proceeds are fully deployed.
CHC’s free cash flow through the first half of fiscal 2015 was a use of $209 million, an increase of $36 million, driven by the company’s decision to increase its mix of company owned aircraft, offset partially by lower deposits.
Liquidity at the end of Q2 was $464 million, up $34 million year over year; leverage dropped sequentially to 5.4X.
In connection with the CD&R transaction, CHC’s calculation of adjusted net loss per ordinary share now includes redeemable convertible preferred-share dividends accrued at 8.5 percent per year. There was a minimal amount in the second quarter.
INDUSTRY ENVIRONMENT
William Amelio, CHC’s president and chief executive officer, said the company is using its continuous-improvement initiatives – new tools, systems and processes that are both streamlining the company and increasing its capabilities – to align costs with industry realities. O&G companies, he said, increased their scrutiny of capital and operating expenditures even before oil prices started to decline, cancelling some exploration projects and delaying others.
Mr. Amelio:
“We have been taking meaningful actions over the past few years to make CHC more capable and efficient in any economic cycle. These improvements include establishment of the offshore helicopter industry’s only global operations center and investments in the supply chain that are raising aircraft availability, both of which provide great value to customers.”
“While this is an unsettled time for the global oil-and-gas industry and businesses that support it in the short term, we remain very optimistic about long-term demand for helicopter services, and our progress in positioning CHC to best understand and meet customer requirements.”
Joan Hooper, CHC chief financial officer:
“We are making good progress in reducing CHC’s debt. The equity investment by CD&R is allowing us to retire obligations earlier than planned, and we will continue to identify and implement initiatives to lower our fixed costs.”
“Our priorities remain to achieve higher levels of safety and customer satisfaction, while we strengthen our balance sheet, improve profitability, and grow in a way that creates value for customers and investors.”
BUSINESS SEGMENTS
HELICOPTER SERVICES (flying):
Second-quarter revenue for CHC’s flying business was up 2 percent to $417 million, led by new contracts with oil-and-gas customers in the West North Sea and Africa-Euro Asia regions, together with increased activity in the Americas.
In October, Total E&P UK extended a decades-long relationship with CHC in the North Sea through a helicopter-transportation contract to support Total’s offshore operations across the United Kingdom Continental Shelf. The contract spans up to seven years and took effect last month, and calls for CHC to operate two Sikorsky S-92 and two Airbus EC225 helicopters from Aberdeen, Scotland, to Total’s Elgin-Franklin, Alwyn and Dunbar fields and mobile drilling rigs.
HELI-ONE (MRO):
External revenue from our maintenance, repair and overhaul (MRO) services rose 16 percent to $41 million, with gains from both MRO and power-by-the-hour customers.
Heli-One Poland recently completed its first G-Check inspection – a major overhaul – of an Airbus Helicopter Super Puma AS 332L aircraft. The facility in Rzeszow, one of four Heli-One locations around the world, has a maintenance hangar that can accommodate up to six large airframes.
Heli-One modified Sikorsky S-76 C+ aircraft for Waypoint Leasing, helicopters that were destined for an operator flying in Indonesia.
ABOUT CHC
CHC Helicopter is a leader in enabling customers to go further, do more and come home safely, including oil and gas companies, government search-and-rescue agencies and organizations requiring helicopter maintenance, repair and overhaul services through the Heli-One segment. The company operates more than 230 aircraft in about 30 countries around the world.
