CHC Helicopter

CHC Helicopter

September 11, 2013 16:00 ET

CHC Helicopter Announces Fiscal First-Quarter Operating Results

VANCOUVER, BRITISH COLUMBIA--(Marketwired - Sept. 11, 2013) - CHC Helicopter -

  • Revenue Virtually Flat; Net Loss Higher on Interest Charges, Non-Cash Expenses

  • EBITDAR(i) Growth Reflects Efficiency From Ongoing Transformation

  • Heli-One's Third-Party MRO Revenue Up 13 Percent

CHC Helicopter reported a 10-percent increase in EBITDAR(i) in its fiscal first-quarter 2014, on revenue that was virtually flat with the same quarter a year ago. The results reflected continued improvement in the company's operating efficiency.

CHC's revenue for the three months ending July 31 was $415 million, down $1 million from last year.

The company reported a net loss of $36 million for the quarter, an increase from a net loss of $32 million last year. However, EBITDAR(i) (earnings before interest, taxes, depreciation, amortization and rent, and excluding aircraft leasing costs), CHC's primary measure of operational performance, was up 10 percent to $111 million.

First Quarter
(in millions) FY14 FY13 Change(iv)
Revenue $415 $416 -
Net Loss ($36 ) ($32 ) N/A
EBITDAR(i) $111 $101 10 %
EBITDA(ii) $56 $52 7 %
Adjusted Net Loss(iii) ($29 ) ($12 ) N/A
  1. Segment EBITDAR (adjusted) is referred to in this document as EBITDAR. See a description of non-GAAP calculations and reconciliation to comparable GAAP measures below.
  2. Consolidated EBITDA is referred to in this document as EBITDA. See a description of non-GAAP calculations and reconciliation to comparable GAAP measures below.
  3. See a description of non-GAAP calculations and reconciliation to comparable GAAP measures below.
  4. All growth rates in this release are year-over-year unless otherwise noted.

While CHC was able to mitigate much of the operational disruption to customers, the unavailability of EC225 aircraft for flying operations in Q1 resulted in lower company revenue. There were related cost tradeoffs in the quarter: normal operating expenses were lower because those aircraft were not flying, but this was offset somewhat by first-quarter spending to prepare the EC225s to resume service in Q2.

"We have been working hard to implement engineering changes to our fleet of EC225s, and it's great for customers and for our industry that we're now safely returning those aircraft to full service," said William Amelio, CHC's president and chief executive officer.

BUSINESS HIGHLIGHTS

Helicopter Services (flying):

  • Revenue from CHC's flying segment was down 1 percent in Q1, mostly attributable to the EC225 situation. Sales were up in Eastern North Sea, Asia Pacific and Africa‐Euro Asia, driven by new contracts with oil and gas producers.

  • EBITDAR(i) from Helicopter Services increased 22 percent, partly because of additional margins from new contracts and lower EC225-related costs.

  • Business wins in Q1 were broadly distributed around the globe, including in Australia, Brazil, Ireland, Kazakhstan, Malaysia, Norway, Thailand and the United Kingdom.

  • CHC has been working with customers to stage the return of EC225s to full service and now has two-thirds of the aircraft safely ready to fly. The company expects to have its entire EC225 fleet available during October.

Heli-One (MRO):

  • First-quarter total revenue from Heli-One, CHC's helicopter maintenance, repair and overhaul (MRO) segment, rose 4 percent, hampered by inactivity of CHC's EC225s. However, sales to third-party customers were up 13 percent.

  • Heli-One's EBITDAR(i) decreased $12 million, mostly because of costs incurred to increase availability of other CHC aircraft while EC225s were on the ground in Q1, and to prepare for the start of their return to service in Q2.

  • Heli-One is investing in additional marketing and sales capacity to best reach additional MRO opportunities.

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 is headquartered in Vancouver and operates about 250 aircraft in about 30 countries around the world.

Segment Performance
(Expressed in thousands of United States dollars)
Segment Third Party Revenue
For the three months ended July 31,
2013 2012
Helicopter Services $ 387,302 $ 391,523
Heli-One 27,629 24,546
Consolidated totals $ 414,931 $ 416,069
EBITDAR and EBITDA Summary
For the three months ended July 31,
2013 2012
Helicopter Services $ 128,629 $ 105,760
Heli-One 1,623 13,813
Corporate (18,061 ) (18,525 )
Eliminations (757 ) (149 )
Segment EBITDAR (adjusted) (i) 111,434 100,899
Less: aircraft lease and associated costs (55,279 ) (48,430 )
Consolidated EBITDA (i) $ 56,155 $ 52,469
(i) See a description of non-GAAP calculations and reconciliation to comparable GAAP measures below.
Consolidated Statements of Operations
(Expressed in thousands of United States dollars)
For the three months ended
July 31, 2013 July 31, 2012
Revenue $ 414,931 $ 416,069
Operating Expenses
Direct costs (343,106 ) (346,087 )
Earnings from equity accounted investees 2,391 1,012
General and administration costs (18,061 ) (18,525 )
Depreciation (32,057 ) (28,310 )
Restructuring costs - (1,930 )
Asset impairments (7,324 ) (6,501 )
Loss on disposal of assets (1,122 ) (1,591 )
(399,279 ) (401,932 )
Operating income 15,652 14,137
Interest on long-term debt (38,577 ) (29,883 )
Foreign exchange loss (13,148 ) (7,401 )
Other financing income (charges) 5,824 (8,154 )
Loss from continuing operations before income tax (30,249 ) (31,301 )
Income tax expense (5,308 ) (1,281 )
Loss from continuing operations (35,557 ) (32,582 )
Earnings from discontinued operations, net of income tax - 345
Net loss $ (35,557 ) $ (32,237 )
Net earnings (loss) attributable to:
Controlling interest $ (38,205 ) $ (33,105 )
Non-controlling interest 2,648 868
Net loss $ (35,557 ) $ (32,237 )
Consolidated Statements of Cash Flows
(Expressed in thousands of United States dollars)
For the three months ended
July 31, 2013 July 31, 2012
Cash provided by (used in):
Operating activities:
Net loss $ (35,557 ) $ (32,237 )
Less: earnings from discontinued operations, net of tax - 345
Net loss from continuing operations (35,557 ) (32,582 )
Adjustments to reconcile net loss to cash flows provided by (used in) operating activities:
Depreciation 32,057 28,310
Loss on disposal of assets 1,122 1,591
Asset impairments 7,324 6,501
Non-cash financing and lease costs 336 (164 )
Earnings from equity accounted investees (2,391 ) (1,012 )
Deferred income taxes 1,613 (5,740 )
Pension contributions, net of pension expense (17,588 ) (11,746 )
Increase to deferred lease financing costs (1,724 ) (1,273 )
Foreign exchange gain (loss) (5,827 ) 22,275
Other 3,180 2,503
Decrease in cash resulting from changes in operating assets and liabilities (26,815 ) (54,580 )
Cash used in operating activities (44,270 ) (45,917 )
Financing activities:
Sold interest in accounts receivable, net of collections (6,446 ) 8,243
Long-term debt proceeds 400,000 225,153
Long-term debt repayments (225,948 ) (151,953 )
Increase in deferred financing costs related to the notes (5,902 ) -
Dividend distribution to parent (25,148 ) -
Cash provided by financing activities 136,556 81,443
Investing activities:
Property and equipment additions (104,385 ) (46,667 )
Proceeds from disposal of property and equipment 46,163 47,225
Aircraft deposits, net of lease inception refunds (27,947 ) (30,081 )
Restricted cash (4,852 ) 5,346
Cash used in investing activities (91,021 ) (24,177 )
Cash provided by continuing operations 1,265 11,349
Cash flows provided by (used in) discontinued operations:
Cash flows provided by (used in) operating activities - 345
Cash flows provided by (used in) financing activities - (345 )
Cash provided by (used in) discontinued operations - -
Effect of exchange rate changes on cash and cash equivalents (10,410 ) (9,821 )
Increase (decrease) in cash and cash equivalents during the period (9,145 ) 1,528
Cash and cash equivalents, beginning of period 123,714 55,547
Cash and cash equivalents, end of period $ 114,569 $ 57,075
Consolidated Balance Sheets
(Expressed in thousands of United States dollars, except share information)
July 31, 2013 April 30, 2013
Assets
Current Assets:
Cash and cash equivalents $ 114,569 $ 123,714
Receivables, net of allowance for doubtful accounts 310,655 317,249
Income taxes receivable 23,374 25,871
Deferred income tax assets 48 49
Inventories 113,936 105,794
Prepaid expenses 35,722 22,219
Other assets 58,282 56,083
656,586 650,979
Property and equipment, net 1,052,542 1,075,254
Investments 29,363 26,896
Intangible assets 194,373 197,810
Goodwill 425,940 430,462
Restricted cash 33,470 29,639
Other assets 476,620 438,777
Deferred income tax assets 9,118 10,752
Assets held for sale 51,858 32,047
$ 2,929,870 $ 2,892,616
Liabilities and Shareholder's Equity
Current Liabilities:
Payables and accruals $ 374,657 $ 419,179
Deferred revenue 36,481 27,652
Income taxes payable 40,736 47,987
Deferred income tax liabilities 618 618
Current facility secured by accounts receivable 45,450 53,512
Other liabilities 20,386 22,791
Current portion of long-term debt 24,512 2,138
542,840 573,877
Long-term debt and capital lease obligations 1,632,068 1,475,087
Deferred revenue 62,242 55,990
Other liabilities 239,612 246,455
Deferred income tax liabilities 10,810 10,627
Total liabilities 2,487,572 2,362,036
Redeemable non-controlling interests (6,206 ) (8,262 )
Capital stock: Par value 1 Euro;
Authorized and issued:
1,228,377,771 and 1,228,377,771, respectively 1,607,101 1,607,101
Contributed surplus 80,803 80,686
Deficit (1,122,463 ) (1,059,110 )
Accumulated other comprehensive loss (116,937 ) (89,835 )
Total Shareholder's Equity 448,504 538,842
$ 2,929,870 $ 2,892,616

Non-GAAP Financial Measures:

This press release includes non-GAAP financial measures, adjusted net earnings (loss), segment earnings before interest, taxes, depreciation, amortization and aircraft lease rent and associated costs ("segment EBITDAR (adjusted)") referred to above as EBITDAR and earnings before interest, taxes, depreciation and amortization ("EBITDA") that are not required by, or presented in accordance with U.S. generally accepted accounting principles ("GAAP"). These non-GAAP measures are not performance measures under GAAP and should not be considered as alternatives to net earnings (loss) or any other performance or liquidity measures derived in accordance with GAAP. In addition, these measures may not be comparable to similarly titled measures of other companies. CHC has provided a reconciliation of these non-GAAP measures to the most directly comparable GAAP measure below. CHC has chosen to include adjusted net earnings (loss) as we consider this to be a useful measure of our results before asset impairments, gain or loss on the disposal of assets and foreign exchange gains or losses. We have chosen to include segment EBITDAR (adjusted) as we consider this to be a significant indicator of our financial performance and use this measure to assist us in allocating available capital resources. We have also included EBITDA as this measure is useful to our debt holders as it is a proxy of Adjusted EBITDA, a non-GAAP measure. Adjusted EBITDA provides useful information to investors as it is a measure to calculate certain financial covenants related to our revolving credit facility and certain covenants in our note indentures and other financing instruments. CHC has provided a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measure below and has presented a detailed discussion of its reasons for including non-GAAP financial measures and the limitations associated with those measures as part of the "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in our Quarterly Reports on Form 10-Q and Annual Report on Form 10-K. CHC encourages investors to review the reconciliation and the non-GAAP discussion in conjunction with our presentation of these non-GAAP financial measures.

EBITDA - Non-GAAP Reconciliation
(Expressed in thousands of United States dollars)
For the three months ended July 31,
2013 2012
Helicopter Services $ 128,629 $ 105,760
Heli-One 1,623 13,813
Corporate (18,061 ) (18,525 )
Eliminations (757 ) (149 )
Segment EBITDAR (adjusted) 111,434 100,899
Less: aircraft lease and associated costs (55,279 ) (48,430 )
Consolidated EBITDA 56,155 52,469
Depreciation (32,057 ) (28,310 )
Restructuring costs - (1,930 )
Asset impairments (7,324 ) (6,501 )
Loss on disposal of assets (1,122 ) (1,591 )
Operating income 15,652 14,137
Interest on long-term debt (38,577 ) (29,883 )
Foreign exchange loss (13,148 ) (7,401 )
Other financing income (charges) 5,824 (8,154 )
Loss from continuing operations before income tax (30,249 ) (31,301 )
Income tax expense (5,308 ) (1,281 )
Loss from continuing operations (35,557 ) (32,582 )
Earnings from discontinued operations, net of income tax - 345
Net loss $ (35,557 ) $ (32,237 )
Adjusted net loss - Non-GAAP reconciliation
(Expressed in thousands of United States dollars)
For the three months ended July 31,
2013 2012
Adjusted net loss $ (28,727 ) $ (11,590 )
Asset impairments (7,324 ) (6,501 )
Loss on disposal of assets (1,122 ) (1,591 )
Gain (loss) on derivatives 14,764 (5,154 )
Foreign exchange loss (13,148 ) (7,401 )
Net loss $ (35,557 ) $ (32,237 )

Cautionary Note on Forward-Looking Statements:

This press release contains forward-looking statements and information within the meaning of certain securities laws, including the "safe harbor" provision of the United States Private Securities Litigation Reform Act of 1995 and any applicable Canadian securities legislation. All statements, other than statements of historical fact included in this press release, regarding our strategy, future operations, projections, conclusions, forecasts and other statements are "forward-looking statements". While these forward-looking statements represent our best current judgment, the actual results could differ materially from the conclusions, forecasts or projections contained in the forward-looking information. Certain material factors or assumptions were applied in drawing a conclusion or making a forecast or projection in the forward-looking information contained herein. Such factors include, but are not limited to, the following: competition in the markets we serve, long-term support contracts, failure to maintain standards of acceptable safety performance, political, economic, and regulatory uncertainty, problems with our non-wholly owned entities, including potential conflicts with the other owners of such entities, exposure to credit risks, inability to fund our working capital requirement, risks inherent in the operation of helicopters, unanticipated costs or cost increases associated with our business operations, exchange rate fluctuations, trade industry exposure, inflation, inability to maintain government issued licenses, inability to obtain necessary aircraft or insurance, loss of key personnel, work stoppages due to labor disputes, and future material acquisitions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated. The Company disclaims any intentions or obligations to update or revise any forward-looking information, whether as a result of new information, future events or otherwise. Please refer to our annual report on Form 10-K, our quarterly reports on Form 10-Q, and our other filings, in particular any discussion of risk factors or forward-looking statements, which are filed with the SEC and available free of charge at the SEC's website (www.sec.gov), for a full discussion of the risks and other factors that may impact any estimates or forward-looking statements made herein.

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