HNZ GROUP INC
Don Wall
President and Chief Executive Officer
Tel: 780-429-6919
Tel: 450-452-3007
• Revenue of $207.5 million, versus $255.1 million last year
• Adjusted EBITDAR of $44.0 million or 21.2% compared to $80.3 million or 31.5% a year ago
• Adjusted EBITDA of $34.7 million or 16.7% compared to $76.7 million or 30.1% a year ago
• Net income of $12.3 million or $0.94 per share, versus $19.9 million or $1.52 per share last year
• Solid financial position with $14.1 million cash position, $125 million credit facility and no debt, allowing HNZ
to meet its ongoing commitments and proactively pursue growth opportunities and targeted acquisitions MONTREAL, March 19, 2015 - HNZ Group Inc. (TSX: HNZ.A, HNZ.B) (the "Corporation"), an international provider of helicopter transportation and related support services, today announced its financial and operating results for the fourth quarter and fiscal year ended December 31, 2014.Financial Highlights | Quarters ended December 31, | Fiscal years ended December 31, | ||
(in thousands of dollars, except per share data) | 2014 | 2013 | 2014 | 2013 |
Revenue | 41,999 | 62,048 | 207,532 | 255,111 |
Adjusted EBITDAR (1) | 1,833 | 14,396 | 44,040 | 80,257 |
Adjusted EBITDA (2) | 24 | 12,700 | 34,658 | 76,680 |
Goodwill impairment charge | - | - | - | (23,500) |
Net (loss) income (3) | (2,933) | 6,491 | 12,281 | 19,858 |
Per share - basic and diluted ($) | (0.22) | 0.50 | 0.94 | 1.52 |
Adjusted cash flows related to operating activities (4) | 3,067 | 11,237 | 33,870 | 63,032 |
Weighted-average shares outstanding (all classes) | 13,068,700 | 13,068,700 | 13,068,700 | 13,068,700 |
(1) Adjusted EBITDA (as defined below) before aircraft operating leases expense but including payments made to lessors to cover variable costs for leased aircraft such as maintenance and crew costs (see reconciliation in the Non-IFRS financial measures section)
(2) Net income before net financing charges, income taxes, depreciation and amortization, adjusted for gain or loss on disposal of property, plant and equipment, goodwill impairment charge (if any), change in fair value of the obligation to purchase the shares of non-controlling interests in subsidiaries as disclosed in the reconciliation of the EBITDA and EBITDAR (see reconciliation in the Non-IFRS financial measures section)
(3) Attributable to the shareholders of the Corporation
(4) Before net changes in non-cash working capital balances and deferred revenues (see reconciliation in the Non-IFRS financial measures section)
FOURTH QUARTER RESULTS
The Corporation generated revenue of $42.0 million in the fourth quarter of 2014, compared with revenue of $62.0 million a year ago. The Corporation flew 8,351 hours compared to 12,522 hours in the fourth quarter of 2013, a decrease of 33.3%.
Visual Flight Rules (VFR) revenue decreased by $19.0 million due to reduced activities in Afghanistan and in western Canada. Instrument Flight Rules (IFR) revenue decreased by $1.3 million as a result of a decrease in oil and gas activities in New Zealand and mining activities in Australia, partially offset by the Shell offshore support contract in the Philippines. Ancillary revenue increased by $0.3 million due to increased revenues from repair and maintenance at Heli-Welders and Nampa, partially offset by the decrease in Contracted Flying and Training Services revenue, reduced training revenues and no revenue from the Cambodian subsidiary that was sold at the end of 2013.
Operating expenses decreased by $8.3 million in the fourth quarter compared to the comparative period of the previous year. This is mainly due to the decrease in crew, maintenance, base and insurance costs related to activities in Afghanistan due to the closure of one base and commensurate reduced activities.
Adjusted EBITDAR and adjusted EBITDA for the fourth quarter of 2014 were $1.8 and $0.02 million respectively, compared to $14.4 and $12.7 million a year earlier.
Consequently, net loss attributable to the shareholders of the Corporation totaled $2.9 million, or $0.22 per share in the fourth quarter of 2014, compared to net income of $6.5 million, or $0.50 per share for the same period in 2013. Adjusted cash flows related to operating activities before net change in non-cash working capital balances and deferred revenues were $3.1 million in the fourth quarter of 2014, versus $11.2 million in the corresponding period a year earlier, mainly due to reduced activities and revenues compared to the previous year.
Adjusted net free cash flows for the twelve months ended December 31, 2014 totaled $28.5 million, compared with $54.3 million for the corresponding period in 2013.
"The fourth quarter reflected the conclusion of our Afghanistan contracts," said Don Wall, President and Chief Executive Officer of HNZ Group. "However, the recent offshore contract award from Shell Canada marks a milestone in the execution of our post-Afghanistan strategy to enter the offshore oil and gas support business in eastern Canada. In the fourth quarter, we continued to add to our team with the addition of Christine Baird as Strategic Advisor, International Offshore Oil and Gas. We remain in an excellent financial position with no debt, and a positive cash position to support our growth initiatives."
As at December 31, 2014, the Corporation's financial position is strong with working capital of $49.1 million, no debt and cash and cash equivalents of $14.1 million, combined with a revolving operating credit facility of $125 million that matures on January 31, 2017. The Corporation also has an option to increase the credit facility to $175 million subject to certain conditions.
For the twelve-month period ended December 31, 2014, revenue stood at $207.5 million, compared with revenue of $255.1 million in the corresponding period of 2013. This variation is explained by a decrease in VFR revenue of $66.0 million and a
decrease in ancillary revenue of $0.7 million, partially offset by an increase in IFR revenue of $19.1 million. The contracts in
Afghanistan, in aggregate, experienced a level of revenues not significantly different from those previously announced despite the decreased flying hours experienced this year due to the wind-down of these contracts. The activities in
Afghanistan decreased significantly in 2014 and concluded as planned and previously announced, on October 31, 2014. The
Corporation flew 46,202 hours over the twelve-month period ended December 31, 2014, compared to 58,698 hours in the same period in 2013.
Adjusted EBITDAR and adjusted EBITDA amounted to $44.0 and $34.7 million respectively, compared to $80.3 and $76.7 million a year earlier.
Net income attributable to the shareholders of the Corporation totaled $12.3 million, or $0.94 per share, compared with $19.9 million, or $1.52 per share for the same period in 2013. Adjusted cash flows related to operating activities before net change in non-cash working capital balances and deferred revenues totaled $33.9 million, versus $63.0 million in the corresponding period a year earlier.
In 2014, mining activity continued to face headwinds due to sustained lower commodity prices and the second half of the year was marked by a dramatic decrease in the price of oil. These economic events have impacted our business in the mining and oil and gas sectors and resulted in reduced customer expenditures and lower demand for helicopter services in
these sectors, which comprised 44.9% of revenues for 2014. This year was exceptional in that both resource classes experienced exceptional price weakness and thus reduced activity in the same year.
Acquisition of Airbus Helicopters Flight Training Device
On March 3, 2015, the Corporation announced that it had entered into an agreement to purchase a state-of-the-art Airbus Helicopters AS350 B2/B3E Level 7 Flight Training Device ("FTD") from Frasca International, Inc. The FTD is to be housed at the Edmonton International Airport ("EIA") main terminal building as part of the growing flight-training sector established at EIA.
The high fidelity device will allow for more in-depth and efficient training than can be accomplished from aircraft use alone. It will allow pilots to simulate inadvertent entry into deteriorating weather conditions, night flying, platform and rooftop landings, confined area procedures and emergency procedures training including failures not possible to practice safely in the aircraft. The FTD will be used in completing Airbus Helicopters AS350 B2/B3E initial type endorsements and recurrency training. Upon certification of the FTD, HNZ's training course will be the first in North America to receive regulatory credit for in-aircraft flight ours on a helicopter FTD and represents a unique training offering.
New Nova Scotia offshore oil and gas support contract
On January 26, 2015, the Corporation announced that it had been awarded a contract by Shell Canada Energy ("Shell") to provide offshore personnel and cargo transport, medevac and search and rescue services from Halifax, Nova Scotia, Canada. The services will be delivered by HNZ's subsidiary Canadian Helicopters Ltd, which has provided emergency medical services support to Nova Scotia's Emergency Health Services from the Halifax Stanfield International Airport since
1999.
Following a competitive tender process, the contract, which is subject to the execution of a definitive agreement, was awarded in support of Shell's "Shelburne Basin Venture Exploration Drilling Project" which is expected to commence mid- year of 2015 for approximately 260 days. The contract will utilize two leased Sikorsky S-92 aircraft for offshore personnel, cargo and medevac transport and a third leased Sikorsky S-92 aircraft for dedicated search and rescue operations. Over the term of the initial contract period, revenues are expected to be approximately $20 million dollars.
Addition of Ms. Christine Baird as Strategic Advisor, International Offshore Oil and Gas
On November 24, 2014, the Corporation announced the addition of Ms. Christine Baird as Strategic Advisor. Christine brings over 30 years of relevant experience to the business and will strengthen the Corporation's international offshore oil and gas growth initiatives. Under her leadership, the international division of CHC Helicopters expanded operations throughout South East Asia, the Middle East, South America, Africa and Australia. As President of CHC Global Operations she presided over a
16-fold increase in revenue during her tenure.
"We expect to continue to face headwinds in the Canadian market and possibly from reduced offshore oil and gas exploration throughout 2015 as customers suspend discretionary spending. However, we believe that current market conditions could be favourable for increased tenders for offshore production support work as customers revisit markets to seek more favorable pricing on ongoing production support work. Our recent contract win with Shell Canada in eastern Canada represents a significant achievement and validates our capability to operate heavy aircraft for personnel transport and search and rescue in the North Atlantic. We will also continue to manage our expenses and cost structure prudently, particularly in Canada. Post-Afghanistan, we will return to greater seasonality with stronger results expected in the second and third quarters. Our solid balance sheet provides us with the flexibility to invest in the infrastructure, equipment and personnel required to expand our business where prudent and ensures our ability to easily pay the dividend, in spite of expected weakness in the resource sector," concluded Mr. Wall.
CHANGES IN MD&A DISCLOSURESince the first quarter of 2014, the Corporation added "Adjusted net free cash flows" and "Adjusted EBITDAR" measures in its MD&A.
Adjusted net free cash flows
Management believes this supplementary disclosure provides useful additional information to the cash flows of the Corporation including the amount available for distribution to the shareholders, repayment of debt and other investing activities.
Adjusted EBITDAR
This information is widely used by other important industry players. It will be a more precise tool of comparison with companies that do present this information, as the Corporation is planning to do more offshore work and expand its leased fleet. This measure is also a more stable one since it presents pre-capital numbers.
CONFERENCE CALL
The Corporation will hold a conference call to discuss these results on Friday March 20, 2015 at 11:00 AM (ET). Interested parties can join the call by dialing 514-807-9895 (Montreal) or 1-888-231-8191 (toll free). If you are unable to call at this time,
you may access a tape recording of the conference call by dialing 416-849-0833 (Toronto), 514-807-9274 (Montreal), or 1-
855-859-2056 (toll free) followed by access code: 98508919. This tape recording will be available until March 27, 2015.
The Corporation is an international provider of helicopter transportation and related support services with operations in Canada, Australia, New Zealand, Antarctica and Southeast Asia. The Corporation operates in excess of 120 helicopters in support of a range of multinational companies and government agencies, including onshore and offshore oil and gas, mineral
exploration, military support, hydro and utilities, forest management, construction, air ambulance and search and rescue. In addition to charter services, it provides flight training and third-party repair and maintenance services. HNZ Group is headquartered near Montreal, Canada and employs approximately 700 personnel from 34 locations around the world. The Corporation operates from fixed-base locations as well as from temporary locations, commonly referred to as "pool locations", and provides helicopters in a wide variety of climatic conditions and terrain across the globe.
Certain statements in this press release may constitute "forward-looking" statements which involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Corporation, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. When used in this MD&A, such statements use such words as "may", "will", "intend",
"should", "expect", "believe", "plan", "anticipated", "estimate", "predict", "potential" or the negative of these terms and other similar terminology. Examples of such statements include, but are not limited to, the financial position, results of operations, objectives, dividend policy, participation in bidding processes, continuing business relationship with actual or potential key clients (in particular Rio Tinto and Shell), expected revenues from contracts with key clients, seasonal levels of activity, maintenance of contractual relationships, impact of any economic uncertainty, expected competition, use of available funds,
maintenance of strategic relationships with aboriginal groups and regulations (in particular environmental and transportation regulations) and legislation (including tax legislation) applicable to the Corporation. Consequently, readers should not place any undue reliance on such forward-looking statements.
Although the forward-looking statements contained in this press release are based upon what management of the Corporation believes are reasonable assumptions, the Corporation cannot assure investors that actual results will be consistent with these forward-looking statements. The assumptions on which the forward-looking statements are based include, but are not limited to, general economic trends, industry trends, current contractual and business relationships, capital markets and current competitive, governmental, regulatory and legal environment.
These statements are not based on historical facts but instead reflect current expectations of management regarding future events and operating performance and speak only as of the date of this press release. Forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including, but not limited to, the factors
discussed in this press release or referred to under "Risk Factors". These forward-looking statements are made as of the date of this press release, and the Corporation assumes no obligation to update or revise them to reflect new events or circumstances, unless required by applicable laws.
This press release contains certain non-IFRS financial measures as defined under applicable securities legislation, including adjusted EBITDAR, adjusted EBITDA, Adjusted cash flows related to operating activities and Adjusted net free cash flows. The Corporation believes that such non-IFRS financial measures improve the period-to-period comparability of the Corporation's results by providing more insight into the performance of ongoing core business operations. As required by applicable securities legislation, the Corporation has provided reconciliations of those measures to the most directly comparable IFRS measures. Investors and other readers are encouraged to review the related IFRS financial measures and the reconciliation of non-IFRS measures to their most directly comparable IFRS measures set forth below and should consider non-IFRS measures only as a supplement to, not as a substitute for or as measure to, measures of financial performance prepared in accordance with IFRS.
• References to "Adjusted EBITDA" are to net income (loss) before net financing charges, income taxes, depreciation and amortization, adjusted for gain or loss on disposal of property, plant and equipment, goodwill impairment charge (if any) and change in fair value of the obligation to purchase the shares of non-controlling interests in subsidiaries. Adjustments to standard EBITDA are made by management to normalize for non-recurring events.
• References to "Adjusted EBITDAR" are to Adjusted EBITDA before aircraft operating leases expense but including payments made to lessors to cover variable costs for leased aircraft such as maintenance and crew costs.
• References to "Adjusted cash flows related to operating activities" are to cash flows related to operating activities before net changes in non-cash working capital balances and deferred revenues.
• References to "Adjusted net free cash flows" are to cash flows from operating activities before net change in non-cash working capital balances and deferred revenues less "Maintenance CAPEX". Maintenance CAPEX is defined by management as any capital expenditure which is undertaken to maintain current output in terms of revenues and operating cash flows, as opposed to "Growth CAPEX" which is defined as capital expenditures undertaken to increase the Corporation's capacity for potential growth as defined by management.
Since Adjusted EBITDAR, Adjusted EBITDA, Adjusted cash flows related to operating activities and Adjusted Net Free Cash Flows are useful to many investors to compare issuers on the basis of the ability to generate cash from operations on a recurring basis, management believes that in addition to net income, Adjusted EBITDAR, Adjusted EBITDA, Adjusted cash flows related to operating activities and Adjusted net free cash flows are useful supplementary measures which exclude non- recurring items or items that are not related to the day-to-day operations. Management believes that Adjusted net free cash flows provides useful additional information to investors concerning the operations and cash flows of the Corporation including the amount available for distribution to the shareholders, repayment of debt and other investing activities.
Adjusted EBITDAR, Adjusted EBITDA, Adjusted cash flows related to operating activities and Adjusted net free cash flows are not earnings or cash flows measures recognized under IFRS and do not have a standardized meaning prescribed by IFRS. Therefore, Adjusted EBITDAR, Adjusted EBITDA, Adjusted cash flows related to operating activities and Adjusted net free cash flows may not be comparable with similar measures presented by other entities. Investors are cautioned that Adjusted EBITDAR, Adjusted EBITDA, Adjusted cash flows related to operating activities and Adjusted net free cash flows should not be construed as alternatives to net income determined in accordance with IFRS as indicators of the Corporation's performance, or to cash flows related to operating, investing and financing activities as measures of liquidity and cash flows.
Revenue 41,999 62,048 207,532 255,111
Operating expenses before aircraft operating leases expenses 38,576 46,978 162,431 173,730
Foreign exchange loss 1,590 674 1,061 1,124
Adjusted EBITDAR 1,833 14,396 44,040 80,257
Aircraft operating lease expenses1 1,809 1,696 9,382 3,577
Adjusted EBITDA 24 12,700 34,658 76,680
• Amortization 4,077 3,657 17,035 16,160
• Goodwill impairment charge - - - 23,500
• Net gain on disposal of property, plant and equipment (11) (56) (300) (1,324)
• Net financing charges 131 339 592 1,599
• Change in fair value of other liabilities - - - 39
Income before income taxes (4,173) 8,760 17,331 36,706
Net (loss) income attributable to:Shareholders of the Corporation (2,933) 6,491 12,281 19,858
Non-controlling interests 64 9 446 361
Net (loss) income (2,869) 6,500 12,727 20,219 Adjusted cash flows from operating activities and Adjusted net free cash flow Reconciliation to cash flows from operating activities Twelve months ended December 31, December 31,(in $000's)
2014 2013
Cash flows related to operating activities 37,836 48,334
Add (deduct):
Net change in non-cash working capital balances and deferred revenues (3,966) 14,699
Adjusted cash flows related to operating activities 33,870 63,033Less:
Maintenance CAPEX (5,366) (8,707)
Adjusted net free cash flows 28,504 54,326
Note to readers: Complete consolidated financial statements and Management's Discussion & Analysis of Operating Results and Financial Position are available on the Corporation's website at www.hnz.comand on SEDAR at www.sedar.com.
1 The aircraft operating lease expenses exclude the payments made to lessors to cover variable costs for leased aircraft such as maintenance and crew costs.
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