Bristow Group, Inc. 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.
In a release on Feb. 6, Bristow Group said adjusted net income, which excludes special items and asset disposition effects, decreased 27 percent 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 percent. 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 2013 quarter 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:
-A decrease in operating revenue of $6.9 million in our Australia business unit primarily resulting from the ending of short-term contracts, while overall maintenance expense remained flat and labor costs increased in anticipation of new contracts that start during the fourth quarter of fiscal year 2014 and early fiscal year 2015, and
-An increase in operating expense of $3.4 million in our Other International business unit due to start up of operations in a new market with revenue to follow in the fourth quarter;
We also saw additional expenses in the December 2013 quarter including:
-Maintenance expense of $9.5 million and labor costs of $9.0 million in our Europe business unit, which primarily resulted from the return to service of Eurocopter EC225 aircraft in this market, and costs associated with our Sikorsky S-92 fleet in Norway,
-An increase in labor costs in our West Africa business unit of $2.6 million, and
-An increase in general and administrative expense at the corporate level of $3.3 million primarily due to higher incentive compensation levels driven by a year-over-year increase in BVA and improved stock price.
"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
-Operating revenue increased 8 percent to $373.6 million compared to $346.7 million in the same period a year ago.
-Operating income decreased 60 percent to $29.5 million compared to $74.1 million in the December 2012 quarter.
-GAAP net income decreased by 48 percent to $18.9 million, or $0.51 per diluted share, compared to $36.4 million, or $1.00 per diluted share, in the December 2012 quarter.
-GAAP results for the December 2013 quarter were affected by the following items that are excluded from our adjusted non-GAAP financial measures for the quarter:
-Lower earnings from Lider of $19.3 million related to a payment made by Lider under a tax amnesty program in November 2013 and related tax expense recorded by Lider. This special item decreased net income by $12.6 million and earnings per share by $0.34,
-A gain on disposal of assets of $4.0 million compared to a gain of $7.4 million in the December 2012 quarter,
-A charge of $2.1 million in direct costs related to the restructuring of our North America business unit and the planned closure of our Alaska operations which related primarily to employee severance and retention costs. We expect to incur approximately $2.1 million in additional costs related mostly to severance and retention through August 2014 to provide services for the remaining Alaska contracts and to close our operations, and
-A charge of $2.1 million in direct costs related to severance costs in the Southern North Sea.
-Adjusted net income, which also excludes special items and asset disposition effects, decreased 27 percent to $31.3 million, or $0.85 per diluted share, compared to $42.6 million, or $1.17 per diluted share, in the December 2012 quarter.
-Adjusted EBITDAR, which excludes special items and asset disposition effects, decreased 8 percent to $100.7 million compared to $109.2 million in the same period a year ago.
-Cash as of December 31, 2013 totaled $323.2 million compared to $215.6 million as of March 31, 2013. Our total liquidity, including cash on hand and availability on our revolving credit facility, was $617.2 million as of December 31, 2013 compared to $415.0 million as of March 31, 2013, a 49 percent increase.
On February 3, 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, 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 Chiles effective immediately following the annual meeting. The Company also expects to nominate 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 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 percent growth in adjusted EBITDAR and over 12 percent growth in adjusted EPS for the nine months ended December 31, 2013 compared 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."
DIVIDEND AND SHARE REPURCHASE
On February 5, our Board of Directors approved our twelfth consecutive quarterly dividend. This dividend of $0.25 per share will be paid on March 14, to shareholders of record on February 28, and is 67 percent 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 2013 quarter, 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, our Board of Directors approved an increase of the remaining repurchase amount of our Common Stock to up to $100 million through November 5.
EASTERN AIRWAYS TRANSACTION
On February 6, Bristow Helicopters Limited ("Bristow Helicopters") acquired a 60 percent interest in the privately owned Eastern Airways International Limited ("Eastern Airways") for cash of GBP27 million ($45 million) with possible earn out consideration of up to GBP6 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 at Humberside 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.
Bristow Group is a 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 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.
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