- Revenue of $74.9 million, versus $70.0 million for the comparative period of 2012
- EBITDA of $30.1 million or 40.2% compared to $27.8 million or 39.7% for the comparative period of 2012
- Net loss of $5.8 million or $0.44 per share due to a non-cash goodwill impairment charge of $23.5 million or net income before goodwill impairment charge totaling $17.7 million or $1.36 per share
- Strong financial position with working capital of $49.7 million and long-term debt-to-equity ratio of 0.19
- Start-up, in Q3, of the new offshore support contract with Shell Global Solutions International B.V.
- Adopts policy of rotating Board roles and appoints Mr. Larry Pollock as incoming Chair, effective 2014
MONTREAL, Nov. 11, 2013 /CNW Telbec/ - HNZ Group Inc. (TSX: HNZ.A, HNZ.B) ("the Corporation"), an international provider of helicopter transportation and related support services, today announced its financial and operating results for the third quarter ended September 30, 2013.
| Financial Highlights
||Quarters ended September 30,||Nine months ended September 30,|
|(in thousands of dollars, except per share data)||2013||2012||2013||2012|
|Goodwill impairment charge||23,500||-||23,500||-|
|Net income (loss) (2)||(5,783)||16,069||13,367||36,462|
|Per share - basic and diluted ($)||(0.44)||1.23||1.02||2.79|
|Cash flows related to operating activities (3)||23,671||21,565||51,795||52,029|
|Weighted-average shares outstanding (all classes)||13,068,700||13,068,700||13,068,700||13,068,700|
(1) Income (loss) before net financing charges, income taxes, depreciation and amortization, goodwill impairment and gain or loss on disposal of property, plant and equipment
(2) Attributable to the shareholders of the Corporation
(3) Before net changes in non-cash working capital balances and deferred revenues
THIRD QUARTER RESULTS
The Corporation generated revenue of $74.9 million, compared with revenue of $70.0 million in the third quarter of 2012. The increase in revenue was mainly due to an increase in Instrument Flight Rules (IFR), as well as smaller increases in Visual Flight Rules (VFR) and Ancillary revenues. While the Corporation flew 21,540 hours compared to 22,824 hours in the third quarter of 2012, the positive mix of hours flown generated an increase in revenues.
IFR revenue increased by $4.0 million mainly due to an increase in activity in the mining sector in Australia related to the Rio Tinto contract and the start-up of the Shell offshore support contract in Asia. VFR revenue increased by $0.6 million primarily due to an increase in pipeline support revenues in Canada partially offset by reduced Canadian domestic mining activity. Ancillary revenue increased by $0.3 million due to an increase in the repair and maintenance revenues from the Nampa and Heli-Welders businesses partially offset by a reduction of third party aircraft lease revenue in the Southern Hemisphere.
EBITDA for the third quarter of 2013 reached $30.1 million, compared to $27.8 million a year earlier. During the quarter, the Corporation recorded a foreign exchange net gain of $0.2 million compared to a net loss of $0.9 million last year.
During the third quarter of 2013, the Corporation recorded a goodwill impairment charge of $23.5 million with respect to its Canadian Helicopters operations in Canada, including Afghanistan (and not HNZ Global helicopter transportation services in the Southern Hemisphere or its repair and maintenance services provided under the Heli-Welders or Nampa Valley Helicopters brands) primarily as a result of the reduced future cash flows expected from declining USTRANSCOM revenues in Afghanistan. The goodwill impairment charge is a non-cash adjustment and has no adverse impact on the company meeting its debt covenants.
Net income attributable to the shareholders of the corporation prior to the recognition of the goodwill impairment charge was $17.7 million or $1.36 per share compared to $16.1 million or $1.23 per share for 2012. After recognizing goodwill impairment, the Corporation experienced a net loss of $5.8 million or $0.44 per share. Cash flows related to operating activities before net change in non-cash working capital balances and deferred revenues were $23.7 million in the third quarter of 2013, versus $21.6 million in the corresponding period a year earlier.
"We are pleased with the strong third quarter performance of the Corporation," said Don Wall, President and CEO of HNZ Group Inc. "Revenues were stronger than expected and the important mandate we started for Shell Global Solutions in Asia signifies excellent opportunity for our brand in Asia. Our expanded 10-year contract with Rio Tinto in Australia, which began in May, positively impacted HNZ's third-quarter results, and, while modest in size, the increasing contribution to revenues from HNZ's repair and maintenance subsidiaries point to the success of our diversification efforts. The goodwill impairment charge recorded in the third quarter of 2013 reflects the winding down of our work with USTRANSCOM in Afghanistan and while it does have an effect on net income, it does not reflect the strong quarterly operating results nor the strong growth prospects."
As at September 30, 2013, the Corporation's financial position remains strong with working capital of $49.7 million and debt and bank indebtedness, net of cash and cash equivalents, of $49.3 million, with $47 million drawn under the Corporation's 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 third quarter, the long-term debt-to-equity ratio was 0.19, compared to 0.16 a year ago.
For the nine-month period ended September 30, 2013, revenue reached $193.1 million, compared with revenue of $195.3 million in the corresponding period of 2012. This variation is mainly explained by a net decrease in VFR revenue of $4.7 million. This net decrease is mainly due to a decrease in revenues from Canadian mining, the Australian utility market and Afghanistan contracted revenues. The contracts in Afghanistan, in aggregate, experienced a level of revenues not significantly different from those previously announced despite the decrease in flying hours experienced this year compared to prior years due to the impact of annual rate escalation. The Corporation flew 46,177 hours over the nine-month period ended September 30, 2013, compared to 52,428 hours in the same period in 2012.
EBITDA amounted to $64.0 million, versus $63.5 million a year earlier. Net income attributable to the shareholders of the Corporation before goodwill impairment charge stood at $36.9 million, or $2.82 per share, compared with $36.8 million, or $2.79 per share, last year. After recognition of the goodwill impairment, the Corporation reported net income for the nine-month period of $13.4 million or $1.02 per share. Finally, cash flows related to operating activities before net change in non-cash working capital balances and deferred revenues totaled $51.8 million, versus $52.0 million, in 2012.
The Corporation commenced providing service to Shell Global Solutions International B.V. ("Shell") in September of 2013. In July 2013, Shell requested and the Corporation agreed to contract for an additional AW139 aircraft as back-up for the term of the contract as well as some additional crewing for the primary operational aircraft. As a result of these changes, revenues under the contract during the initial four year term are expected to be approximately US$57 million, instead of the US$40 million initially estimated.
BOARD OF DIRECTORS
The Board has decided to adopt a policy of periodically rotating the roles of Board members. Consistent with that, effective January 1, 2014 Larry Pollock will replace Randy Findlay as Chairman. Both Mr. Pollock and Mr. Findlay have been on the Board as independent directors since its Initial Public Offering in 2005 and have sat on the Boards' Audit committee. Both Mr. Pollock and Mr. Findlay will continue to sit on the Board's Audit Committee.
Commenting on his appointment, Mr. Pollock said, "Randy Findlay has been extremely helpful in leading the Board through its history as a public company, initially as an income trust and then in late 2010 through its conversion to a corporation, as well as in guiding the Board through a significant growth period and we wish to thank him for that. I am very pleased to assume an expanded role on the Board and view the company's future as bright".
"Looking ahead," said Mr. Wall, "We expect HNZ's activities in Afghanistan will go on producing strong revenues until the end of this year. Then, in subsequent quarters, as we detailed recently in an earlier press release, our mission in that country will increasingly wind down and we expect the Corporation's revenue and earnings to be significantly affected. Meanwhile, HNZ's core transportation services in Canada and the Southern Hemisphere appear both strong and growing, and we expect the coming quarters to continue delivering satisfactory financial results.
The balance of this year will also be positively affected by the continuation of pipeline work in Canada, and we are well-positioned to benefit from an upsurge in the Canadian mining and exploration sector. Our new facility in Terrace, B.C., has recently been opened and will continue to serve our long-term customer Rio Tinto Alcan, and will support pipeline projects in Canada. Our balance sheet is strong," concluded Mr. Wall, "and we are continuing to follow opportunities for expansion through acquisition and organic growth."
The Corporation will hold a conference call to discuss these results on Tuesday November 12, 2013 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: 80229436. This tape recording will be available until November 19, 2013.
ABOUT HNZ GROUP INC.
The Corporation is an international provider of helicopter transportation and related support services with operations in Canada, Australia, New Zealand, Afghanistan, Antarctica and Southeast Asia. The Corporation operates in excess of 130 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, the Corporation provides flight training and third-party repair and maintenance services. The Corporation is headquartered near Montreal, Canada and employs approximately 800 personnel from 36 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 Canada, Australia, New Zealand Afghanistan, Antarctica and Southeast Asia.
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. 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 USTRANSCOM in Afghanistan, 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), legislation (including tax legislation) applicable to the Corporation and the future contractual relationship between HNZ Group and USTRANSCOM and in particular with respect to expected revenues, the availability of funding for the period covered by the renewal option, the duration of such relationship and any goodwill impairment that could result from changes to the relationship. Forward-looking statements, specifically those concerning future performance and expected revenues from contracts, are subject to certain risks and uncertainties, such as customary U.S. government approval of operational funding and the reduction of USTRANSCOM's activities in Afghanistan, and actual results may differ materially. 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.
DEFINITION OF NON-IFRS MEASURES: EBITDA
References to "EBITDA" are to income (loss) before net financing charges, income taxes, depreciation and amortization, goodwill impairment charge, gain or loss on disposal of property, plant and equipment and change in fair value of other liabiilties. Since EBITDA is a metric used by many investors to compare issuers on the basis of the ability to generate cash from operations, management believes that in addition to net income or loss, EBITDA is a useful supplementary measure.
EBITDA is not an earnings measure recognized under IFRS and does not have a standardized meaning prescribed by IFRS. Therefore, EBITDA may not be comparable with similar measures presented by other entities. Investors are cautioned that EBITDA should not be construed as an alternative to net income determined in accordance with IFRS as an indicator of the Corporation's performance, or to cash flows from operating, investing and financing activities as measures of liquidity and cash flows.
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.com and on SEDAR at www.sedar.com.
SOURCE: HNZ Group Inc.
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HNZ Group Inc.
President and Chief Executive Officer