HNZ Group reports 2014 third quarter results

• Revenue of $58.1 million, versus $74.9 million last year
• Adjusted EBITDAR of $20.2 million or 34.8% of revenue compared to $31.0 million or 41.4% a year ago
• Adjusted EBITDA of $17.9 million or 30.8% of revenue compared to $30.1 million or 40.2% a year ago
• Net income of $9.6 million or $0.73 per share, versus a net loss of $5.8 million or $0.44 per share after goodwill impairment charge last year
• Solid financial position with $7.9 million cash position, $125 million credit facility and no debt, allowing HNZ to proactively pursue growth opportunities and targeted acquisitions

MONTREAL, Nov. 10, 2014 /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, 2014.

Financial Highlights		Quarters ended September 30,					Nine months ended September 30,
(in thousands of dollars, except per share data)		2014			2013			2014		2013
Revenue		58,123			74,906			165,533		193,062
Adjusted EBITDAR (1)		20,159			31,036			42,206		65,860
Adjusted EBITDA (2)		17,904			30,134			34,634		63,979
Goodwill impairment charge		-			(23,500)			-		(23,500)
Net income (3)		9,584			(5,783)			15,214		13,367
	Per share - basic and diluted ($)	0.73			(0.44)			1.16		1.02
Adjusted cash flows related to operating activities (4)		14,702			23,671			30,803		51,795
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)

THIRD QUARTER RESULTS
The Corporation generated revenue of $58.1 million in the third quarter of 2014, compared with revenue of $74.9 million a year ago. This decrease is mostly due to a decrease in Visual Flight Rules (VFR) operations in Afghanistan and in western Canada. The Corporation flew 16,700 hours compared to 21,540 hours in the third quarter of 2013, a decrease of 22.5%.

VFR revenue decreased by $18.8 million primarily due to reduced activities in Afghanistan and in western Canada. Ancillary revenue decreased by $0.7 million due to the decrease in Contracted Flying and Training Services revenue on major components and helicopter repair revenue. Instrument Flight Rules (IFR) revenue increased by $2.7 million as a result of an increase in oil and gas activities in New Zealand and the reflection of a full quarter of revenue from the Shell offshore support contract in the Philippines, which started in September 2013, partially offset by decreased activities on the North Warning System contract in Canada.

Operating expenses decreased by $4.1 million in the third quarter compared to last year. This is mainly due to the decrease in crew, base and insurance costs in Afghanistan due to the closing of one base and commensurate reduced activities.

Adjusted EBITDAR and adjusted EBITDA for the third quarter of 2014 were $20.2 and $17.9 million respectively, compared to $31.0 and $30.1 million a year earlier.

Net income attributable to the shareholders of the Corporation totaled $9.6 million, or $0.73 per share in the third quarter of 2014, compared to a net loss of $5.8 million, or $0.44 per share after goodwill impairment charge 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 $14.7 million in the third quarter of 2014, versus $23.7 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 nine months ended September 30, 2014 totaled $26.1 million, compared to $44.0 million for the same period a year ago. For the twelve-month period ended September 30, 2014, adjusted net free cash flows stood at $36.4 million, compared with $54.3 million for the year ended December 31, 2013.

"The third quarter results marked an improvement over the second quarter largely reflecting better performance from our Canadian operations," said Don Wall, president and chief executive officer of HNZ Group. "While the business environment and market conditions in Canada remain challenging, HNZ Global continued to perform well and the results demonstrate the value of having diversified operations.  During the third quarter, we disposed of three surplus aircraft for proceeds of $6.0 million.  We are now debt free with a cash position of $7.9 million and a $125 million credit facility to support our organic growth and acquisition opportunities." 

As at September 30, 2014, the Corporation's financial position is strong with working capital of $50.3 million, and cash and cash equivalents of $7.9 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.

NINE-MONTH RESULTS
For the nine-month period ended September 30, 2014, revenue stood at $165.5 million, compared with revenue of $193.1 million in the corresponding period of 2013. This variation is explained by a decrease in VFR revenue of $47.1 million and a decrease in ancillary revenue of $0.9 million, partially offset by an increase in IFR revenue of $20.4 million. The contracts in Afghanistan, in aggregate, are achieving a level of revenue 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 have concluded, as planned and previously announced, on October 31, 2014. The Corporation flew 37,852 hours over the nine-month period ended September 30, 2014, compared to 46,177 hours in the same period in 2013.

Adjusted EBITDAR and adjusted EBITDA amounted to $42.2 and $34.6 million respectively, compared to $65.9 and $64.0 million a year earlier.

Net income attributable to the shareholders of the Corporation totaled $15.2 million, or $1.16 per share, compared with $13.4 million, or $1.02 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 $30.8 million, versus $51.8 million in the corresponding period a year earlier.

OUTLOOK
"As previously announced, our contract in Afghanistan ended on October 31, 2014. We are evaluating both selling and redeploying the associated aircraft based on industry demand. Going forward, we aim to continue improving our performance in Canada and focus our efforts on gaining offshore oil and gas support business in Asia-Pacific, Eastern Canada and Africa. Our excellent balance sheet gives us the flexibility to invest in the infrastructure, equipment and personnel required to expand our business.  We remain optimistic about our growth strategy and HNZ's long-term prospects," concluded Mr. Wall.

CHANGES IN MD&A DISCLOSURE
Since 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 lease 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 Tuesday November 11, 2014 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: 23377290. This tape recording will be available until November 18, 2014.

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 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, 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.

FORWARD-LOOKING STATEMENTS
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 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.

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.

NON-IFRS FINANCIAL MEASURES
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" as determined by management. 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 determined 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. 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.

Adjusted EBITDAR and Adjusted EBITDA Reconciliation to income before income taxes

	Three-month periods ended September 30,		Nine-month periods ended September 30,
($000's except for shares and per share amounts)	2014	2013	2014	2013
Revenue	58,123	74,906	165,533	193,062
Operating expenses before aircraft operating leases expenses	38,604	44,074	123,856	126,752
Foreign exchange (gain) loss	(640)	(204)	(529)	450
Adjusted EBITDAR	20,159	31,036	42,206	65,860
Aircraft operating lease expenses^1	2,255	902	7,572	1,881
Adjusted EBITDA	17,904	30,134	34,634	63,979
- Amortization	4,575	4,677	12,958	12,502
- Goodwill impairment charge	—	23,500	—	23,500
- Net (gain) loss on disposal of property, plant and equipment	(1,075)	15	(289)	(1,268)
- Net financing charges	115	350	461	1,260
- Change in fair value of other liabilities	—	—	—	39
Income before income taxes	14,289	1,592	21,504	27,946
Net income (loss) attributable to:
Shareholders of the Corporation	9,584	(5,783)	15,214	13,367
Non-controlling interests	218	49	382	352
Net income (loss)	9,802	(5,734)	15,596	13,719

Adjusted cash flows from operating activities and Adjusted net free cash flow Reconciliation to cash flows from operating activities

	Nine months ended		Last Twelve months ended	Year ended
(in $000's)	September 30, 2014	September 30, 2013	September 30, 2014	December 31, 2013
Cash flows related to operating activities	27,456	27,960	47,829	48,334
Add (deduct): Net change in non-cash working capital balances and deferred revenues	3,347	23,835	(5,789)	14,699
Adjusted cash flows related to operating activities	30,803	51,795	42,040	63,033
Less: Maintenance CAPEX	(4,724)	(7,836)	(5,595)	(8,707)
Adjusted net free cash flows	26,079	43,959	36,445	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.com and on SEDAR at www.sedar.com.

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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.

SOURCE: HNZ Group Inc.

HNZ Group Inc., Don Wall, President and Chief Executive Officer, Tel: [phone], Tel: [phone]