HNZ Group reports 2013 year-end results

HNZ Group Inc. (the “Corporation”), an international provider of helicopter transportation and related support services, has announced its financial and operating results for the fourth quarter and fiscal year ended Dec. 31, 2013. 

The Corporation generated revenue of $62.0 million, compared with revenue of $60.7 million in the fourth quarter of 2012. The increase in revenue was due to an increase in Instrument Flight Rules (IFR) partially offset by a decrease in Visual Flight Rules (VFR) and Ancillary revenues. While the Corporation flew 12,522 hours compared to 12,818 hours in the fourth quarter of 2012, the positive mix of hours flown generated an increase in revenue. 

IFR revenue increased by $7.7 million mainly due to an increase in activity in the mining sector in Australia related to the Rio Tinto contract, the oil and gas sector in New Zealand and the start-up of the previously-announced Shell offshore support contract in the Philippines. VFR revenue decreased by $4.5 million primarily due to the loss of the forest fire suppression contracts in Australia, reduced activities in Afghanistan and decreased activities in Antarctica partially offset by increased oil and gas activities in western Canada. Ancillary revenue decreased by $1.9 million due to the decrease in repair and maintenance revenues from the Nampa and Heli-Welders businesses and decreased activities in aircraft leases and ground handling in the Southern Hemisphere. 

EBITDA for the fourth quarter of 2013 totaled $12.7 million, compared to $14.0 million a year earlier. During the quarter, the Corporation recorded a foreign exchange net loss of $0.7 million compared to a net gain of $0.6 million last year. 

Net income attributable to the shareholders of the Corporation totaled $6.5 million, or $0.50 per share in the fourth quarter of 2013, compared to $6.7 million, or $0.51 per share for the same period in 2012. Cash flows related to operating activities before net change in non-cash working capital balances and deferred revenues were $11.2 million in the fourth quarter of 2013, versus $11.4 million in the corresponding period a year earlier. 

“Our operations in the final quarter of 2013 generated all expected revenues and concluded a strong year for HNZ globally,” said Don Wall, president and CEO of HNZ Group Inc. “Even though our support work in Afghanistan is winding down as planned, we are seeing a promising uptick in oil and gas activities in the Southern Hemisphere and in western Canada. We are pleased with the overall 2013 performance of the Corporation, as we set the stage for growth in the Philippines with the start-up of our offshore activities for Shell. In North America, the opening of our new facilities in Terrace, B.C., is well timed with the increased demand for pipeline support work in western Canada.” 

As at Dec. 31, 2013, the Corporation’s financial position remains strong with working capital of $46.5 million and debt net of cash and cash equivalents, of $18.8 million, with $23 million drawn under the Corporation’s revolving operating credit facility of $125 million that matures on Jan. 31, 2017.The Corporation also has an option to increase the credit facility to $175 million subject to certain conditions. As at Dec. 31, 2013, the long-term debt-to-equity ratio was 0.09, compared to 0.16 a year ago. 

For the twelve-month period ended Dec. 31, 2013, revenue reached $255.1 million, compared with revenue of $256.0 million in the corresponding period of 2012. This variation is explained by a decrease in VFR revenue of $9.1 million and a decrease in ancillary revenue of $1.7 million partially offset by an increase in IFR revenue of $9.9 million. The contracts in Afghanistan, in aggregate, are still experiencing a level of revenue not significantly different from those previously announced despite the decreased flying hours experienced this year compared to prior years due to the impact of annual rate escalation.

The Corporation flew 58,698 hours over the twelve-month period ended Dec. 31, 2013, compared to 65,246 hours in the same period in 2012. 

EBITDA amounted to $76.7 million, versus $77.5 million a year earlier. During the year, the Corporation recorded a foreign exchange net loss of $1.1 million compared to a net gain of $0.4 million last year. 

“While we are very pleased with the financial results for the year, we are also extremely grateful to be able to recognize another year of accident free operations across our global network, in some very difficult operating environments” said Wall. 

During the third quarter of 2013, the Corporation recorded a non-cash 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. 

Net income attributable to the shareholders of the Corporation stood at $19.9 million, or $1.52 per share, compared with $43.1 million, or $3.30 per share, last year. Without the impact of the goodwill impairment, the Corporation would have reported net income for the twelve-month period of $43.4 million or $3.32 per share. Finally, cash flows related to operating activities before net change in non-cash working capital balances and deferred revenues totaled $63.0 million, versus $63.4 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. 

The Corporation has received confirmation from the Canada Revenue Agency that it has changed its fiscal year-end from Dec. 30 to Dec. 31, effective for fiscal 2013. The reason for this change was to align the Corporation’s year-end with that of its subsidiary companies and to facilitate financial reporting and the preparation of corporate tax returns. 

“In the quarters ahead, as previously announced, we anticipate that our activities in Afghanistan will significantly decrease,” said Wall, “Despite the adverse effect this will have on HNZ’s revenues and EBITDA, we expect our ongoing activities in North America and the Southern Hemisphere to continue to be strong. Moreover, the operational expertise and outstanding safety record we demonstrated in Afghanistan during the last six years will serve us well as we continue to build our brand worldwide. As we transition our resources, we will be studying entry opportunities in a variety of different geographic areas. The Corporation’s solid financial position also enables us to remain proactive in the search for beneficial acquisitions.”