CHC Group (NYSE: HELI) reported Q2 EPS of ($0.34), $0.04 better than the analyst estimate of ($0.38). Revenue for the quarter came in at $443 million versus the consensus estimate of $470.1 million.

Press Releases

CHC Group Reports 3-Percent Growth in Revenue, 14-Percent Increase in Adjusted EBITDAR in Second-Quarter Fiscal 2015

December 9, 2014 4:04 PM EST Send to a Friend

• $500 Million in Equity Investment By CD&R Now Closed; $100 Million More Expected
• $105 Million in Senior Unsecured Debt Retired in November
• Asset Impairment of $146 Million Reflects Shift to Newer Technology Helicopters

VANCOUVER, British Columbia, Canada--(BUSINESS WIRE)-- CHC Group (NYSE: HELI), the parent company of CHC Helicopter, produced higher revenue and a double-digit increase in a key profitability measure during the company’s fiscal-2015 second quarter.

Results and actions during the quarter were consistent with CHC’s long-term financial priorities to strengthen its balance sheet, expand EBITDAR dollars and margin, and improve cash flow.

1. Operating revenue is total revenue less reimbursable revenue, which are costs reimbursed from customers.

2. Net loss per ordinary share is calculated by net loss available to common stockholders divided by weighted average number of ordinary stock outstanding - basic and diluted.

3. See a description of non-GAAP financial measures and reconciliation to comparable GAAP measures on Pages 10, 11, 12 and 13.

4. The impact of items related to corporate transaction costs was excluded from EBITDAR. See a description of non-GAAP financial measures and reconciliation to comparable GAAP measures on Pages 10, 11, 12 and 13.

5. Adjusted EBITDAR margin excluding special items is calculated as EBITDAR as a percentage of operating revenue.

6. Adjusted net loss excludes corporate transaction costs, asset dispositions, asset impairments, debt extinguishment, the revaluation of our derivatives and foreign-exchange gain (loss), and net income or loss attributable to non-controlling interests.

7. Adjusted net loss per share is calculated by dividing adjusted net loss available to common stockholders by adjusted share count.

8. Adjusted share count is the number of ordinary shares outstanding at the date of our initial public offering for the prior year quarter and prior year period and the weighted average for the current year quarter and current year period.

CHC reported revenue of $458 million for the quarter ended Oct. 31, up 3 percent. The company had a net loss of $177 million. Adjusted EBITDAR (earnings before interest, taxes, depreciation, amortization and helicopter lease and other costs), excluding special items, rose 14 percent to $125 million. All references to EBITDAR in this release represent adjusted EBITDAR excluding special items. Unless otherwise noted, all comparisons are year-over-year.

In the quarter, the company took a non-cash impairment charge of $146 million for certain helicopter and related assets. This impairment is excluded from CHC’s adjusted net loss. The company said the impairment reflects two broad industry factors:

• First, customers increasingly prefer – and are willing to pay higher rates for – newer-technology helicopters, accelerating CHC’s fleet migration to fewer and newer aircraft types, and
• Second, that market demand for older-technology aircraft is not as strong as it has been in the past.

The impairment charge does not affect CHC’s operations or cash flow.

CHC is now in the final stage of a private placement of preferred shares with Clayton, Dubilier & Rice (CD&R), a transaction that was first announced during CHC’s second quarter. CHC has already received $500 million from CD&R for 500,000 preferred shares – $116 million of that in the second quarter. The final closing on an additional $100 million worth of preferred shares is expected to occur by Dec. 15. CHC estimates that net proceeds from the private placement will be about $572 million, excluding anticipated expenses.

The company began deploying proceeds from CD&R’s investment to redeem $105 million in senior unsecured notes after the end of Q2, and will retire some senior secured notes in the next few months. In addition, the company used proceeds to increase the number of company owned aircraft. Driven by lower fixed costs related to interest and lease expense, the company expects an improvement in annual cash-flow of $50 million to $60 million once the equity proceeds are fully deployed.

CHC’s free cash flow through the first half of fiscal 2015 was a use of $209 million, an increase of $36 million, driven by the company’s decision to increase its mix of company owned aircraft, offset partially by lower deposits.

Liquidity at the end of Q2 was $464 million, up $34 million year over year; leverage dropped sequentially to 5.4X.

In connection with the CD&R transaction, CHC’s calculation of adjusted net loss per ordinary share now includes redeemable convertible preferred-share dividends accrued at 8.5 percent per year. There was a minimal amount in the second quarter.

INDUSTRY ENVIRONMENT

William Amelio, CHC’s president and chief executive officer, said the company is using its continuous-improvement initiatives – new tools, systems and processes that are both streamlining the company and increasing its capabilities – to align costs with industry realities. O&G companies, he said, increased their scrutiny of capital and operating expenditures even before oil prices started to decline, cancelling some exploration projects and delaying others.

Mr. Amelio:

“We have been taking meaningful actions over the past few years to make CHC more capable and efficient in any economic cycle. These improvements include establishment of the offshore helicopter industry’s only global operations center and investments in the supply chain that are raising aircraft availability, both of which provide great value to customers.”

“While this is an unsettled time for the global oil-and-gas industry and businesses that support it in the short term, we remain very optimistic about long-term demand for helicopter services, and our progress in positioning CHC to best understand and meet customer requirements.”

Joan Hooper, CHC chief financial officer:

“We are making good progress in reducing CHC’s debt. The equity investment by CD&R is allowing us to retire obligations earlier than planned, and we will continue to identify and implement initiatives to lower our fixed costs.”

“Our priorities remain to achieve higher levels of safety and customer satisfaction, while we strengthen our balance sheet, improve profitability, and grow in a way that creates value for customers and investors.”

For earnings history and earnings-related data on CHC Group (HELI) click here.

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