HNZ Group Inc., an international provider of helicopter transportation and related support services, announced its financial and operating results for the third quarter ended Sept. 30, 2017.
Third quarter results
Revenue was $72 million in the third quarter of 2017, an increase of $17.3 million compared to $54.7 million a year ago. This variation is mostly explained by an increase in offshore revenue and onshore revenue, partially offset by a decrease in ancillary revenue. The corporation flew 18,127 hours compared to 14,178 hours in the third quarter of 2016, an increase of 27.9 per cent.
Offshore revenue increased by $12.5 million from the third quarter of 2016 primarily due to the addition of the new INPEX crew transport offshore contract and the ExxonMobil and Encana contract. Onshore revenue increased by $7.1 million as a result of higher VFR activity in western Canada and in Acasta. Ancillary revenue decreased by $2.3 million mainly due to decreased activity at Nampa Valley, Heli-Welders and the Contracted Flying and Training Services (“CFTS”) project.
Operating expenses, before aircraft operating leases expenses, amounted to $51.1 million for the third quarter, compared to $41.3 million last year, representing an increase of $9.8 million. The increase is mainly due to operating costs incurred in the period for the following recently awarded contracts: INPEX crew transport offshore contract, the INPEX-Shell search-and-rescue (SAR) contract in Asia-Pacific and the ExxonMobil and Encana contract, partially offset by lower costs from the completion of the Shell Halifax contract.
Adjusted EBITDAR (earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs) and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for the third quarter of 2017 were $21.4 million and $15.9 million respectively or 29.7 percent and 22.1 percent of revenues, compared to $12.8 million and $9.8 million a year earlier.
Net income from continuing operations attributable to the shareholders of the corporation totaled $6.3 million or $0.49 per share, compared to $2.3 million, or $0.18 per share for the same period in 2016. Net income attributable to the shareholders of the corporation totaled $6.4 million or $0.50 per share, compared to $1.7 million, or $0.13 per share in 2016.
Cash flows related to operating activities were $7.6 million in the third quarter of 2017 versus $10.5 million in the corresponding period a year earlier. The decrease in cash flows is primarily related to operating costs incurred on the new contracts.
Adjusted net free cash flows for the nine months ended Sept. 30, 2017 were $6.4 million, compared to $17.7 million for the same period a year ago. For the 12-month period ended Sept. 30, 2017, adjusted net free cash flows stood at $6.4 million, compared with $17.7 million for the year ended Dec. 31, 2016.
“The third quarter results saw the benefits of increased fire suppression activities and the ramp-up of the PHI/HNZ operations, as well as the ExxonMobil/Encana contract, which was partially offset by delays in the ramp-up of the INPEX-Shell SAR contract and decreased activity at Nampa Valley, Heli-Welders and CFTS.” said Don Wall, president and chief executive officer of HNZ Group Inc.
As at Sept. 30, 2017, the corporation had working capital of $55.1 million, and cash and cash equivalents, net of short-term debt of $0.6 million.
Nine-month results
For the nine-month period ended Sept. 30, 2017, revenue totaled $168.3 million, an increase of $11.1 million compared to $157.2 million a year ago. The increase is mostly due to an increase in offshore revenue of $15.1 million and an increase in onshore revenue of $1.4 million, partially offset by a decrease in ancillary revenue of $5.4 million.
The corporation flew 35,218 hours compared to 32,251 hours in 2016.
Adjusted EBITDAR and adjusted EBITDA for the nine-month period amounted to $30.6 million and $21.2 million respectively, compared to $37.8 million and $28.4 million a year earlier.
Net income from continuing operations attributable to the shareholders of the corporation totaled $6.7 million or $0.52 per share, compared to $8.8 million, or $0.67 per share for the same period in 2016. Net income attributable to the shareholders of the corporation totaled $4.1 million or $0.32 per share, compared to $6.4 million, or $0.49 per share in 2016.
Cash flows related to operating activities were $0.4 million for the nine-month period versus $16.1 million in the corresponding period a year earlier.
Post-third quarter highlight
On Oct. 31, 2017, HNZ Group and PHI, Inc. (PHI) announced that, together with Don Wall, the corporation’s president and CEO, have entered into an arrangement agreement (the arrangement agreement) pursuant to which Don Wall, through a wholly-owned acquisition company (the Canadian Purchaser and together with PHI, the Purchasers), will acquire all of the issued and outstanding common and variable voting shares of the corporation by way of a statutory plan of arrangement under Section 192 of the Canada Business Corporations Act (the arrangement) for C$18.70 per share in cash (the consideration).
As part of the arrangement, PHI will acquire from the Canadian Purchaser the portion of the corporation’s offshore business conducted in New Zealand, Australia, the Philippines and Papua New Guinea (the offshore operations).
The consideration represents a premium of 43.3 percent to the Oct. 30, 2017 closing price of the corporation’s common and variable voting shares on the Toronto Stock Exchange and a premium of 46.6 percent to the 20-day volume weighted average price of the corporation’s common and variable voting shares on the Toronto Stock Exchange from Oct. 2, 2017 to Oct. 30, 2017.
The arrangement values the corporation at approximately C$242.4 million, based on the number of outstanding shares of the corporation as of Oct. 30, 2017.
The corporation’s board of directors (with Don Wall abstaining), after consultation with its financial and legal advisors, and following receipt of the unanimous recommendation by a special committee of the board of directors composed entirely of independent directors, has unanimously approved the arrangement and unanimously recommends that holders of the corporation’s common and variable voting shares vote in favor of the arrangement. The arrangement has also been approved unanimously by the board of directors of PHI.
