Q4 2019 Earnings Call

Good day and to the Air Group resorts fiscal year in order for 2019 results Conference call Today's conference is being recorded.

Next time I would like to turn the conference over to Mr. Crystal Gordon Please.

Please go ahead.

Thank you Brittney and good morning, everyone welcome to Eric fiscal yearend in fourth quarter 2019 earnings call.

Here today, with our President and CEO, Chris Bradshaw, and my fellow Senior Vice President Jennifer Whalen do Stanley Oh wait Grant Newman and Dave on it.

Let me remind everyone. During the call management may make forward looking statements that are subject to risks and uncertainties that are described in more detail on slide three of our investor presentation.

You may access our investor presentation on our website.

We'll also reference certain non-GAAP financial measures, such as EBITDA and free cash flow a reconciliation of such measures to GAAP is included in the earnings release and Investor side and also available on the Investor page of our website.

Further air intends to file with the FCC a registration statement on form S. Four that will include a joint proxy consent solicitation statement, Aaron Bristow and a prospectus an era.

Investors are urged to read this carefully because it will contain important information about the proposed transaction you may obtain a copy when it becomes available as he sees website, they calling era, where by going to our website.

So in certain of their respective directors and executive officers, maybe deemed to be participant in the solicitation of proxies from Aaron Bristow stockholder in respect of the proposed transaction under the rules of the FCC.

You may obtain information regarding the name affiliation and interest Air Directors and executive officers an error Aaron annual report on form 10-K, I'll now turn the call over to our President and CEO Chris.

Thank you Crystal and welcome to the call everyone.

As always I will begin our prepared remarks, no on safety, which is Arabs, most important core value and our highest operational priority.

We're pleased to report that era achieved our dual goals of zero air accidents, and zero recordable workplace incidents in full year 2019 and year to date 2020.

The company has not experienced an air accidents in the last two years and we have now gone over 890 consecutive days without a recordable workplace incident.

I want to thing and command the entire Eric team for their hard work dedication and placing safety first every day.

I will now turn it over to our CFO for a review of Q4 and full year financial results Jennifer.

Thank you Chris.

EBITDA adjusted to exclude special items, but 37 million for the fourth quarter of 29, he compared to 10.5 million in the third quarter of financing.

This increase is primarily due to 3.1 million of gains on [laughter], especially.

It was an increase of 1.5 million in revenues due to higher utilization as helicopters and our U.S. oil and gas operation and the full quarter impact of emergency response services contract and eating or.

Selling and administrative expenses were 2.2 million higher due to increased compensation costs.

Higher professional service fees related to the expected merger with.

Moving onto the full year 2019 compared to the full year 2018 result.

Adjusted EBITDA was 1 million higher so your 2019 revenues rose 4.4 million higher due to the commencement of new dry leasing and emergency response.

Operating expenses were 3 million higher primarily due to increase repairs and maintenance and personnel.

General and administrative expenses were 6.8 million lower in the current year, primarily due to the absolute.

Professional service fees related to litigation that I don't have an area.

You can find a more detailed description of the special items and the reconciliation of non-GAAP measures section of our earnings release.

Finally during 2019, we generated 35 million in adjusted free cash flow.

The next to continue to strengthen the company's balance sheet and financial.

As of yearend areas total liquidity with approximately 242 million, including 117 million in cash.

Our net debt balances, just 45 million, which is more than an 80% reduction from when the industry downturn began in late twenties Archie.

But strong balance sheet.

Her back every means position.

Well positioned for positive free cash flow generation.

At this time I'll turn the call refresh for further remarks right.

Thank you Jennifer.

I want to take a minute to address the current concerns regarding the Corona virus disease 2019 for coated 19.

We're working in concert with our customers to limit the spread of the virus and mitigate potential future impacts on our operations.

We have implemented enhanced screening procedures at our facility.

And we've issued new policies and alerts to keep our employees and passenger well informed.

At this time, we have not experienced any material impacts on our operations.

Through the first two months of 2020, we have witnessed similar levels of customer activity.

Those that we experienced in Q4 of last year.

And we're not currently aware of any adverse impacts from Cowen 19 on our customer spending plans.

Having said that we're all operating in a period of limited visibility given the uncertainty regarding the duration and severity of the Corona virus outbreak.

We will continue to work closely with our customers the monitor developments and take the necessary measures to protect our people.

And mitigate potential impacts on our operations.

Turning to a more positive topic.

We remain very excited about the announced merger with Bristow group.

Which we believe will create substantial value for the stakeholders of both companies.

As previously announced the merger is expected to close in the second half of this year.

And we believe there is a very attractive future for the combined company.

We anticipate filing a form S. Four with the FCC and the next 30 days.

And that document will contain additional information on the transaction.

I want to remind everyone that era in Bristow remain separate companies and competitors until the time at the transaction closes.

As such we're not in a position to answer any bristow specific questions in the interim.

And we are unable to provide additional information on the transaction beyond what was it has already been publicly disclosed.

We are happy though to address era specific question as well as questions related information that has already been disclosed on the merger.

With that let's open the lines for questions Buddy.

Yes. Thank you.

I'd like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure your mute function. It's turned off to allow your signaled to reach our equipment again press star one to ask a question well pause for just a moment to allow everyone an opportunity to signal for questions.

Our first question comes from Adam Ritzer Investor.

Hi, good morning, guys doing.

Plan. So so I guess I'm not exactly sure what you can and can't ask but let me maybe give you a simple one I think when you guys had announced transaction you said you'd be willing to buy back.

$10 million worth of shares can you comment on if you've been able to do any of that and over what the plans are for that.

Sure we actually have done historically, we will take an opportunistic approach to the share repurchases it won't be programmatic. So we're monitoring.

Market developments and if we see a compelling opportunity will act and if and when there is share repurchase activity to disclose we'll do that pursuant to the relevant disclosure requirements.

Okay Olin yet he gets you guys, which was pretty I think you haven't done this for a while you put out your any need calculation et cetera.

Either way you want to look at it from a perspective or any the stock is trading well below 50% of that.

Why did you not want to be buying back you know with all your liquidity more than $10 million worse. So the pull form a share count after the transaction.

Clauses.

Or even less than what you know you projected that maybe you could explain that a little bit.

Sure so with respect to the size of the program. That's been approved as is customary in transaction agreements of this nature. Both sides have agreed to limit certain activities that they will pursue in the interim period between announcement it closer that there's not a fundamental change in either companies up business or financial.

Profile, so some of those considerations or whats governing the size of the approved program.

You referenced oriented you disclosure, which.

As you know we provide a once a year we did that again a this morning as part of the Investor Slide deck.

As it's been the case for for sometime during the downturn our stock price is is trading at a discount to both in Navy for share and net book value per share I think that we have.

Consistently demonstrated over a long period of time, a that we're able to sell assets at a premium to book value over the last 10 or 12 years, we've sold well north of 100 at helicopters at a premium to book value. So I think we haven't demonstrate demonstrated track record of being able to monetize assets at book value.

Okay. So the bottom line is your restricted from buying back more than $10 million warrants and stock because of the agreement is that correct.

That's accurate yes.

Okay. So that's that's the bottom line okay.

Let me ask are you aware I was just speak more about your synergy projection you would do you have been synergy projections up $35 million have you been able to do any more work on that.

Is that something you're allowed to comment on.

So as you referenced we did announce synergies of at least $35 million. Most of those are going to come from reducing fixed cost. So we see them as being highly achievable. The largest contributor will be from the elimination of redundant corporate expenses.

Next in line in terms of size of potential savings relates to operational efficiencies that we believe we can realize giving given our old overlapping presence in the U.S. Gulf of Mexico.

And the next in line would be some fleet savings that we anticipate from the optimization of our aircraft maintenance programs and optimizing fleet utilization between.

The new combined suite.

In terms of more work, we will we have begun a pre integration planning process, Oh, we can't actually implement any changes prior to closing the transaction, obviously, but we have begun to present the integration planning process and at this time, we have no changes or updates to that at least 35 million.

Dollar number that we provide.

Okay, what's the police implementation.

Did you say you're.

No.

Ask hospitals more cost that you know anything directionally now that you've gotten there a little bit and take a look at things.

On the synergies, we believe there at least $35 million a as we get into the business more it to the extent that there is our more savings that we can realize there may be some upside there but at this time, we remain focused and dedicated on delivering that at least 35 million dollar number.

Got it a then last question I guess, you said you'd be S. Four is gonna be out within the next you know monster, So and I realize from your last slide presentation 65 million about EBITDA run rate you gave for Bristow was actually end up there.

Fiscal year, which is March 2019.

Since it's pretty much a year later or.

Are you going to be able to upkeep list those numbers in the S. Four.

So then the number for Bristow really.

Really have not changed that that $165 million was a ER.

Oh, It was a run rate number for them. So that's after a bridging from what they did and that's why in their F. White Knight team to the run rate and we provide we provided a summary of that EBITDA bridge on page nine of that Investor Slide deck. So again, that's about $165 million number.

There is a a run rate.

Adjusted EBITDA number for Bristow and there are no changes or updates that number at this time.

Okay, so you're not going to uptake that when you put out the S. Four for anything that happened since the end of their last fiscal year right.

I'm not aware of any changes or developments that would change that that number into an artist floater, yes for Oh God. Okay. Great. That's it I appreciate your time and I guess, we'll look forward. So when they ask for comes out thanks a lot.

Thank God ticker.

Thank you at this time there are no further questions in the queue I will turn the conference back over to Mr., Chris Bradshaw.

I do apologize Britney.

We did just have one party queue up my apologies.

Well take a question.

It comes from John Die sure with Pinnacle.

Hi, good morning, everyone.

I was just curious on the capital commitments a section going forward.

Talking about the APW 189, just to be delivered 2020 and 21.

Is there a go no go date.

That's approaching that we should be aware of and I guess, if you had to make the decision today, where do you perceive a proceed with those commitments.

So we're really pleased with the partnership that we have with Leonardo and the flexibility that we have in that order books. So.

We are already well beyond the original decision dates for those flexible orders.

They've been extended a number of times, we're optimistic that we will.

Be able to extend them.

If we desire and preserve that flexibility that's one of the track to position now we're not obligated to spend any unfunded capital commitments, but we have the flexibility to bring in those aircraft if the opportunities present themselves.

To address your question, if we had to make all of these decisions today, we would cancel a these flexible orders. However, we don't we have the ability to see how things play out and again. This order book gives us some flexibility to bring in those aircraft if they're compelling opportunities to do that.

Okay, Great and of course, I guess you're going to.

Monitor or a accommodates a fleet of Bristow and then making those decisions going forward.

That's right that's exactly right right.

That was it thank you.

Thanks, John.

Thank you again, there were no further questions in the queue I will now turn the conference back over to Mr., Chris spread shop.

Thank you Britney and thank you everyone for joining the call I look forward to speaking in next quarter and as always stay safe.

Thank you everyone that concludes today's teleconference. You may now disconnect.

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