UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities and Exchange Act of 1934
Date of report (Date of earliest event reported): June 15, 2018
PHI, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Louisiana | 0-9827 | 72-0395707 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification Number) |
2001 SE Evangeline Thruway, Lafayette, Louisiana | 70508 | |||
(Address of Principal Executive Offices) | (Zip Code) |
(337) 235-2452
(Registrants Telephone Number, Including Area Code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 7.01 | Regulation FD Disclosure |
On June 15, 2018, PHI, Inc. (the Company, PHI, our, or we) announced its proposal to privately offer (the Debt Offering) up to $500 million aggregate principal amount of senior secured notes due 2023 (the Notes), subject to market and other conditions. In connection with the Debt Offering, beginning on June 18, 2018 we intend to provide certain information to potential investors, portions of which have not previously been publicly reported. Such information is hereby furnished in Exhibit 99.1 (which constitutes excerpts from a preliminary offering memorandum being disseminated in connection with the Debt Offering).
This Current Report on Form 8-K is for information purposes only and is neither an offer to sell nor a solicitation of an offer to buy any security. The Notes will not be registered under the Securities Act of 1933, as amended (the Securities Act) and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements. Notes sold to investors within the United States will be sold to persons reasonably believed to be qualified institutional buyers (as defined in Rule 144A under the Securities Act) in reliance on such Rule 144A.
The information contained in this current report on Form 8-K, including the exhibit, is being furnished and shall not be deemed filed for the purposes of or otherwise subject to liabilities under Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act or the Securities Exchange Act of 1934, as amended, other than to the extent that such filing incorporates by reference any or all of such information by express reference thereto.
Item 8.01 | Other Events |
As previously announced, on June 15, 2018, we obtained commitment letters under which lenders have agreed to provide a $100 million senior secured term loan facility (the Term Loan Facility) and a $75 million senior secured asset-backed revolving credit facility (the Revolving Credit Facility). The definitive documentation that will govern the Term Loan Facility and Revolving Credit Facility has not yet been finalized, and, accordingly, the actual terms of the debt financing provided thereunder may differ from those described below. We cannot provide you with any assurances that these other financing transactions will be completed on the terms described herein or at all.
Term Loan Facility
The Term Loan Facility will be provided by Tennenbaum Capital Partners, LLC pursuant to a commitment letter dated June 15, 2018. The Term Loan Facility will consist of a $100 million first lien senior secured term loan facility, which will mature 3 years after the closing of the Term Loan Facility. The consummation of the Term Loan Facility is subject to a number of factors, and there can be no guarantee that we will enter into the Term Loan Facility on the terms described herein or at all.
Guarantees and Security
Our obligations under the Term Loan Facility will be guaranteed, subject to certain exceptions, by all of our existing and future restricted subsidiaries that will guarantee our obligations under the Notes offered in the Debt Offering.
The Term Loan Facility will be secured by a first-priority security interest in the collateral securing the Notes, on a pari passu basis with the Notes.
Availability
Concurrently with the closing of Debt Offering, we intend to borrow the full amount available under the Term Loan Facility. The borrowings under the Term Loan Facility, together with the net proceeds of the Debt Offering and cash on hand, will be used, together with borrowings under our Revolving Credit Facility, (i) to fund our previously-announced pending tender offer for all $500 million aggregate principal amount of our outstanding 5.25% Senior Notes due 2019 (the 2019 Notes) or to redeem promptly any of the 2019 Notes not purchased in the tender offer and (ii) to retire our current revolving credit facility (the 2013 Credit Facility).
Interest Rates and Fees
The Term Loan Facility will bear interest on the unpaid principal amount at a rate equal to, at our option, either:
| a base rate determined by reference to the highest of (i) the U.S. Prime Lending Rate as published in The Wall Street Journal, (ii) the federal funds effective rate and (iii) one-month LIBOR, adjusted for statutory reserve requirements, plus 1.00%, plus an applicable margin; or |
| a LIBOR rate determined by reference to the London interbank offered rate for U.S. dollars for the relevant interest period, adjusted for statutory reserve requirements, plus the applicable margin. The LIBOR rate will be subject to a 1.00% rate floor. |
We expect that the initial applicable margin for borrowings under the Term Loan Facility will be 5.00% with respect to the base rate borrowings and 6.00% with respect to LIBOR borrowing.
We will pay customary fees and expenses in connection with obtaining the lenders commitment letter and the commitments thereunder.
Prepayments
Amounts borrowed under the Term Loan Facility will amortize in equal quarterly installments, commencing with the first full fiscal quarter ending after the closing of the Term Loan Facility, in aggregate annual amounts equal to 1.00% of the original principal amount of the Term Loan Facility, with the balance payable on the maturity date of the Term Loan Facility.
We must prepay the Term Loan Facility, subject to exceptions and limitations, with:
| the net cash proceeds of certain asset sales, subject to the same exceptions and thresholds applicable to the Notes (which prepayments will be pro rata between the Term Loan Facility and the Notes); |
| 100% of the net cash proceeds from any issuance or incurrence of indebtedness (other than indebtedness permitted by the Term Loan Facility). |
We may voluntarily prepay loans outstanding under the Term Loan Facility, in whole or in part, without premium or penalty (except as described below) in minimum amounts to be determined, at any time, subject to customary breakage costs with respect to LIBOR rate loans.
We will be required to pay a prepayment premium in connection with any voluntary prepayment or any mandatory prepayment of the Term Loan Facility equal to a percentage of the principal amount so prepaid as follows: (a) during the first year following the closing date of the Term Loan Facility, 3.0%, (b) during the second year following the closing date of the Term Loan Facility, 2.0%, and (c) during the third year following the closing date of the Term Loan Facility, 1.0%.
Covenants and Events of Default
The credit agreement that will govern the Term Loan Facility will contain the same negative covenants and events of default as are applicable to the Notes, except that a change of control of PHI will be an event of default under the Term Loan Facility.
The credit agreement that will govern the Term Loan Facility will contain a maintenance covenant relating to value of the aircraft collateral pledged thereunder which will be the same as the maintenance covenant for the Notes. The credit agreement that will govern the Term Loan Facility will also contain a maintenance covenant requiring us to maintain a minimum liquidity (defined as of the sum of (i) amount of all unrestricted cash of us and our restricted subsidiaries and (ii) the amount of all undrawn commitments under the Revolving Credit Facility that are then available to be drawn) of $25 million at all times.
The credit agreement will also contain certain customary affirmative covenants and representations and warranties.
Conditions to Term Loan Facility
The obligation of the lender to provide the Term Loan Facility is subject to certain conditions, including without limitation (i) the execution and delivery of definitive documentation with respect to the Term Loan Facility and any related agreements, (ii) the issuance of $500 million of Notes in connection with the consummation of the Debt Offering, and (iii) the effectiveness of the Revolving Credit Facility.
Revolving Credit Facility
Pursuant to a commitment letter dated June 15, 2018, we expect to receive a $75.0 million senior secured asset-based revolving line of credit facility from (i) UBS AG, Stamford Branch, and Royal Bank of Canada, both of which are affiliates of the Notes initial purchasers, and (ii) certain other lenders to be agreed upon. The Revolving Credit Facility will also include a $5.0 million subfacility available to the Australian and New Zealand subsidiaries of the Company. A portion of the Revolving Credit Facility will also be available for the issuance of letters of credit and the advance of swing line loans, each of which will reduce availability under the Revolving Credit Facility on a dollar-for-dollar basis. The consummation of the Revolving Credit Facility is subject to a number of conditions, and there can be no guarantee that we will enter into the Revolving Credit Facility on the terms described herein or at all.
Availability
Borrowings under the Revolving Credit Facility will be subject to the satisfaction of customary conditions, including (i) the absence of a legal prohibition to the borrowing or a default or event of default and (ii) the accuracy of representations and warranties in all material respects. Proceeds from loans under the Revolving Credit Facility drawn after the closing date of the transactions contemplated in the preliminary offering memorandum for the Debt Offering will be used for working capital and general corporate purposes.
The availability of funds to the borrowers located in each of the United States and Australia/New Zealand is subject to a borrowing base for that jurisdiction. The credit agreement provides that commitments under the Revolving Credit Facility may be increased at any time by an additional $50.0 million, subject to certain conditions.
Interest Rate and Fees
Borrowings under the Revolving Credit Facility will bear interest at a rate equal to an applicable margin plus, at our option, either (a) a base rate determined by reference to the highest of (i) the rate of interest per annum published from time to time by the Wall Street Journal, (ii) the Federal Funds open rate plus 0.5% and (iii) LIBOR for an interest period of one month plus 1.0% or (b) a LIBOR rate as adjusted for maximum statutory reserve requirements and subject to a floor of 0.00% per annum (Adjusted LIBOR). We expect that the initial applicable margin for borrowings under the Revolving Credit Facility will be 1.50% with respect to the base rate borrowings and 2.50% with respect to LIBOR borrowings. The applicable margin under the Revolving Credit Facility will be subject to step-downs based upon average excess availability (as a percentage of the commitments under the Revolving Credit Facility).
In addition to paying interest on outstanding principal under the Revolving Credit Facility, we will be required to pay a commitment fee to the lenders under the Revolving Credit Facility in respect of the unutilized commitments thereunder. The commitment fee rate will be 0.375% when the aggregate amount of loans and letters of credit outstanding is less than or equal to 50% of the commitments under the Revolving Credit Facility and 0.25% per annum when the aggregate amount of loans and letters of credit outstanding is greater than 50% of the commitments under the Revolving Credit Facility. We will also be required to pay customary letter of credit fees.
We will pay a customary fee in connection with obtaining lenders commitment to establish the Revolving Credit Facility.
Prepayments and Commitment Reductions
We may voluntarily repay outstanding loans under the Revolving Credit Facility at any time without premium or penalty, other than customary breakage costs with respect to LIBOR loans.
Maturity
Principal amounts outstanding under the Revolving Credit Facility are due and payable upon the earlier of (i) 5 years after the facilitys closing date and (ii) 90 days prior to the maturity of the Term Loan Facility.
Guarantees and Security
All obligations under the Revolving Credit Facility will be unconditionally guaranteed, subject to certain exceptions, by the Company and each of our existing and future domestic wholly-owned subsidiaries that are not borrowers thereunder. The Australian and New Zealand borrowers will not guarantee any obligations of the domestic borrowers; however, the domestic borrowers will guarantee the obligations of the Australian and New Zealand borrowers.
All obligations under the Revolving Credit Facility, and the guarantees of those obligations, will be secured by a first priority security interests in accounts receivable, inventory (other than any assets constituting collateral for the Notes), deposit accounts and securities accounts into which proceeds of accounts and inventory are deposited, related general intangibles and proceeds of the foregoing of the borrowers (collectively, the ABL Collateral), in each case, wherever located, now or hereafter owned, subject to such other exceptions as are agreed. The subfacility available to the Australian and New Zealand borrowers will be secured by the assets of the Australian and New Zealand borrowers and such assets will not secure any obligations of the domestic borrowers; however, the assets of the domestic borrowers will secure the obligations of the Australian and New Zealand borrowers. The Revolving Credit Facility will not have any security interests in the collateral securing the Notes or the Term Loan Facility, and the Term Loan Facility and the Notes will not have any security interests in the ABL Collateral.
Covenants and Events of Default
The credit agreement that will govern the Revolving Credit Facility will contain negative covenants and events of default customary to facilities of this type; provided that the credit agreement will include a springing financial covenant set at a fixed charge coverage ratio of 1.1:1.0, which will become effective if the aggregate unused borrowing available under the Revolving Credit Facility is less than the greater of (i) $7.5 million and (ii) 10% of the lower of (a) the commitments under the Revolving Credit Facility and (b) the aggregate borrowing base. The credit agreement will also contain certain customary affirmative covenants.
Conditions to Revolving Credit Facility
The obligations of the lenders to enter into the Revolving Credit Facility is subject to certain conditions, including without limitation (i) the execution and delivery of definitive documentation with respect to the Revolving Credit Facility and any related agreements, (ii) the issuance of at least $500 million of Notes in connection with the consummation of the Debt Offering, and (iii) our borrowing of $100 million under the Term Loan Facility.
Forward-Looking Statements
All statements other than statements of historical fact contained in this current report on Form 8-K, including the exhibit hereto, are forward-looking statements, as defined by (and subject to the safe harbor protections under) the federal securities laws. Forward-looking statements are based on a number of judgments and assumptions as of the date such statement are made about future events, many of which are beyond our control. These forward-looking statements, and the assumptions on which they are based, (i) are not guarantees of future events, (ii) are inherently speculative and (iii) are subject to significant risks, uncertainties. Actual events and results may differ materially from those anticipated, estimated, projected or implied by us in those statements if one or more of these risks or uncertainties materialize, or if our underlying assumptions prove incorrect. All of our forward-looking statements are qualified in their entirety by reference to our discussion of certain important factors that could cause our actual results to differ materially from those anticipated, estimated, projected or implied by us in those forward looking statements.
Factors that could cause our results to differ materially from the expectations expressed in such forward-looking statements include, but are not limited to, PHIs ability to consummate the Debt Offering and its other proposed debt refinancing transactions on terms that will permit PHI to reduce its short-term debt and otherwise meet its objectives; corporate developments that could preclude, impair or delay the above-described transactions due to restrictions under the federal securities laws; changes in the credit ratings of PHI; changes in PHIs cash requirements, financial position, financing plans or investment plans; changes in general market, economic, tax, regulatory or industry conditions that impact the ability or willingness of PHI to consummate the above-described transactions on the terms described above or at all; and other risks referenced from time to time in PHIs filings with the U.S. Securities and Exchange Commission. There can be no assurances that the above-described transactions will be consummated on the terms described above or at all.
Additional factors or risks that we currently deem immaterial, that are not presently known to us, that arise in the future or that are not specific to us could also cause our actual results to differ materially from our expected results. Given these uncertainties, investors are cautioned not to unduly rely upon our forward-looking statements, which speak only as of the date made. PHI undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or developments, changed circumstances, or otherwise. Further, we may make changes to our plans at any time and without notice, based on any changes in the above-listed factors, our assumptions or otherwise.
Item 9.01 | Financial Statements and Exhibits |
(d) | Exhibits. |
99.1 | Supplemental Disclosures. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Current Report to be signed on its behalf by the undersigned hereunto duly authorized.
PHI, Inc. | ||||||
Date: June 18, 2018 | By: | /s/ Trudy P. McConnaughhay | ||||
Trudy P. McConnaughhay | ||||||
Chief Financial Officer and Secretary |
Exhibit 99.1
SUPPLEMENTAL DISCLOSURES
(excerpted from the Companys preliminary offering memorandum)
Non-GAAP Financial Measures
In addition to information prepared in accordance with accounting principles generally accepted in the United States (GAAP), the Company presents herein as additional non-GAAP financial metrics:
| Earnings before interest expense, income taxes, depreciation, amortization and gains or losses on asset dispositions or impairments (EBITDA); |
| EBITDA of PHI combined with EBITDA of the international offshore aviation services business that we purchased from HNZ Group Inc. on December 29, 2017 (the HNZ Offshore Business), prepared as if we instead acquired such business on the first day of the periods presented herein (Combined EBITDA); and |
| Combined EBITDA, as adjusted either to exclude certain non-recurring items or to reflect the full reporting period effect of certain specified transactions that occurred in 2017 or early 2018 (Adjusted Combined EBITDA and, collectively with EBITDA and Combined EBITDA, the Supplemental Metrics). |
The Company uses some or all of the Supplemental Metrics, or variants of them, in a variety of ways, including to monitor the profitability of its operations, to compare its performance to that of its peers, to evaluate contract opportunities, and as performance metrics under its incentive-based compensation awards. EBITDA is an accrual-based measure that has the effect of excluding period-to-period changes in working capital and shows profitability without regard to the effects of capital or tax structure. Combined EBITDA and Adjusted Combined EBITDA are both intended to depict the performance of our business during the periods presented herein after reflecting the full-year impact of our HNZ acquisition and various other transactions impacting our revenues and costs. For these reasons, the Company believes the Supplemental Metrics may be helpful to investors in analyzing trends in the profitability of its continuing core operations or making comparisons to other companies with different capital or tax structures. The Company has been advised that metrics similar to EBITDA are measures frequently used to evaluate the performance of companies with substantial leverage, and that certain of the Companys primary stakeholders (including its stockholders, bondholders and banks) from time to time may use EBITDA, or a comparable metric, to evaluate the Companys period-to-period performance. The Supplemental Metrics do not represent the residual cash flow available for discretionary expenditures and have other important limitations as analytical tools. The Supplemental Metrics should not be viewed in isolation and should not be considered an alternative to, or more meaningful than, amounts determined in accordance with GAAP, including: (a) operating income as an indicator of operating performance or (b) cash provided by operating activities as a measure of liquidity. For these reasons, the Company uses operating income to measure the Companys operating performance and uses the Supplemental Metrics only as supplemental measures thereof.
The Supplemental Metrics exclude some, but not all, items that affect net income, and our calculation or use of these measures may vary from how other companies calculate or use these measures or other similarly-titled measures. Moreover, our Combined EBITDA and Adjusted Combined EBITDA figures included herein have not been prepared in conformity with SEC rules governing the preparation of pro forma financial data under Regulation S-X. See Summary Consolidated Financial Data for more detailed definitions of the Supplemental Metrics and reconciliations thereof to the most directly comparable GAAP measures.
Summary Consolidated Financial Data
The following tables present summary consolidated financial and other data for the years ended December 31, 2015, 2016 and 2017 and for the three and twelve-month periods noted below. The summary consolidated financial and other data for the years ended December 31, 2015, 2016 and 2017 are derived from, and should be read together with, our audited consolidated financial statements and notes thereto. The unaudited consolidated interim historical financial and other data for the three months ended March 31, 2018 and 2017 are derived from, and should be read together with, our unaudited condensed consolidated financial statements and the notes related thereto. The summary consolidated data for the last twelve months ended March 31, 2018 have been derived from our audited and unaudited consolidated financial statements. Amounts for the last twelve months ended March 31, 2018 are calculated as the corresponding amounts for the three months ended March 31, 2018 plus the corresponding amounts for the year ended December 31, 2017 less the corresponding amounts for the three months ended March 31, 2017. The operating results for any period should not be considered indicative of results for any future period and the interim results and last twelve months ended March 31, 2018 are not necessarily indicative of the results to be expected for the full year. The financial data below is only a summary and should be read
together with, and is qualified in its entirety by reference to, such historical consolidated financial statements and the accompanying notes and Managements Discussion and Analysis of Financial Condition and Results of Operations, all of which are included elsewhere herein.
(in thousands) | ||||||||||||||||||||||||
Years ended December 31, | Three months ended March 31, | Last twelve months ended |
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Statement of operations summary data |
2015 | 2016 | 2017 | 2017 | 2018 | March 31, 2018 | ||||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||||||
Operating revenues, net |
$ | 804,228 | $ | 634,098 | $ | 579,545 | $ | 134,618 | $ | 160,370 | $ | 605,297 | ||||||||||||
Expenses |
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Direct expenses |
687,050 | 592,550 | 546,699 | 136,513 | 156,226 | 566,412 | ||||||||||||||||||
Selling, general and administrative |
46,422 | 44,418 | 53,817 | 13,044 | 15,459 | 56,232 | ||||||||||||||||||
Interest expense |
29,066 | 30,644 | 32,183 | 8,195 | 8,197 | 32,185 | ||||||||||||||||||
Loss (gain) on disposition of assets, net |
339 | (3,350 | ) | 298 | | 879 | 1,177 | |||||||||||||||||
Equity in loss (profit) of unconsolidated affiliate |
306 | (151 | ) | 385 | 1,003 | 37 | (581 | ) | ||||||||||||||||
Impairments of assets |
| 407 | 368 | | | 368 | ||||||||||||||||||
Other loss (income), net |
(2,211 | ) | (3,271 | ) | (2,764 | ) | (1,064 | ) | 1,045 | (655 | ) | |||||||||||||
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Earnings (loss) before income taxes |
43,256 | (27,149 | ) | (51,441 | ) | (23,073 | ) | (21,473 | ) | (49,841 | ) | |||||||||||||
Income tax expense (benefit) |
16,332 | (469 | ) | (58,973 | ) | (7,825 | ) | (4,490 | ) | (55,638 | ) | |||||||||||||
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Net earnings (loss)(1) |
$ | 26,924 | $ | (26,680 | ) | $ | 7,532 | $ | (15,248 | ) | $ | (16,983 | ) | $ | 5,797 | |||||||||
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Other financial data |
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Capital expenditures |
$ | (57,123 | ) | $ | (81,842 | ) | $ | (56,757 | ) | $ | (4,789 | ) | $ | (6,665 | ) | $ | (58,633 | ) | ||||||
Gross proceeds from asset dispositions |
5,236 | 14,983 | 1,296 | | 842 | 2,138 | ||||||||||||||||||
EBITDA(2)(3) |
39,291 | 4,171 | 46,618 | |||||||||||||||||||||
Combined EBITDA(2)(3) |
54,377 | 4,171 | 58,461 | |||||||||||||||||||||
Adjusted Combined EBITDA(2)(3) |
71,862 | 6,679 | 69,671 | |||||||||||||||||||||
Statement of cash flows summary data |
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Net cash provided by (used in) operating activities |
$ | 133,918 | $ | (564 | ) | $ | (19,103 | ) | $ | (8,253 | ) | $ | (1,432 | ) | $ | (12,282 | ) | |||||||
Net cash used in investing activities, including capital expenditures |
(149,833 | ) | (75,218 | ) | 42,033 | 7,937 | (4,157 | ) | 29,939 | |||||||||||||||
Net cash provided by (used in) financing activities |
12,052 | 75,971 | (16,756 | ) | 1,400 | 4,250 | (13,906 | ) |
(1) | Net earnings in 2017 includes a net tax benefit of $49.2 million related to the remeasurement of our net deferred tax liability under the Tax Cuts and Jobs Act. Net earnings in 2016 includes an after-tax charge of $1.0 million related to voluntary early retirement programs. Net earnings in 2015 includes an after-tax charge of $8.8 million related to voluntary early retirement programs. |
(2) | EBITDA is defined as net earnings before interest expense, income taxes, depreciation, amortization and gains or losses on asset dispositions or impairments. Combined EBITDA is defined as EBITDA of PHI combined with EBITDA of the HNZ Offshore Business, prepared as if we acquired such business on the first day of the period presented below. Adjusted Combined EBITDA is defined as Combined EBITDA adjusted either to exclude certain non-recurring items or to reflect the full reporting period impact of certain transactions that occurred in 2017 or early 2018 that reduced our costs or enhanced our revenues, as described in greater detail in note 3 below. The Company has been advised that metrics similar to EBITDA are frequently used to evaluate the performance of companies with substantial leverage and that certain of the Companys primary stakeholders (including its stockholders, bondholders and banks) from time to time may use EBITDA, or a comparable metric, to evaluate the Companys period to period performance. The Supplemental Metrics are not measures of financial performance under GAAP, and the items excluded therefrom are significant components in understanding and assessing our financial performance. The Supplemental Metrics should not be considered in isolation or as alternatives to amounts determined in accordance with GAAP. Because the Supplemental Metrics are not measurements determined in accordance with GAAP and are thus susceptible to varying calculations, the Supplemental Metrics as presented may not be comparable to other similarly-titled measures of other companies. For more information, see Non-GAAP Financial Measures. |
(3) | The following table sets forth the manner in which we calculated EBITDA, Combined EBITDA and Adjusted Combined EBITDA for the year ended December 31, 2017, the three months ended March 31, 2018 and the last twelve months ended March 31, 2018 for purposes of the preliminary offering memorandum: |
(in thousands; unaudited) | ||||||||||||
Year ended December 31, 2017 |
Three months ended March 31, 2018 |
Last twelve months ended March 31, 2018 |
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Net earnings |
$ | 7,532 | $ | (16,983 | ) | $ | 5,797 | |||||
Interest expense |
32,183 | 8,197 | 32,185 | |||||||||
Income tax expense (benefit) |
(58,973 | ) | (4,490 | ) | (55,638 | ) | ||||||
Depreciation and amortization(a) |
57,883 | 16,569 | 62,729 | |||||||||
Loss on disposition of assets |
298 | 879 | 1,177 | |||||||||
Impairment of assets |
368 | | 368 | |||||||||
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EBITDA |
39,291 | 4,171 | 46,618 | |||||||||
EBITDA from acquired business(b) |
15,086 | | 11,843 | |||||||||
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Combined EBITDA(c) |
54,377 | 4,171 | 58,461 | |||||||||
Aircraft warranty credit(d) |
(9,875 | ) | | (9,875 | ) | |||||||
Headcount reduction cost savings(e) |
7,381 | | 5,772 | |||||||||
Pilot pay adjustments(f) |
4,680 | | 4,077 | |||||||||
Recent base closures(g) |
4,186 | 504 | 4,186 | |||||||||
Warranty program contract(h) |
4,235 | 1,776 | 1,776 | |||||||||
Professional fees(i) |
3,403 | 228 | 2,995 | |||||||||
Recent contract wins(j) |
3,475 | | 2,279 | |||||||||
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Adjusted Combined EBITDA |
$ | 71,862 | $ | 6,679 | $ | 69,671 | ||||||
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(a) | Excludes for purposes of this presentation the amortization of approximately $12.5 million, $3.9 million, and $10.3 million of pre-paid expenses for the year ended December 31, 2017, the three months ended March 31, 2018, and the last twelve months ended March 31, 2018, respectively. |
(b) | Reflects 2017 EBITDA generated by the HNZ Offshore Business that we acquired on December 29, 2017. The results of our operations prepared in accordance with GAAP reflect the operating results of the HNZ Offshore Business only since January 1, 2018. |
(c) | Derived by adding EBITDA and EBITDA from acquired business, without reflecting any adjustments. Combined EBITDA has not been prepared in conformity with SEC rules governing the preparation of pro forma financial data under Regulation S-X. |
(d) | Reflects the exclusion of a non-recurring credit of $9.9 million received by us in 2017 from a warranty provider in connection with our cancellation of a warranty program relating to a portion of our fleet of medium aircraft. |
(e) | Reflects (i) the additional 2017 cost savings that we estimate would have been realized if our reduction in headcount of maintenance and base personnel during 2017 had instead been implemented on the first day of the period presented and (ii) the exclusion of $3.2 million and $1.6 million of related non-recurring severance pay for the year ended December 31, 2017 and the last twelve months ended March 31, 2018, respectively. |
(f) | Reflects the additional cost savings that we estimate we would have realized if the market adjustments we implemented in mid-2017 to our pilot pay practices had instead been implemented on the first day of the period presented. |
(g) | Reflects the additional cost savings that we estimate we would have realized if each of the four bases that we closed between June 2017 and February 2018 had instead been closed on the first day of the period presented. |
(h) | Reflects the cost savings we estimate we would have realized in 2017 had a warranty program contract entered into in early 2018 been in effect beginning on the first day of the period presented. |
(i) | Excludes certain non-recurring legal, consulting and other professional fees incurred in connection with reviewing strategic transactions that we ultimately did not pursue. |
(j) | We began operations with respect to newly-awarded contracts in Australia and Canada in April 2017 and June 2017, respectively. Reflects the additional EBITDA that we estimate we would have generated during 2017 had operations with respect to these contracts instead commenced on the first day of the period presented. |
Fleet Valuation
Based on desktop valuations prepared by third parties, the Company estimates the value of its fleet (excluding leased helicopters, customer-owned helicopters, two additional fixed wing aircraft for corporate use and six Bell 206 helicopters held for sale in the Oil & Gas segment) was approximately $857 million at December 31, 2017. These desktop valuations are based on limited information, without any physical inspections of the helicopters. No appraisal has been made in connection with the Companys offering, and the value of the fleet in the event of liquidation may be materially different from the book value.