MONTREAL, Nov. 4, 2013 /CNW Telbec/ - HNZ Group Inc. (TSX: HNZ.A, HNZ.B)
("HNZ Group"), an international provider of helicopter transportation
and related support services, announced today that the United States
Transportation Command ("USTRANSCOM") has exercised contract and option
extensions, subject to funding, to extend its two outstanding contracts
for work in Afghanistan involving the movement of supplies and
passengers for the U.S. Department of Defense.
The first contract, previously announced on December 22, 2008, involves
the provision by HNZ Group of three fully crewed and supported Bell 212
(B212) medium category helicopters. The final of four one-year renewal
periods expires on November 30, 2013 and USTRANSCOM has exercised a
discretionary additional extension of the contract. Management believes
the discretionary additional extension period will end early in the
first quarter of 2014. Total revenue to HNZ Group for the additional
extension period, assuming that expected hours are flown, would be
approximately $6 million.
The second contract, previously announced on October 1, 2010, involves
the provision by HNZ Group of two fully crewed and supported Sikorsky
S-61 (S61) heavy category helicopters and four B212s. The second of
four one-year renewal periods expired on October 31, 2013. USTRANSCOM
has exercised an additional one-year renewal option to extend the
contract with a reduced number of aircraft until October 31, 2014. The
contract has not been extended with respect to two of the four B212s
and the two S61s are expected to be released early during the first
quarter of 2014, with the result that only two B212s are expected to be
flown until the end of the renewal term on October 31, 2014. Total
revenue to HNZ Group for the renewal period, assuming that expected
hours are flown, would be approximately $22 million. Total revenue
from this contract was originally disclosed as in excess of $360
million, assuming all option periods to June 30, 2016 were exercised
and expected hours were flown. Given the reduction in aircraft and
flying hours announced in connection with the renewal of the contract,
total revenue from the contract is expected to be approximately $190
million to $200 million, approximately $152 million of which has
already been earned as of June 30, 2013.
Both USTRANSCOM contracts are denominated in U.S. dollars, are comprised
of a fixed monthly rate and variable hourly revenue components and are
subject to funding and to customer requirements. The level of
profitability of the USTRANSCOM contracts reflects the greater level of
effort and financial and operational risks of operating helicopter
transportation services in Afghanistan.
As a result of the reduced future cash flows from the USTRANSCOM
contracts in Afghanistan, HNZ Group is in the process of completing an
interim goodwill impairment test for its third quarter ended September
30, 2013. HNZ Group expects that these events will result in the
recognition of a non-cash goodwill impairment charge during the quarter
ended September 30, 2013 with respect to its Canadian Helicopters
operations in Canada, including Afghanistan (and not HNZ Group's 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). Please refer to the interim
consolidated financial statements and Management's Discussion and
Analysis for the third quarter of 2013 expected to be filed on or about
November 12, 2013.
HNZ Group's President and CEO, Don Wall, said: "As we have indicated
over the past year, our Afghanistan support contract will be winding
down in 2014. The troop withdrawal and overall reduced activities is
resulting in a reduced contractor support requirement for USTRANSCOM.
While we are disappointed that we did not get the entire fleet
complement for the larger contract extended through 2014, we are
pleased to have received the renewal to the extent we have, and truly
believe that it is as a result of having provided an exceptionally high
level of service since 2009. As we conclude this project in 2014, we
will do so having acquired Helicopters New Zealand, Nampa Valley
Helicopters and Heli-Welders and, ignoring any significant expansionary
capital expenditures, expect to have net cash in bank at its
conclusion. While we will look for redeployment options for the fleet
currently in Afghanistan, we continue to seek expansion opportunities
both organically and through acquisition with particular emphasis on
Southeast Asia and regions of Africa. My management team and I continue
to remain optimistic about our existing business and new
ABOUT HNZ GROUP INC.
HNZ Group is an international provider of helicopter transportation and
related support services with operations in Canada, Australia, New
Zealand, Afghanistan, Antarctica and Southeast Asia. HNZ Group operates
in excess of 130 helicopters in support of a range of multinational
companies and government agencies, including onshore and offshore oil
and gas, mineral exploration, military support, hydro and utilities,
forest management, construction, air ambulance and search and rescue.
In addition to charter services, HNZ Group provides flight training and
third-party repair and maintenance services. HNZ Group is headquartered
near Montreal, Canada and employs approximately 800 personnel from 35
locations around the world. HNZ Group operates from fixed-base
locations as well as from temporary locations, commonly referred to as
"pool locations", and provides helicopters in a wide variety of
climatic conditions and terrain across Canada, Australia, New Zealand,
Afghanistan, Antarctica and Southeast Asia.
This press release contains forward-looking statements relating to the
future contractual relationship between HNZ Group and USTRANSCOM and in
particular with respect to expected revenues, the availability of
funding for the period covered by the renewal option, the duration of
such relationship and any goodwill impairment that could result from
changes to the relationship. Forward-looking statements, specifically
those concerning future performance and expected revenues from
contracts, are subject to certain risks and uncertainties, such as
customary U.S. government approval of operational funding and the
reduction of USTRANSCOM's activities in Afghanistan, and actual results
may differ materially. Consequently, readers should not place any undue
reliance on such forward-looking statements. In addition, these
forward-looking statements relate to the date on which they were made.
HNZ Group disclaims any intention or obligation to update or revise any
forward-looking statement, whether as a result of new information,
future events or otherwise unless being required by applicable laws.
SOURCE: HNZ Group Inc.
HNZ Group Inc.
President and Chief Executive Officer