Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Bristow Group's Second Quarter Earnings Conference Call. [Operator Instructions] This conference is being recorded today, November 8, 2013. I would now like to turn the conference over to Linda McNeill, Director of Investor Relations. Please go ahead, ma'am.

Thank you, Richard, and good morning, everyone. Welcome to Bristow Group's second quarter fiscal year '14 earnings call. I am Linda McNeill, Director of Investor Relations. And with me on the call are Bill Chiles, President and CEO; Jonathan Baliff, Senior Vice President and CFO; Jeremy Akel, Senior Vice President, Global Operations; Mark Duncan, Senior Vice President, Commercial; Brian Allman, Vice President and Chief Accounting Officer; and Mike Imlach, Director of our European Business Unit. We hope you've seen our earnings release, which was issued yesterday afternoon. It is posted in the Investor Relations section of our website at bristowgroup.com. Let me remind everyone that during the call, Bristow Group management may make forward-looking statements that reflect our beliefs, expectations, hopes, intentions or predictions of the future. All forward-looking statements are subject to risks and uncertainties that are described in more detail on Slide 3 of our investor presentation. Additionally, to the extent we discuss non-GAAP measures during the call, please see our earnings release or the investor presentation on our website, for the calculation of these measures and GAAP reconciliation. With that, I'd like to turn the call over to Bill. Bill?

Thank you, Linda. Good morning to all of you, and thank you for joining us on our fiscal year 2014 second quarter earnings call. And I'm going to start on Slide five, we are going to -- as always, begin talking about safety. As always, our commitment to Target Zero is our fundamental goal and serves as the cultural touchstone for our company. Touch wood, to this point year-to-date, our air safety performance has been consistent with our Target Zero goal, with no accidents or no incidents reported so far. Obviously, a great credit to the entire team around the world. However, we continue to be vigilant, and as I said, touch wood, highly collaborative outside -- within Bristow, and highly collaborative outside, which I will talk about in just a few minutes. Our goal is to improve safety performance, not only within Bristow, but also help improve the safety performance in the entire industry. On ground safety, we were challenged, we were able to continue to reduce our lost work case rate from an unacceptable high of 1.26 per 200,000 man hours in April to 0.44 in September. Good work on everybody's part to improve from a really bad start. We are highly focused on making improvements in the area of safety and to this end, I would like to formerly introduce Steve Predmore as Bristow's Vice President and Chief Safety Officer, who has just joined the company. Steve's job is to further our drive to Target Zero and work to improve safety across the entire industry, as I said, within Bristow and outside. Steve has a long and proven track record of outstanding leadership in aviation and ground safety, including 11 years with JetBlue Airways as Vice President and Chief Safety Officer, and 6 years with Delta Air…

Thank you, Bill. So let's review some of the financial highlights from this quarter. Please turn to Slide 15. Our GAAP earnings were a record high this quarter, due to the gain on the sale of our interest in FB Heliservices of a $1.85 previously spoken about. We received cash of $112.2 million on an asset that was on our books for approximately $8 million. Excluding the impacts of this sale and a few other special items and asset disposition effects, our adjusted EPS was $1.27, a 59% increase over last year's $0.80 and a sequential increase of 27% over the first quarter of fiscal '14. Operational and commercial performance in Europe, in West Africa and the addition of Cougar drove much of this improvement. Corporate and Other decreased $0.06 per share, driven by an increase in information technology and other corporate expenses. This was partially offset by an increase in revenue from Cougar for maintenance support and an increase in military training revenue at our Bristow Academy. The second quarter also had a $2.1 million or $0.06 per share benefit due to the revaluation of a deferred tax liability, as a result of the enactment of a tax rate reduction in the United Kingdom. As previously discussed, Líder's standalone performance was very strong, but foreign exchange movements had a negative EPS impact of $0.08, primarily due to the impact of the reais-U.S. dollar rate on our earnings from Líder. At November 21's Líder Investor Day, we will go into more detail about the impact of these currency exchange rates on our equity and earnings and we will go into more detail about Lider's excellent standalone performance. Second quarter fiscal 2014 adjusted EBITDAR was $108.5 million, which is a 28% improvement from second quarter of fiscal 2013, an almost 6%…

Thank you, Jonathan. Turn to Slide 20 -- 21 for some concluding remarks. Safety continues to be our #1 core value. As you well know, we are working very, very hard to achieve Target Zero and we will achieve Target Zero. Bristow is well-positioned in the markets that have the highest growth for helicopter services for offshore drilling, and also, we're looking very hard at growth in search and rescue, as I mentioned earlier. Confidence in continued revenue growth and excellent cash flow from our core business and significant current liquidity will allow us to increase our adjusted EPS guidance this quarter. So we look forward to good operational performance in the future. We have some confidence in our Lider affiliate in Brazil and to this end, I am looking forward to seeing you all on Investor Day on November 21 in New York, and there will be more information on that in the next few weeks, next week or so. We'll provide greater color on Lider's operations in Brazil. As I said earlier, you will hear from Eduardo Vaz, Lider's CEO and President. You will hear about Brazil's aviation growth outlook and a lot more information about what's going on within Petrobras and outside with the IOCs. So with that, operator, I will turn it back over to you for questions. Thank you very much.

[Operator Instructions] Our first question today comes from the line of James West from Barclays.

Quick question on your share buyback, so we moved or we continued the $100 million authorization. Your liquidity is enormous right now. Should we expect you to be more aggressive in the market buying back stock at this point and I mean, I think historically, you've been a little bit less aggressive?

Yes, I think, I don't like using the term aggressive on a phone call James, but let's talk about the stock buyback and what influences management's decision. The first is, obviously, our liquidity position, which we are obviously very pleased with the operational and commercial performance to get us there. So from that standpoint, you are absolutely right, we have enough to do a number of things. We also do care about the value that we get for shareholders, so we don't just have an automatic stock buyback. We also look at the price of our stock also. But we will say this, we do believe that a number of factors that precluded us from really buying back stock last year, which really dealt with U.K. SAR, the Cougar integration, these are now behind us. And so, without being too specific, we look forward to the next year, where again, like we previously said, we will be able to provide this tool, this stock buyback tool, as another way to get a good, balanced and enhanced return for our shareholders.

Okay. So if we take aggressive off the table and say more active, is that a reasonable statement?

Yes.

Okay, all right. And the BVA increase sequentially, obviously very impressive and you had a good run here, of 8 quarters in a row, being positive on BVA. How sustainable do you believe these types of levels of BVA to be going forward?

I'll answer from a financial standpoint, but I would like for Bill to answer from his and we have obviously got Jeremy and Mark here. But this is not just a financial tool for evaluation and if you look at the BVA improvement that we have gotten, a lot of it has been associated with operational margin improvement, which is a testament to the commercial and operational activities that we have going on. And we think, and we will talk to you in our third quarter call, about a number of the things that Jeremy and his teams are doing as part of efficiency programs, both driven by technological change within the company, but also driven by simplification and standardization of process globally. So we think there are still lots of room to move and as we've talked about in the past, there is no impact of U.K. SAR. You are starting to see the impact of Gap SAR in our BVA, but that U.K. SAR is also a big one.

Yes, James, when I think about what's driving this, to me is just 3 things. If we look at our financial performance over the last several years, it's the passion, the fire in the belly that our teams have around the world. I mean, examples are winning the SAR contract. But they have a passion to be the best at what we do. I know that sounds -- everybody is going to say that, but it really is happening at Bristow. Second is the first time that we've seen really good interdependency between operations, commercial, finance, legal and administration. These various teams are working together like I have never seen before. And the third driver is the focus on BVA, our BVA concept at Bristow. It's really amazing what that's done to improve discipline and operational performance. So to me, those are the 3 big areas, and so I do -- to answer your question, I do expect that this performance is sustainable, and I would like to -- I don't want to be the lady who doth protest too much, but Jeremy, you might want to comment on opportunities that Jonathan mentioned in operations.

Thanks, Bill. Yes, essentially in operations, where we have been over the past couple of years very focused on identifying and driving efficiencies through the business, largely driven by the premise that we can simplify our business model and standardize it in such a way that continues to meet our key customers' needs and still allows us to drive up asset utilization. Those initiatives are in place and they will continue. And we think there is intrinsic value in their implementation that we'll see over the next 3 to 5 years.

And our next question comes from the line of Jon Donnel from Howard Weil.

I had a question on these incremental SAR opportunities that you called out in the press release and in the slides here. It seems like you are clearly getting a lot of new interest from places beyond the North Sea. And I'm wondering if you can maybe help us a little bit with what we should expect in terms of the timing of the potential new contracts here. I think we previously thought that getting the U.K. SAR underway and then showing success in that was going to be a requirement for getting new work. But given the number of new inquiries that you are clearly getting is, should we be thinking about that as possibly being accelerated here over the next couple of years as opposed to maybe 5 or 6 years down the road?

Jon, Mark Duncan will take that question.

Jon, we'd previously outlined that SAR was active before we had acquired the U.K. SAR contract. The U.K. SAR contract is big and is the first real sizable outsource by a government. And we expect future outsourcing of that type to rely on the success of that project. In the meantime, as our oil and gas customers are going to new locations where SAR may or may not be well developed, they have a requirement to provide that service to their workforce that is offshore and that's driving most of the incremental opportunities that we mentioned in the call. These are oil and gas opportunities where the clients are going in, drilling and producing, and they are nice size opportunities, because they're not a big apple to bite, like the U.K. SAR is. We can incrementally add them. The lead time on a SAR project at the moment to get aircraft, because all of these tend to be new aircraft, is 2 years. So we're bidding those projects now. You can expect those to be awarded and then 2 years later they start. The only non-oil and gas SAR opportunity that we see right now is the Falkland Islands and that is an extension of the U.K. government's SAR coverage, because of course, the Falklands is part of the U.K. And we mentioned that last year, when we won the contract, as a potential opportunity to supplement that contract.

Okay, great. That's helpful. And then I guess, could you give us a little idea on the scope of this, the U.K. inquiry here into helicopter safety and maybe kind of the general plans for what they're going to talking about and maybe chances of that impacting your operations, either in the shorter or longer term in the U.K.?

Am going to let Mike Imlach, Mike Imlach is Director of our European business unit and he is here so, he is in the middle of that -- in that area and that inquiry.

Jon, we visited, just now, with the various authorities in United Kingdom, Civil Aviation Authority, and also we're heavily involved with the U.K. oil and gas helicopter safety group and also as Bill mentioned, the initiative with our competitors, Bond and CHC. And I think it's going to be very positive for our industry in the United Kingdom and also globally. We feel we are going to definitely add a contribution to that. And I think we're seeing the value of other safety and training regimes within the company, showing through our recent incremental awards. So we are very, very supportive to be a part of that and if we can increase our, other safety aspects within the U.K. and elsewhere, we truly believe we will get value and the industry will get value from it as well.

And our next question comes from the line of Ryan Fitzgibbon from Global Hunter Securities.

Kind of thinking about the guidance, I know you guys are generally conservative, don't like to move that number much from the first half of the year and want us to think on an annual growth basis. But with LACE rates trending up, EBITDAR margins going higher, what do you view as the major risks that would preclude Bristow from actually posting better results in the second half versus the first half?

Go ahead, Jonathan.

Go ahead, Bill. I will take it. Ryan, the first thing I would say to your question is, first I appreciate you recognizing management's, really, emphasis on annual guidance. And we understand as you go into the year, it becomes more like a quarterly or next half guidance. But again, we're focused on multi-year value creation with the company, which I hate to harken back to one of your peer's questions, but it also gets back to being able to give you a higher growth dividend and also buying back shares as part of this. Obviously, that has an impact on guidance, but as we've spoken in the past, we don't give you guidance based on buying back shares. That's the first thing I would say. The second thing I would say is in the past we have always said that the second half -- I say in the past, in the recent past, we've said second half is generally stronger than first half, and that is a possibility here also. But because of the number of issues associated with the fleet management, with the return to service of the EC225, and then I would say a third thing, which is, there has been a lot going on in the industry, as Mike Imlach spoke about, we want to be conservative, we want to be prudent on other possibilities, we're still very positive about the business. And so we hope to be able to obviously meet this expectation of a nickel on either end increase, but other than, it's very unusual for us to raise guidance in the second quarter. We've done it because we have such good positive feelings about the rest of the year and then even FY '15 and beyond. So that's the best way I think I can answer that question, but don't forget about that first, there are other value creation ways, with higher dividend and stock buyback.

I appreciate that. And then second question for me is on the EC225s, and maybe 2 parts. First, how would you say customer behavior has been so far in terms of reactivating those aircraft? And then secondly, what should we be modeling for the cadence of the, call it the final 15 aircraft, being returned to service in the back half of this year?

Ryan, it's Mark here, I'll take that question. We are being very prudent on the return to service. So we are doing that in conjunction, working with our customers. So we've got 5 back in service, which are fully in conjunction with the customers. We have other aircraft that are ready to go and we are working through with the customers associated with those contracts that are still in place and making sure that they're ready to go and what's delaying that is the customers getting to their workforce and making sure the workforce are confident in the safety of the aircraft and the operation, and they're fully involving Bristow in briefing those offshore employees. That said, those that are waiting to go on contract are still obtaining MSCs that we've disclosed previously. Of the remaining aircraft that are being, continue to be modified ready for service, we have a large opportunity map ahead of us. We do put that there on our presentations, but the opportunity map over the next year or 2 is very healthy versus the number of aircraft that we have available. So we have some 225s still to contract that weren't on full time contracts, so are off revenue and we have additional orders that are coming in to deliver and we've gone and exercised some addition options recently. So we have confidence that we'll be able to put all those aircraft to work. This will be in conjunction with, in the mid-short to medium-term, retiring our older 332s. They were very useful in keeping our operations going, but our plan was originally to exit those aircraft and that will be the case and the 225s will be obviously a part of backfilling those as well.

And our next question comes from the line of James Crandell from Cowen Group.

This is Peter Hatfield filling in for Jim.

Okay.

My first question is that you've mentioned that you're looking at more global contracts with some of your large customers. So wondering if you can go into little bit more detail on how these contracts are or will be structured and what the mix of global contracts will be, in your view moving forward?

Peter, it's Mark, again. Let me take that one, because I am involved in several discussions in that regard. We have customers who recognize the potential differentiation and advantage that we bring by being a global operator who is present or can be present in the areas they are going to and then they are working in. And they are recognizing the excellent service that we are providing as part of our client promise and they are recognizing the safety we provide, the reliability and efficiency that we provide on the service itself. We have a large focus on that at the moment and that's driving benefit that they are recognizing and they want that service everywhere and they don't always find it everywhere when they go around the world and they work with a disparate group of different companies. It also fits their category management style, where they want to reduce the number of providers that they have, because it helps them reduce and control their supply chain. So that all plays well into discussions to look at global agreements. We wouldn't say that, that's going to become prolific, but there are certainly opportunities out there. And it doesn't have to be fully global, it doesn't mean we'll get all the work in the world with one company. But it does mean we'll have an effective way of communicating with those customers to get early warning of those opportunities, so that we can position to increase our chances of success. And that's all done by proving the value we provide to them. So we are very encouraged by that. And I'm not going to tell you which companies we're talking to, because that's obviously competitive and confidential.

And our next question comes from the line of Brandon Dobell from William Blair.

Wondering if we could focus on North America for a second, given all the puts and takes there, with selling some aircraft and the margin profile? If we look out 18 months or 2 years, what do you think the fleet looks like and how does that or how should we think about that impacting what the margin profile might look like in North America?

I'll let Jeremy Akel answer that.

Yes, the North American shift is one to -- is one consistent with our continued evolution of our delivery model. We are, in a sense, repositioning ourselves to better serve our key clients in deepwater. And make that operation much [indiscernible] with our delivery model globally. So the answer to your question is, you'll start to see a shift towards more twin-engine, medium and heavy over time, and as we start to target deepwater with earnest in North America.

Okay. Any sense of timing on the LOI to sell the 206 aircraft and how do you think about the, I guess, the potential revenue impact of that small aircraft fleet going off your books?

You in a sense have already seen the revenue impact. The majority of the aircraft are, have been decommissioned, if you will. And there is a few that will remain until mid-next year and then we'll be completely out of the L4s in the Gulf of Mexico.

Okay.

And let me add to that, Brandon. For example, in West Africa, where we are operating some of these L4s in Escravos, Nigeria, we will replace, we are not going to drop those contracts, we'll replace those aircraft with Bell 407s.

Got it. Okay

Which is an enhanced version of the 206 L4, 4-bladed prop, little more power. So we're not going to give up, so the revenue is not going to actually go away on good sustainable contracts that we have for those L4s.

Got it. Okay. And then as the fleet migrates to a larger average size, do you think you've got the opportunity to extend the average contract duration, kind of from that 3 to 6 months to 1 to 2 year, to mirror more the rest of the contracts you have in different regions, or is it going to be still stuck at that shorter duration?

Yes, Brandon, it's Mark here. Let me clarify that for you. The larger helicopters are only being offered on longer-term contracts.

Okay.

So the last 2 S-92s that we brought in were on 3-to-5 year commitments. The one that we announced recently as part of the large amount of rewards we have, there was one in the Gulf of Mexico there, it's due to start up next May, I believe. It's a 3-year plus option contract and we're bidding contracts today that are 5-years plus. So there is a definite theme change there with those larger types and we expect that to continue. Now that said, the Gulf of Mexico, as far as we're concerned, is competing with other opportunities that we have in the other business units for that finite amount of aircraft. So we want the pricing in the Gulf of Mexico to be better as well. But we see the amount of rig activity and the amount of commitments our clients are making to drilling rigs, pushing that demand to a point where supply and demand are going to be hopefully in our favor.

Okay. Great. And then a final one, Jon, any sense of how CapEx needs in the back half of the year should look or compare to the first half of the year here?

So we do and have disclosed to you the capital liquidity and how many aircraft we have on order. I think, if you just look at the total amounts we've disclosed in the past, it's probably not going to be at the same rate in the second half as the first half, just given the mathematics of it. So you should expect it still to be much higher than average, but probably not the doubling that we saw. And I would just reference you to that disclosure.

[Operator Instructions] And our next question comes from the line of David Anderson from JPMorgan.

I'm trying to true-up your guidance on the LACE with your earnings guidance. Now you lowered the number today, presumably it's the 60 small aircraft coming out of North America. But I'm looking at my EBITDAR numbers going for the rest of the year. Does EBITDAR stay flat here for the rest of the year, that's kind of what it looks like on my numbers and I had it going up?

We don't give you specific EBITDAR, we've given you EBITDAR guidance, where a lot of these small aircrafts have been either put in held for sale or actually on LOIs. We've said expect it to be in the low-30s, really, because in North America, that includes our Cougar affiliate, which is doing quite well. And so we kind of kept to that number, right now, David. I think you will see us give a little bit more clarity once we're in the third quarter for that specific, but you're hitting the exact right point, which is, just given the nature of these aircraft, even though they're small, from a LACE standpoint, they do -- they do impact the LACE number. But again, because we are redeploying the monies in more positive, Bristow value added ways, combined with the aircraft -- a number of aircraft are coming on service, you're seeing that LACE rate go up commensurately. I think if you did the math there with within your models, you'll see that we'll stay within that guidance range, that increased guidance range that we've just given.

As the EC225s come back into service, is there additional cost associated with bringing them back into service? You kept your margin guidance in all the different regions flat from last quarter. So it doesn't seem to be in there, is there additional cost there?

David, we are going to see -- this is Jeremy. We're going to see some cost, but I wouldn't call it material cost. There is some additional checks and maintenance activities we need to do as part of the redeployment program, but I don't anticipate seeing any additional dilution, I guess you would say, as a result of that.

And lastly, on your percentage of leased aircraft, you're now above 20%. You've been targeting 30%. It looks like you're going to kind of blow through that pretty quick. Is there a new target that's out there? I mean, it looks like you're going to be well above 30% by this time next year. Am I wrong?

Yes, I mean, we have a changed our disclosure. When you look at the amount of LACE aircraft, if you check in the Q. We've moved from that 20% to 30% previous disclosure to recognize 2 things with the lease market. One, we've got a lot of lessors who want to work with us and we want to show partnership. But more importantly too, it really has lowered our overall cost of capital, given the advantages that we have as an investment-grade secured company. And so for us, that's something we want to take advantage of it. It's also a low interest environment and so, you're right, you're going to see us move through that. That being said, we like the residual value of our helicopters. We like owning more helicopters than leasing. We appreciate the partnerships that it gives us and the capital efficiency, but we like owning helicopters and that's [indiscernible] area...

Let me -- I want to make sure people understand, we have certain -- the board and the management team are very conservative in terms of our capital structure. So we are not going to violate or blow through any of our coverage ratios. We will maintain a very strong rating, our strong ratings, so the debt equity ratios, debt-to-cap and the coverage ratios or going to remain very, very strong. So we're not using leasing to blow through that, because as you know, we consider leases a fixed obligation, even though we don't put them on our balance sheet. We do our metrics. In Bristow, we use our unfunded pension liability and all the other things, all the bells and whistles out there to calculate our metrics. We're going to remain very conservative.

And I show no further question in the queue. I'd like to turn it back to management for any closing remarks.

Well, thank you, everyone. I appreciate your support and perseverance over, during times when we overpromised and under-delivered, so we are happy to continue this. And have a great holiday season. We hope to see all of you on November 21 in New York. Thank you very much.

And ladies and gentlemen, this does conclude the Bristow Group's Second Quarter Earnings Conference Call. ACT would like to thank you for your participation and you may now disconnect.