Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Bristow Group's First Quarter 2015 Earnings Conference Call. This conference is being recorded, August 5, 2014. I would now like to turn the conference over to Linda McNeill, Director of Investor Relations. Please go ahead, ma'am.

Thank you, Casey, and good morning, everyone. Welcome to Bristow Group's First Quarter Fiscal '15 Earnings Call. I am Linda McNeill, Director of Investor Relations. With me on the call are Jonathan Baliff, President and CEO; John Briscoe, Senior Vice President and CFO; Jeremy Akel, Senior Vice President and Chief Operating Officer; and Brian Allman, Vice President and Chief Accounting Officer. We hope you've seen our earnings release which was issued yesterday afternoon. It is posted on the Investor Relations section of our website at bristowgroup.com. Let me remind everyone that during the call, Bristow management may make forward-looking statements that reflect our beliefs, expectations, hopes, intentions or predictions of the future. Our forward-looking statements are subject to risks and uncertainties that are described in more detail on Slide 3. 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 reconciliations. With that, I'd like to turn the call over to Jonathan. Jonathan?

Good morning, and thank you for joining us on our first quarter or June 30 quarter end earnings call for fiscal 2015. Please turn to Slide 5 as I will continue our tradition of making a few comments on Bristow's safety performance this quarter. Bristow's commitment to Target Zero safety continues to be at the core of everything we do. It is a testament to the passion and professionalism of our employees that the team achieved a first quarter fiscal year 2015 result of no air or ground accidents in our global commercial rotary wing operations. Our overall corporate TRIR with a world-class 0.07, with 1 ground lost work case this quarter due to a minor incident at Eastern Airways. All but one of our EC225 fleet is now available for revenue service. The new gear shaft has been redesigned and certified by EASA, with the expectation that our entire global oil and gas fleet will have the new shaft installed in the next 12 to 24 months. We already have a number of aircraft lined with this new shaft with excellent results. Continuing on with the North Sea. CAP 1145 introduction is progressing, with sea state restrictions enforced starting June 1, 2014, and new passenger emergency breathing devices to be in place by September 1, 2014. Training of the North Sea offshore workforce on this new breathing system has commenced, with the rollout of new passenger life jackets incorporating this system commencing in mid-August. We expect most locations to have these devices in place by September 1 deadline. But there is a possibility that some passenger capacity restrictions may be necessary which could lead to additional flights being required by us, our competitors or our clients. I do also want to report that on July 21, one of our…

Thank you, Jonathan. Before I start my prepared remarks, I have a few initial comments. As most of you know, I have been with Bristow for about 60 days and I'm absolutely thrilled to be working with the team at Bristow. The company has a fantastic culture, focused on safety first; great people that work as a team and act like owners; and a culture of capital discipline that drives free cash flow and better-than-market returns. These are things that differentiate Bristow and would make it a leader in any industry. Many of you listening realize the compelling, long-term differentiators that make our sector unique and create significant growth opportunities. I believe these secular differentiators, growth opportunities and great culture make Bristow an outstanding investing opportunity with significant upside to our current share price. I will be focused on telling this compelling story in a way that is clear, transparent and gives a clear view to our opportunities. Now let's go over the financial highlights of the quarter. Please turn to Slide 16. As Jonathan mentioned earlier, as a result of improvements in operating performance in Europe, Australia and North America, our adjusted EPS improved to $1.32 per common share compared to $1 in the prior year quarter and $1.35 in the March 2014 quarter. Our adjusted EBITDAR margin was 29.2%, an improvement from last year's Q1 margin of 28.5% and represents a record for our fiscal first quarter. This Q1 margin improvement, as compared to the prior year first quarter, was due to a number of items, including strong performance in Europe, the start of certain contracts, reduction of foreign exchange losses, as well as our ability to recoup costs from an OEM for amounts that negatively impacted our results in Europe and Australia in prior years and continue…

Thank you, John. Please turn to Slide 22. Just a few bullets to finish this up. Safety continues to be our #1 core value as we continue to strive to achieve Target Zero. And I'm proud of our global teams across the world who are responsible for improvement this fiscal year, especially in ground safety and air accident rates on a year-over-year basis. Management's fiscal year '15 focus is on execution for our clients while continuing to strengthen our capital deployment strategy that John spoke about for you, our shareholder. Despite our clients' concerns, and there are concerns, and they are our concerns over their rising operational costs and renewed scrutiny on capital spending, demand for Bristow's exceptional services continues to be strong. We are pleased with our results in the first quarter and remain positive about the remainder of the fiscal year. We are reaffirming our fiscal 2015 EPS guidance, and also our operational cash flow performance continues to be strong in advance of significant CapEx as we ramp up for our U.K. SAR implementation next year. Finally, I want to thank all of Bristow's employees for putting so much hard work on the SAP and eFlight implementations. They are truly pulling double, triple and even quadruple duty in this commitment and are adding to a capability that is an example to us all of what is possible to achieve at Bristow and continues to build legacy of a premier performer in the oilfield service space and beyond. And with that, operator, I would like to turn the call over to you and our shareholders for any questions. Thank you.

[Operator Instructions] Our first question is from Mr. Jon Donnel with Howard Weil.

Obviously, a lot of new details, especially in the Europe business segment here, and I appreciate that. But I just want to make sure that we're thinking about this in the right way, and then perhaps you can help us a little bit just determining kind of the direction of each of these things. I guess, first off, with the maintenance credits. Sounds like there's still going to be some positive impacts from that going forward. But I wonder if you could maybe give us sort of a historical perspective of -- is this something that's completely new or has it been kind of embedded in the numbers before? I know we've had this kind of detail broken out of the positives versus the negatives on a quarter-to-quarter basis. And I just wanted to think about, if we look back to maybe trying to compare to the past margin performance there in the Europe business unit, taking out the GAP SAR and the EC225 issues. I mean, is this something like a mid-30s or the upper 30s EBITDAR margin range for just the helicopters, something to be modeling as we go forward and get to a more normalized basis or are there other pieces that we need to be considering for that?

Sure. Let me take that one, Jon. The first thing about OEM credits and the nature of them, this is not a new phenomenon. And I would say it's existed as long as we've had partnership agreements as part of our ongoing support. A helicopter just begins its life at the start of the sale, but our partnerships allow us to have a relationship with the OEMs on parts and other maintenance that we do for ourselves or they actually do for some of our components. So we've actually had in our numbers credits that have offset expenses. And that's the important part to note here. We are disclosing the nature of these OEM credits because they are of a magnitude that there is a materiality. However, the economic reality is no different if it was $4 million of credits or if it was $400,000 of credits. The issue is we are taking on significant expenses. We have opportunity cost with grounded aircraft that our OEMs, and it's not restricted to just one OEM, all of them provide excellent partnership that allows us to offset that. And just think of it as, again, it's the life of a 30-year machine that we're trying to work through on -- it's not just about one specific quarter. We have to disclose it to you as part of one quarter, but we're anticipating both expenses that are happening in the current quarter, but also expenses that could happen in future quarters that these credits offset. And so, yes. Is it complicated? Somewhat. Is it normal? Absolutely. And again, we don't think that shareholders should exclude them because you shouldn't also exclude the costs. These are real costs that we're having to commit to as part of our safe and efficient service to our clients. So that's the way I would talk about the credits. Include them on the part of our guidance. It's how management thinks about things. I think the good news is, we don't see this level of crediting so that we have to actually disclose going out years, totally going out for the next couple of quarters. I think the more important thing in Europe that you have to understand is we actually include now a fixed-wing operation that has significant revenue in EBITDAR contribution. And again, we didn't partner with Eastern to get into the fixed-wing business by itself. We're doing this to provide our clients with a more seamless, point-to-point logistics service. And so for us, the issue is financial results due to a lower EBITDAR margin business kind of joining with our higher EBITDAR rotary wing business. That's what's actually creating some of the lower 30s overall margin in our European business unit. But I think we're giving you enough disclosure that you kind of start figuring that out as Eastern comes into our numbers.

Okay, I mean, that goes right into my next question of just the EBITDAR margin performance was a lot better than expected, at least from my perspective here, for Eastern during the quarter. I'm just wondering, how much of that was kind of one-off or it sounds like the expectation is for that to be a little bit lower here going forward. And then also just in conjunction to that to kind of wrap up the margin discussions. On the GAP SAR, is that -- are those operations and those revenues coming with accretive overall EBITDAR margins, the business unit, or how should we be thinking about those here over the coming quarters as well?

I'll take the last part. Absolutely accretive. That's clear. Jeremy or Jonathan, you want to take the first part?

I'll take the Eastern. Again, we manage, and Eastern manages itself on a long-term basis. It's not a quarter-to-quarter basis. And they're -- we've always seen a little bit of seasonality in their numbers as their number of flights during longer daylight hours can happen. They have a tendency not to fly as much at night because of airport restrictions at the airports they fly out of, so you get a little bit of seasonality. But again, we still believe that, that business is kind of a mid-teens, which is an excellent margin for a fixed-wing regional operator, and we don't expect that to change. What we do expect to change is our ability to differentiate point-to-point logistics in our rotary wing and get more clients and better service on a seamless basis for our broad European client base. And I think you actually asked one more question concerning a GAP and I think -- the GAP SAR. I think John already answered that.

Yes, that those are accretive margins to the overall business unit? And I guess, and even just the helicopter operations, excluding Eastern?

That's correct. I mean, if you remember, John, in our earnings -- or I'm sorry, Analyst Day 2 years ago, when we gave you a number of pages on the margins and the BVA of U.K. SAR and GAP SAR. GAP SAR is accretive to our oil and gas business, not as much as U.K. SAR. U.K. SAR is actually more accretive than even GAP SAR because of the nature of the contract. So both are accretive to oil and gas. But we expect to do much better in oil and gas. So I don't want to restrict us on being able to drive margins even better due to Jeremy's and the operational teams' operational excellence initiatives.

Mr. Jim Crandell with Cowen.

My first question is, as your helicopters come off contract in the world, and let's assume for the point of the question, they're coming off 4-year contracts internationally. Can you give us a sense as to the magnitude of the price improvement that a helicopter would roll to on average, versus the rates negotiated 4 years ago?

Yes, what we publicly -- I'm going to take this one, Jim. What we publicly disclosed, and Jeremy can give you some information and it hasn't changed, is that given this, what we call trailing edge to leading edge pricing, has improved generally overall pricing, 10% to 30% globally, as an average, globally. But we have seen our Brazilian pricing trailing edge to leading edge significantly improve above that 30%. And that's driven a good chunk of that 10% to 30%. That's kind of the best way I would say it right now, and we still continue to see that dynamic and you see it in our LACE rates. I don't know, Jeremy, if you want to...

No more. You said it right.

And, Jonathan, is the -- with so many ultra-deepwater rigs being built, certainly, the helicopters that serve that market, you can understand that they're doing very well. But we've seen reductions in the mid-water and maybe even shallow water demand. Does that create any excess capacity for your helicopters that serve that market sort of on a global basis?

Jim, the answer is -- this is Jeremy by the way. The answer is not really. Our sort of fleet mix and our future fleet mix is leaning towards, as Jonathan said earlier in the call, to the medium to heavy aircraft. So our exposure to that effect that you're speaking of is very low. We're not seeing that yet in our results, and we don't anticipate seeing anything significant over the next few quarters in that area from a diluted perspective.

And Jim, I'll add one -- this is John. I'll add one additional comment. A big part of that is also an oversupply issue with the mid-water and shallow water rigs, and so you have a little bit of cannibalization that's happening there, with deepwater rigs moving down to mid-water. And remember, there's about 100 jack-ups, over 100 jack-ups that are coming out in the next 2 years, as well as significant deliveries in the past. And so that's helping to create that oversupply issue and creating some stacking.

Okay. And just if I could sneak in one last question. How would you characterize the overall level of new builds today? I know there's quite a backlog, and one would have to wait for, I don't know, 2 years or more, to -- if you are ordering new helicopters today. But do you see any -- from your suppliers, or do you see any diminution in ordering, acceleration in ordering, what are you noticing happening in the industry as a whole?

Jim, again, Jeremy here. I think we've mentioned why Jonathan mentioned supply earlier in the call to calendar year '16 is where we're seeing a large helicopter supply fleet tons push out to. And so we're essentially reconfirming that statement. You would probably -- you could assert that on the mediums, the supply lead times are slightly less, if you want to look for some trending. However, just to remind you and those on the call, we have significant number of options in place with our OEMs that allows us to short-circuit lead times if it need be.

Mr. Brandon Dobell with William Blair.

Just wanted to focus on Australia and the Gulf for a second. When should we anticipate, I guess, a positive impact on the mix shift in those 2 geographies or operating units to, I don't know, plateau or slow down? Are we in the third inning of that aircraft mix shift, eighth inning? Just trying to gauge when those year-on-year comparisons get a little tougher.

Obviously, you and I obviously spoke a lot about baseball these last -- we do have a global employee force. So we're kind of in the -- I would say we're in the first half of the first period, if it was football. We are in the fourth inning if it was baseball. First period of hockey, [indiscernible] I've got to put that one in there. So we're in the early stages of it. I would -- the INPEX contract has just started. The North American restructuring is -- although the restructuring itself, I would say, is finishing up, the benefits of that to our clients is now just appearing to them, and also appearing in our financials. So for you guys actually seeing what was, in essence, the result of a lot of hard work last year on Rob Phillips, who leads our North American business unit, and Alan Blake, who leads Australia, and their teams. I mean a lot of work, and now we're starting to see the benefits of that work come to fruition. But it's only their early days yet.

Okay. Any expectations for the rules that are going into place in the North Sea, around passenger safety and capacity and things like that, to make their way outside of the North Sea, perhaps into other regions for you guys? Or is there any discussions of how the impacts of those rules may flow in the response?

Yes, Greg (sic) [Brandon], this is Jeremy. Very insightful question. It is a topic of conversation for us. It's a topic of conversation for the joint operators review association that we've created to drive standards globally. We are looking at those rules from CAP 1145 and how they might apply in other regions. But we're not taking sort of a blanket position that they do until we look at it in a measured way and consult with our customers to ensure that their implementation is appropriate for the regions we're working in. But the debate is definitely out there.

Mr. Gregory Lewis with Crédit Suisse.

It looks like it's about 11:00, so I'll try to be quick. I guess...

We'll extend it for you, Greg. Don't worry.

Lucky me, my lucky day. Not to harp on the maintenance credits, but I guess what I would say in the last quarter, we took them -- you were able to benefit from maintenance credit, which was, I guess, related to last year over the full year. Is this a continuation of that maintenance credit or is this something new? And was this related to what OEM things last year or was this more realtime?

Yes. As I said before, it does relate to some of the issues associated with last year. But there are ongoing costs associated with this. And I will say, it's not restricted to just one aircraft or one OEM. There are credits and other benefits that we're getting from all of our OEM partners. And so for us, it's really not as much about the past. It's really about these current and future costs as we run our business on an annual basis. And so that's how we thought about these larger credits. It's really about an ongoing, yearly offset of significant expenses. Last year's credits really offset a lot of last year's costs. These year's credits offset on a yearly basis this year's cost and could extend a little bit into some of the cost we might get in FY '16. But again, it really does, for lack of a better word, amortize. It comes down a lot as we move into the fourth quarter of this year and first quarter of next year.

Okay, great. And then just as we think about modeling LACE out going forward -- I mean, I'm sorry, SAR. As we think about modeling SAR out, going forward, clearly, there's going to be an opportunity for sale and leasebacks for this SAR fleet. As we think about that, that roughly $1 of earnings guidance or earnings contribution from SAR, is that a -- do we have a sense for whether that's an unleased number and or is that sort of bare-bones type number? I guess I'm trying to figure out if there's maneuverability upside -- I mean to the upside or potentially downside if we're going to be leasing some of these aircraft?

Nice try for us to give you forward, forward, forward guidance, which, Greg, we don't do, as you know, as a matter of course. That being said, all of the EPS guidance we've given you on U.K. SAR is after financing, both leases and ownership. Remember, we're still going to own a significant number of these U.K. SAR aircraft. And so -- but that EPS dollar is really after all of the financing costs that were generally done in conservative rates, and the best thing I will tell you is let us prosecute what is the endgame of these financings. And if we feel a need to bring up that dollar, we will do so at an appropriate time. But just know that, that EPS does already take into account all the leases for the SAR, the U.K. SAR aircraft and GAP SAR aircraft, too.

Operator, we'll take questions for one more caller.

Mr. Daniel Burke with Johnson Rice.

I'll be fast in deference to the hour. The outlook for Europe certainly seems very positive. I know last quarter, Jonathan, you all talked about having 11 LACE allocated to the EVA market in fiscal year '15. I was just wondering if there's any update. Looked like you had a fair chunk of LACE in the first fiscal quarter as it stands.

Yes. I mean, some of this is pretty fluid, Daniel. We've allocated those kind of on a medium and long-term basis. Short-term, we've made it to deploy aircraft into Europe to make sure that we're covering for our clients on CAP 1145, and that's a bit of a dynamic situation. So I'd say that the magnitude is in around that 11. But know that it can go up, probably from there, just given the nature of some of the short-term deployments we need to make sure our clients are being serviced. And we have some capacity globally to be able to do that.

Okay, great. And then maybe just one other one on the financial side. On the 6 1/4% [ph] notes, you guys bought back just a little bit there. Can you talk about the strategy there?

Well the strategy is to try to be opportunistic in how we manage our cost of capital. And we see -- when we see opportunities to step out there and buy back debt, we're going to devote some of our free cash flow to do that. So it's part of the overall capital deployment strategy that we think about. And so we don't just think about returning cash to shareholders. Clearly, that's at the bottom of the waterfall and where we want everything to end up. But we do improve our cost of capital when we bought back some of this high-cost debt. And so we will -- you will continue to see us do some things in the market as we have those opportunities.

Operator, I think we're going to be concluding the call right now with just saying thank you for -- to everybody for your time and effort here and look forward to talking to you more throughout the month as we progress on our business plan. Thank you again.

Ladies and gentlemen, this concludes the Bristow Group's First Quarter 2015 Earnings Conference Call. If you'd like to listen to a replay of today's conference, please dial toll-free 1 (888) 203-1112, or toll 1 (719) 457-0820. The conference center would like to thank you for your participation. You may now disconnect.