Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Bristow Group's Fourth Quarter Earnings Conference Call. [Operator Instructions] This conference is being recorded today, May 22, 2014. I'd now like to turn the call over to Linda McNeill. Please go ahead.

Thank you, George, and good morning, everyone. Welcome to Bristow Group's Fourth Quarter Fiscal '14 Earnings Call. I'm Linda McNeill, Director of Investor Relations. With me on the call today are Bill Chiles, President and CEO; Jonathan Baliff, Senior Vice President and CFO; Jeremy Akel, Senior Vice President and Chief Operating Officer; Brian Allman, Vice President, Chief Accounting Officer; and Mike Imlach, our Vice President of Global Operations. 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. 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 the GAAP reconciliations. With that, I would like to turn the call over to Bill. Bill?

Thank you, Linda, and good morning to all of you, and thank you for joining us today. I know there are other calls going on. We appreciate your time. I'm going to start on Slide 5, for those of you that have the slide presentation up, and focus on our safety performance for the year. Noteworthy that we had 0 aviation accidents for the year, and it also means we had -- well, in addition, we had no Class Bs. Class As are the -- are what count when you calculate the aviation accident rate. So we had no Class Bs as well. Now I will talk about one accident we had in the Academy in a minute. We're very proud of that. We actually reached Target Zero in our aviation -- our commercial flying business, very noteworthy. Also, our ground safety was excellent. We improved our Total Recordable Incident Rate to 0.26 for the year and our lost work case rate to 0.22. So I'm very proud of all of our employees out there who worked very hard to achieve these great -- a great record for the year. I'm always a little bit skeptical [ph] about talking about it, patting ourselves on the back, because I'm just a little bit superstitious about it. But a great year. And I would also like to specifically mention West Africa Business Unit as well as our centralized maintenance division for Target Zero performance for the full fiscal year in all safety measures. So that proves that we can actually reach Target Zero. So great work to those business units and to those employees who worked so hard to achieve that. It's also noteworthy -- although we are proud of the safety performance that I mentioned for the year, the corporate management…

Thank you, Bill. So let's go over some of the financial highlights from this quarter and this fiscal year. Please turn to Slide 15. Our fourth quarter fiscal year '14 adjusted EPS was $1.35, excluding special items and asset disposition effects, an increase of almost 34% over the fourth quarter of fiscal 2013 and a 50% -- a 58% increase sequentially over the previous third quarter of fiscal year 2014. Our full year fiscal year 2014 adjusted earning per share was $4.45, an almost 18% improvement over last year's record $3.78. This excellent fourth quarter result delivers on our annual fiscal '14 adjusted EPS guidance, ending the year at the middle of our already increased guidance range. The operational increases in our fiscal 2014 adjusted EPS have already been discussed and support our view, but while quarterly EPS results vary due to a number of factors, the best comparison of our results against guidance expectations is an annual comparison as this is in line with how we manage our businesses. The improvement in adjusted EPS performance year-over-year was also driven by corporate increases. Our corporate EPS improvement was driven by a lower effective tax rate and earnings we get from providing maintenance and other support services to our Cougar affiliate in Atlantic Canada. Please turn to Slide 16 for discussion of adjusted EBITDAR. On the strength of operating performance in Europe, West Africa and North America, our adjusted EBITDAR improved to a record level of $433.7 million, a 13% improvement year-over-year. Our fourth quarter adjusted EBITDAR improved by 19% over the prior year to $122 million, $22.9 million driven by Large Aircraft Equivalent rate increases across most of our business units. On a sequential basis, compared with our third quarter, adjusted EBITDAR improved by over $22 million or 22%. Our…

Thanks, Jonathan. Turning to Slide 23, actually it's 22 on my set, for final comments. As you know, safety continues to be our #1 core value. We will continue to strive for Target Zero, and as you've heard me say often, if you don't have a good safety record in the aviation business, you're basically out of business. So Target Zero is where we're headed. As I said earlier, we were able to achieve Target Zero at several of our business units, and have been able to do so consistently year-over-year. So it is possible. Management and the board is going to continue to focus on execution, as you've seen over the last several years. With the introduction of BVA in 2010, we strengthened our capital allocation strategy and developed a culture of ownership in our management team in the pursuit of operational excellence, the results of which could be seen in our consistent delivery over the last several years that I mentioned earlier. As you all likely know, this is my last earning call for Bristow as CEO, probably very highly likely, my last earnings call ever as a public company -- as CEO of a public company. And when I look back over the past 10 years, I'm very proud of what our management team has been able to achieve. When times are really tough, everybody out there in the field were going out there day in and day out and doing their job and doing it safely. I'm very, very happy about the financial strength we built, the discipline around BVA, and our relentless focus on innovation, the customers have really -- for the customers which set -- has really set us apart in the industry. Every employee has contributed to our success, and I'm sure it…

[Operator Instructions] Our first question is from the line of Jon Donnel with Howard Weil.

Bill, first of all, congratulations on your successful tenure here at Bristow, and you'll certainly be missed here from our side, and I appreciate the kind words as well in your opening statements there.

Thanks, Jon. I appreciate it.

Okay. Going to the Europe, the safety regulations and update there, could you talk a little bit about how the operators are factoring into this scenario with the discussions with you guys. And to the extent that may be they are participating on some of the cost side too, certainly, there's not going to be cause for you to retrofit all of the aircraft here. I was wondering maybe how their input is factoring into the decisions on what ultimately gets done, and also how they may be participating, whether it's from helping you out on the capital side or a change in the contract structure going forward.

Okay. Jon, I'm going to let the horse's mouth speak here. We've got Mike Imlach in the room who is formerly -- I guess he's currently still Managing Director of Bristow Helicopter Limited in our European business unit. He's taking over global operations according to Jeremy shortly [ph]. He's been in the middle of the mix on CAP 1145. So I'll let him comment on it.

As you're probably aware, that's quite a number of recommendations, and came out of the Civil Aviation Authority report. The 2 main ones would be working to a specific sea state for each aircraft type that the CAA have mandated. Fortunately, that's not going to affect us in heavy aircraft. We worked to the sea state 6 that's mandated as a standard operating procedure anyway. The one that's probably going to give the most short-term party is the emergency breathing systems for passengers. That was due to come in, in the June 1, and has now been delayed to the September 1. The recommendation there is a Category E commercial in breathing system, which currently is not available in the market, or certified to category. So there's various tests going on with specific equipment in the moment, and we believe that is going to be ready in time for the September 1 deadline. That breathing system will be part of the life jacket that the passengers currently wear, and that will then be rolled up from, we suspect August, September onwards until the end of the year. If the EBS does come in, it removes some of the requirements, for example, additional safe [indiscernible] on the helicopter until a later date. We're working with clients just now, because we've got 3 months breathing window here, it's actually eased it a little bit for us and the clients. We are looking at taking in -- we have some additional aircraft to take up any capacity constraints that may come out of this and also trying to maximize routes and flight patterns, so we can move the maximum amount of passengers in any one day for our clients.

Okay. I guess, along with that I noticed that you've held some additional large aircraft for sale in the Europe business unit. Are those ones that could be brought back to work should you need to have more aircraft if these new considerations cause some supply disruptions or some capacity disruptions?

Yes. Potentially, we could. The ones we would held for sale are the old technology, what we used to call the Bristow Tiger, the ES 332. We have 5 of them held for sale just now and another 2 are continuing to work through July to help us out during this period. We can continue those longer if required. However, our focus is on returning the 225 back to service and by the end of August, beginning of September, we should have a complete fleet with 2 of the new gearbox shafts fitted by that date. So we feel pretty comfortable where we are with the aircraft at the moment.

Okay, great. And then...

I'll add one of the reasons for the 3-month reprieve was the summer months are very strong flying months, because that's when a lot of the maintenance is done on platforms offshore and the North Sea. So the argument was that they may be increasing the risk by limiting the number of passengers per aircraft. We actually did a risk analysis, risk assessment with the other operators in Aberdeen, and feel that we could have handled the increased number of flights. However, as Mike said, we're able to move passengers around. There will be more flying this summer though, in any event, which is what happens in every year. But fortunately, the restrictions will -- are being held off until September when we get through those summer months to get that flying done. We do have additional aircraft if we need to bring them in to meet increased demand if we have to after September.

Okay, great. And then moving towards the fair market value calculation that you guys put in on Slide 20, and the backup on Slide 36, I think most of the numbers are relatively straightforward, maybe except for the leased imputed debt number. Just so kind of getting to that net asset value for the leased aircraft, can you maybe give us a little more color on some of the inputs that go into that calculation for you guys, so we can better reconcile those numbers as we move forward through our models?

Sure. The lease imputed debt is calculated consistently with how we've talked to you guys for the last 2 or 3 years. We take the lease rental streams and then do a net present value at a 6% discount rate. So that rental stream, which is a corporate commitment. If you remember, our leases don't have financial covenants in them. We keep it that way, because we make the actual rental streams themselves a corporate commitment. Because of that, we'd like to use 6% because then we use the same thing calculations for our rating agencies, for our shareholders, for our internal BVA calculation. So for us, we stay consistent in how we approach this, and it's actually probably academically, probably more conservative than weighted average cost of capital. But that's how we come up with the -- with those numbers as of the dates that we talk about. We also use the non-aircraft lease rentals, which are not insignificant, to come up with that.

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

Mainly want to focus on cash flow expectations for '15, given kind of some the back and forth between 2013 and '14. How do we think about some of maybe the, not one-time, but just special items that will impact both operating and free cash flow this fiscal year as we try to figure out our models?

Sure. I mean, I think that '15 again will be a very -- first of all, as you know, we don't give guidance for operating cash flow, but you can probably deconstruct it a bit and get there because of the EBITDAR numbers, and again, because we're kind of coming to the end of our lease origination. I think that's one of the areas where we try to do a good job, we'll do an even better job of getting the street comfortable with the amount of annual pretax lease payments. But in the end, '15 is probably going to look a lot like '14 from the standpoint of cash flow, operating cash flow generation. We're not going to be able to sustain very high increases in operating cash flow generation, mostly because of a lot of what I would call the investing impacts of UK SAR, which gets put into operating cash flow. That being said, we continue to see very positive BVA. Our expectation is that we will improve the BVA from this year to next year, we don't give BVA guidance, but you could assume that we are pretty incented as a management team to only really looking at earning above that capital charge, which still remains at 10.5% globally even though we know that our cost of capital is probably well below that. So for us, use a marker of '14 for operating cash flow, and maybe it's not going to be quite that high, just given again significant amounts of cost in anticipation of the UK SAR aircraft coming online, and then -- but I will tell you in '16, that's really when things get very interesting, because we're starting to -- we'll start to get returns on all this investment on UK SAR as the contract goes on online.

Got it. And maybe just a segue from that, you mentioned kind of reaching that threshold for 1/3 of the aircraft leased. Is there a reason you don't want to go above that? Is there a financial reason or an operational flexibility reason that 1/3 of the aircraft is the right number, and that's not 40% or 45%?

Yes. I -- the best way I can answer that is, we're not 10%, 15% smart on this, but I will tell you it is not because -- it is also, I will tell you not because of any operating flexibility. Our lease partners like Milestone and others really provide us a tremendous amount of flexibility on our leased aircraft versus our owned aircraft. The reason why we don't do it is because $150 million even in a large company like ourselves, is a very high fixed cost. And as you know, that fixed cost has to get paid no matter what's happening in the marketplace. And so for us to sleep at night, to stay consistent with our prudent balance sheet management philosophy, we look at lots of downside scenarios in which certain really bad things can happen to this marketplace. And so with those downsides, we want to be able to not just thrive, and we want to really succeed and have extra cash flow frankly available for opportunities. Because in those downturns, that's where companies like ourselves can really -- can also not just survive but thrive. But that's -- it's a combination of prudent balance sheet management and having cash flow available so that we can use it strategically in times of maybe distress in the industry.

Okay. And then final one for me, as you think about bringing the EC225s back online, was there any residual costs that you guys had in the fourth quarter, anything that we should expect in the first quarter just that might skew the quarter-on-quarter or year-on-year comparisons in the European business unit or elsewhere I guess?

Let me take the financial, I think your question has a financial feel to it, and then I'm going to let Jeremy talk about maybe some of the operational. From a financial standpoint, this is really important, these costs are not considered special items or the cost recovery from our OEMs, and I have to emphasize, it wasn't just one OEM. The cost recovery of our OEM partners was really something that we've been thinking about for the last 1.5 years. These are credits associated with maintenance costs that we had to undertake above and beyond normal operating costs, and one of the reasons why you saw our third quarter actually lower in margin in certain markets like Australia and Europe. We knew that we were going to be able to get these OEM credits back because they're great partners. That has happened. We are not necessarily, depending on future OEM credits for us, for our account in the '15 guidance. But I will say that we do have some left over, but it is really going to be dependent on the operations of -- with those OEMs. I'll hand it over to Jeremy.

Brandon, not much more to add from what Jonathan said, only to the extent from a maintenance perspective, we don't expect anything material on a quarter-to-quarter that would skew the numbers. [indiscernible].

And our next question is from the line of Jeff Spittel with Clarkson Capital Markets.

Bill, I'd just like to echo what my friend Jon said. Wish you nothing but the best in the future and certainly appreciate all your support over the years.

Thank you very much for that.

If we could talk a little bit about the dead horse from the last quarterly conference call, maybe preemptively in terms of LACE rates and pricing, is it still fair to say that the increase that we're envisioning over the next year or so is primarily a function of the contract rollovers from longer duration work, and then the beneficial mix shift as you introduce the new technology, rather than in this environment where E&Ps are maybe a little margin constrained, being able to purely push pricing on new aircraft.

Yes, I mean, I'll let Bill answer, because I think some of the questions deal with the historical perspective of this industry. But the best way I can answer it is yes.

I agree with all of the above.

Everything you said.

What you see is when we replace -- give you a mathematical example, we replace a 332 with an S-92 or 225, you're going from $4.5 million, $5 million in value to $25 million to $33 million in value. So that's why the LACE rates continue to go up as we replace aircraft. The other thing going on when we retire the small aircraft, and as you recall 4 small aircraft equal 1 LACE aircraft. Those 4 aircrafts in total are not making near the LACE rate of the aircraft that replace them in the medium and heavy category. So you see a lot of that going on. Also as you suggested, we have the dynamic of coming off older contracts with old legacy aircraft, but even some older contracts with new aircraft, they are rolling over and getting the rates that have been around for the last year or so. That's what's happening rather than actually pushing the ultimate marginal rate in the market. We're not -- we don't see that. We're really trying to focus more on finding ways to make our customer's businesses more efficient. For example, we tell our customer in Trinidad that if we can make a good transition to all AW139s as opposed to the old 412, we will be able to reduce the number of aircraft from -- by 1 or 2 or 3 possibly. And they -- that's the kind of -- that's what they really want to hear. We're focused on reducing their total cost of operation and even reducing our capital. We can move that capital elsewhere, we have to work elsewhere. So that's what we're really trying to focus on now is looking for ways to produce the total cost to our customers, because we know the pressure that they're under with flat commodity prices and increasing costs, increasing rates on rigs, of course, unfortunately the rates on the rigs and then some of the other equivalent focus on exploration are going down. But even though we make up a small portion of their costs, it's our job to find ways to make them more efficient. So that's what we're really focusing on today.

Appreciate it, that's helpful. And then maybe if we could touch on Brazil a little bit. It seems like Petrobras is trying to focus a little bit more on enhancing the existing production at the fields that are already online and maybe doing some more workover sort of activity, which would suggest to me that, that would be beneficial for your business rather than them focusing more on exploration. Is that a fair characterization? And is that what you're seeing down there today?

Jeff, this is Jeremy. Actually, we're seeing a bit of a mixed bag. We still anticipate Petrobras to continue to -- in a way re-fleet and move to heavier aircraft. And that -- part of that is tied to some of their development work. They are -- they have been probably going a little slower than we thought they would, but we still believe that in the next 12 months, we'll see some significant uptick from an end [ph] perspective from Petrobras.

[Operator Instructions] Our next question is from the line of Pike Howard with Johnson Rice.

Most of my questions have been answered. I just was curious, I thought I heard you guys break out the Eastern Airways contribution this quarter. I didn't see it in the slide deck. I was just curious if you could run through that one more time.

Yes. So we did break it out and I think it's on the European slide. Take a look at that and in our specifics, which you'll see on the transcript, but it is in fourth quarter, we had $21.2 million in operating revenue and $4.2 million in adjusted EBITDAR contributed by Eastern Airways. This is important because it does contribute a little bit of EPS. And I think you're getting at a point, which has a broader implication, which is we have committed to the market as of last year a 10% to 15% EPS growth rate. And that was somewhat independent, at the time, of any M&A and this is M&A. So if you really look at some of the small EPS contribution, it really wasn't that much EPS contribution of that this quarter. You can see that we would have been a little bit lower from the $4.45 without Eastern. I think that's important when you then compare our guidance of $4.70 to $5.20, that we're well within that 10% to 15% or even beyond -- above that 10% to 15% when you take Eastern into account. Now Eastern is taken somewhat into account for next year, given that we will have the full benefit of Eastern. But we know that there are still also costs of integration and other things like that, which we don't necessarily take as special items. So for us, we did Eastern really not because of the financial benefit, because of the strategic benefit that we think it'll bring our clients and customers in logistics solution that is already starting to bear fruit in Europe.

Right. No, and you hit the nail on the head. That's kind of where I was going. I was just trying to get a better feel for how to think about Eastern going forward so, appreciate it.

I think the important thing on Eastern too, is it's not included in our LACE rates. Right, it's a fixed wing, it has different economics. We're not going to break it out all that much, we decided to do it here, but it's really being run as an integrated solution and hopefully, what ends up happening is we get better LACE rates out of our helicopters, because we are combining a logistics solution with our clients.

. And I'm showing no further questions. I'll turn the call back to Bill Chiles for closing comments.

Okay. Thank you, George. I appreciate it, and thanks to all of you for joining the call this morning, and again, thank you for your continued support year in and year out and look forward to great things from the management team going forward after I'm out on July 31. So personally thank you for all your support of me over the years. And hopefully, we'll run across each other down the road. Thank you very much.

Ladies and gentlemen, this concludes our conference. Thank you for your participation. You may now disconnect.