Blueway annual report 2010 Blueway AS Notes to the Accounts 47 Taxes related to paid group contributions which is booked as an increase of the cost price of the related shares, and taxes related to received group contributions which is booked as a reduction of the cost price of the related shares, are both booked directly against tax in the balance sheet (taxes payable if the Group contri bution affects taxes payable and deferred tax if the Group contribution affects deferred tax). Cash flow statement The cash flow statement has been prepared according to the indirect method. Cash and cash equivalents include cash, bank deposits, and other short term investments with maturity less than 3 months from the date of acquisition and which immediately and with minimal exchange risk can be converted into known cash amounts. NOTES NOTE 1 SUBSIDIARIES Net profit Subsidiary (all figures in NOK 1 000) Registered office Ownership Equity (100%) (100%) Book value Airlift AS Førde 100% 28 305-4 355 115 079 Blueway Helicopter AS Bærum 100% 20 909 12 867 449 Blueway Offshore Norge AS Bærum 100% 12 744 5 649 12 610 Airlift Sweden Holding AB Sweden 100% 37 195 175 47 964 Airlift Sweden Helicopter AB (tier-subsidiary) Sweden 100% 12 774-2 025 2 703 Airlift Services AS (tier-subsidiary) Førde 100% 1 155-4 - DanCopter AS 100 Denmark 100% 78 104 4 965 398 032 Vertech Holding AS Lillesand 60% 8 200-262 58 274 Vertech Offshore AS (tier-subsidiary) Lillesand 60% 9 904 7 028 - Closing net book amount 635 111 Voting rights in the subsidiaries equals the ownership of each company. In 2010, the company invested NOK 12.6 million in Blueway Offshore Norge AS through a capital increase. NOTE 2 RECEIVABLES Receivables Other short-term receivables 18 908 14 798 Prepayments relating to helicopters 33 063 - Dividends - 1 800 Accounts receivables 51 971 16 598 Receivables due later than one year Inter company loans 412 564 495 457 Total 412 564 495 457 During 2010, the company has paid approx. NOK 33.1 million in instalments for three new offshore helicopters (AgustaWestland 139). The helicopters will be delivered in Q4 2011 and will be used in the Blueway Group s ongoing operations in Nigeria. If the Company should choose to cancel the order, the Company would not be entitled to receive the entire amount of prepayments.
48 Blueway AS Notes to the Accounts Blueway annual report 2010 NOTE 3 BORROWINGS Non-current Liabilities Bank borrowings 579 209 670 531 Loan from Shareholders 56 846 - Convertible bonds 86 952 - Total 723 006 670 531 Current liabilities Bank borrowings (next 12 months amortsations) 47 243 57 720 Bank overdraft - 2 571 Current debt to shareholders - 52 855 Current debt to non-controlling interests in subsidiaries - 5 840 Trade and other payables 1 315-13 094 Other current liabilities 12 335 6 328 Total 60 893 112 220 Current debt to minority shareholdes of NOK 5.8 million is related to an Earn Out agreement between Blueway AS and the minority shareholdes in Vertech Holding AS. The Earn Out agreement was established in connection with the acquisition of Vertech Holding AS in 2007. The final payment related to this agreement was made in 2010. Convertible bonds The Company issued convertible bonds at value of NOK 82.25 million on 5 July 2010. The bonds mature 18 months from the issue date at their nominal value of NOK 82.25 million or can be converted into shares at the holder`s option at the maturity date. Bank loans The SEB engagement is divided into two facilities. Facility A is a combined NOK and EUR facility, while facility B is denominated in EUR only. Facility B is related to financing of the Group s helicopters. The bank borrowings mature in 2014 and average interest (exclusive interest rate swaps) were 4,88 percent annually (2009: 4,92 percent annually). Loan facility Face value 31.12.2010 NOK Face value 31.12.2010 EUR Nominal interest rate NOK Yearly payment EUR Book value NOK Facility A (SEB) 20 065 20 958 NIBOR/ EURIBOR + 2,5% 5 760 5 320 183 795 Irredeemable Facility B (SEB) - 56 658 EURIBOR + 1,75% until repayment 2014 442 765 Total bank borrowings 626 561 Average interest rate on facility A was 5,37% in 2010. Average interest rate on facility B was 4,65% in 2010. The carrying amounts of the Company s borrowings are denominated in the following currencies (amount in NOK). NOK 163 862 82 406 Euro 606 387 701 270 Total 770 249 783 676 Interest rate swaps The Company has entered into interest rate swaps for 100 percent of the bank loans until maturity in 2014.
Blueway annual report 2010 Blueway AS Notes to the Accounts 49 Loan facility Hedged amount Payment structure Maturity Estimated market value at 31 December 2010 Facility A NOK 20 065 quarterly payments 31 December 2014 NOK - 258 Facility A EUR 20 958 quarterly payments 31 December 2014 EUR - 561 Facility B EUR 56 660 quarterly payments 30 June 2014 EUR - 1 996 Total estimated marked value at 31 December 2010 NOK - 20 232 The interest rate swaps are not recognised in the balance sheet. Covenants The covenants on the Company s bank loans are linked to the financial performances of the Blueway Group and not directly to the company. Three out of five financial covenants have been operative during 2010. The Group is per 31.12.2010 in breach with one covenant concerning the relationship between the last 12 months EBITDA (Operating profit before depreciations, amortisations and impairments) and total senior debt. The company received a waiver for this covenant breach. The two last covenants will be operative from 2011. The financial covenants are related to requirements such as debt/ebitda-ratio, minimum liquidity level, cash flow, minimum market value of the helicopter fleet and investment levels. Bank borrowings are secured by shares in subsidiaries, helicopters, trade receivables and buildings owned by subsidiaries. Secured debt 626 452 730 822 Book value of assets pledged as security Shares in subsidiaries 635 111 622 501 Trade receivables 431 472 512 055 Total 1 066 583 1 134 555 NOTE 4 RELATED PARTY TRANSACTIONS Receivables Payables 2010 2009 Blueway Helicopter AS 316 468 349 799 - - DanCopter AS 101 902 139 911 - - Airlift AS 2 718 5 747 - - Vertech Holding AS - 5 400 - - Blueway Offshore Norge AS 9 306-10 524 - Airlift Helicopter AB 1 020 - - - Miscellaneous short-term inter company debt 0 9 995 - - Total 431 414 510 852 10 524 0 The Company s operating revenue is made up of intercompany fees related to the performance of management services. In addition, the Company has provided loans to some of its subsidiaries and subsequent interest income from these loans. Debt to Shareholders In March and June 2009, the owners granted two loans to Blueway AS amounting to NOK 30 million and NOK 20 million, respectively. The owners have made pro rata contributions according to ownership percentage as of the time the loans were granted, i.e. 60 percent granted from Reiten & Co Capital Partners VI LP, 38 percent from Helicopter Transportation Group AS and 2 percent from Skogstad Corporate AS. Both loans were included in one agreement in 2010 and the duration was extended until the latest event of February 2012 or the final repayment of the Company s current loan facilities in SEB. As such, the loan was reclassified to non-current liabilities. The loan carries an interest rate of 8 percent which is accumulated on the loan until final repayment. As of 31 December 2010, accumulated interest on the loan amounted to NOK 6.1 million.
50 Blueway AS Notes to the Accounts Blueway annual report 2010 NOTE 5 EQUITY Changes in equity during the year (NOK 1 000) Share capital Share premium Retained earnings Total Equity Equity at 1 January 2010 2 555 337 522 28 808 368 886 Profit for the year - - -1 706-1 706 Equity at 31 December 2009 2 555 337 522 27 103 367 180 NOTE 6 SHARE CAPITAL AND SHAREHOLDER INFORMATION The share capital of NOK 2 555 100 consists of 25 551 authorised ordinary shares with a par value of NOK 100. All issued shares have equal rights. Shareholders at 31 December 2010 (NOK 1 000) Number of shares Ownership Reiten & Co Capital Partners VI LP 15 428 60.4% Helicopter Transportation Group AS 9 772 38.2% Skogstad Corporate AS 351 1.4% Total number of shares 25 551 100% The Chairman of the Board in Blueway AS, Aage Krog, controls 40 percent of the shares in Helicopter Transportation Group AS through his company La Mani AS. Member of the Board in Blueway AS, Jan Bragnes, controls 28 percent of the shares in Helicopter Transportation Group AS through his company Lave AS. NOTE 7 TAXES Calculation of deferred tax/deferred tax benefit Temporary differences (NOK 1 000) 2010 2009 Net temporary differences -12 1 Tax losses carried forward -63 264-60 943 Basis for deferred tax -63 276-60 942 28% deferred tax -17 717-17 064 Deferred tax benefit not shown in the balance sheet - - Deferred tax in the balance sheet -17 717-17 064 Basis for income tax expense, changes in deferred tax and tax payable Result before taxes -2 359 39 964 Permanent differences 25-1 695 Basis for the tax expense for the year -2 334 38 269 Change in temporary differences and tax losses carried forward 2 334-38 269 Basis for payable taxes in the income statement - - +/- Group contributions received/given - - Taxable income (basis for payable taxes in the balance sheet) - -
Blueway annual report 2010 Blueway AS Notes to the Accounts 51 Components of the income tax expense Payable tax on this year's result - - Adjustment in respect of priors - - Total payable tax - - Change in deferred tax -654 10 715 Tax expense -654 10 715 NOTE 8 REVENUE Segment allocation (NOK 1 000) 2010 2009 Management services 10 648 7 102 Total 10 648 7 102 Geographic allocation Norway 4 805 2 274 Denmark 4 823 3 724 Sweden 1 020 1 104 Total 10 648 7 102 NOTE 9 SALARIES, RETIREMENT BENEFIT PLAN, AUDITORS FEE ETC. Wages and salaries (NOK 1 000) 2010 2009 Wages and salaries 1 181 8 770 Social security tax 167 733 Pension costs 101 533 Other benefits 69 289 Total 1 518 10 325 The Company is obliged to provide an employment pension plan and the company has established a defined contribution plan for its employees. Under a defined contribution plan the Company is only obliged to pay a fixed premium and will have no obligation to pay further contributions. For the defined contribution plans the premiums are expensed. Average number of people employed in 2010 was 1.7. 2010 2009 Management remuneration (NOK 1 000) CEO Board of Directors CEO Board of Directors Wages and salaries 0 188 1 518 250 Invoiced fee CEO 3 411 0 791 0 Pension costs 0 0 161 0 Other benefits 0 0 10 0 Total 3 411 188 2 480 250 The CEO during 2010 was hired in October 2009. The CEO has been paid according to monthly invoices and has not received salaries from the Company. As such, he has not been part of the Company s pension scheme and all expenses related to the CEO are classified as other operating expenses.the CEO has had a contractual performancebased successive bonus plan related to the development in the Group s EBITDA. This is based on a defined basis level of EBITDA. The agreement has no upper limit, but is adjusted for changes in EBITDA caused from sale and purchase of enterprises. The engagement is regulated by a contract with duration of 18 months, which can be unilaterally extended by the company. By the time of the finalization of the Financial Statements, the CEO has informed the Board of Directors that he will resign from his positon with effect from June 20th 2011. No loans or guarantees are granted in favour of the CEO, Chairman of the Board or other related parties. No single loan/guarantee amounts to more than 5 percent of the Company s equity.
52 Blueway AS Notes to the Accounts Blueway annual report 2010 Auditors fee Auditor s fee is allocated as follows: Audit services (incl. technical assistance with financial statements) 421 296 Other assurance services 97 89 Tax advisory (incl. technical assistance with tax returns) 369 59 Other assistance (specified below) 783 - Total 1 670 444 IFRS conversion 280 Accounting compliance advice 433 Other 70 Total other assistance 783 All fees in the tables are excl. VAT. NOTE 10 OTHER OPERATING EXPENSES Other operating expenses (NOK 1 000) 2010 2009 Consultants, legal and finance 14 261 3 389 Travel expenditures 1 041 1 204 Premises 677 314 IT/communication 159 126 Misc. other operating expenses 350 920 Total other operating expenses 16 487 5 952 NOTE 11 FINANCIAL ITEMS Inter company interest income on long term loans 24 179 22 880 Other interest income 791 275 Unrealized agio/disagio long term monetary items 6 473 74 654 Realized agio/disagio 10 400 (7 090) Group contributions 7 000 - Dividend received - 1 800 Financial income 48 843 92 519 Interest expenses on inter company non-current liabilities (679) (174) Interest expenses on non-current liabilities (42 770) (42 062) Other financial expenses (378) (1 135) Financial expenses -43 827-43 371 Net financial income/(expenses) 5 016 49 148
Blueway annual report 2010 Blueway AS Notes to the Accounts 53 NOTE 12 RESTRICTED FUNDS, BANK OVERDRAFTS Restricted funds (NOK 1 000) 2010 2009 Tax deduction employees 179 321 Granted bank overdrafts Bank overdraft 50 000 5 000 Of this not used 50 000 2 429 NOTE 13 RISK MANAGEMENT The Company s operations is exposed to several financial risk elements such as currency risk and interest rate risk. Currency risk The Company s exposure to currency risk is mainly due to the fact that a significant part of the borrowings is denominated in Euro. In 2010 the Company had recognised approx. MNOK 6.5 of net unrealised currency gain arising from the loan portfolio as a result of currency fluctuations between EUR and NOK. The Company s income is solely denominated in NOK. Most of its daily expenses is also in NOK but interest expenses on the majority of the Company s external bank financing is made in EURO. During 2010, the Company did not use any hedging strategies to reduce the company s currency exposure, but this is evaluated continuously by the Company s Board and Management. Interest rate risk The Company s interest rate risk exposure is mainly related to interest expenses relating to the long-term loan portfolio. During 2009 the Company entered interest rate swap agreements towards the loan portfolios payment structure in order to ensure predictability for future interest rate payments. The bank is acting as counterparty in the interest rate swap agreements, where the Company swaps fixed to floating interest rates. The agreements ensures both parties a mutual option on pre-maturity settlements against settlement of excess/diminished values at maturity date. In 2010, the Company has made interest payments of approximately MNOK 42.8 million in relation to its long-term borrowings. Liquidity risk Cash flow forecasting is performed in the operating entities of the Group and aggregated by group treasury. Group treasury monitors rolling forecasts of the Group s liquidity requirements with aim to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its committed borrowing facilities at all times so that the Group does not breach borrowing limits or covenants on any of its borrowing facilities. Such forecasting takes into consideration the Group s debt financing plans, covenant compliance, compliance with internal balance sheet ratio targets and, if applicable external regulatory or legal requirements for example, currency restrictions. Surplus cash held by the operating entities over and above balance required for working capital management are transferred to the group treasury. Group treasury primarily deposit surplus cash in interest bearing bank accounts. NOTE 14 EVENTS AFTER THE REPORTING PERIOD In April 2011, DanCopter AS, a subsidiary of the Company won a significant five year contract with Mærsk Oil & Gas. The contract includes a defined period of options for extension. The contract is an offshore contract consisting of crew changes on offshore installations in the North Sea. Mærsk Oil & Gas has the options for extension of the contract. The operations will start in July 2012 and the Group will be using three new EC225 helicopters for these operations in addition to one equal back-up helicopter. The three first helicopters were ordered during Q1 2011 with deliveries during Q2 2012. The Group paid approx EURO 3 mill as a first down payment for these three helicopters during Q1 2011 and is currently working towards the remaining financing of the helicopters. The order of the helicopters and other necessary investments will in total amount to approx MNOK 600-650. These investments trigger at financing need over the next 12-15 months of approx MNOK 600 650. The Group is currently analyzing various options in order to arrange for the best possible financing solution. At this stage, the options include a range of different loan structures as well as a financial lease structure. Mr. Leif Salomonsen has decided to resign from the position as CEO in Blueway with effect from June 20th 2011. Mr. Salomonsen has held this position since he joined the Group in October 2009. EVP Offshore, Mr. Jakob Bae took on the position as CEO from the same date. Johnny Skoglund, former deputy CEO of SAS Norway, has accepted the position as new Managing Director in Blueway AS subsidiary Airlift AS. Mr Skoglund will also be responsible for the Onshore Business Area in the Group. Mr. Skoglund joined the Group in May 2011. In January 2011, Airlift AS won a court case raised by some insurance companies related to an accident in 2005. The insurance companies have decided not to appeal the courts decision and the case is closed for any further litigations.