Bristow Group Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended September 30, 2022. The filing refers to this as fiscal 2023 based on the company’s March 31 fiscal year-end, although the Board approved a transition to a December 31 year-end in August 2022. Bristow provides helicopter, fixed-wing, search-and-rescue, government and energy-related aviation services globally through one aviation services segment.
Key financial metrics
| Metric | Three months ended Sept. 30, 2022 | Three months ended Sept. 30, 2021 | Six months ended Sept. 30, 2022 | Six months ended Sept. 30, 2021 |
|---|---|---|---|---|
| Total revenue | $307.3 million | $301.6 million | $609.0 million | $602.2 million |
| Operating income | $14.7 million | $12.5 million | $20.4 million | $0.2 million |
| Net income attributable to Bristow | $16.5 million | $2.8 million | $20.5 million | $(11.4) million |
| Diluted EPS | $0.58 | $0.10 | $0.72 | $(0.40) |
| Net cash from operating activities | Not separately reported | Not separately reported | $5.2 million | $73.2 million |
- Operating revenue increased 3.2% year over year in the quarter and 2.6% for the six-month period. Fixed-wing revenue increased 23.2% for the quarter and 14.2% for the six months; oil and gas revenue increased 2.3% for the six months, while government services revenue was essentially flat.
- Approximate operating margin was 4.8% for the quarter and 3.3% for the six months. Approximate net margin attributable to Bristow was 5.4% and 3.4%, respectively.
- Quarterly results included $11.3 million of other income, primarily $10.2 million of foreign-exchange gains. Six-month other income of $28.1 million included $24.2 million of foreign-exchange gains, $2.5 million of government grants and a $1.3 million favorable pension-related adjustment.
- Cash, cash equivalents and restricted cash totaled $201.3 million at September 30, 2022, including $199.5 million of unrestricted cash, compared with $266.0 million at March 31, 2022.
- Total principal debt was $503.7 million, comprising $392.4 million of 6.875% senior notes due March 2028 and $111.3 million of Lombard debt. The Lombard tranches mature in December 2023 and January 2024, and management plans to refinance them.
- The ABL facility had $85.0 million of commitments, expandable to $120.0 million; no borrowings were outstanding, but $15.9 million of letters of credit were issued. Management reported total liquidity of $251.2 million, including $51.7 million of remaining ABL availability.
- Total assets were $1.76 billion and total stockholders’ equity was $768.8 million at September 30, 2022.
Material changes versus comparable periods
- Six-month operating income improved to $20.4 million from $0.2 million, and net income attributable to Bristow improved by $31.9 million to $20.5 million.
- The improvement reflected higher revenue, lower depreciation and amortization, lower merger and integration costs, no restructuring costs, and substantially lower impairment losses. The prior-year period included $24.8 million of impairments, including a $16.0 million impairment of the Petroleum Air Services investment.
- Operating expenses increased $22.7 million for the six months. Fuel expense rose $26.0 million due to higher fuel prices and flight hours, while repairs and maintenance increased $10.9 million, partly offset by lower personnel, insurance and leased-in equipment costs.
- Operating cash flow declined $68.0 million to $5.2 million, primarily because of $31.2 million paid under new power-by-the-hour maintenance agreements, higher cash taxes, increased prepaid expenses and lower accrued liabilities.
- Foreign currency translation adjustments produced an $89.8 million cumulative other comprehensive loss for the six months, contributing to a decline in Bristow stockholders’ equity despite reported net income.
- On August 2, 2022, Bristow acquired British International Helicopter Services Limited for approximately $12.7 million in cash. The acquisition added government-services contracts and approximately $7.0 million of amortizable customer-contract intangibles.
- The company repurchased 425,938 shares for $10.0 million during the six months and established a new $40.0 million repurchase authorization in August 2022.
Outlook, commentary, risks and unusual items
- Management stated that operating cash flows and existing liquidity are expected to support working capital, debt service and capital expenditures, but long-term liquidity depends on sustained operating profitability, asset sales, financing access and demand for aviation services.
- Unfunded capital commitments totaled $71.3 million, primarily for three AW189 and five AW169 helicopters. Approximately $59.5 million of these commitments, including option deposits, could be terminated with approximately $1.9 million of liquidated damages.
- New AW139 power-by-the-hour agreements required an approximately $55 million buy-in; $31.2 million had been paid by September 30, 2022, with $24.2 million payable in December 2022. The company also recorded a $5.2 million impairment of legacy AW139-related intangible assets.
- Management cited exposure to oil and gas demand, customer concentration, energy-transition trends, foreign exchange, inflation and supply-chain disruption, aircraft availability and safety, political instability, government contract spending, competition, interest rates, refinancing risk and potential asset impairments.
- The filing provides no specific quantitative revenue or earnings guidance. Management’s outlook emphasizes diversification into government services, offshore wind and advanced air mobility, continued aircraft deployment and refinancing of the Lombard debt.
- Potential government tax claims in certain international jurisdictions are considered reasonably possible but not probable; no clear aggregate exposure is provided. Routine litigation reserves have been recorded, and management does not expect existing matters to have a material effect.
Investor verification priorities
- Verify the sustainability of reported earnings excluding $28.1 million of six-month other income, particularly foreign-exchange gains.
- Monitor operating cash conversion after the maintenance-agreement buy-in payments and the December 2022 $24.2 million obligation.
- Assess refinancing progress and terms for the $111.3 million of Lombard debt maturing in 2023 and 2024.
- Track aircraft capital commitments, delivery timing, cancellation rights and the effect of new aircraft on utilization and margins.
- Evaluate foreign-exchange sensitivity, especially the British pound and Norwegian krone, and the effect of fuel inflation on contract profitability.
- Review the performance and integration of the BIH acquisition and the company’s ability to expand government-services revenue.
- Confirm the effect of the fiscal-year transition to December 31 on future period comparability and reporting periods.