Bristow Group Inc. annual report, FY2022

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Bristow Group Inc. — Form 10-K Summary

Reporting period: Fiscal year ended March 31, 2022, filed May 31, 2022. The request references “2021 Q4,” but the supplied filing is an annual report for fiscal 2022. Comparisons are primarily with fiscal 2021. Financial statements reflect Successor accounting following Chapter 11 emergence on October 31, 2019 and may not be comparable with Predecessor periods.

Business context

Bristow is a global provider of helicopter, fixed-wing and other vertical-flight services. It operates one aviation-services segment across Europe, the Americas, Africa and Asia Pacific. Fiscal 2022 operating revenue mix was approximately 67% oil and gas, 24% government services and 9% fixed wing and other services. The fleet comprised 229 aircraft, including 213 helicopters, as of March 31, 2022.

Financial performance and key metrics

  • Operating revenue: $1.139 billion, essentially flat versus $1.139 billion in fiscal 2021. Total revenue, including reimbursable revenue, was $1.185 billion, up 0.6%.
  • Revenue by service line: Oil and gas declined 2.6% to $767.7 million; government services increased 8.2% to $272.9 million; fixed wing increased 15.8% to $85.4 million; other services declined 47.8% to $13.1 million. Prior-period service-line classifications were revised.
  • Operating income: $1.2 million versus a $102.9 million operating loss in fiscal 2021. The approximate operating margin was 0.1%, compared with negative 9.0% previously.
  • Net loss attributable to Bristow: $15.8 million, or $0.55 per diluted share, versus a $56.1 million loss, or $2.32 per diluted share, in fiscal 2021. The approximate net margin was negative 1.3%.
  • Cost pressures: Operating expenses increased 2.5% to $872.9 million. Fuel expense rose 64.1% to $74.2 million, and repairs and maintenance increased 6.4% to $248.5 million. These increases were partly offset by lower personnel and leased-in equipment costs.
  • Impairments and unusual items: The company recorded $24.8 million of impairment charges, including $16.0 million for Petroleum Air Services, $5.9 million for helicopters held for sale and $2.9 million for H225 parts inventory. Fiscal 2021 impairment charges were $91.3 million. Fiscal 2022 also included a $9.0 million bankruptcy-related legal settlement gain, while fiscal 2021 benefited from an $81.1 million bargain-purchase gain from the Era merger.
  • Cash flow: Operating cash flow was $123.9 million, up from $96.8 million. Capital expenditures were $31.1 million, compared with $14.8 million. Net cash used in financing was $63.5 million, including $41.2 million of share repurchases and $19.2 million of net debt repayments.
  • Liquidity: Unrestricted cash was $263.8 million and remaining ABL availability was $54.9 million, for total reported liquidity of $318.7 million at March 31, 2022. Approximately 54% of cash was held outside the United States.
  • Debt: Principal debt totaled $547.1 million; carrying-value debt was $525.7 million, consisting mainly of $400.0 million of 6.875% senior notes due 2028 and Lombard debt due in 2023 and 2024. No ABL borrowings were outstanding, although $20.5 million of letters of credit were issued.
  • Balance sheet: Total assets were $1.824 billion, total liabilities were $988.9 million and stockholders’ equity was $835.4 million. The net pension liability was $18.2 million.

Material changes versus fiscal 2021

  • Revenue was broadly unchanged, but the mix shifted toward government services and fixed wing services, partly offsetting lower oil and gas revenue.
  • Operating results improved substantially because fiscal 2021 included much higher merger and integration costs, restructuring costs, impairment charges and debt-extinguishment costs.
  • Operating expenses increased despite lower personnel and lease costs, primarily because of higher fuel prices, flight hours, maintenance costs, insurance rates and Hurricane Ida-related costs.
  • Interest expense declined by $9.7 million to $41.5 million, primarily due to lower debt balances.
  • Aircraft sales declined to 10 from 54, with proceeds of $14.5 million versus $67.9 million in fiscal 2021.
  • Shares repurchased during fiscal 2022 totaled approximately 1.48 million for $40.0 million under the company’s repurchase program; $25.0 million remained authorized at year-end.
  • Fiscal 2022 included a $2.0 million loss on the sale of the company’s Colombian subsidiary.

Outlook, management commentary and risks

Management expects government services, particularly search and rescue, to provide diversification and believes additional outsourcing opportunities may emerge, although timing is uncertain. A 10-year Netherlands SAR contract was awarded in January 2022, with service expected to begin in November 2022. The company also announced a planned acquisition of British International Helicopter Services Limited in April 2022, subject to regulatory approval and customary closing conditions.

Management stated that oil and gas prices had recovered from pandemic lows and that a multi-year growth cycle might be developing, but demand remained below pre-pandemic levels and the outlook remained uncertain. The filing does not provide formal quantitative revenue, earnings or cash-flow guidance.

  • Major exposures include offshore oil and gas activity, oil and gas prices, customer consolidation, contract cancellations or downsizing, and dependence on the North Sea and U.S. Gulf of Mexico.
  • Government services represented approximately 24% of revenue, including approximately 21% from the U.K. SAR contract. The contract may be terminated by the U.K. Department for Transport and expires in 2026, subject to stated contractual rights.
  • Supply-chain disruptions, inflation, higher fuel and labor costs, aircraft-parts shortages and limited manufacturers or suppliers could reduce utilization and margins.
  • Weather, hurricanes, aircraft accidents, fleet groundings, insurance limitations and safety performance remain material operational risks. Hurricane Ida caused facility and aircraft damage and temporary relocation costs during fiscal 2022.
  • The company had $84.7 million of unfunded capital commitments, primarily for three AW189 helicopters and five AW169 helicopters. Approximately $67.4 million could be terminated subject to approximately $1.9 million of liquidated damages.
  • Future non-cancelable operating lease payments totaled $217.7 million, including $158.4 million related to aircraft.
  • Fiscal 2023 pension funding was expected to be $16.9 million.
  • International operations expose the company to foreign exchange, political instability, local-content requirements, foreign-ownership restrictions, sanctions, corruption, tax and regulatory risks. The Russia-Ukraine conflict and related sanctions were identified as potential sources of market disruption.
  • The company reports effective disclosure controls and effective internal control over financial reporting as of March 31, 2022. KPMG issued unqualified audit opinions.

Important facts for investors to verify

  • Confirm the sustainability of operating cash flow and liquidity after fuel, maintenance, lease, pension and capital-commitment requirements.
  • Review debt covenants, maturity schedules, variable-rate exposure and the terms of the ABL amendment executed May 20, 2022.
  • Assess the extent to which revenue growth depends on the U.K. SAR contract, a concentrated customer base and government appropriations.
  • Monitor oil and gas activity, aircraft utilization, contract renewals, customer downsizing and fleet resale values.
  • Evaluate further impairment risk for aircraft, parts inventory and unconsolidated affiliates, particularly PAS and other investments exposed to weak regional markets.
  • Track the planned BIH acquisition, the Netherlands SAR contract commencement and the company’s ability to diversify into government services, offshore wind and advanced air mobility.
  • Review the effects of inflation, fuel prices, supply-chain constraints, labor negotiations and approximately 60% employee coverage by union or collective bargaining agreements.
  • Consider the comparability limitations created by Chapter 11 fresh-start accounting, the Era merger and changes in service-line presentation.